Summary of Principal Financial Group Conference Call Company Overview - **Company**: Principal Financial Group (NasdaqGS:PFG) - **Event**: 2026 Conference on February 11, 2026 - **Speaker**: Deanna Strable, President and CEO Key Financial Highlights - **2025 Performance**: - Adjusted EPS growth of 12%, at the top end of the targeted range - Reported EPS growth nearly 20% - Free cash flow at the top end of the targeted range - Return on Equity (ROE) increased by 120 basis points, within the top half of the targeted range [11][12] - **2026 Outlook**: - Targeting 9%-12% EPS growth - Raised ROE target from 14%-16% to 15%-17% - Confidence in maintaining 75%-85% free cash flow [13][14] Business Segments and Strategies - **Focus Areas**: - Retirement ecosystem - Small to midsize businesses (SMBs) - Global asset management [13] - **SMB Market Insights**: - SMBs defined as employers with up to 1,000 employees - Principal has a strong platform for growth in this segment, particularly in retirement and benefits [18] - SMB customers have been in business for an average of 30 years, indicating stability [19] - 95% of SMB employers plan to increase or maintain salaries, and 85% plan to keep or increase employment levels [20] Cross-Selling Opportunities - **Cross-Sell Strategy**: - Focus on leveraging advantages in SMB to drive growth in both retirement and benefits - Challenges in cross-selling due to reliance on third-party advisors [22] - Successful cross-sell examples include Total Retirement Solutions and executive business owner solutions [23][24] Employee Benefits Trends - **Claims Trends**: - Dental claims have increased, while life and disability loss ratios have decreased [25][26] - Work-from-home dynamics have changed disability claims [26] - **Pricing Strategy**: - Ability to reprice benefits annually, allowing for stable premiums while adjusting for claims trends [28] Global Asset Management - **International Strategy**: - Focus on leveraging U.S. strengths in select international markets (China, Brazil, Chile, Mexico) [38] - 40%-45% of AUM from affiliated sources, indicating strong integration with other business lines [39] - **Real Estate Market**: - Six consecutive quarters of growth in real estate returns, with positive flows expected to continue [42] - Interest from Asian and Middle Eastern customers in U.S. capabilities [43] Technology and AI Integration - **AI Utilization**: - AI is viewed as a tool to enhance distribution and service, particularly for SMBs [47] - Proprietary AI tools have been rolled out to a significant portion of employees, enhancing productivity and customer service [51][52] Dividend and Capital Allocation - **Dividend Policy**: - Targeting a 40% payout ratio with a commitment to quarterly dividend increases [57] - Balancing dividends with share buybacks to maintain a 75%-85% payout ratio [58] Cultural Considerations - **Company Culture**: - Emphasis on maintaining a unified culture across global operations, with a focus on leveraging technology and AI [66][67] Conclusion - Principal Financial Group is positioned for continued growth with a strong focus on SMBs, a diversified asset management strategy, and a commitment to leveraging technology for operational efficiency. The company maintains a balanced approach to capital allocation, ensuring shareholder returns while investing in growth opportunities.

Financial Data and Key Metrics Changes - The company reported a 13% year-over-year growth in adjusted earnings per share and a 14% increase year-to-date, exceeding target ranges [4][5] - Return on equity expanded significantly and is now at the high end of the target range [4] - Year-to-date free capital flow conversion ratio is over 90%, tracking above target [4] - Non-GAAP operating earnings reached $474 million, or $2.10 per share, a 19% increase year-over-year [11] - Total managed AUM increased to $784 billion, a 4% sequential increase [13] Business Line Data and Key Metrics Changes - Workplace Savings and Retirement Solutions (WSRS) transfer deposits grew 13% year-over-year, with total Retirement Investment Solutions (RIS) sales of $7 billion, an 8% increase [6][7] - Small and mid-sized business segment saw WSRS SMB recurring deposits grow 8% and transfer deposits increase by 27% [7] - Global asset management gross sales reached $32 billion, up 19% year-over-year, with private markets generating net inflows of $1.7 billion [8][9] - Specialty Benefits pre-tax operating earnings were $147 million, a record quarter, reflecting a 28% increase year-over-year [16] Market Data and Key Metrics Changes - The company experienced positive net cash flow of $400 million in the quarter, driven by investment management flows [13] - International pension reported record AUM of $151 billion, a 9% year-over-year increase [15] Company Strategy and Development Direction - The company is focused on three significant profit pools: the retirement ecosystem, small and mid-sized businesses, and global asset management [5] - Continued investment in modernizing recordkeeping capabilities and enhancing individual customer service [22] - The company aims to capitalize on opportunities in financial inclusion and fintech solutions [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering full-year enterprise financial targets based on strong performance and business momentum [5][17] - The economic environment has created challenges, but there are significant opportunities for growth in financial inclusion and retirement solutions [10] Other Important Information - The company returned $400 million to shareholders in the quarter, including $225 million in share repurchases [12] - The common stock dividend was raised by 8%, marking the ninth consecutive quarter of increases [5][12] Q&A Session Summary Question: Margin expansion expectations - Management expects continued margin expansion driven by strong underwriting results and disciplined expense management [19][20] Question: Free capital flow conversion trends - The company maintains a strong capital position with a capital-efficient mix of business, allowing for organic investments while returning capital to shareholders [26][27] Question: Investment management flows and investor sentiment - Positive net cash flow of $800 million was reported, with strong demand in private markets and emerging market fixed income [33][34] Question: Performance fees outlook - Performance fees are expected to remain modest, but there has been an uptick in transaction and borrower fee activity [36][37] Question: Bering Strategic Partnership fee rate - The partnership aims to enhance private market expertise and is expected to create value for the company [41][43] Question: 401k business and market consolidation - The company anticipates benefiting from industry consolidation and is focused on driving organic growth [45][49] Question: Private credit market dynamics - The company maintains a strong credit quality in its portfolio, with a focus on underwriting standards [86][90]