A.M. Best retained the issuer credit ratings (ICR) of “a-” of Principal Financial Group, Inc. (PFG). Concurrently, the rating agency reiterated the financial strength rating (FSR) of A+ (Superior) and the ICR of “aa-” of Principal Life Insurance Company (PLIC) and Principal National Life Insurance Company, the subsidiaries. The outlook for the ratings remains stable.
The rating affirmations came on the back of its premier position as a provider of defined contribution plans, defined benefit plans, termination annuities and nonqualified plans in the United States. It also has a steady earnings stream, ample revenue generating sources, a solid balance sheet and positive net flows across most business segments. However, lower risk-adjusted capitalization, operational risks due to expansion global footprint and exposure to higher-risk assets within its investment portfolio dwarf its positives.
Principal’s intensified focus on fee-based revenue sources is leading to steady earnings and generating cash flows apart from limiting exposure to the interest rate environment. The asset manager has been able to deliver solid results on the strength of its expansive product portfolio, distribution strategy and cost containment.
Though any rating upgrade is unlikely in the near to medium term, the slide in its competitive position, deteriorating operating performance and/or erosion in risk-adjusted capitalization will subject ratings to downgrade.
Rating affirmations or upgrades from credit rating agencies play an important role in retaining investors’ confidence in the stock and maintaining credit worthiness in the market, helping it raise money easily. We believe that the company’s strong score with the credit rating agencies will help it write more business going forward.
Principal Financial presently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked investment managers include Affiliated Managers Group Inc. (AMG), Brookfield Asset Management Inc. (BAM) and Janus Capital Group, Inc. (JNS). While Affiliated Managers sports a Zacks Rank #1 (Strong Buy), Brookfield Asset Management and Janus Capital carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment