JANUARY 25, 2017 11:30 AM (EST)
A.M. Best Affirms Credit Ratings of Principal Financial Group, Inc. and Its Subsidiaries
|Kate Steffanelli |
Senior Financial Analyst
+1 908 439 2200, ext. 5063
Ken Johnson, CFA, CAIA, FRM
+1 908 439 2200, ext. 5056
Manager, Public Relations
+1 908 439 2200, ext. 5159
Director, Public Relations
+1 908 439 2200, ext. 5644
FOR IMMEDIATE RELEASE
OLDWICK - JANUARY 25, 2017 11:30 AM (EST)
A.M. Best has 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 (PLIC) and Principal National Life Insurance Company. Both are life insurance operating companies of Principal Financial Group, Inc. (PFG) [NYSE: PFG], which is headquartered in Des Moines, IA. These companies are collectively referred to as Principal. Concurrently, A.M. Best has affirmed the Long-Term ICR of “a-” of PFG, as well as the group’s existing Long- and Short-Term Issue Credit Ratings (Long-Term IR; Short-Term IR). The outlook of these Credit Ratings (ratings) is stable.
Principal’s rating affirmations reflect the continued solid risk-adjusted capitalization of the organization, as well as its well-managed balance sheet, its strong business profile, reflecting diverse products and distribution channels, and the company’s consistently favorable operating results. Partially offsetting these positive attributes is Principal’s elevated exposure to higher risk assets, which are predominantly real-estate related assets and lower-rated bonds, as well as its growing exposure to country risk, specifically as several of the countries Principal operates in possess moderate levels of political and financial risk.
Through the nine months ending Sept. 30, 2016, Principal reported good sales and operating results across its various reporting segments. The company offers a diverse array of insurance and investment–related products through its key business segments, Retirement and Income Solutions, Principal International, Principal Global Investors and U.S. Insurance Solutions, with just under 70% of operating earnings being driven by fee-based businesses. Principal’s global businesses provide favorable diversity to the overall operations, and position the company for continued growth outside of the United States in Latin America and Asia.
A.M. Best notes that PLIC, the lead life insurance entity, remains the primary servicer of the holding company’s needs, with the insurance company upstreaming over $700 million to PFG through the third quarter of 2016. While PLIC historically has maintained a more-than-adequate level of risk-adjusted capitalization, given its insurance and investment-related risks, it is on the lower end relative to similarly rated peers. Financial flexibility for the organization is considered good, with debt-to-capital of roughly 24% and interest coverage at over 10 times. PFG recently improved its debt maturity profile with new debt financing.
Principal also is a well-recognized global investment manager, providing services internally and externally to third parties. While A.M. Best notes a material exposure to mortgage and real estate-related assets, the concern is offset somewhat by Principal’s high quality portfolio, with commercial mortgage loans having a 46% average loan-to-value and 2.8 times debt service coverage, and commercial mortgage-backed securities that predominantly are rated NAIC classes 1 and 2. The company’s elevated exposure in these asset classes will continue to be monitored actively for volatility.
For a complete listing of Principal Financial Group, Inc. and its subsidiaries’ FSRs, Long-Term ICRs and Long- and Short-Term IRs, please visit Principal Financial Group, Inc.
This press release relates to Credit Ratings that have been published on A.M. 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 A.M. 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.
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