TEXT-S&P rates Principal Financial Group's notes 'BBB+'
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+ Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
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