UPDATE 1-Friedman raises Principal Financial, StanCorp rating

(Recasts, adds details)

May 26 (Reuters) - Friedman Billings Ramsey raised both Principal Financial Group Inc (PFG.N) and StanCorp Financial Group Inc (SFG.N) to "outperform" from "market perform," saying the insurers have enough capital cushion to absorb remaining credit losses.

Principal should experience significant credit losses in its low-rated commercial mortgage-backed securities and corporate debt portfolios, but can survive the current recession as it was able to raise $1.1 billion of equity and $745 million of debt capital, the brokerage said.

StanCorp's very small amount of delinquencies and ability to work out mortgages with borrowers make it a relative outperformer when applying loss assumptions, the brokerage said.

The brokerage raised its price targets on Principal stock to $27 and $20 and on StanCorp stock to $38 from $28.

The brokerage also raised its price targets on the stock of AFLAC Inc (AFL.N) and Prudential Financial Inc (PRU.N). [ID:nWNAB3275]

Principal shares closed at $20.58 Friday on the New York Stock Exchange. StanCorp closed at $28.55. (Reporting by Supantha Mukherjee in Bangalore; Editing by Anil D'Silva)