OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the outlook to positive from stable for the Long-Term Issuer Credit Ratings (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” of Principal Life Insurance Company and Principal National Life Insurance Company. Both are life insurance operating companies of Principal Financial Group, Inc. (PFG) [NASDAQ: PFG], and collectively are referred to as Principal. The outlook of the FSR remains stable. Concurrently, AM Best has revised the outlook to positive from stable and affirmed the Long-Term ICRs of “a-” of Principal Financial Services, Inc. and PFG, as well as the group’s Long-Term Issue Credit Ratings (Long-Term IR). AM Best also has affirmed the group’s Short-Term Issue Credit Ratings (Short-Term IR). (Please see below for a detailed listing of the Long- and Short-Term IRs.) All companies are headquartered in Des Moines, IA.
The Credit Ratings (ratings) reflect Principal’s balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).
The positive Long-Term ICR outlook for Principal reflects the continued strength and evolution of the organization’s ERM capabilities and the strength of risk culture and governance that is apparent throughout its operations. The company has a strongly communicated risk culture across its organization, with formalized risk appetite statements and tolerances that are communicated internally and externally. AM Best expects that risk management practices will continue to evolve favorably, driven by strategies and innovation apparent throughout the marketplace. AM Best also expects Principal to further enhance its demonstrated capabilities going forward.
Principal’s balance sheet strength considers the continued level of very strong risk-adjusted capitalization, which Principal historically has maintained. Additionally, the ratings reflect the considerable liquidity and financial flexibility of the life insurance operations and the organization as a whole. In recent years, operations outside of the domestic life insurance companies have strengthened the holding company’s ability to provide capital support to the overall operations. Furthermore, PFG maintains significant holding company cash and liquidity with favorable interest coverage in excess of 13 times and financial leverage of just under 20%, as of year-end 2018. The organization has demonstrated strong management of its diversified investment portfolio. However, AM Best notes that the life insurance companies maintain a higher-than--average exposure as compared with the industry to real-estate related assets, including mortgages, mortgage-backed securities and lower rated bonds.
The life insurance operations, which reflect diverse product and distribution capabilities, continue to report strong and consistent pre-tax operating earnings, with return metrics that have matched or exceeded industry and peer benchmarks. The company has worked to achieve notable market share in its core lines of business and has reported favorable longer-term trends of premium growth in those lines of business. Additionally, the organization has focused on efficiency and innovation as a strategy to enhance sales and customer experience. Principal’s strong operating performance and favorable business profile assessments reflect an organization that has a proven track record of strong earnings generation and lower volatility of earnings relative to industry peers while effectively managing expenses. However, due to increasingly competitive sales and pricing in the market, AM Best feels the company may experience challenges to sustain favorable trends in certain core lines of business.
The following Long-Term IRs have been affirmed, with the outlook revised to positive from stable:
Principal Financial Group, Inc.—
-- “a-” on $300 million 3.30%
senior unsecured notes, due 2022
-- “a-” on $300 million 3.125%
senior unsecured notes, due 2023
-- “a-” on $400 million 3.40%
senior unsecured notes, due 2025
-- “a-” on $505.6 million 6.05%
senior unsecured notes, due 2036
-- “a-” on $300 million 4.625%
senior unsecured notes, due 2042
-- “a-” on $300 million 4.35%
senior unsecured notes, due 2043
--“a-” on $350 million 3.10%
senior unsecured notes, due 2026
--“a-” on $300 million 4.30%
senior unsecured notes, due 2046
-- “bbb+” on $400 million 4.70%
junior subordinated notes, due 2055
Principal Life Global Funding I—“aa-” program rating
--
“aa-” on all outstanding notes issued under the program
Principal Life Global Funding II—“aa-” program rating
--
“aa-” on all outstanding notes issued under the program
Principal Financial Global Funding, LLC—“aa-” program rating
--
“aa-” on all outstanding notes issued under the program
Principal Financial Global Funding II, LLC—“aa-” program rating
--
“aa-” on all outstanding notes issued under the program
Principal Life Income Funding Trusts—“aa-” program rating
--
“aa-” on all outstanding notes issued under the program
The following Short-Term IR has been affirmed:
Principal Life Insurance Company—
-- AMB-1+ commercial paper
rating
The following indicative Long-Term IRs on securities available under universal shelf registration have been affirmed, with the outlook revised to positive from stable:
Principal Financial Group, Inc.—
-- “a-” on senior unsecured
debt
-- “bbb+” on subordinated debt
-- “bbb” on preferred stock
Principal Capital I, II and III—
-- “bbb” on preferred
securities
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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