Moody's: Principal outlook negative

Moody's Investors Service said it changed the outlook for Principal Financial Group, Inc. and its subsidiaries to negative from stable and affirmed their ratings, including the A2 senior debt ratings of Principal and Principal Financial Group Australia (Pty.) Ltd., the A1 surplus notes of Principal Life Insurance Co. and the Aa2 senior secured debt of Principal Income Fundings Trusts, Principal Global Funding LLC, Principal Global Funding I and Principal Global Funding II, LLC.

The outlook for Principal Financial Services, Inc.'s Prime-1 short-term rating for commercial paper remains stable.

The agency said the outlook change is due to continuing investment losses and weakening earnings capacity and follows Principal's announcement of fourth-quarter and full-year 2008 results, which included net income of $425 million for 2008, compared with $827 million for 2007.

The affirmation is based on Principal's strong position in the U.S. group pension markets, solid profitability, conservative asset-liability management and the company's excellent capital adequacy and strong liquidity, Moody's said.

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