A.M. Best Affirms Ratings of Principal Financial Group, Inc.; Assigns Rating to New Senior Unsecured Notes.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and the issuer credit rating (ICR) of "aa" of Principal Life Insurance Company (Principal Life) (Des Moines, IA). A.M. Best has also affirmed the existing debt ratings of Principal Financial Group, Inc. (PFG) (NYSE: PFG) (Des Moines, IA) and its subsidiaries. Additionally, A.M. Best has assigned a debt rating of "a" to PFG's recent offering of $500 million 6.05% 30-year senior unsecured notes. The outlook for all ratings is stable. (See link below for a detailed list of ratings.)

The ratings reflect PFG's dominant position serving small and medium-sized businesses in the U.S. employer-sponsored retirement plan market, its diverse and sustainable earnings, disciplined financial management and solid liquidity. The ratings also reflect PFG's well-established product lines and broad distribution, cost-efficient operations and emerging global growth. In addition, PFG has strengthened the focus on its core business lines through merger and acquisition activity with the expected acquisition of WM Advisors, Inc. from Washington Mutual, as well as through various other strategic and scale-related acquisitions and joint ventures.

Offsetting factors include continuing modest operating company risk-adjusted capitalization resulting from significant dividends paid to PFG, potential geopolitical risks from emerging international markets, limited potential for sales growth of life and health products and the competitive pressures in maintaining a leading market share within its defined contribution target market. Holding company dividends paid by Principal Life in 2006 have been utilized primarily to fund share repurchases, although some of the cash will be earmarked to fund a portion of the $740 million acquisition of WM Advisors, Inc.

A.M. Best expects PFG to use the bulk of the proceeds from its new debt offering to fund the remaining portion of the WM Advisors, Inc. acquisition. PFG's financial leverage (excluding non recourse debt) is expected to increase modestly to approximately 16%, incorporating considerable equity credit for the company's outstanding perpetual preferreds per A.M. Best's hybrid methodology. PFG's 2006 interest coverage is projected to be roughly 13 times, which is well within A.M. Best's guidelines for the current ratings.

For a complete listing of Principal Financial Group, Inc.'s FSRs, ICRs and debt ratings, please visit www.ambest.com/press/110203principal.pdf.

For Best's Debt Ratings, all other Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.