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���������ֳ� - New York - 08 May 2025: ���������ֳ� has affirmed the Insurer Financial Strength (IFS) ratings of Principal Financial Group, Inc.'s (Principal Financial) U.S. operating subsidiaries at 'AA-' (Very Strong). ���������ֳ� has also affirmed Principal Financial's Long-Term Issuer Default Rating (IDR) at 'A' and senior unsecured debt at 'A-'. The Rating Outlook for Principal Financial is Stable.

The rating affirmation reflects Principal Financial's 'Very Strong' and stable operating performance and its 'Very Strong' company profile, which is driven by the company's market position and significant operating scale focusing on small and midsize businesses in the retirement and benefits markets. The ratings also consider Principal Financial's very strong capitalization and moderately above-average investment risk.

Key Rating Drivers

'Very Strong' Company Profile: Principal Financial Group, Inc.'s 'Very Strong' company profile reflects its leading market position and significant operating scale. ���������ֳ� views Principal Financial's leading position in the U.S. retirement, benefits and protection, and asset management markets favorably. Within the U.S. retirement, and benefits and protection segments, the company focuses on small and mid-sized businesses, leading to strong retention.

The company's latest acquisition of Ascensus's employee stock ownership plan (ESOP) recordkeeping business in 2024 strengthens its position as a leading ESOP service provider in the U.S. Principal Financial also has a strong market share as a global asset manager and as a leading pension provider in Latin America and Asia.

Conservative Product Risk: ���������ֳ� views Principal Financial's product risk profile as conservative relative to the industry. The company also has below-average interest rate risk due to its focus on the defined contribution retirement business. The company's liability profile is weighted towards fee-based and protection-based products after the 2022 reinsurance transaction with Talcott Financial Group, Ltd.

Stable Operating Performance: ���������ֳ� considers Principal Financial's operating performance as very strong, with reported operating earnings of $1.6 billion in 2024, in line with 2023 results. Operating earnings were driven by higher net investment income due to higher new money rates and slightly higher fees in asset management resulting from stronger market performance. These gains were partially offset by slightly higher operating expenses. ���������ֳ� views the company's earnings as less interest-sensitive than those of its peers, due to its material proportion of fee-based earnings. Operating earnings were $415 million in 1Q25, slightly higher than $394 million in 1Q24.

Macroeconomic and geopolitical uncertainty may affect equity markets and Principal Financial's earnings through declines in asset values and fee income. However, ���������ֳ� views the company's 'Very Strong' capitalization and earnings diversification as partial risk mitigants.

'Very Strong' Capitalization: Statutory capitalization remained very strong, with a reported risk-based capital (RBC) ratio for Principal Life Insurance Company of 404% as of YE 2024, which is above the company's consolidated RBC target of 375% to 400%. Principal Financial's 2024 U.S. Life Prism capital model score is 'Very Strong', which is in line with the 'aa' rating expectations. Principal Financial's financial leverage was 23% as of YE 2024, slightly higher than 22% as of YE 2023. As of 1Q25, financial leverage increased to 24% due to the exercise of its 2028 pre-capitalized trust securities and within its 20% to 25% target. Financial leverage is expected to decline in 2Q25 following the maturity of $400 million of senior notes in May.

Above-Average Investment Exposure: Principal Financial has moderately above-average investment exposure to commercial real estate through direct mortgages, structured mortgage securities, and direct real estate investments. Commercial real estate was 24% of invested assets as of YE 2024, excluding funds withheld, down slightly compared to 25% as of YE 2023. This exposure is marginally offset by a high-quality portfolio, long track record, and favorable performance.

As of YE 2024, 94% of the company's commercial mortgage loan portfolio was allocated to the National Association of Insurance Commissioners' highest-rated categories of Commercial Mortgage (CM) 1 and CM2, in line with YE 2023. Office loans represent 18% of Principal Financial's mortgage loan exposure as of YE 2024, down from 22% YoY, and in-line compared with the industry. Loan losses have been benign but ���������ֳ� expects them to trend upward over the coming periods. However, ���������ֳ� expects losses related to commercial mortgage loans to remain manageable in relation to capital.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

--Run-rate return on equity (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 below 'Very Strong';

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

--Deterioration in asset performance and quality, particularly in the commercial real estate portfolio, resulting in increased impairments or realized losses that lead to material capital or earnings degradation.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

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

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

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

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

--Financial leverage below 20%;

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. ���������ֳ�'s ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on ���������ֳ�'s ESG Relevance Scores, visit /topics/esg/products#esg-relevance-scores.

Additional information is available on

APPLICABLE MODELS

Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).

• Prism U.S. Life Insurance Capital Model, v1.3.5-2024 (1)

ADDITIONAL DISCLOSURES

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

ENDORSEMENT STATUS