OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has assigned a debt rating of “a-” to $400 million 3.4% 10-year senior unsecured notes of Principal Financial Group, Inc. (Principal) (Des Moines, IA) [NYSE: PFG]. Concurrently, A.M. Best has assigned a debt rating of “bbb+” to $400 million 4.7% fixed-to-floating junior subordinated notes due 2055 recently issued by Principal. Both tranches of securities are fully and unconditionally guaranteed by the group’s intermediate holding company, Principal Financial Services, Inc. The outlook assigned is stable. Principal’s existing issuer credit and debt ratings are unchanged.
A.M. Best expects Principal to utilize the proceeds from these issuances to redeem its $300 million Series A non-cumulative perpetual preferred stock and $250 million Series B non-cumulative perpetual preferred stock, in whole or in part, and the remainder, if any, for general corporate purposes. As such, Principal’s adjusted financial leverage ratio will increase slightly to about 25%. The junior subordinated notes receive minimal equity credit per A.M. Best’s criteria given the issuer call option that can be exercised in five years. A.M. Best notes that Principal has good overall financial flexibility and strong interest coverage of roughly 10 times.
Principal’s ratings reflect the group’s diversified revenue sources, consistent operating earnings, solid balance sheet and positive net flows across most business segments. The ratings also reflect Principal’s position as a leading provider of defined contribution plans, defined benefit plans, plan termination annuities and nonqualified plans in the United States. Partially offsetting these strengths are the group’s lower risk-adjusted capitalization relative to similarly-rated peers, augmented country risk due to the rapid expansion of its international operations and notable exposure to higher-risk assets within its investment portfolio.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
- Insurance Holding Company and Debt Ratings
- Equity Credit for Hybrid Securities
- Analyzing Insurance Holding Company Liquidity
This press release relates to rating(s) 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 visit A.M. Best’s Ratings & Criteria Center.
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