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 March 31, 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 (I.R.S. Employer Identification Number) (S ...

Financial Performance - The company reported non-GAAP operating earnings of $415 million, a 5% increase compared to Q1 2024[5] - Non-GAAP operating earnings per diluted share (EPS) reached $1.81, reflecting a 10% growth from Q1 2024[5] - The company returned $370 million of excess capital to shareholders, including $200 million in share repurchases and $170 million in common stock dividends[4] - The common stock dividend was raised to $0.76 for Q2 2025, a 7% increase from Q2 2024 and a 9% increase on a trailing twelve-month (TTM) basis[4] - Total company Assets Under Management (AUM) stood at $718 billion, a 1% increase compared to Q4 2024[6] Segment Performance - Retirement and Income Solutions (RIS) pre-tax operating earnings, excluding significant variances, increased by 9%[11] - RIS recurring deposits grew by 9% year-over-year, with Small and Medium Business (SMB) recurring deposit growth at 12%[2, 14] - Principal Asset Management non-affiliated private real estate Net Cash Flow (NCF) was +$1.1 billion[2, 9] - Mexico and Southeast Asia locally managed strategies saw a NCF of +$0.7 billion[2, 9] - Life Insurance business market premium and fee growth increased by 20%[4, 24] - Specialty Benefits incurred loss ratio improved by 40 bps from 1Q24[2] Capital and Liquidity - The company's excess and available capital position was $1.75 billion, including $400 million pre-funding of Q2 2025 maturity[4, 5] - The debt to capital ratio was 22.3%, pro forma for Q2 2025 debt maturity[4, 5]

Financial Data and Key Metrics Changes - First quarter adjusted non-GAAP earnings were $439 million or $1.92 per diluted share, representing a 10% increase in EPS compared to Q1 2024 [9][17] - Total company managed AUM increased to $718 billion at the end of the quarter, reflecting positive market performance and favorable exchange rates [9][10] - Net cash flow was negative $4 billion in the quarter, primarily due to low-fee institutional fixed income withdrawals [10] Business Line Data and Key Metrics Changes - In retirement, positive account value net cash flow was $400 million, with small and mid-sized market flows increasing to $1.3 billion, up from $1 billion in the prior year [11] - Pension risk transfer volume grew to $800 million in the quarter, maintaining a leading position in the industry [11] - Specialty benefits saw strong underwriting results, but overall growth was impacted by lower dental sales and the absence of new PFML markets [12][24] Market Data and Key Metrics Changes - Strong local investment management flows of $700 million were recorded in Mexico and Southeast Asia, indicating the benefits of global business reach [10] - The S&P 500 and small/mid-cap indices finished the quarter down, while international equities and fixed income products delivered positive returns [19] - Foreign exchange rates positively impacted AUM by $8 billion due to improved spot rates [19] Company Strategy and Development Direction - The company is focused on growth across the retirement ecosystem, small and mid-sized businesses, and global asset management, which are seen as significant market growth opportunities [8] - A disciplined approach to aligning expenses with revenue is emphasized, with actions already underway to support this strategy [7][31] - The company aims to maintain a diversified portfolio to navigate market volatility effectively [35] Management's Comments on Operating Environment and Future Outlook - The current market environment is described as dynamic and unpredictable, with significant volatility impacting fee revenue in retirement and asset management [6][7] - Management remains confident in the company's diversified business model and its ability to deliver growth despite market challenges [35][41] - The company anticipates continued focus on expense management and aligning costs with revenue to mitigate macroeconomic impacts [39][44] Other Important Information - The company returned $370 million to shareholders in Q1, including $200 million in share repurchases and a $0.76 common stock dividend, reflecting a 9% growth rate on a trailing twelve-month basis [30] - Principal was recognized as one of the 2025 World's Most Ethical Companies, highlighting its commitment to ethical practices [14] Q&A Session Summary Question: EPS growth outlook amidst uncertainty - Management acknowledged the dynamic environment and reiterated confidence in a diverse portfolio, which is crucial during volatile times [34][35] Question: Flexibility on expense management - Management emphasized a proven track record of aligning expenses with revenue and highlighted ongoing efforts to manage costs effectively [43][44] Question: Client behavior in asset management - Management noted an improvement in the pipeline and increased activity in mandates, indicating a positive trend despite market volatility [50][52] Question: Hardship withdrawals in retirement - Management reported no significant increase in hardship withdrawals, with participant behavior remaining stable [58][60] Question: Mortality in the life business - Management indicated that mortality results can be volatile, but overall mortality remains aligned with expectations, despite a specific large claim impacting results [66][68] Question: Growth of spread-based products in retirement - Management confirmed strong performance in spread-based businesses, with significant growth in registered index-linked annuity sales and pension risk transfer [72] Question: Specialty benefits and dental pricing - Management acknowledged competitive pressures in dental sales but emphasized a disciplined approach to pricing and maintaining consistent renewals [84][86] Question: Dynamics in the small and medium-sized business market - Management expressed confidence in the resilience of the SMB market, noting that it has historically performed well through various economic cycles [114][115]

Core Insights - Principal Financial Group, Inc. (PFG) reported first-quarter 2025 operating net income of $1.81 per share, which missed the Zacks Consensus Estimate by 2.1%, but increased 10% year over year [1] - The company experienced a 5.5% year-over-year increase in operating revenues to $4 billion, driven by higher premiums, fees, and net investment income, surpassing the Zacks Consensus Estimate by 0.9% [1][2] Financial Performance - Total expenses rose 7% year over year to $3.7 billion, attributed to higher benefits, claims, and settlement expenses, but was lower than the estimated $4.1 billion [2] - As of March 31, 2025, assets under management (AUM) reached $717.9 billion, reflecting a 1.3% year-over-year increase [2] Segment Performance - **Retirement and Income Solution**: Revenues increased 7.4% year over year to $2 million, with pre-tax operating earnings rising 8% to $283.7 million, although below the estimate of $315.1 million [3] - **Investment Management**: Revenues grew 4.2% year over year to $453.7 million, but pre-tax operating earnings decreased 5% to $116.3 million, missing the estimate of $155.9 million [4] - **International Pension**: Revenues rose 6.2% year over year to $237.8 million, with pre-tax operating earnings climbing 10% to $71.2 million, exceeding the estimate of $63.1 million [5] - **Specialty Benefits**: Revenues increased 4.2% year over year to $883.9 million, while pre-tax operating earnings rose 4% to $106 million, but both figures missed estimates [6] - **Life Insurance**: Revenues decreased 2.2% year over year to $330.5 million, yet pre-tax operating earnings surged 36% to $13.3 million, although below the estimate of $27.3 million [7] - **Corporate**: Pre-tax operating losses widened to $105.6 million, exceeding the estimate of a loss of $71.5 million [8] Financial Update - As of March 31, 2025, cash and cash equivalents were $3.9 billion, down 7% year over year, while long-term debt increased 10% to $4.3 billion [9] - Book value per share was $53.70, a slight decrease of 0.1% year over year [9] Dividend and Share Repurchase - Principal Financial returned $369 million to shareholders, including $200 million in share repurchases and $169 million in dividends [10] - The board raised the second-quarter dividend by 7% to 76 cents, marking a 9% increase on a trailing 12-month basis [10]

Core Insights - Principal Financial (PFG) reported a revenue of $4.01 billion for the quarter ended March 2025, reflecting a year-over-year increase of 5.5% [1] - The earnings per share (EPS) for the quarter was $1.81, up from $1.65 in the same quarter last year, although it fell short of the consensus estimate of $1.85 by 2.16% [1] Financial Performance Metrics - Assets under management (AUM) for Investment Management reached $555.8 billion, exceeding the average estimate of $550.36 billion [4] - AUM for International Pension was reported at $133.5 billion, surpassing the average estimate of $123.45 billion [4] - Total AUM stood at $717.9 billion, above the average estimate of $687.46 billion [4] - Revenue from Premiums and other considerations was $1.75 billion, slightly below the average estimate of $1.78 billion, marking a year-over-year increase of 4% [4] - Revenue from Fees and other revenues was $1.08 billion, compared to the average estimate of $1.13 billion, with a year-over-year change of 2.4% [4] - Net investment income revenue was $1.17 billion, slightly above the average estimate of $1.16 billion, reflecting an 8.7% year-over-year increase [4] - In the Principal Asset Management Segment, net investment income was $166.70 million, below the estimate of $168.27 million, but up 10.8% year-over-year [4] - Specialty Benefits in the Benefits and Protection Segment reported total revenue of $883.90 million, below the average estimate of $903.31 million, with a year-over-year change of 4.2% [4] - Life Insurance fees and other revenues were $110.70 million, exceeding the average estimate of $105.24 million, representing a year-over-year increase of 5.3% [4] Stock Performance - Over the past month, shares of Principal Financial have returned -13.5%, compared to a -5.1% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Group 1: Earnings Performance - Principal Financial reported quarterly earnings of $1.81 per share, missing the Zacks Consensus Estimate of $1.85 per share, but showing an increase from $1.65 per share a year ago, resulting in an earnings surprise of -2.16% [1] - The company posted revenues of $4.01 billion for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 0.98%, compared to year-ago revenues of $3.8 billion [2] - Over the last four quarters, Principal Financial has not surpassed consensus EPS estimates, but has topped consensus revenue estimates three times [2] Group 2: Stock Performance and Outlook - Principal Financial shares have lost about 4.4% since the beginning of the year, while the S&P 500 has declined by 8.6% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the coming quarter is $2.07 on $4 billion in revenues, and $8.22 on $15.94 billion in revenues for the current fiscal year [7] Group 3: Industry Context - The Zacks Industry Rank indicates that the Insurance - Multi line sector is currently in the top 14% of over 250 Zacks industries, suggesting a favorable outlook for stocks in this sector [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5] - The estimate revisions trend for Principal Financial is mixed, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6]

Financial Performance - Net income attributable to Principal Financial Group (PFG) for Q1 2025 was $48 million, a significant decrease from $532.5 million in Q1 2024[7] - Non-GAAP net income attributable to PFG, excluding exited business, was $299 million, down 20% from $376.4 million in Q1 2024[7] - Non-GAAP net income attributable to PFG, excluding exited business, was $299.4 million in 1Q25, down from $376.4 million in 1Q24[31] - Total segment pre-tax operating earnings for 1Q25 were $485.1 million, slightly up from $472.2 million in 1Q24[31] - The Corporate segment experienced a loss of $105.6 million in 1Q25, worsening from a loss of $88.9 million in 1Q24[31] - Total income (loss) from exited business in Q1 2025 was $(251.3) million, compared to a profit of $156.1 million in Q1 2024[38] Earnings and Dividends - Non-GAAP operating earnings for Q1 2025 increased by 10% to $1.81 per diluted share, compared to $1.65 in Q1 2024[6] - The company raised its common stock dividend for Q2 2025 to $0.76 per share, marking a 7% increase from Q2 2024[6] - Non-GAAP operating earnings for 1Q25 increased to $414.5 million, compared to $394.3 million in 1Q24, reflecting a growth of 2.7%[31] Assets and Capital - Assets under management (AUM) reached $718 billion, contributing to total assets under administration (AUA) of $1.7 trillion[6] - The company reported a strong financial position with $1.75 billion of excess and available capital[6] - Total assets as of 1Q25 were $313.0 billion, a slight decrease from $313.7 billion in 4Q24[34] - Stockholders' equity available to common stockholders increased to $11,216.8 million in Q1 2025 from $11,086.4 million in Q4 2024, representing a growth of 1.17%[36] - Book value per common share increased to $49.85 in 1Q25 from $49.01 in 4Q24[34] - Book value per common share, excluding cumulative change in fair value of funds withheld embedded derivative, rose to $53.70 in Q1 2025, slightly up from $53.69 in Q4 2024[36] Revenue and Expenses - Operating revenues less pass-through expenses for Investment Management reached $416.0 million in Q1 2025, up from $398.6 million in Q1 2024, indicating a growth of 4.4%[40] - Commissions and other expenses in Investment Management for Q1 2025 were $37.7 million, slightly higher than $36.9 million in Q1 2024[40] - Pre-tax operating earnings for the Investment Management segment decreased by 5% to $116.3 million in Q1 2025[10] Market and Sales Performance - Retirement and Income Solutions (RIS) recurring deposits increased by 9% to $13.8 billion, with strong Pension Risk Transfer (PRT) sales of $0.8 billion[8] - Life Insurance business market premium and fees increased by 20% in Q1 2025 compared to the previous year[8] Tax and Capital Gains - Total GAAP income taxes for Q1 2025 showed a benefit of $34.0 million, compared to an expense of $95.1 million in Q1 2024[38] - Net realized capital gains (losses) adjusted for Q1 2025 were $(115.1) million, a significant decline from $(17.9) million in Q1 2024[38] - The total net realized capital gains (losses) after-tax adjustments for Q1 2025 were $2.0 million, a recovery from $(17.0) million in Q1 2024[38] Forward-Looking Statements - Forward-looking statements indicate ongoing strategies for growth and potential share repurchases, though actual results may differ[25] Variances and Changes - Significant variances in 1Q25 included lower than expected variable investment income across multiple segments[23] - The cumulative change in fair value of funds withheld embedded derivative decreased to $(2,215.6) million in Q1 2025 from $(2,381.3) million in Q4 2024[36] - Noncontrolling interest reported a loss of $(51.5) million in Q1 2025, compared to a loss of $(44.9) million in Q4 2024[36]

Core Viewpoint - Principal Financial Group, Inc. (PFG) is expected to report first-quarter 2025 earnings on April 24, with a consensus estimate of $1.85 per share, reflecting a 12.1% increase year-over-year, despite a negative earnings surprise in the previous quarter [1][7]. Group 1: Earnings and Revenue Expectations - The first-quarter results are anticipated to show a rise in fee revenues, higher yields, favorable market performance, and increased sales of single premium group annuities [2]. - Operating revenues are projected to increase to $3.97 billion, marking a nearly 4.4% rise from the same quarter last year [3]. - Net investment income is expected to reach $1.1 billion, benefiting from higher yields and average invested assets [6]. Group 2: Expense and Performance Factors - Operating expenses are likely to increase to $1.3 billion due to higher benefits, claims, and settlement expenses [7]. - Investment Management is expected to see improved performance from higher management fee revenues, although this may be offset by lower performance fee revenues and increased variable compensation expenses [4]. Group 3: Market and International Operations - International Pension operations are expected to benefit from increased earnings from equity method investments in Brazil and favorable market performance, although foreign currency headwinds may offset some gains [5]. - Assets under management are likely to improve due to favorable market performance across equity, fixed income, and real estate [6]. Group 4: Earnings Prediction Model - The earnings prediction model indicates a potential earnings beat for Principal Financial, supported by a positive Earnings ESP of +0.31% and a Zacks Rank of 3 [8][9].

Company Overview - Principal Financial (PFG) is expected to report a year-over-year increase in earnings due to higher revenues for the quarter ended March 2025, with earnings projected at $1.86 per share, reflecting a +12.7% change, and revenues expected to be $3.97 billion, up 4.5% from the previous year [1][3]. Earnings Expectations - The upcoming earnings report is scheduled for April 24, and the stock may rise if the reported numbers exceed expectations, while a miss could lead to a decline [2]. - The consensus EPS estimate has been revised 2.44% lower over the last 30 days, indicating a bearish sentiment among analysts regarding the company's earnings prospects [4][10]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates a negative Earnings ESP of -0.33% for Principal Financial, suggesting that the Most Accurate Estimate is lower than the Zacks Consensus Estimate [11]. - The company currently holds a Zacks Rank of 3 (Hold), making it challenging to predict a beat on the consensus EPS estimate [11]. Historical Performance - In the last reported quarter, Principal Financial was expected to post earnings of $1.95 per share but delivered $1.94, resulting in a surprise of -0.51% [12]. - The company has not beaten consensus EPS estimates in any of the last four quarters, indicating a trend of underperformance [13]. Industry Comparison - Goosehead Insurance (GSHD), another player in the Zacks Insurance - Multi line industry, is expected to post earnings of $0.23 per share for the same quarter, reflecting a year-over-year change of -17.9%, with revenues projected at $78.25 million, up 21.4% [17]. - Goosehead has an Earnings ESP of 4.35% and has beaten consensus EPS estimates in each of the trailing four quarters, contrasting with Principal Financial's performance [18].

Core Viewpoint - Principal Financial Group, Inc. (PFG) is experiencing a short-term bullish trend, with its share price currently at $85.67, down 6.8% from its 52-week high of $91.98, while trading above its 50-day simple moving average (SMA) [1][2][3] Financial Performance - PFG has a market capitalization of $19.32 billion and an average trading volume of 1.48 million shares over the last three months [2] - Year-to-date, PFG shares have increased by 10.6%, outperforming the Finance sector's growth of 4% and the Zacks S&P 500 composite's growth of 2.4% [4][6] - The Zacks Consensus Estimate for PFG's 2025 earnings per share indicates a year-over-year increase of 22%, with revenues projected at $16.53 billion, reflecting a 5.7% improvement [9] Growth Drivers - Revenue growth is expected to improve due to higher premiums, fees, and improved net investment income across segments [10] - The Principal International segment is likely to benefit from increased single-premium annuity sales in Chile, with operating earnings supported by foreign currency tailwinds [10] - The Specialty Benefits Insurance business is anticipated to continue benefiting from record sales, strong retention, and employment growth [11] - Strong institutional flows across various asset classes are expected to drive positive net cash flow [11] Capital Management - PFG has a strong capital position with sufficient cash generation capabilities and liquidity, revising its RBC target to a range of 375% to 400% [13] - The company plans to deploy $1.4 billion to $1.7 billion in capital in 2025, including $700 million to $1 billion for share repurchases [15] - PFG raised its dividend by 9% for the sixth consecutive quarter, aligning with a targeted 40% dividend payout ratio, resulting in a solid dividend yield of 3.6% [14] Valuation and Market Position - PFG's return on equity in the trailing 12 months was 14.68%, surpassing the industry average of 14.18% [16] - The shares are trading at a price-to-earnings multiple of 9.85, higher than the industry average of 9.26, indicating a premium valuation [17] Conclusion - PFG's financial stability and favorable growth estimates suggest positive prospects, driven by strategic buyouts, effective capital deployment, and strong retention [18]