Principal Financial Group Q4 Earnings Call Highlights

Principal Financial Group (NASDAQ:PFG) detailed fourth-quarter and full-year 2025 results and provided its 2026 outlook, highlighting double-digit earnings growth, margin expansion, and continued capital returns to shareholders.

Full-year 2025 results and drivers

CEO Deanna Strable said 2025 followed a strong 2024, with the company delivering its enterprise financial targets in both years. For 2025, adjusted non-GAAP earnings per share increased 12%, which management said was at the high end of its target range. Strable added that reported results were stronger, with EPS growth of nearly 20%.

Strable attributed 2025 performance to favorable market conditions, strong underwriting results in Specialty Benefits, and margin expansion supported by disciplined expense management while continuing to invest in the business. She emphasized the company’s “diversified and resilient business mix” and said the momentum positions the company well for 2026.

CFO Joel Pitz reported full-year non-GAAP operating earnings, excluding significant variances, of $1.9 billion, or $8.55 per diluted share. Fourth-quarter non-GAAP operating earnings were $499 million, or $2.24 per diluted share, up 7% from the year-ago quarter. Pitz said variable investment income improved from the third quarter and was in line with the assumptions provided during the 2025 outlook call. He also noted a gain on a real estate transaction of about $40 million pre-tax that was recorded “below the line.”

Pitz said non-GAAP operating ROE for 2025 was 15.7%, up 120 basis points from the prior year and at the high end of the company’s 14% to 16% target range. He also reported margin expansion of 80 basis points to 31% for 2025, driven by top-line growth and expense discipline, with compensation and other operating expenses up 2%.

Capital position and shareholder returns

Management said it ended the year with $1.6 billion of excess available capital, including $800 million at the holding company, $300 million in subsidiaries, and $480 million in excess of the targeted 375% risk-based capital ratio. Pitz said the company’s RBC ratio was 406% at year-end.

Principal returned over $1.5 billion to shareholders in 2025, including $851 million of share repurchases and $684 million of common dividends. In the fourth quarter alone, the company returned $448 million, including $275 million of repurchases and $172 million of dividends.

The company also announced an $0.80 common stock dividend payable in the first quarter of 2026, a $0.01 increase from the prior quarter and a 7% increase from the first quarter of 2025. Pitz said the increase aligns with the company’s targeted 40% dividend payout ratio.

Business performance highlights

Strable reiterated the company’s focus on three “attractive profit pools”: the retirement ecosystem, small and midsize businesses (SMB), and global asset management. She said Principal’s integrated model helps connect capabilities across businesses, including recordkeeping, asset management, wealth management, and income solutions.

• Retirement ecosystem: Total retirement transfer deposits were $35 billion in 2025, up 9%, and workplace savings and retirement solutions (WSRS) recurring deposits rose 5%. WSRS deferring participants increased more than 3%, and average deferrals per member rose over 2%. Participant roll-ins reached $6.5 billion, up 15%. Pension risk transfer sales totaled $3 billion across 70 cases, and Strable said nearly a quarter of PRT premiums came from existing clients. DCIO sales were nearly $8 billion.
• SMB market: In SMB retirement, management said WSRS recurring deposits grew 8% and transfer deposits increased 32%, contributing to positive account value net cash flow of $1.5 billion. In Benefits and Protection, the company said group benefits customers averaged 3.13 products, up nearly 3% versus 2024, and employment growth across the block was nearly 2% on a trailing 12-month basis. Business market premium and fees in life grew 15% in 2025, which management said reflected demand for specialized solutions for business owners.
• Global asset management: Investment Management gross sales were $127 billion in 2025, up 16%, with private markets sales up 50%. Private markets generated positive net cash flow of $3.5 billion, and the ETF platform added nearly $2 billion of positive net cash flow. Private markets AUM grew 12%, the ETF platform reached record AUM of $9 billion, and International Pension AUM rose 24% to a record $154 billion.

AUM, flows, and portfolio actions

Pitz said total company managed AUM was $781 billion at year-end, down $3 billion sequentially but up 10% from the prior-year quarter. He said the sequential decline was primarily due to $13 billion of disposed operations and stated those dispositions would have no impact on future earnings outlook. Quarterly net cash flow was negative $2 billion, including positive private flows of $1 billion. He added that the company’s net cash flow definition excludes $2.4 billion of dividends reinvested within its mutual fund franchise.

Strable said the company recently announced the sale of its runoff annuities business in Chile as part of ongoing portfolio optimization, describing the move as consistent with a strategy to focus on higher growth, higher return, and more capital-efficient businesses. In Q&A, Pitz said the Chile runoff annuities business generated about $65 million of revenue in 2025 and about $30 million of pre-tax earnings. He said the company expects the transaction to close in the third quarter of 2026, subject to regulatory approvals, and said the freed-up capital is expected to support elevated share repurchases once the deal closes.

2026 outlook and targets

For 2026, Pitz outlined enterprise targets of 9% to 12% EPS growth, 75% to 85% free capital flow conversion, and 15% to 17% ROE, assuming normal market conditions. He said the ROE target was increased to reflect strong 2025 results, competitive positioning, and the capital efficiency of the company’s mix.

Principal said it is targeting $1.5 billion to $1.8 billion of capital deployments in 2026, including $800 million to $1.1 billion of share repurchases and an increase in the common dividend aligned with its payout ratio framework.

Management also described several updated business segment targets, including upward revisions to multiple margin ranges. Pitz said the company expects the first quarter of 2026 to be seasonally lower in Investment Management earnings due to deferred compensation and payroll taxes, with $30 million to $35 million of seasonal expenses expected in the first quarter. He also noted that dental claims in Specialty Benefits are typically higher in the first half of the year, contributing to expectations for stronger earnings in the second half of 2026.

In Q&A, executives discussed topics including the outlook for performance fees (described as typically $30 million to $40 million in an average year, with 2026 expected to be similar to 2025), potential changes to how operating earnings reflect real estate-related items, and trends in employment and wages among SMB customers. Management said it was not seeing meaningful impacts to employment growth in RIS or Specialty Benefits and cited survey results indicating most SMB customers expect staffing levels and wages to stay stable or increase.

Closing the call, Strable said the company ended 2025 with “very strong momentum,” including earnings growth and ROE at the top end of targets, expanding margins, and robust capital deployment, and said Principal is positioned to deliver against its 2026 targets.

About Principal Financial Group (NASDAQ:PFG)

Principal Financial Group (NASDAQ: PFG) is a global financial services company headquartered in Des Moines, Iowa, that provides a range of retirement, investment and insurance solutions to individuals, employers and institutional clients. The firm’s business is organized around retirement services, asset management, and insurance products designed to help clients plan, invest for, and protect income over the long term.

Principal’s product and service offerings include retirement plan recordkeeping and administration for employer-sponsored plans, individual and group retirement annuities, life and disability insurance, employee benefits solutions, and wealth management services.