A.M. Best Affirms Credit Ratings of Principal Financial Group, Inc. and Its Subsidiaries
February 13, 2018 at 16:41 PM 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 and Principal National Life Insurance Company. Both are life insurance operating companies of Principal Financial Group, Inc. (PFG) [Nasdaq: PFG].These companies are collectively referred to as Principal and are headquartered in Des Moines, IA. 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.
The ratings reflect Principal’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its favorable operating performance, favorable business profile and appropriate enterprise risk management. Principal’s risk-adjusted capitalization is considered very strong and favorable relative to similarly rated peers as of year-end 2017. Additionally, the organization’s financial leverage of 19.6% and interest coverage of over 12 times remain appropriate for its current rating. The company manages a well-diversified investment portfolio of public and private corporate bonds, structured securities and commercial mortgage loans, with a strategy that has been relatively consistent over the past few years. However, Principal currently maintains a somewhat elevated exposure to higher risk assets, which are predominantly real-estate related assets and lower-rated bonds, though liquidity metrics remain more than adequate for the organization.
Principal’s favorable operating performance reflects its sustained, favorable level of GAAP and statutory operating income reported and favorable sales and premiums metrics tied to its core offerings in its various reporting segments. Principal’s fee-based products generated over sixty percent of GAAP operating earnings, and the company has reported record assets under management as of year-end 2017. A.M. Best notes that the company’s net income reflected a sizable benefit from the U.S. Tax Cuts and Jobs Act in fourth-quarter 2017. Overall operating expenses, while somewhat elevated relative to prior year, reflect Principal’s strategic investments in its various business segments.
Principal retains a leading position in the market for retirement plans domestically and internationally, and is a top-five carrier in domestic Specialty Benefits and Retirement markets. The company benefits from the diversity of its product and distribution channels across multiple operating segments and continues to grow organically and through acquisition in the United States, and in Latin America and Asia. As it expands internationally, A.M. Best continues to monitor the organization’s potential for exposure to country risk, specifically as several of the countries Principal operates in possess moderate levels of political and financial risk.
For a complete listing of Principal Financial Group, Inc.’s 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. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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