���������ֳ�

���������ֳ�-Chicago-17 February 2009: ���������ֳ� has downgraded and placed on Rating Watch Negative the ratings of Principal Financial Group Inc. (PFG) and its subsidiaries. The downgrades and watch assignments include the insurer financial strength (IFS) ratings of PFG's primary life insurance company subsidiaries to 'AA-' from 'AA' and its holding company senior debt rating to 'A-' from 'A'. A full list of rating actions follows at the end of this release.

The downgrade reflects ���������ֳ�'s ongoing review of PFG's exposure to the current credit market turmoil and expectation of continued deterioration in 2009.

The Negative Rating Watch reflects ���������ֳ�'s concern over PFG's ability to successfully refinance a $455 million holding company debt maturity due later this year without drawing upon its insurance subsidiary capital. ���������ֳ� believes the adequacy of insurance company capital at the current 'AA-' insurer financial strength level will be tested in 2009 due to expected investment losses, without the added pressure of making significant dividend payments to the holding company. Therefore, ���������ֳ� will closely monitor the refinancing prospects for PFG. Inability to successfully refinance could result in a one-notch downgrade. Successful refinancing could result in an affirmation of current ratings with a Negative Outlook reflecting ���������ֳ�'s industry view.

���������ֳ� views the current capital levels of PFG's life insurance subsidiaries at the low end of rating expectations considering the risk contained in the investment portfolio. Combined statutory TAC for PFG is estimated at $5.1 billion at Dec. 31, 2008, which is $522 million or 11% more than year-end 2007. However, the 2008 TAC gain includes a $120 million benefit from an Iowa permitted practice related to admitting a portion of existing non-admitted deferred tax assets, which ���������ֳ� excludes for its analytical purposes.

Principal Life Insurance Company, PFG's lead operating company, expects to report a Risk Based Capital (RBC) ratio of 420% - 445% for year-end 2008, which is above both year-end 2006 and 2007 levels. However, in ���������ֳ�'s opinion, the potential for future investment impairment could lead to an RBC between 325% - 350% on a pro-forma basis. While lower than the reported result, this pro-forma RBC estimate remains strong in ���������ֳ�'s view.

Particular areas of concern in PFG's investment portfolio are its above average commercial mortgage-related investments and large exposure to the financial services sector; 27% and 29% of total investments, respectively. While PFG's commercial mortgage whole loans are performing well, commercial mortgage backed securities (CMBS) and CMBS collateralized debt obligations (CDOs) of 6% of total investments, have experienced credit deterioration in 2008. ���������ֳ� expects further credit deterioration in 2009. In addition, financial sector exposure includes substantial exposure to the Tier 1 capital structure of European banks, which ���������ֳ� believes are currently under stress.

Reflecting these facts, PFG recorded a $3.8 billion increase in GAAP gross unrealized pre-tax capital losses in the fourth quarter of 2008, primarily on mortgage-related and fixed maturity corporate securities. For the entire year, GAAP shareholder's equity declined by 67% to $2.5 billion due mainly to these unrealized losses. However, based on PFG's strong liquidity, ���������ֳ� does not anticipate the company will have to liquidate assets at depressed prices to fund maturing operating company liabilities.

PFG's exposure to risks in other investment securities is considered manageable. PFG's exposure to residential mortgage-related investments at about 8% of total investments is manageable. Structured residential mortgage securities are relatively limited at 2% of total investments (including a 1% exposure to subprime and Alt-a related investments.
PFG's exposure to below investment grade (BIG) bonds has been stable at about 3.6% of total U.S. invested assets or 39% of TAC at Dec. 31, 2008.

PFG continues to hold a favorable operating profile reflecting the company's strong market position in the employee benefit insurance business. Positively, the company has modest exposure to the troubled variable annuity segment, where movements in the equity markets have negatively impacted reserves. However, operating earnings in 2009 will be negatively impacted by the sensitivity of the asset management and pension businesses to financial market and economic conditions.

���������ֳ� downgrades the following ratings and places them on Rating Watch Negative:

Principal Financial Group:
--Issuer Default Rating (IDR) to 'A' from 'A+';
--$600 million senior unsecured debt, 6.05% due Oct. 15, 2036 to 'A-' from 'A';
--5.563% preferred stock due 2015, series A to 'BBB+' from 'A-';
--6.518% preferred stock due 2035, series B to 'BBB+' from 'A-'.

Principal Financial Services Inc.:
--IDR to 'A' from 'A+'.
--Senior debt rating to 'A-' from 'A';
--$465 million 8.2% due Aug. 15, 2009 to 'A-' from 'A'.

Insurance subsidiaries:

Principal Life Insurance Company:
--IFS to 'AA-' from 'AA';
--IDR to 'A+' from 'AA-';
--Surplus notes to 'A' from 'A+';
--$100 million due March 1, 2044 to 'A' from 'A+'.

Principal National Life Insurance Company:
--IFS to 'AA-' from 'AA'.

The following funding agreement backed notes issuance programs and their outstanding issues are downgraded to 'AA-' from 'AA':

--Principal Financial Global Funding LLC;
--Principal Life Income Fundings Trust;
--Principal Life Global Funding I;
--Principal Financial Global Funding II, LLC.

���������ֳ� also affirms the following rating:

Principal Financial Services Inc.:
--Commercial paper at 'F1'.

Contact: Bruce Cox +1-312-606-2316 or Julie Burke +1-312-368-3158, Chicago.

Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278, Email: sandro.scenga@fitchratings.com.