Fitch has also affirmed and withdrawn the ratings of PFG's funding agreement-backed notes issuance programs, as the ratings are no longer considered by Fitch to be relevant to the agency's coverage. A full list of rating actions is shown below.
KEY RATING DRIVERS
The ratings affirmation reflects PFG's strong capitalization and stable, balanced operating profitability, partially offset by increased financial leverage and above-average exposure to direct mortgages and structured mortgage securities.
The revision in the company's Rating Outlook to Stable from Negative primarily reflects diminishing concerns related to execution risk associated with PFG's integration of AFP Cuprum S.A. (Cuprum), which it acquired in
PFG's financial leverage was approximately 22.6% at
In 1Q'14, PFG reported pre-tax operating earnings of
As a result of improving earnings, fixed charge coverage increased to approximately 8.5x in 2013 from approximately 6.8x in 2012. In 1Q'14, fixed charge coverage was 10.0x. While Fitch expects PFG to continue to generate solid, stable earnings on its growing fee-based businesses, low market interest rates, continued competitive pressures and less robust capital market conditions are likely to restrain earnings growth in the intermediate term.
PFG's strong capitalization is supported by the organization's primary insurance operating company, PLIC, which reported a risk-based capital ratio (RBC) of 438% at
Fitch considers PFG's allocation to direct mortgages to be above average relative to the life insurance sector as a whole. In addition to
PFG, headquartered in
The key rating triggers that could result in an upgrade include:
--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%;
--Reported RBC ratio above 475%.
The key rating triggers that could result in a downgrade include:
--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%;
--Increase in financial leverage to a level above 25% debt-to-total capital.
Fitch has affirmed the following ratings and revised the Outlook to Stable from Negative:
Principal Financial Group, Inc.
--IDR at 'A';
--5.563% preferred stock due 2015, series A at 'BBB';
--6.518% preferred stock due 2035, series B at 'BBB'.
--Long-term IDR at 'A';
--Short-term IDR at 'F1;
--Commercial paper at 'F1'.
--IFS at 'AA-'.
Principal National Life Insurance Company
--IFS at 'AA-'.
Fitch has affirmed and withdrawn the following rating as the company has redeemed all surplus notes issued by
--IDR at 'A+'.
Fitch has also affirmed and withdrawn the ratings on the following funding agreement-backed notes issuance programs and their outstanding issues at 'AA-':
--Principal Life Global Funding I
Additional information is available at 'www.fitchratings.com'.
--'Insurance Rating Methodology' (
--'Life Insurance (U.S.) Sector Credit Factors' (
Insurance Rating Methodology
Life Insurance (U.S.) Sector Credit Factors
Source: Fitch Ratings
Most Popular Stories
- Cantwell Targets Gender Gap in Small-Business Loans
- Chrysler Gets Nod as a Top Employer for Hispanic Women
- Hispanic Entrepreneurs Set Pace in Florida
- Health-care Deal Aids Port Contract Talks
- FBI Probes JPMorgan Hack
- South Korea's Kia to Invest $1 Billion in Mexico
- Perry's Lawyers Try to Close Abuse Case
- Mario Lopez Inks New Clear Channel Deal
- What's the Law for Kids at Gun Ranges?
- Apple Loses Bid to Block Sales of 9 Samsung Phones