AM Best Comments on Credit Ratings of Principal Financial Group, Inc. and Its Subsidiaries Following Acquisition Announcement
April 16, 2019 by AM Best
OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has commented that the Credit Ratings (ratings) of Principal Financial Group, Inc. [Nasdaq:PFG] (headquartered in Des Moines, IA) and its insurance subsidiaries (Principal) remain unchanged following the announcement that the company has signed a definitive agreement to acquire Wells Fargo’s Investment Retirement and Trust business. Under the agreement, the purchase price is $1.2 billion in cash, with up to an additional $150 million payable in two years based on revenue retention.
The transaction increases Principal’s U.S. retirement business’ assets under administration by approximately $820 billion from almost four million plan participants across retirement and non-retirement trust and custody, defined benefit and defined contribution accounts. AM Best notes that the acquired business will be held outside Principal’s domestic insurance operations upon transaction close with the expectation that this business will be transitioned through its domestic insurance entities over time. As a result, the immediate impact on the ratings of Principal’s insurance operations are modest, but support improving diversification, scale and profitability over the long-term. The transaction is expected to close in the third quarter of 2019, pending regulatory approval.
On Feb. 21, 2019, AM Best revised the outlook to positive from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term ICR of “aa-”of Principal Life Insurance Company and Principal National Life Insurance Company. The outlook of the FSR remains stable. The ratings reflect Principal’s balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM). The positive outlook reflects the continued strength and evolution of the organization’s ERM capabilities.
This press release relates to Credit Ratings that have been published on AM 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 see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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Keith Behrmann, CFA, CAIA, ChFU, CLU
Senior Financial Analyst
+1 908 439 2200, ext. 5733
Ken Johnson, CFA, CAIA, FRM
+1 908 439 2200, ext. 5056
Manager, Public Relations
+1 908 439 2200, ext. 5159
Director, Public Relations
+1 908 439 2200, ext. 5644