Moody’s stabilizes Principal view

Moody's Investors Service said it affirmed the Baa1 senior backed unsecured debt rating of the Principal Financial Group, Inc., guaranteed by Principal Financial Services, Inc., Baa1 the issuer rating of PFSI, and returned the outlook to stable from positive.

“The rating action follows the PFG's announcement that Principal Life and certain affiliates had entered into a Master Transaction Agreement with Sutton Cayman, Ltd. (Sutton Cayman), a subsidiary of Sixth Street, to reinsure its guaranteed universal life insurance (GUL) and fixed annuity businesses for a net negative ceding commission of $189 million. PFG expects the transaction, together with additional capital transactions related to its in-force life insurance blocks, to generate $800 million in deployable proceeds upon closing, which the firm intends to return to shareholders through share repurchases,” Moody’s said in a press release.

“The return to a stable outlook reflects the net result of the different transactions, their positive credit attributes being more than offset by shareholder friendly activities, as well as the introduction of counterparty risk, and uncertainty with PFG's operations in Chile,” the agency said.

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