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���������ֳ� - New York - 30 Jun 2022: ���������ֳ� 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 for PFG is Stable.

Key Rating Drivers

The rating affirmation reflects PFG'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 market. The ratings also consider PFG's very strong capitalization and moderately above-average investment risk.

���������ֳ� views PFG's agreement to cede its in-force U.S. retail fixed annuity and universal life insurance with secondary guarantee (ULSG) blocks to Sutton Cayman, Ltd., an affiliate of Talcott Resolution Life, Inc., a subsidiary of Sixth Street Partners, LLC. earlier this year as neutral to the rating. The incremental decline in business diversification is largely offset by the lower business risk profile due to the divestiture of the ULSG block.

PFG exhibited very strong operating performance in 2021. Reported operating earnings of $1.8 billion was driven by favorable market conditions, generating higher than expected variable investment income. Additionally, assets under management (AUM) and account balances increased yoy, leading to higher spreads and management fee income on AUM. Given the less favorable market environment, ���������ֳ� expects earnings to deteriorate in 2022 but to remain aligned with rating expectations. PFG's earnings are less interest-sensitive than its peers, given its material proportion of fee-based earnings.

PFG's very strong company profile reflects the company's leading market position and significant operating scale as a retirement plan provider, recordkeeper and as an asset manager. PFG has a higher concentration of small and midsize businesses relative to the industry and is a leading provider of defined contribution plans and recordkeeping, with respect to assets under administration and plan participants.

The ratings also consider PFG's very strong capitalization, supported by the organization's reported RBC ratio of 416% as of YE 2021, which is above the company's consolidated RBC target of 400%. PFG's Prism capital model score is 'Very Strong', in line with 'aa' rating expectations. PFG's financial leverage ratio is currently below 25% pro-forma for a $300 million maturity in 3Q22. ���������ֳ� expects PFG to continue managing capitalization and leverage in line with rating expectations.

PFG has moderately above-average investment exposure to commercial real estate through direct mortgages, structured mortgage securities, and direct real estate investments. This exposure is marginally offset by a high-quality portfolio, long track record and favorable performance. 97% of the company's commercial mortgage loan portfolio is allocated to the NAIC's highest rated categories of CM1 and CM2, and mortgage loan credit losses have been benign.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive rating action/upgrade:

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

--Sustainable return on equity 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'.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

--Run-rate return on equity 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%.

Best/Worst Case Rating Scenario

International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit /site/re/10111579

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

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This 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. For more information on ���������ֳ�'s ESG Relevance Scores, visit

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, v1.3.1-2021 (1)

ADDITIONAL DISCLOSURES

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

ENDORSEMENT STATUS