Core Insights - Principal Financial Group is experiencing strong momentum heading into 2026, with a focus on small and midsize business (SMB) retirement and benefits, global asset management, and technology investments related to artificial intelligence [5] SMB Market Insights - 95% of SMB employers surveyed expect to increase or maintain salaries, and about 85% plan for stable or increasing employment levels [1] - SMB customers have been resilient, with an average business tenure of around 30 years, and many clients have been with Principal for over 10 years [2] - The company targets 9% to 12% EPS growth and 75% to 85% free cash flow, with an increased ROE target of 15% to 17% [3] Financial Performance - Principal reported a strong performance in 2025, with adjusted EPS growth of 12%, nearly reaching the top end of the targeted range, and free cash flow also at the top end of expectations [4] - Return on equity increased by 120 basis points, landing in the top half of the targeted range [4] Employee Benefits and Insurance - Principal's employee benefits business is characterized by a focus on dental, life, and disability insurance, with an average of over 3.1 coverages per benefits customer [10] - The company has seen changes in claims trends post-COVID, with dental claims rising while life and disability loss ratios have improved [12] - Annual repricing in SMB allows for adjustments in dental pricing, contributing to a more stable total premium for customers [13] Global Asset Management and AI Strategy - Principal has reorganized its asset management structure to focus on international strengths, with significant growth in real estate and private markets, generating approximately $3.5 billion to $4 billion in positive flows during 2025 [15][16] - AI is viewed as a tool to enhance productivity rather than replace advisors, with significant investment in AI tools leading to increased employee access [17] - The company anticipates that AI investments will yield benefits in margin improvement and growth over time [18] Capital Return and Acquisition Strategy - Principal targets a 40% dividend payout ratio and a total payout ratio of 75% to 85%, including share buybacks [19] - The company remains open to inorganic growth opportunities but emphasizes that acquisitions are not necessary to meet current objectives [19]