AM Best has upgraded the Long-Term Issuer Credit Ratings (Long-Term ICR) to “aa” from “aa-” and affirmed the Financial Strength Rating of A+ (Superior) 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 Long-Term ICRs has been revised to stable from positive, while the outlook of the FSR remains stable.

Concurrently, AM Best has upgraded the Long-Term ICRs to “a” from “a-” of Principal Financial Services, Inc. and PFG, as well as PFG’s Long-Term Issue Credit Ratings (Long-Term IR). The outlook of these ratings has been revised to stable from positive. AM Best also has affirmed Principal Life Insurance Company’s Short-Term Issue Credit Rating (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. Lastly, AM Best has assigned Long-Term IRs of "aa" with stable outlooks to the newly issued program notes under Principal Life Global Funding II (Delaware).

The 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 very strong enterprise risk management (ERM).

The upgrade of the Long-Term ICR reflects the continued strengthening of Principal’s ERM program. Principal has demonstrated strong management capabilities through continued enhancements to its formalized risk appetite statement and risk tolerances to support the overall business strategy, increasing coordination between the business units and centralized risk management functions, as well as expansion of the company’s stress testing and modeling processes. The framework also benefits from the diversity of its insurance, asset management and international operations to identify and integrate best practices.

AM Best views Principal’s risk-adjusted capitalization as very strong, although growth in capital has been constrained by dividends to the parent company. The balance sheet strength also benefits from favorable financial flexibility and liquidity profiles, as well as a high quality investment portfolio. The company continues to report favorable growth trends and profitability metrics, benefiting from its diverse lines of business and distribution channels and leading market positions. The acquisition of Wells Fargo’s Institutional Retirement and Trust business in 2019 provides additional scale and diversification to Principal’s revenues, but is still subject to execution risk as the integration of personnel and IT systems continues. However, AM Best notes that political and macroeconomic events in several of its key international markets could have negative effects on the holding company going forward.

The following Long-Term IRs have been upgraded, with the outlook revised to stable from positive:

Principal Financial Group, Inc.—
-- to “a” from “a-” on $300 million 3.30% senior unsecured notes, due 2022
-- to “a” from “a-” on $300 million 3.125% senior unsecured notes, due 2023
-- to “a” from “a-” on $400 million 3.40% senior unsecured notes, due 2025
-- to “a” from “a-” on $350 million 3.10% senior unsecured notes, due 2026
-- to “a” from “a-” on $500 million 3.70% senior unsecured notes, due 2029
-- to “a” from “a-” on $505.6 million 6.05% senior unsecured notes, due 2036
-- to “a” from “a-” on $300 million 4.625% senior unsecured notes, due 2042
-- to “a” from “a-” on $300 million 4.35% senior unsecured notes, due 2043
-- to “a” from “a-” on $300 million 4.30% senior unsecured notes, due 2046
-- to “a-” from “bbb+” on $400 million 4.70% junior subordinated notes, due 2055

Principal Life Global Funding I—to “aa” from “aa-” on program rating
-- to “aa” from “aa-” on all outstanding notes issued under the program

Principal Life Global Funding II—to “aa” from “aa-” on program rating
-- to “aa” from “aa-” on all outstanding notes issued under the program

Principal Financial Global Funding, LLC—to “aa” from “aa-” on program rating
-- to “aa” from “aa-” on all outstanding notes issued under the program

Principal Financial Global Funding II LLC—to “aa” from “aa-” on program rating
--to “aa” from “aa-” on all outstanding notes issued under the program

Principal Life Income Fundings Trusts—to “aa” from “aa-” on program rating
--to “aa” from “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 upgraded, with the outlook revised to stable from positive:

Principal Financial Group, Inc.—
-- to “a” from “a-” on senior unsecured debt
-- to “a-” from “bbb+” on subordinated debt
-- to “bbb+” from “bbb” on preferred stock

Principal Capital I, II and III—
-- to “aa” from “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 Guide to 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.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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