Summary of Principal Financial Group (PFG) 2025 Conference Call Company Overview - **Company**: Principal Financial Group (PFG) - **Focus**: Benefits and protection businesses, particularly in the small to midsize business (SMB) sector Key Points Unique Business Model - PFG's Group Benefits business is notably focused on small to midsize businesses (SMBs), defined as companies with 2 to 500 employees, with a sweet spot under 100 employees [3][4] - The company has a comprehensive product portfolio that integrates technology solutions to assist brokers and employers [5] - PFG has a higher concentration of knowledge workers (55%) compared to the industry average (40-45%), which differentiates its business model [6][10] SMB Market Sentiment - Recent well-being index results indicate that SMBs are resilient, with 51% of surveyed businesses adding staff in the last three months [12][14] - Business owners are reluctant to reduce benefits, indicating a strong focus on employee retention and hiring [13] Disability Insurance Insights - The company has seen improvements in disability loss ratios post-pandemic, attributed to better incidents, recoveries, and severity management [17][19] - Incidents are expected to return to pre-COVID levels, while improvements in severity and recoveries are likely to be sustained due to the nature of the knowledge worker block [23][24] - PFG has been adjusting pricing based on favorable performance, with new sale rates becoming more competitive [32] Dental Insurance Challenges - The dental segment is experiencing inflationary pressures, with claims rising due to increased utilization and severity [41][42] - PFG has a strategy to bundle dental with other products, which helps maintain persistency and manage renewal rates [45] - The company anticipates a slowdown in new sales but remains confident in long-term growth [46] Life Insurance Strategy - PFG has shifted focus to the business market, moving away from the highly commoditized retail life insurance sector [57] - The business market is characterized by fewer competitors (4-5) compared to the retail market (38), allowing for a more consultative sales approach [61] - Premium growth in the business market is strong (10-12%), while legacy blocks are running off [59] Technology Investments - PFG is investing in technology to enhance claims processing and improve efficiency, particularly in the small market segment [69][70] - The company is utilizing AI and predictive analytics to better manage claims and improve outcomes [70][71] Long-term Growth Outlook - PFG projects long-term premium and fee growth in specialty benefits at 6-9%, although this year may be lower due to current market conditions [54] - The company is focused on maintaining strong relationships with brokers and advisers, which is crucial for expanding its business market presence [66] Additional Insights - The company is actively managing fraud detection across its products, utilizing advanced technology to identify atypical behaviors [39] - PFG's approach to disability and individual disability insurance is complementary, allowing for a more comprehensive coverage strategy [68] This summary encapsulates the key insights and strategic directions discussed during the Principal Financial Group conference call, highlighting the company's focus on SMBs, technology integration, and market resilience.

Core Insights - Principal Financial Group, Inc. (PFG) is currently trading above its 200-day simple moving average, indicating a short-term bullish trend, with a share price of $80.84, down 12.1% from its 52-week high of $91.98 [1] Price Performance - PFG shares have gained 4.4% year to date (YTD), underperforming the industry return of 7%, the Finance sector's return of 12.5%, and the Zacks S&P 500 composite's return of 9.8% [4][7] - The average number of shares traded in the last three months was 1.2 million, with a market capitalization of $18 billion [3] Valuation - PFG's shares are trading at a price-to-earnings multiple of 9.13, which is higher than the industry average of 9.04, and more expensive compared to peers like Enact Holdings, Inc., Everest Group, Ltd., and Radian Group Inc. [8] Growth Projections - The Zacks Consensus Estimate for PFG's 2025 earnings per share indicates an 18.3% year-over-year increase, with revenues projected at $15.86 billion, reflecting a 1.4% year-over-year improvement [9] - For 2026, earnings per share and revenues are expected to increase by 11.2% and 7.1%, respectively, from the 2025 estimates [9] Target Price - The Zacks average price target for PFG, based on short-term price targets from 13 analysts, is $85.77 per share, indicating a potential upside of 6.48% from the last closing price [10] Revenue Growth Factors - PFG is expected to see long-term revenue growth driven by higher premiums, fees, and improved net investment income across its segments [12] - The company benefits from its leadership in retirement and long-term savings, group benefits, and global asset management, which supports solid operating earnings [13] Specialty Benefits Insurance - The Specialty Benefits Insurance business is projected to benefit from record sales, strong retention, and employment growth, contributing positively to pre-tax operating earnings [14] Capital Position and Deployment - PFG has a strong capital position with sufficient cash generation capabilities, targeting $1.4 billion to $1.7 billion in capital deployments for 2025, including 35-45% of net income for share buybacks and about 10% for strategic M&A activities [16][18] Dividend Distribution - PFG raised its dividend for the seventh consecutive quarter in Q2 2025, aligning with a targeted 40% dividend payout ratio, reflecting a 7% increase over the year-ago quarter and a solid dividend yield of 3.7%, higher than the industry average of 2.7% [17]

Financial Data and Key Metrics Changes - Revenue increased by 21% to $49.4 million, exceeding guidance of 15-20% [5][7] - Underlying EBITDA margin decreased slightly to 24% from 25% in the previous year, while underlying EBITDA rose by 17% [7][26] - Reported EBITDA surged by 39% to $10.6 million, with reported EPS up 37% to 1.87¢ per share [7][8] - Net profit after tax and amortization increased by 42% to $5.9 million, with net profit after tax up 59% [7][21] Business Line Data and Key Metrics Changes - Wealth segment revenue grew by 38%, while business revenue increased by 7%, contributing to the overall 21% revenue growth [21][23] - Self-Managed Superannuation Fund (SMSF) revenue rose by 19%, marking a return to growth after a previous decline [23] - Accounting division revenue increased by 11%, while capital revenue remained flat [23] Market Data and Key Metrics Changes - Funds under management increased by 58%, partly due to the Lincoln acquisition, adding $600 million [8][9] - The number of high net worth investors grew by 3,300, significantly expanding the client base [9][16] Company Strategy and Development Direction - The company aims to achieve $100 million in revenue by FY 2028 to FY 2030, with a focus on both organic and acquisition-driven growth [36][63] - Emphasis on technology integration, including a full technology review and the implementation of AI to enhance service delivery [14][19][60] - The strategy includes deep integration of acquired businesses to maximize value and client service [64][70] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving growth targets, citing a strong pipeline of acquisition opportunities and a favorable operating environment [49][50] - The company is not reliant on equity capital markets for growth, focusing instead on its diverse service offerings [72] - Management acknowledged the potential impact of AI on operations but emphasized a balanced approach to technology adoption [59][60] Other Important Information - The company has maintained a modest debt level at 1.3 times underlying EBITDA, with plans to reduce working capital tied up [7][29] - Dividends increased by 5% for the final dividend, reflecting a commitment to returning value to shareholders [8][31] Q&A Session Summary Question: How confident is the company in achieving the $100 million revenue target? - Management expressed strong confidence based on past performance and the current growth trajectory, with a mix of organic and acquisition-driven growth [36][39] Question: Can you elaborate on the organic and inorganic growth split? - Revenue growth was 21%, with approximately 7% from organic growth and the remainder from acquisitions, particularly noting the contributions from Lincoln and Altor [40][41] Question: What were the key drivers behind the reported EBITDA increase? - The reduction in non-recurring items significantly contributed to the improvement in reported EBITDA, alongside an increase in underlying EBITDA [44][45] Question: How are the recent acquisitions performing? - Recent acquisitions are performing well, with strong integration and cross-referrals contributing to overall business growth [47][48] Question: What is the company's approach to future M&A activity? - The company is actively seeking further acquisitions, focusing on quality and fit rather than volume, with a clear strategy for integration [53][54] Question: How does the company plan to fund its acquisition pipeline? - Funding will be supported by an existing facility with Westpac and a strategy of issuing shares as part of acquisition considerations [55][56] Question: What is the target net debt to EBITDA ratio? - The target is to maintain a net debt to EBITDA ratio between 1 and 1.5 times, balancing growth, dividends, and cash retention [58] Question: How does the company view the impact of AI on its revenue streams? - While AI presents opportunities, it is also seen as a challenge, with a focus on empowering staff and enhancing client service through technology [59][60]

Financial Data and Key Metrics Changes - Revenue increased by 21% to $49.4 million, exceeding guidance of 15-20% [6][8] - Underlying EBITDA margin decreased slightly to 24% from 25% in the previous year, while underlying EBITDA rose by 17% [8][25] - Reported EBITDA surged by 39% to $10.6 million, and reported EPS increased by 37% to $1.87 per share [8][20] - Net profit after tax and amortization grew by 42% to $5.9 million, with net profit after tax up 59% [8][20] - Total dividends for the year increased by 4% to $1.66 per share, with a final dividend up 5% to $0.89 per share [9][29] Business Line Data and Key Metrics Changes - Wealth segment revenue grew by 38%, while business segment revenue increased by 7% [20][22] - Self-Managed Superannuation Fund (SMSF) revenue rose by 19%, recovering from a decline in the previous year [22] - Accounting division revenue increased by 11%, while capital revenue remained flat [22] Market Data and Key Metrics Changes - Funds under management increased by 58%, partly due to the Lincoln acquisition, adding $600 million [9][10] - The number of high net worth investors grew by 3,300, significantly expanding the client base [10][16] Company Strategy and Development Direction - The company aims to achieve $100 million in revenue by FY 2028 to FY 2030, with a focus on both organic and acquisition-driven growth [34][63] - Emphasis on technology integration, including a full technology review and implementation of a group-wide CRM system [14][60] - The strategy includes deep integration of acquired businesses to enhance service offerings and client engagement [64][70] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving growth targets, citing a strong pipeline of acquisition opportunities and a favorable operating environment [34][47] - The company is focused on addressing working capital issues, with a goal to reduce excess tied-up capital [28][72] - Management highlighted the importance of a balanced approach to capital allocation, ensuring continued dividend payments while pursuing growth [57][72] Other Important Information - The company has maintained a modest debt level at 1.3 times underlying EBITDA, indicating strong financial health [8][27] - A significant focus on intergenerational wealth transfer and alternative asset management as key growth areas [17][18] Q&A Session Summary Question: How confident is the company in achieving the $100 million revenue target? - Management expressed strong confidence based on past performance and current growth trajectory, with organic growth settling between 6-10% and two-thirds of growth expected from acquisitions [34][36] Question: Can you provide a breakdown of organic and inorganic growth? - Revenue growth was 21%, with approximately 7% from organic growth and 14% from acquisitions, including a two-month contribution from Lincoln indicators [37][39] Question: What were the key drivers behind the reported EBITDA increase? - The reduction in non-recurring items significantly contributed to the improvement, with non-recurring costs halving compared to the previous year [41][44] Question: How are the recent acquisitions performing? - Acquisitions are performing well, with strong integration and cross-referrals contributing to overall business growth [45][46] Question: What is the outlook for FY '26? - Guidance will be provided at the AGM, but management anticipates continued growth and opportunities in the market [47][48] Question: How does the company plan to fund future acquisitions? - The company has a Westpac facility in place and typically issues 20-50% of acquisition consideration in shares, maintaining a business owner mindset [54][55] Question: How does the company view AI's impact on revenue streams? - AI is seen as both an opportunity and a challenge, with a focus on enhancing client service through technology while maintaining a human touch [59][61]

Full Year 2025 (FY25) Results Presentation 26 August 2025 For personal use only How We Do It OneConnected team - Building scale and capability organically and via acquisition Who We Are For personal use only 2 2 Accounting & Business Advisory Alternative Funding Consulting Employee Share Plan Administration & Management Corporate Finance, M&A & Corporate Development Investment Research & Retail Managed Funds/Solutions SMSF Advice & Administration Property Asset Management Alternative Asset Management Strate ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 1-16725 (Commission file number) PRINCIPAL FINANCIAL GROUP, INC. (Exact name of registrant as specified in its charter) Delaware 42-1520346 (State or other jurisdiction of incorporati ...

Group 1 - Principal Financial Group (NASDAQ: PFG) has underperformed over the past year, losing approximately 5% of its value while missing out on a significant bull market [1] - The company has a history of making contrarian bets based on macro views and stock-specific turnaround stories to achieve outsized returns with a favorable risk/reward profile [1]

Core Insights - Principal Financial Group, Inc. (PFG) reported a second-quarter 2025 operating net income of $2.16 per share, exceeding the Zacks Consensus Estimate by 9% and reflecting a 33% year-over-year increase [1][9] - Operating revenues fell by 9.4% year over year to $3.6 billion, missing the Zacks Consensus Estimate by 7.8% due to decreased premiums [1][9] Revenue and Earnings Performance - Investment Management, Specialty Benefits, and Life Insurance segments experienced higher revenues, contributing to improved asset under management (AUM) [2] - Total expenses decreased by 18% year over year to $3.2 billion, lower than the estimate of $4.3 billion, driven by reduced benefits, claims, and operating expenses [3] - As of June 30, 2025, AUM reached $753 billion, a 7.6% increase year over year, while assets under administration (AUA) totaled $1.7 trillion [3] Segment Analysis - **Retirement and Income Solution**: Revenues decreased by 21.7% year over year to $1.7 billion, missing the estimate of $2.2 billion; however, pre-tax operating earnings rose by 9% to $292.1 million [4] - **Investment Management**: Revenues increased by 5.2% year over year to $467.2 million, surpassing the estimate of $454.4 million; pre-tax operating earnings grew by 18.2% to $157.9 million [5] - **International Pension**: Revenues fell by 1.7% year over year to $240.8 million, below the estimate of $243.3 million; pre-tax operating earnings surged by 41% to $78.5 million [6] - **Specialty Benefits**: Revenues rose by 4% year over year to $892.2 million, exceeding the estimate of $863.3 million; pre-tax operating earnings increased by 17% to $127.6 million [7] - **Life Insurance**: Revenues increased by 7.6% year over year to $354.2 million, beating the estimate of $205.8 million [8] Financial Position - As of June 30, 2025, cash and cash equivalents were $3.6 billion, down 13.1% from the end of 2024; long-term debt was $3.9 billion, a decrease of 0.8% [11] - Book value per share increased by 2.4% to $54.97 from the end of 2024 [11] Shareholder Returns - Principal Financial returned $320 million to shareholders, including $150 million in share repurchases and $170 million in dividends [12] - The board declared a third-quarter dividend of 78 cents per share, an 8% increase from the third quarter of 2024 [12]

Financial Data and Key Metrics Changes - Adjusted non-GAAP earnings for Q2 2025 were $469 million, or $2.7 per share, representing an 18% increase in EPS compared to 2024 [6][16] - Reported non-GAAP operating earnings were $489 million, up 27% year over year, with EPS at $2.16, a 33% increase [15][16] - Total company managed AUM reached $753 billion, a 5% increase sequentially and an 8% increase year over year [8][11] - Net cash flow was negative $2.6 billion for the quarter, but showed improvement driven by positive net cash flow from global institutional clients [8][11] Business Line Data and Key Metrics Changes - In Retirement, overall RIS sales were $6 billion, a 7% year-over-year increase, driven by Workplace Savings and Retirement Solutions [9][10] - Principal Asset Management AUM increased to $723 billion, a 5% sequential increase, with sales of $33 billion, up 19% year over year [11][12] - Specialty Benefits saw a 10% growth in earnings, with a margin expansion of 100 basis points [12][20] - Life Insurance premium fees increased by 5% compared to 2024, driven by strong business market growth [21] Market Data and Key Metrics Changes - The market volatility in April impacted daily averages, leading to lower fee revenue for the quarter [7] - Positive market performance in May and June contributed to the increase in AUM [8] - The pension risk transfer (PRT) sales were $445 million, reflecting a more moderate quarter due to a smaller pipeline of opportunities [10][39] Company Strategy and Development Direction - The company remains focused on aligning revenue and expenses, with a disciplined approach to expense management while investing for growth [27][29] - Continued emphasis on capital return to shareholders, with $320 million returned in Q2, including $150 million in share repurchases [7][24] - The company is committed to maintaining a strong capital position and expects to deliver on full-year capital return targets of $1.4 billion to $1.7 billion [24][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the second half of the year, expecting full-year results to align with 2025 outlook and financial targets [8][9] - The company anticipates improved results in the latter half of 2025, particularly in investment management and performance fees [45][46] - Management acknowledged challenges in flows due to elevated markets but noted improvements in transfer deposits and account retention [61][62] Other Important Information - The company was recognized for its leadership in disability inclusion and AI application in financial services [13] - A $0.78 common stock dividend was announced for Q3, marking an 8% increase over the previous year [25] Q&A Session Summary Question: On overall expense levels - Management indicated a focus on aligning expenses with revenue, with continued margin expansion observed [27][29] Question: On spread balances within RIS - Management noted a decrease in investment-only issuance and emphasized a disciplined approach to PRT opportunities [32][34] Question: On competitive environment in PRT - Management acknowledged increased competition but remains optimistic about converting existing DB clients into PRT [39][40] Question: On variable investment income - Management reported improved performance in variable investment income, with expectations for better results in the latter half of 2025 [44][46] Question: On performance fees in investment management - Management confirmed that performance fees were primarily driven by alternative debt strategies and expect levels to be similar to 2024 [53][54] Question: On dental business outlook - Management highlighted competitive pressures but noted improvements in loss ratios and potential for growth in the second half of the year [81][84] Question: On asset management flows - Management acknowledged challenges in achieving positive flows but noted strong sales momentum and a robust pipeline of client opportunities [100][102]

Financial Data and Key Metrics Changes - Adjusted non-GAAP earnings for Q2 2025 were $469 million, or $2.7 per share, representing an 18% increase in EPS compared to 2024 [5][6] - Reported non-GAAP operating earnings were $489 million, up 27% year over year, with EPS at $2.16, a 33% increase [15][16] - Total company managed AUM reached $753 billion, a 5% increase sequentially and an 8% increase year over year [7][11] - Net cash flow was negative $2.6 billion for the quarter, but showed improvement sequentially [7][11] Business Line Data and Key Metrics Changes - In Retirement, overall RIS sales were $6 billion, a 7% year-over-year increase, driven by Workplace Savings and Retirement Solutions [9][10] - Principal Asset Management AUM increased to $723 billion, a 5% sequential increase, with sales of $33 billion, up 19% year over year [11][12] - Specialty Benefits saw a 10% growth in earnings, with a margin expansion of 100 basis points [12][21] - Life Insurance premium fees increased by 5% compared to 2024, driven by strong business market growth [22] Market Data and Key Metrics Changes - The market drop in April affected daily averages, impacting second quarter fee revenue, but a strong rebound in May and June provided positive momentum [6][7] - International Pension net revenue was impacted by foreign currency, but increased by 2% on a constant currency basis [20] Company Strategy and Development Direction - The company remains focused on disciplined expense management while investing for growth, aiming to align revenue and expenses effectively [29][31] - Continued emphasis on capital return targets, with $320 million returned to shareholders in Q2, including $150 million in share repurchases [6][24] - The company is committed to maintaining a strong capital position and expects to deliver on full-year capital return targets of $1.4 billion to $1.7 billion [24][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the second half of the year, expecting full-year results to align with 2025 outlook and financial targets [7][8] - The company anticipates improved results in the latter half of 2025, particularly in investment management and performance fees [48][49] - Management acknowledged the competitive environment in pension risk transfer (PRT) but remains optimistic about achieving targeted returns [40][42] Other Important Information - The company was recognized for its leadership in disability inclusion and AI application in financial services [13] - A $0.78 common stock dividend was announced for Q3, reflecting an 8% increase over the previous year [26] Q&A Session Summary Question: Overall expense levels and future focus - Management confirmed a continued focus on aligning expenses with revenue while maintaining investments in the business [29][31] Question: Spread balances within RIS - Management noted that investment-only issuance and PRT sales were moderate, emphasizing a disciplined approach to prioritizing returns over volume [34][38] Question: Competitive environment in PRT - Management acknowledged increased competition but remains optimistic about converting existing DB clients into PRT opportunities [40][42] Question: Variable investment income experience - Management indicated improved performance in variable investment income, with expectations for better results in the latter half of 2025 [47][49] Question: Dental business outlook - Management highlighted competitive pricing and renewal rates, with expectations for improved sales in the second half of the year [84][88]