Executive Summary

Q1 2025 EPS came in at $1.81 vs S&P Global consensus $1.83, a slight miss, while revenue of $3.70B trailed the $3.99B consensus; excluding significant variances, EPS was $1.92, +10% YoY (non-GAAP) . Estimates marked with * are from S&P Global; see disclaimer below.*
Mix and margin quality improved: RIS operating margin expanded to 39.2% (+130 bps YoY), International Pension margin to 48.5% (+500 bps), and Specialty Benefits loss ratio improved 40 bps YoY to 60.7% .
Capital deployment remained robust ($369M returned; dividend raised to $0.76 for Q2), and the balance sheet stayed strong (excess/available capital ~$1.75B; RBC ~395% vs ~375% target) .
Management reiterated a path to 9–12% 2025 EPS growth despite April’s unusual volatility, with expense actions underway; catalysts ahead include expense alignment, buybacks, and pipeline conversion in Asset Management, RILA/PRT in RIS, and improving dental pricing flow-through .

What Went Well and What Went Wrong

What Went Well
- Margin expansion in core fee businesses: RIS margin 39.2% (+130 bps YoY) on 5% net revenue growth; International Pension margin 48.5% (+500 bps YoY) despite FX headwinds .
- Specialty Benefits underwriting solid: loss ratio improved to 60.7% (–40 bps YoY) with favorable disability/life claims; operating earnings +4% YoY .
- Capital strength and shareholder returns: $200M buybacks + $169M dividends; dividend lifted to $0.76 for Q2; excess/available capital ~$1.75B; AM Best affirmed A+/aa ratings with stable outlook .
- Management quote: “We will continue to focus on what we can control with a disciplined approach to aligning expenses with revenue, actions to support this are underway.” – CEO Deanna Strable .
What Went Wrong
- Top-line vs estimates: Revenue $3.70B vs $3.99B consensus*; AUM net cash flow –$4.4B, driven by two low-fee institutional fixed income withdrawals (overall revenue mix favorable despite outflow) .*
- Investment Management earnings down YoY on seasonally higher expenses; margin compressed YoY to 29.0% (–200 bps); VII below run-rate headwind persists until expected H2 real-estate transactions .
- Life mortality severity (including a single large 1999-vintage claim) pressured earnings; Corporate losses widened on lower net investment income and higher OpEx .

Financial Results

Headline metrics (non-GAAP unless noted)

Metric	Q3 2024	Q4 2024	Q1 2025
EPS – Non-GAAP Operating ($)	$1.76	$1.94	$1.81
EPS – ex Significant Variances ($)	$2.05	$2.10	$1.92
Non-GAAP Operating Earnings ($MM)	$412.0	$448.1	$414.5
Non-GAAP Net Income ex Exited Business ($MM)	$419.1	$353.5	$299.4
AUM ($B)	$740.6	$712.1	$717.9
AUA ($B)	$1,691.0	$1,663.9	$1,661.6

Consensus vs actual (Q1 2025)

Metric	Consensus	Actual
EPS ($)	$1.83*	$1.81
Revenue ($B)	$3.99*	$3.70*

Segment performance (Q1 2025 vs Q1 2024)

Segment	Pre-tax Op. Earnings Q1’24 ($MM)	Q1’25 ($MM)	Operating Margin Q1’24	Q1’25
Retirement & Income Solutions	262.2	283.7	37.9%	39.2%
Investment Management	122.2	116.3	31.0%	29.0%
International Pension	64.9	71.2	43.5%	48.5%
Specialty Benefits	102.0	106.2	12.7%	12.8%
Life Insurance	9.8	13.3	4.2%	5.7%

KPIs and balance sheet

KPI	Q1 2025
Recurring deposits (RIS)	$13.8B
PRT sales	$0.8B
AUM net cash flow	–$4.4B
Specialty Benefits incurred loss ratio	60.7%
Capital returned to shareholders	$369M (Buybacks $200M; Dividends $169M)
Dividend declared (Q2 2025)	$0.76/sh (vs $0.75 prior)
Excess & available capital	~$1.75B
Book value per share (BVPS)	$49.85
BVPS ex AOCI/embedded derivative adj.	$53.70

Notes on non-GAAP: “Significant variances” in Q1 included lower-than-expected variable investment income (VII) in RIS, Specialty Benefits, Life & Corporate and a GAAP-only closed block adjustment in Life .

Guidance Changes

Metric	Period	Previous Guidance	Current/Update	Change
EPS growth (Non-GAAP)	FY 2025	9–12%	“Path exists” to remain in 9–12% range despite volatility	Maintained
ROE (Non-GAAP)	FY 2025	14–16%	Q1 at ~14% (ex assumption review) within range	Maintained
Free capital flow conversion	FY 2025	75–85%	No change communicated; framework intact	Maintained
Capital deployment (total)	FY 2025	$1.4–$1.7B	Active buybacks; dividend payout ~40%	Maintained
Share repurchases	FY 2025	N/A	On track for $700M–$1.0B in 2025	Clarified/In-line
Statutory RBC target	Ongoing	~375% target	~395% at Q1 end (above target)	Healthy vs target
Effective tax rate	FY 2025	N/A	17–20% target for FY; Q1 below due to FX and seasonality	New/maintained framework
Common dividend	Q2 2025	$0.75/sh (Q1)	$0.76/sh (Q2)	Raised

Earnings Call Themes & Trends

Topic	Q3 2024 (Prev-2)	Q4 2024 (Prev-1)	Q1 2025 (Current)	Trend
Macro/volatility & expense discipline	Positive markets aided earnings	Positive markets; outlook set	“Extreme and unprecedented” April volatility; expense alignment underway	More caution; tighter expense control
RIS margins & flows	RIS margin ex variances improved; recurring deposits +10%	RIS margin ~38%	RIS margin 39.2%; SMB flows strong; PRT $0.8B	Improving margins; balanced spread/fee
Asset Management pipeline/mix	PGI rev +1%; margin ~38%	Operating margin 38.3%	Pipeline improving; higher net revenue rate mandates; NCF masked by low-fee outflows	Quality over quantity; higher-fee mix
International Pension	Record PT OI $121M	FX/encaje headwinds	Margin expansion despite FX; FX headwinds easing	Stabilizing/improving margins
VII/real estate realization	Not emphasized	VII headwind cited	VII below run-rate; H2 real-estate sales expected to drive realization	Back-half skew
Regulatory/closed block (Life)	GAAP-only adjustment cited	GAAP-only closed block adjustment	GAAP-only closed block adjustment noted; mortality severity event	Ongoing accounting nuance
Tariffs/trade policy	—	—	Minimal direct exposure; SMB survey: pricing/supply chain adjustments, not cuts to benefits/wages	Risk monitored; limited direct exposure

Management Commentary

“We are operating in a market that is incredibly dynamic… The magnitude of the volatility we have seen in April has been extreme and unprecedented… We will continue to focus on what we can control with a disciplined approach to aligning expenses with revenue.” – CEO Deanna Strable .
“First quarter… EPS… $1.92 per diluted share [ex SV], a 10% increase… Net cash flow was negative $4 billion… driven by two low fee institutional fixed income withdrawals… mandates we are bringing in now are higher than our average book of business.” – CEO Strable; Asset Mgmt commentary .
“Non-GAAP operating ROE… 14%… Within our targeted range. FX headwinds are dissipating… We ended the quarter… with $1.8B of excess and available capital… RBC ~395%.” – CFO Joel Pitz .
“We returned $370M to shareholders… announced a $0.76 common stock dividend… active share buyback program… on our way to $700M–$1B in 2025.” – CFO Pitz .

Q&A Highlights

EPS outlook: Management still sees a path to 9–12% 2025 EPS growth; durability stems from business mix and expense control despite market volatility .
Expenses: Levers include travel, hiring pace, consulting; 40 bps YoY fee-margin expansion evidences expense alignment progress .
Client behavior & flows: Asset Management pipeline quality improving (higher fee mandates, more “money now” RFPs); negative NCF skewed by low-fee outflows; RIS participant withdrawals stable; large-case lumpiness vs SMB resilience .
VII outlook: Below run-rate in Q1; expect H2 real-estate transactions to drive realization; portfolio less concentrated in PE/HFs .
Capital deployment: Buybacks ongoing under active program; dividend payout ~40% maintained .

Estimates Context

Q1 2025 vs consensus (S&P Global):

Metric	Consensus	Actual
EPS ($)	1.829*	1.81
Revenue ($B)	3.989*	3.696*

Forward consensus at time (S&P Global):

Metric	Q2 2025E	Q3 2025E
EPS ($)	1.971*	2.200*

EPS was a modest miss vs consensus, while revenue missed more notably; we expect estimate revisions to focus on fee-revenue sensitivity to market levels, VII phasing (H2), and improving dental pricing flow-through in Specialty Benefits .
Specialty Benefits trends (loss ratio improvement) and RIS margin expansion could support EPS trajectory; volatility path and VII timing remain key variables .

Estimates marked with * are values retrieved from S&P Global.

Key Takeaways for Investors

Quality improving: RIS and International margins expanded; Specialty Benefits loss ratio improved; mix tilting toward higher-fee mandates in Asset Management .
Manageable miss: Slight EPS miss vs consensus with revenue underperformance; ex-SVs EPS grew 10% YoY, signaling underlying resilience .
Expense flex is the offset: Management is already aligning expenses to revenue; this is the primary lever to defend full-year EPS range amid volatility .
Capital return intact: Active buybacks, dividend increase to $0.76, and RBC comfortably above target underpin capital deployment confidence .
Watch VII timing: Real-estate realizations likely back-half weighted; near-term EPS cadence may reflect VII phasing and market beta on fees .
Flows vs revenue rate: Near-term NCF noise is less concerning given higher net revenue rate on new mandates and SMB strength in RIS .
Risk checks: Life mortality severity spikes can create quarterly noise; FX headwinds easing in International Pension reduce a prior drag .

Other relevant Q1 item: AM Best affirmed PFG/Principal Life ratings (A+/aa; Outlook Stable), citing very strong balance sheet strength and strong operating performance—supportive for funding costs and stakeholder confidence .

PRINCIPAL FINANCIAL GROUP INC (PFG)·Q1 2025 Earnings Summary