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���������ֳ� - New York - 11 Jul 2019: ���������ֳ� has affirmed the 'AA-' (Very Strong) Insurer Financial Strength (IFS) ratings of Principal Financial Group, Inc.'s (PFG) U.S. operating subsidiaries. ���������ֳ� has also affirmed PFG's Long-Term Issuer Default Rating (IDR) at 'A' and senior unsecured debt at 'A-'. The Rating Outlook is Stable. A full list of rating actions follows at the end of this release.

Key Rating Drivers

The rating affirmation reflects PFG's very strong and stable operating profitability and a very strong business profile, which reflects the company's market position and significant operating scale focusing on small and midsize businesses in the retirement market. The ratings also consider PFG's very strong capitalization and moderately above-average investment risk. PFG has above average investment exposure to commercial real estate through direct mortgages, structured mortgage securities, and direct real estate investments.

MAIN DRIVERS

���������ֳ� considers PFG's operating profitability to be very strong and stable. PFG's pretax operating earnings were approximately $1.6 billion for full year 2018, equating to an annualized ROE of 14%, which is solidly within expectations for the company's current ratings. ���������ֳ�'s view on operating performance also considers the company's strong track record of earnings stability over various market cycles, which ���������ֳ� attributes to the company's diversified business mix by product and geography.

PFG's very strong business profile supports its current rating, reflecting a strong market position and significant operating scale in the retirement market. PFG recently announced the completion of its acquisition of Wells Fargo's institutional retirement and trust business in July 2019. ���������ֳ� views the acquisition to be broadly consistent with the company's strategy of maintaining a strong market position among small and midsize businesses in the retirement market and to further gain operating scale in the competitive and fragmented retirement market. On a pro forma basis, PFG ranks among the top four defined contribution record-keepers by number of participants and by number of plans.

���������ֳ� considers PFG's capitalization to be very strong, supported by the organization's primary insurance operating company, PLIC, which reported a 6% YoY increase in total adjusted capital and a risk-based capital ratio (RBC) of 417% at Dec. 31, 2018. The company targets a consolidated RBC of 400%. PFG's PRISM capital model score is expected to be 'Very Strong', which is appropriate for the company's current rating category.

Pro forma financial leverage for PFG, which includes recently issued senior notes in 2Q19, was 24% as of March 31, 2019, and is within expectations for the current ratings. ���������ֳ� expects financial leverage to remain below 25% over the intermediate term.

���������ֳ� views the credit quality of PFG's investments as improved and the investment risk to be moderately above-average relative to the industry. PFG's statutory surplus exposure to risky assets, which ���������ֳ� defines as below investment-grade (BIG) securities, troubled real estate, unaffiliated common equity and Schedule BA other invested assets, has declined substantially over the past two years, driven by a meaningful reduction in the company's BIG bonds to 4% of total bonds in 2018 from a high of 8% in 2015. PFG's risky asset ratio is modestly below the life industry average as of YE 2018.

���������ֳ� also considers PFG's allocation to direct commercial mortgages to be above average relative to life insurer peers and views the level of exposure to be a credit negative. In addition to $14.3 billion in direct commercial loans and $3.6 billion in CMBS holdings as of YE 2018, the company also has direct commercial real estate investments. PFG's investment portfolio continued to perform within expectations as the company's realized investment losses remained at manageable levels in 2018.

Rating Sensitivities

Key rating sensitivities that could result in an upgrade include:

--Improved diversification of the company's sources of revenue and earnings;

--Sustainable ROE of 12% or higher and fixed-charge coverage above 12x;

--Low volatility in earnings and capital over an extended period of time;

--Financial leverage below 20%;

--A PRISM capital model score of 'Extremely Strong'.

Conversely, key rating sensitivities that could result in a downgrade include:

--Run-rate ROE below 10% and a GAAP-based fixed-charge coverage ratio below 7x;

--A decline in the company's reported RBC ratio to a level below 375% or a PRISM capital model score of 'Strong';

--Sustained increase in financial leverage to a level above 25%.

Additional information is available on

Additional Disclosures

• Dodd-Frank Rating Information Disclosure Form
• Solicitation Status
• Endorsement Policy