Principal Financial(PFG) - 2025 Q2 - Quarterly Results

Q2 2025 Earnings Announcement Principal Financial Group announced strong second quarter 2025 results, demonstrating significant growth in earnings and capital returns to shareholders Overview & Highlights Principal Financial Group reported strong second quarter 2025 results, highlighted by significant growth in earnings per share and an expansion in ROE. The company demonstrated confidence in its strategy by returning $320 million to shareholders and increasing its third-quarter dividend, while maintaining a robust capital position with $1.4 billion in excess and available capital Q2 2025 Earnings Per Share and Net Income Summary | Diluted earnings per common share | 2Q25 | Net income attributable to PFG (in millions) | 2Q25 | | :--- | :--- | :--- | :--- | | Net income attributable to PFG | $1.79 | Net income attributable to PFG | $406 | | Non-GAAP net income attributable to PFG, excluding exited business | $1.91 | Non-GAAP net income attributable to PFG, excluding exited business | $432 | | Non-GAAP operating earnings | $2.16 | Non-GAAP operating earnings | $489 | - CEO Deanna Strable attributed the strong results to a continued focus on high-growth markets, competitive advantages, and solid execution, positioning the company to meet its full-year financial outlook[3][4] - Capital Return: Returned $320 million to shareholders, comprising $150 million in share repurchases and $170 million in dividends - Dividend Increase: Raised the Q3 2025 common stock dividend by 2 cents to $0.78 per share, an 8% increase YoY - AUM/AUA: Assets under management (AUM) reached $753 billion, part of $1.7 trillion in assets under administration (AUA) - Capital Position: Maintained a strong financial position with $1.4 billion of excess and available capital[6] Financial Performance The company's financial performance in Q2 2025 showed strong enterprise-level growth and robust segment contributions, with most business lines reporting increased earnings Enterprise-Level Results For Q2 2025, the company reported significant year-over-year growth across key metrics. Net income attributable to PFG increased by 15% to $406.2 million, and non-GAAP operating earnings surged 27% to $489.3 million. This translated to a 33% increase in non-GAAP operating EPS to $2.16. Assets under management (AUM) grew 8% to $752.7 billion, although AUM net cash flow was negative at $(2.6) billion Q2 2025 Enterprise Financial Results (in millions, except per share) | Metric | 2Q25 | 2Q24 | % Change | | :--- | :--- | :--- | :--- | | Net income attributable to PFG | $406.2 | $353.1 | 15% | | Non-GAAP operating earnings | $489.3 | $386.1 | 27% | | Non-GAAP operating EPS | $2.16 | $1.63 | 33% | | Assets under management (billions) | $752.7 | $699.2 | 8% | | AUM net cash flow (billions) | $(2.6) | $(2.1) | (24)% |[7] Segment-Level Overview Most business segments demonstrated strong performance in Q2 2025. Retirement and Income Solutions saw increased deposits, while Investment Management improved revenue and margins through higher fees and expense control. Specialty Benefits benefited from an improved loss ratio. Life Insurance was the only segment to report a decline in earnings, impacted by higher claims, though it still achieved premium growth - Retirement and Income Solutions (RIS): Transfer deposits increased 8% over 2Q24 - Investment Management: Revenue increased 6% and margin improved by 360 basis points to 38% - Specialty Benefits: Incurred loss ratio improved by 130 basis points from 2Q24 - Life Insurance: Premium and fees grew 5%, driven by 17% growth in the business market segment[8] Retirement and Income Solutions (RIS) The RIS segment's pre-tax operating earnings grew 9% year-over-year to $292.1 million in Q2 2025. This growth was driven by a 2% increase in net revenue to $713.9 million and an expansion of the operating margin to 40.9% from 38.2% in the prior-year quarter RIS Financials (in millions) | Metric | 2Q25 | 2Q24 | % Change | | :--- | :--- | :--- | :--- | | Pre-tax operating earnings | $292.1 | $267.8 | 9% | | Net revenue | $713.9 | $700.9 | 2% | | Operating margin | 40.9% | 38.2% | |[9] - The $24.3 million increase in pre-tax operating earnings was primarily due to higher net revenue and margin expansion, achieved while continuing to invest in the business[13] Investment Management This segment's pre-tax operating earnings rose 18% to $157.9 million, fueled by a 6% increase in operating revenues less pass-through expenses. The operating margin significantly improved to 37.5% from 33.9% in the prior-year quarter, reflecting higher management and performance fees Investment Management Financials (in millions) | Metric | 2Q25 | 2Q24 | % Change | | :--- | :--- | :--- | :--- | | Pre-tax operating earnings | $157.9 | $133.6 | 18% | | Operating revenues less pass-through expenses | $429.0 | $406.5 | 6% | | Operating margin | 37.5% | 33.9% | |[10] - The increase in operating revenues was primarily driven by higher management and performance fees[14] International Pension International Pension delivered strong results with a 41% year-over-year increase in pre-tax operating earnings to $78.5 million. This was driven by a 13% rise in net revenue, which benefited from favorable encaje performance compared to an unfavorable result in the prior-year quarter International Pension Financials (in millions) | Metric | 2Q25 | 2Q24 | % Change | | :--- | :--- | :--- | :--- | | Pre-tax operating earnings | $78.5 | $55.7 | 41% | | Net revenue | $159.2 | $141.4 | 13% | | Operating margin | 49.3% | 39.4% | |[15] - Net revenue increased by $17.8 million, primarily due to favorable encaje performance in the current quarter[18] Specialty Benefits Pre-tax operating earnings for Specialty Benefits increased by 17% to $127.6 million, supported by business growth and a more favorable underwriting experience. The incurred loss ratio improved to 60.2% from 61.5% a year ago, primarily due to better performance in group disability and group life Specialty Benefits Financials (in millions) | Metric | 2Q25 | 2Q24 | % Change | | :--- | :--- | :--- | :--- | | Pre-tax operating earnings | $127.6 | $108.7 | 17% | | Premium and fees | $840.2 | $813.5 | 3% | | Incurred loss ratio | 60.2% | 61.5% | |[16] - The incurred loss ratio improved to 60.2% driven by more favorable underwriting experience, particularly in group disability and group life[19] Life Insurance The Life Insurance segment's pre-tax operating earnings decreased by 15% to $20.0 million, a change attributed to higher claims severity. Despite the earnings decline, premium and fees grew by 5% to $238.0 million, as strong growth in the business market offset the runoff of legacy business Life Insurance Financials (in millions) | Metric | 2Q25 | 2Q24 | % Change | | :--- | :--- | :--- | :--- | | Pre-tax operating earnings | $20.0 | $23.6 | (15)% | | Premium and fees | $238.0 | $227.0 | 5% | | Operating margin | 8.4% | 10.4% | |[20] - The decrease in pre-tax operating earnings was driven by higher claims severity, while premium and fees increased due to strong business market growth[20] Corporate The Corporate segment significantly reduced its pre-tax operating loss by 21% to $(81.2) million, compared to a loss of $(103.4) million in Q2 2024. This improvement was primarily the result of higher net investment income and lower operating expenses Corporate Financials (in millions) | Metric | 2Q25 | 2Q24 | % Change | | :--- | :--- | :--- | :--- | | Pre-tax operating losses | $(81.2) | $(103.4) | 21% |[21] - The decrease in pre-tax operating losses was primarily due to higher net investment income and lower operating expenses[21] Shareholder Returns The company demonstrated its commitment to shareholders through significant capital returns and an increased common stock dividend in Q2 2025 Capital Return and Dividends In Q2 2025, PFG returned a total of $320 million to shareholders, consisting of $150 million in share repurchases and $170 million in common stock dividends. The company also announced an increased third-quarter 2025 cash dividend of $0.78 per share, payable on September 26, 2025. This represents an 8% increase over the Q3 2024 dividend - The company returned $320 million of capital to shareholders in Q2 2025, including $150 million of share repurchases and $170 million of common stock dividends[6] - A third-quarter cash dividend of $0.78 per share was announced, payable on Sept 26, 2025, to shareholders of record as of Sept 4, 2025. This is a 2-cent increase over the Q2 dividend[22] Financial Statements and Reconciliations Detailed financial statements and reconciliations provide insights into the company's balance sheet, significant variances, and non-GAAP financial measures Impact of Significant Variances (Exhibit 1) Exhibit 1 quantifies the impact of significant variances on earnings. In Q2 2025, these variances contributed a net positive $24.1 million to pre-tax operating earnings, a reversal from the negative $38.3 million impact in Q2 2024. Key drivers for the quarter included variable investment income fluctuations, encaje performance in Latin America, and a one-time expense accrual release Impact of Significant Variances on Pre-Tax Operating Earnings (in millions) | Period | Impact on Pre-Tax Operating Earnings | | :--- | :--- | | 2Q25 | $24.1 | | 2Q24 | $(38.3) |[23] - Significant variances in 2Q25 included: - Variable investment income performance (mixed across segments) - Higher than expected encaje performance in International Pension - A one-time expense accrual release across multiple segments[24] Selected Balance Sheet Statistics As of the end of Q2 2025, the company's balance sheet showed total assets of $323.1 billion and total stockholders' equity of $11.5 billion. Book value per common share increased to $51.14 from $49.01 at the end of 2024, while book value per share excluding AOCI and other adjustments rose to $54.97 Balance Sheet Data (in billions, except per share) | Metric | 2Q25 | 4Q24 | | :--- | :--- | :--- | | Total assets | $323.1 | $313.7 | | Stockholders' equity | $11.5 | $11.1 | | Book value per common share | $51.14 | $49.01 | | Book value per common share (adjusted) | $54.97 | $53.69 |[34][36] GAAP to Non-GAAP Reconciliations The report provides extensive reconciliations from U.S. GAAP to non-GAAP financial measures, which management believes better represent ongoing operational performance by excluding items like net realized capital gains/losses and results from exited businesses. For Q2 2025, GAAP net income of $406.2 million was reconciled to non-GAAP operating earnings of $489.3 million - Management uses non-GAAP measures to illustrate the performance of normal, ongoing operations, which is important for evaluating the company's financial condition and results[27][33] Q2 2025 GAAP to Non-GAAP Reconciliation Summary (in millions) | Line Item | Amount | | :--- | :--- | | Net income attributable to PFG (GAAP) | $406.2 | | Adjustments for exited business | $26.1 | | Adjustments for net realized capital gains/losses | $57.0 | | Non-GAAP Operating Earnings | $489.3 |[31] Q2 2025 Per Diluted Share Reconciliation | Line Item | Amount | | :--- | :--- | | Net income attributable to PFG (GAAP) | $1.79 | | Non-GAAP Operating Earnings | $2.16 | | Non-GAAP Operating Earnings, ex. significant variances | $2.07 |[32] Supplementary Information This section provides details on the earnings conference call, forward-looking statements, and an overview of Principal Financial Group Conference Call and Forward-Looking Statements The company scheduled an earnings conference call for July 29, 2025, to discuss the quarterly results and future outlook. The report also contains a standard forward-looking statements disclaimer, advising that actual results could differ materially from expectations and referencing its SEC filings for a comprehensive list of risk factors - An earnings conference call with CEO Deanna Strable and CFO Joel Pitz is scheduled for 10:00 a.m. (ET) on Tuesday, July 29, 2025[25] - The release contains forward-looking statements based on current expectations, which are not guarantees of future performance. The company assumes no obligation to update these statements[26] About Principal Financial Group Principal Financial Group is a global financial services company with a 146-year history. It employs approximately 20,000 people and serves over 70 million customers worldwide with planning, insurance, investment, and retirement solutions. The company has been recognized as one of the 2025 World's Most Ethical Companies - Principal is a global financial company with approximately 20,000 employees, serving over 70 million customers[29] - The company has been in business for 146 years and is recognized as one of the 2025 World's Most Ethical Companies[29]