The rating agency also cut its ratings on NLV Financial Corp. and Pacific LifeCorp, saying they too have significant exposure to commercial mortgages and commercial mortgage backed securities relative to their total invested assets.
In addition, S&P raised its outlook on New York Life Insurance Co. to stable from negative, affirmed its ratings on Teachers Insurance & Annuity Association of America and left its ratings on MetLife Inc. (MET) on watch for possible downgrade, where they were put in February.
The firm downgraded its ratings on Principal, an asset manager and life insurer, by one notch to BBB, two steps above junk, and its rating on the life-insurance units one notch to A, five steps below the top rating of AAA.
This month, Principal reported its first-quarter earnings jumped 64%, beating analysts' expectations, as it booked strong growth in fees and other revenue while its investment income rose.
Unlike many peers whose investment losses pushed them into the red, the company stayed in the black and spurned investment from the U.S. government during the recession. It also cut costs and raised capital.
Principal's shares closed at $30.68 and were inactive after hours. The stock has gained 28% this year.
S&P affirmed New York Life's top AAA ratings and said it expects the company to restore its capital adequacy at that level through organic earnings within one year.
The credit rater also kept TIAA's ratings at AAA, saying its earnings power and financial flexibility will allow it to restore capital adequacy to that ratings level within two years.