AM Best has commented that the Credit Ratings (ratings) of Principal Financial Group, Inc. [Nasdaq:PFG] (headquartered in Des Moines, IA) and its insurance subsidiaries (Principal) remain unchanged following the announcement that the company has signed a definitive agreement to acquire Wells Fargos Investment Retirement and Trust business. Under the agreement, the purchase price is $1.2 billion in cash, with up to an additional $150 million payable in two years based on revenue retention.
The transaction increases Principals U.S. retirement business assets under administration by approximately $820 billion from almost four million plan participants across retirement and non-retirement trust and custody, defined benefit and defined contribution accounts. AM Best notes that the acquired business will be held outside Principals domestic insurance operations upon transaction close with the expectation that this business will be transitioned through its domestic insurance entities over time. As a result, the immediate impact on the ratings of Principals insurance operations are modest, but support improving diversification, scale and profitability over the long-term. The transaction is expected to close in the third quarter of 2019, pending regulatory approval.
On Feb. 21, 2019, AM Best revised the outlook to positive from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term ICR of aa-of Principal Life Insurance Company and Principal National Life Insurance Company. The outlook of the FSR remains stable. The ratings reflect Principals balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM). The positive outlook reflects the continued strength and evolution of the organizations ERM capabilities.
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