Principal Financial ratings affirmed by Fitch, outlook remains stable

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Principal Financial ratings stable

Highlights

Fitch affirms Principal Financial’s U.S. operating subsidiaries at AA-, company Long-Term Issuer Default Rating at A, and outlook as stable.
Principal Financial reports $1.9 billion in after-tax operating earnings for 2025 versus $1.6 billion in 2024, driven by higher net investment income and stronger asset management fees.
Commercial real estate accounts for 22% of 2025 invested assets, with 97% of commercial mortgage loans in top NAIC CM1 and CM2 categories, up from 94% in 2024.

Rating rationale and financial profile

As reported by Fitch Ratings, the agency affirms the Insurer Financial Strength ratings of Principal Financial Group’s U.S. operating subsidiaries at AA-, while also affirming the company’s Long-Term Issuer Default Rating at A and senior unsecured debt at A-. The outlook remains stable.

Fitch says the affirmation reflects very strong and stable operating performance, a very strong company profile, strong capitalization and moderately above-average investment risk. The agency points to Principal Financial’s scale and leading positions in U.S. retirement, benefits and protection, and asset management, particularly its focus on small and midsize businesses that supports customer retention.

Fitch also describes the company’s product risk profile as conservative relative to the industry, with below-average interest rate risk because of its concentration in defined contribution retirement business. Reported after-tax operating earnings rise to $1.9 billion in 2025 from $1.6 billion in 2024, supported by higher net investment income and slightly higher asset management fees linked to stronger market performance.

Capital strength and exposure risks

Statutory capitalization remains very strong, with Principal Life Insurance Company reporting a risk-based capital ratio of 406% at year-end 2025, modestly above the group’s consolidated target range of 375% to 400%. Fitch says the company’s U.S. Life Prism capital model score for 2024 is very strong and aligned with aa rating expectations, and it expects that assessment to remain in the same category at year-end 2025.

Financial leverage stands at 22% at year-end 2025, down slightly from 23% a year earlier because of adjusted equity growth, and remains at 22% in the first quarter of 2026. Fitch says macroeconomic and geopolitical uncertainty may still weigh on equity markets and earnings through lower asset values and fee income, although earnings diversification and capitalization partly offset those risks.

The agency says Principal Financial maintains moderately above-average exposure to commercial real estate through direct mortgages, structured mortgage securities and direct real estate investments. Commercial real estate accounts for 22% of invested assets at year-end 2025, excluding funds withheld, down from 24% a year earlier, while 97% of the commercial mortgage loan portfolio sits in the National Association of Insurance Commissioners’ top CM1 and CM2 categories, up from 94% at year-end 2024.

Office loans represent 17% of mortgage loan exposure at year-end 2025, compared with 18% a year earlier, and Fitch says losses remain benign even though they are expected to trend upward over coming periods. The agency also expects recent private credit volatility to have minimal effect on the company because of below-average exposure to illiquid bonds and a large institutional client base in asset management.

Our earlier coverage of KBRA’s Q2 2026 U.S. credit outlook highlighted that spreads were recovering after Q1 widening while yields still offered income and diversification in a volatile environment. We noted KBRA’s base case of continued U.S. economic resilience and corporate earnings support, but with key risks centered on sticky inflation, geopolitical tensions in the Middle East affecting commodity prices, and elevated equity valuations despite AI-driven investment tailwinds.

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