Insurer Upset With CRE-related Downgrade

The Principal Financial Group took issue with Standard & Poor's downgrading the insurer's financial strength rating from "A+" to "A". Terry Lillis, chief financial officer of Principal, said "S&P has introduced a new 'stress model' for investment portfolio assets for U.S. life insurers, one we believe is a very simple tool for commercial real estate and is at odds with our more detailed analysis of expected losses for commercial mortgage investments. As we stated in our 1st quarter 2010 earnings call, we believe the real estate market is returning to stability and values will be stable to rising going forward. While we expect higher than normal losses for several quarters, the losses from commercial mortgages will be quite manageable." CRE losses in the company's investment portfolio for the first quarter were $11 million, Lillis said.