Core Insights - Deriva Energy has successfully completed a $127 million debt financing for two operating energy assets, Ledyard Wind and Pisgah Ridge Solar [1][2] - The financing was provided by Principal Asset Management and MetLife Investment Management, highlighting strong investor confidence in Deriva's renewable energy projects [2][3] - Deriva Energy, a leader in clean energy, operates over 6,200 MW of assets and has over 10,500 MW in development across the U.S. [4] Financing Details - The portfolio includes Ledyard Wind, a 207 MW wind facility in Iowa, and Pisgah Ridge, a 250 MW solar facility in Texas, both of which began commercial operations in 2022 [2] - Both projects have long-term power purchase agreements with high-quality corporate purchasers, ensuring stable revenue streams [2] - This marks the second debt financing arranged with Principal Asset Management and MetLife Investment Management since Brookfield's acquisition of Deriva in October 2023 [3] Company Background - Deriva Energy, formerly known as Duke Energy Renewables, is headquartered in Charlotte, North Carolina, and is a portfolio company of Brookfield, a major player in renewable power and climate transition assets [4] - The company is recognized for its significant operational capacity and ongoing development in the clean energy sector [4]

Group 1 - Principal Financial Group, Inc. (NASDAQ: PFG) operates in retirement, asset management, and life insurance sectors but lacks a competitive advantage compared to peers in these segments [1] - The current valuation of Principal Financial Group appears to be underwhelming when compared to its competitors [1]

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]

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]

Summary of Principal Financial Group (PFG) Conference Call - February 10, 2025 Company Overview - **Company**: Principal Financial Group (PFG) - **Industry**: Insurance and Financial Services - **Key Participants**: Amy Friedrich (President of Benefits & Protection), Michael Ward (Vice President & Senior Analyst - US Insurance) Core Business Segments - **Benefits and Protection**: Encompasses all insurance businesses, with a focus on specialty benefits and group benefits as growth engines [3][2] - **Life Insurance**: Transitioned from retail to business market, focusing on individual life insurance solutions for business owners [3][2] - **Affiliated Distribution**: Involves a network of 1,200 financial professionals contributing to production in securities, mutual funds, asset management, and retirement business [4][2] Market Focus and Growth Strategy - **Small and Mid-Sized Businesses (SMB)**: PFG targets the SMB market, which is a significant driver of U.S. job growth, with over 100,000 employer relationships [6][7] - **Product Expansion**: Expanded product offerings to include worksite and voluntary products such as critical illness, hospital indemnity, and accident insurance [9][10] - **Distribution Strategy**: Focuses on regional relationships rather than large national ones, emphasizing partnerships with distributors serving the SMB market [11][12] Employer and Employee Sentiment - **Employer Well-Being Index**: Approximately 58% of employers describe their businesses as growing, indicating healthy demand for benefits [20][21] - **Employee Concerns**: Inflation and personal finance are top concerns for employees, but interest in voluntary products remains high [25][26] Voluntary Products and Market Trends - **Voluntary Product Growth**: Coverage count in voluntary and worksite products grew by over 60% from 2021 to 2023, indicating strong demand [27][28] - **Simplified Billing**: PFG emphasizes the importance of streamlined billing processes for small employers to enhance product uptake [29][30] Technology and AI Integration - **AI in Disability Claims**: PFG utilizes AI to improve the disability claims experience, enhancing recovery rates and return-to-work capabilities [36][37] - **Human-Assisted AI**: AI applications are complemented by human oversight to ensure quality in underwriting and claims processing [45][46] Competitive Landscape and Market Opportunities - **Market Saturation**: The large employer market is saturated, while the mid-market and small business segments present growth opportunities [49][50] - **Greenfield Opportunities**: PFG is focused on expanding its presence in the small business segment, which is under-penetrated, with about 50-60% saturation [52][55] Product Performance and Pricing Strategy - **Dental and Vision Products**: Increased utilization post-COVID has led to adjustments in pricing strategies to reflect inflationary trends [56][57] - **Life and Disability Products**: Positive performance in life and disability segments, with a focus on maintaining competitive pricing for renewals [62][63] Future Growth and Acquisition Strategy - **Organic Growth Focus**: PFG emphasizes organic growth but remains open to strategic acquisitions that align with its growth platforms [65][66] - **Bundled Products**: The company favors bundled offerings that combine employer-paid and voluntary coverages to enhance customer retention and satisfaction [67][68] Mortality and Morbidity Trends - **Monitoring Trends**: PFG is observing trends in mortality and morbidity, particularly related to new drug classes and their impact on the working population [71][75] - **Neutral Outlook**: Currently, there is no significant change in mortality or morbidity trends over the long term, but PFG continues to monitor these closely [76][77]