A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of “aa-” of Principal Life Insurance Company and Principal National Life Insurance Company (together referred to as Principal Life). Both are life insurance operating companies of Principal Financial Group, Inc. (PFG) [NYSE: PFG]. The outlook for these ratings is stable.
A.M. Best also has affirmed the ICR of “a-” of PFG as well as all existing debt ratings. Concurrently, A.M. Best has assigned debt ratings of “a-” to each of the three senior unsecured notes recently issued by PFG. The outlook assigned to these ratings is stable. All companies are domiciled in Des Moines, IA. (Please see link below for a detailed listing of the companies and ratings.)
Principal Life’s ratings reflect its diversified operating earnings, record assets under management, solid risk-adjusted capitalization and its continued performance improvement within its investment portfolio. The ratings also reflect the strong enterprise risk management (ERM) capabilities of PFG.
PFG continues to generate favorable operating earnings across its multiple business segments. The group's expanded product diversification, controlled distribution strategy and ongoing expense management have contributed to its consistent earnings. Additionally, the composition of PFG's business is less reliant on its spread-based products relative to its fee-based products. PFG continues to generate significant improvement in net flows, primarily from its Full Service Accumulation and Principal Funds businesses within the Retirement and Investor Services segment, in addition to positive net flows within the Principal International and Principal Global Investors business segments, where its assets under management (AUM) has continued to grow. The fee income generated from the organization's record AUM has been able to offset the decline in its net investment income for the year. Net income also has benefited from the improved performance of its investment portfolio. PFG's net realized losses have decreased considerably since the recent economic crisis. However, A.M. Best expects realized losses to continue in 2013 as more of its commercial mortgage-backed securities portfolio continues to mature. A.M. Best notes PFG's ERM has been an area of strength for a number of years. A.M. Best believes that PFG’s recent independent review from an outside audit company will only enhance the risk management capabilities of an already strong program.