Fitch Assigns Principal Financial Group's Senior Note Issuance 'A'.

CHICAGO -- Fitch Ratings has assigned an 'A' rating to Principal Financial Group Inc. (PFG) issuance of a 30-year, $500 million senior unsecured note. The Rating Outlook for PFG's ratings remains Stable.

Fitch expects that the proceeds of the issue will be used primarily to fund a portion of PFG's pending acquisition of WM Advisors, Inc., which was previously announced in July 2006 and for general corporate purposes.

The acquisition of WM Advisors, Inc. almost doubles the assets under management (AUM) of PFG's existing Principal Mutual Funds business. Fitch expects the acquisition will add to PFG's scale with a set of strongly performing funds and enhance its distribution capabilities in the wholesale area, but does not anticipate significant expense savings or earnings from the combination. PFG's existing mutual funds business contributed only 2% of the company's 2005 consolidated operating earnings and therefore does not materially affect the company's pension oriented earnings profile. However, Fitch believes the acquisition is in-line with PFG's strategy to expand its global asset management business.

Although the size of the debt offering is larger than Fitch initially anticipated, the increase reflects the company's capital management process and does not reflect a change in the acquisition price. Fitch estimates PFG's proforma June 30, 2006 equity credit adjusted leverage to be 21.5%; reflecting 100% equity credit for PFG's $542 million of perpetual preferred shares. Fitch expects year-end leverage for PFG and Risk Based Capital (RBC) for PLIC will remain at levels acceptable for the rating category.

Fitch assigns the following rating:

Principal Financial Group:

--$500 million 6.05% due Oct. 15, 2036 'A'.

Fitch currently rates PFG and its subsidiaries as follows:

Principal Financial Group:

--Issuer default issuer rating (IDR) 'A+';

--5.563% preferred stock due 2015, series A 'A-';

--6.518% preferred stock due 2035, series B 'A-'.

Principal Financial Services Inc.:

--Issuer default issuer rating (IDR) 'A+';

--Senior debt rating 'A';

--$465 million 8.2% due Aug. 15, 2009 'A'.

-- Commercial paper rating 'F1'.

Insurance subsidiaries:

Principal Life Insurance Company

--Insurer financial strength (IFS) 'AA';

--Issuer default issuer rating 'AA-';

--Surplus notes 'A+';

-- $100 million due March 1, 2044 'A+'.

The following funding agreement backed notes issuance programs and their outstanding issues at 'AA':

--Principal Financial Global Funding LLC;

--Principal Life Income Fundings Trust;

--Principal Life Global Funding I;

--Principal Financial Global Funding II, LLC.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.