TEXT-S&P rates Principal Financial Group's notes 'BBB+'

Tue Nov 13, 2012 12:18pm EST

Nov 13 - Standard & Poor's Ratings Services today said that it assigned its
'BBB+' rating to Principal Financial Group Inc.'s issuances of
approximately $750 million in senior unsecured notes due in 2017, 2023, and
2043. Principal will use the proceeds to complete its planned acquisition of
Chile-based AFP Cuprum. The 'BBB+' rating on Principal Financial Group, Inc. and
the 'A+/A-1' ratings on its lead U.S. life insurance company, Principal Life
Insurance Co. remain unchanged. The outlook is negative.

As of Sept. 30, 2012, Principal Financial Group reported total balance-sheet 
assets of $159 billion, total assets under management of $392 billion, and 
total common shareholders' equity before accumulated other comprehensive 
income of $8.4 billion. The company reported strong operating earnings, 
excluding realized gains and losses, of $564 million for the first nine months 
of the year. As of Sept. 30, 2012, Principal Financial had a satisfactory debt 
leverage ratio of 24.1% and a total financial leverage ratio of 29.8% relative 
to the rating level. Given the company's strong earnings generation, 
fixed-charge coverage (EBITDA divided by fixed charges) was a healthy 7.1x for 
the first nine months of the year. Postissuance, Principal Financial Group 
will have a debt leverage ratio of 28.1%, total financial leverage ratio of 
33.5%, and fixed-charge coverage of 6.8x. 

While the total financial leverage would be within the 35% tolerance generally 
viewed as acceptable for the current ratings, debt-funded double leverage as 
defined by Standard & Poor's would be in excess of the 20% limit as set out 
within our insurance ratings criteria. Debt in excess of 20% leverage that 
does not otherwise qualify for equity treatment under our criteria will 
adversely affect the quality of capital because the excess amount would be 
deducted from available operating company capital in our capital model as 
stated within our criteria. Assuming our base case economic scenario in 2013, 
we would expect Principal Financial to generate a generally accepted 
accounting principles EBIT and fixed charge coverage ratio (EBITDA divided by 
fixed charges) of at least $1.05 billion and 6x, respectively; net realized 
capital losses (after taxes) to remain below $250 million; and capital 
adequacy to continue supporting the ratings.

RELATED CRITERIA AND RESEARCH
Holding Company Analysis, June 11, 2009

RATINGS LIST
Principal Financial Group, Inc.  
Counterparty credit rating              BBB+/Negative/--

Ratings Assigned
Senior Unsecured 
$250 million 5 years                    BBB+
$250 million 10 years                   BBB+
$250 million 30 years                   BBB+


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