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PRINCIPAL FINANCIAL GROUP INC (PFG)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered strong non-GAAP operating EPS of $2.10 and adjusted EPS of $2.32 (+13% YoY ex significant variances), driven by margin expansion across RIS, Investment Management, and Specialty Benefits; GAAP diluted EPS was $0.95 .
  • Capital deployment accelerated: $398M returned ($225M buybacks, $173M dividends) and dividend raised to $0.79 for Q4; excess capital stood at $1.6B with RBC ~400%, positioning for elevated Q4 buybacks .
  • Segment momentum: RIS margin 41.3% (+510bps YoY), Investment Management margin 39.8% (+180bps YoY), and Specialty Benefits record earnings with loss ratio improvement; Life Insurance faced less favorable mortality and actuarial assumption review impacts .
  • Versus S&P Global consensus: EPS modest miss (Actual $2.10 vs $2.20*) and revenue miss (Actual $3.68B vs $4.14B*), while Q2 was a beat on EPS (Actual $2.16 vs $1.97*) and Q1 slight miss (Actual $1.81 vs $1.83*)*. Values retrieved from S&P Global.
  • Catalysts: dividend increase and guidance reaffirmation for capital returns; visible margin discipline; improving transaction activity in real estate and positive asset management net flows signal potential estimate revisions .

What Went Well and What Went Wrong

What Went Well

  • Margin expansion and EPS growth: “Robust operating performance delivered strong EPS growth... underpinned by... enhanced margin performance” — Deanna Strable (CEO) .
  • Specialty Benefits record earnings (+53% YoY), loss ratio improved (56.4% reported; 58.1% ex SV) on favorable underwriting across group life, disability, and dental .
  • Investment Management momentum: Operating margin +180bps YoY to 39.8% and AUM $601.6B (+5% YoY); management fee growth +5% YoY .
  • Capital strength and returns: $1.6B excess/available capital; ~$400M returned in Q3; Q4 dividend raised; CFO reaffirmed $1.4–$1.7B full-year capital return with $700M–$1B buybacks .

What Went Wrong

  • Life Insurance pressured: pre-tax operating loss of $(69.0)M vs $(37.3)M YoY; less favorable mortality and GAAP-only model refinements from actuarial review .
  • International Pension net revenue down (−4% YoY) with encaje/inflation and SV impacts; reported margin divergence between disclosures (53.9% press release vs 47% excluding SV on call) indicates comparability caution .
  • Estimate optics: EPS and revenue came in below S&P consensus for Q3, likely reflecting VII mix (real estate transaction gains below operating earnings) and actuarial review effects; management highlighted more transaction activity expected in Q4 .

Financial Results

EPS and Revenue vs Prior Periods and Estimates

MetricQ3 2024Q2 2025Q3 2025
GAAP Diluted EPS ($)$(0.95) $1.79 $0.95
Non-GAAP Net Income EPS (ex exited) ($)$2.05 $1.91 $2.06
Non-GAAP Operating EPS ($)$1.76 $2.16 $2.10
Non-GAAP Operating EPS, ex significant variances ($)$2.05 $2.07 $2.32
Consensus vs Actual (S&P Global)Q1 2025Q2 2025Q3 2025
Primary EPS Consensus Mean ($)1.829*1.971*2.200*
Primary EPS Actual ($)1.81*2.16*2.10*
Revenue Consensus Mean ($MM)3,989.1*3,982.95*4,138.1*
Revenue Actual ($MM)3,695.9*3,671.3*3,681.6*

Values retrieved from S&P Global.

Segment Pre-Tax Operating Earnings and Margins

SegmentQ3 2024 Pre-tax ($MM)Q2 2025 Pre-tax ($MM)Q3 2025 Pre-tax ($MM)
Retirement & Income Solutions (RIS)$246.1 $292.1 $310.3
Investment Management$159.1 $157.9 $173.5
International Pension$109.7 $78.5 $101.2
Specialty Benefits$101.7 $127.6 $155.5
Life Insurance$(37.3) $20.0 $(69.0)
Corporate$(79.4) $(81.2) $(91.6)
Segment Operating MarginQ3 2024Q2 2025Q3 2025
RIS Margin (%)36.2% 40.9% 41.3%
Investment Mgmt Margin (%)38.0% 37.5% 39.8%
International Pension Margin (%)56.1% 49.3% 53.9% (PR); 47% ex SV (call)
Specialty Benefits Margin (%)12.4% 15.2% 18.4%
Life Insurance Margin (%)(15.5)% 8.4% (27.7)%

KPIs and Capital

KPIQ3 2024Q2 2025Q3 2025
Assets under Administration (AUA, $B)1,691.0 1,737.8 1,792.5
Assets under Management (AUM, $B)740.6 752.7 784.3
AUM Net Cash Flow ($B)(1.1) (2.6) 0.4
Capital Returned ($MM)—320 398
Share Repurchases ($MM)—150 225
Common Dividend per Share ($)—0.78 (Q3 declared) 0.79 (Q4 declared)
Excess & Available Capital ($B)—1.4 1.6
Estimated RBC Ratio (%)—~400% ~400%
Weighted Avg Diluted Shares (MM)233.8 226.5 225.2

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Full-year capital returnFY 2025$1.4–$1.7B; buybacks $700M–$1B Reaffirmed; 4Q buybacks “outsized” vs Q3 Maintained; buybacks more elevated in Q4
Dividend payout ratioOngoing~40% target ~40%; Q4 dividend $0.79 (+1c QoQ, +8% YoY) Maintained; dividend raised
Tax rateFY 202517%–20% 17%–20% implied continuation Maintained
Investment Mgmt performance fees2H 2025Similar to 2024 Similar to 2024; transaction/borrower fees trending up modestly Maintained; slight positive in transaction fees
VII outlook2H 2025Improvement vs 1H; below LT run-rate Optimistic for H2; real estate transactions picking up; some gains below OE Maintained with positive near-term tone
RIS marginFY 2025Upper end of target range Upper end; continued expense discipline Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Margin disciplineQ1: enterprise margin expansion; Q2: +140bps YoY enterprise, RIS near high end +180bps enterprise; RIS 42% excl SV; Investment Mgmt +180bps Improving
Asset management flows & feesQ1: private real estate NCF +$1.1B; mgmt fees +5% Q2: gross sales +24%; performance fees similar to 2024 Q3: net cash flow +$0.8B; mgmt fees +5%; real estate transactions increasing
Specialty Benefits underwritingQ1: loss ratio improved 40bps Q2: loss ratio +130bps; dental pricing actions Q3: record earnings; loss ratio improved; broad product strength
Life Insurance experienceQ1: higher claims severity; GAAP adjustment Q2: earnings down on mortality severity Q3: less favorable mortality; actuarial model refinements (GAAP-only)
Technology/AI initiativesQ2: PAGE recognized by Newsweek AI Impact Awards; digital ID verification award Continued investments in recordkeeping modernization & data exchange Stable/Building
International PensionQ1: FX headwinds; margin expansion Q2: margin +180bps; constant-currency net revenue up Q3: reported margin 53.9%; ex SV ~47%; encaje/inflation impacts
Capital deploymentQ1: $369M returned Q2: $320M returned; buybacks to increase in H2 Q3: $398M returned; buybacks to be elevated in Q4

Management Commentary

  • “Robust operating performance delivered strong EPS growth... Sustained free cash flow enabled investments ... and shareholder distributions... we remain confident in achieving our full-year guidance” — Deanna Strable, CEO .
  • “We ended the quarter in a strong position with $1.6 billion of excess and available capital ... we expect elevated levels [of buybacks] in the fourth quarter” — Joel Pitz, CFO .
  • “Specialty Benefits... operating earnings were $147 million, a record quarter... driven by more favorable underwriting results and business growth” — CFO prepared remarks .
  • “Within investment management... management fees increased 5% year-over-year... contributed to a 180 basis point improvement in ... operating margin” — CFO .
  • “Mortality in the quarter was better than expected, but slightly less favorable than a year-ago quarter” — CFO on Life Insurance .

Q&A Highlights

  • Margins outlook: Management expects continued margin expansion while investing; RIS targeting upper-end margins; enterprise margin +180bps with disciplined expenses .
  • Free capital flow conversion >90% YTD; excess capital $1.6B; Q4 buybacks to be “outsized,” reaffirming $1.4–$1.7B capital return and dividend policy .
  • Asset management flows: Positive net cash flow in Q3 led by privates; diversified wins across channels; performance fees similar to 2024, with transaction/borrower fees trending up .
  • RIS spread business: Strong GA products in WSRS, disciplined PRT focus on returns (smaller market segments); RILA growth supports lifetime income offering .
  • Actuarial assumption review: GAAP-only, non-cash; two-thirds impact from model refinements, one-third from experience; immaterial to ongoing run-rate and free capital .
  • VII outlook: Improved H2 expected; more real estate transactions with some gains below OE; optimistic for latter half .

Estimates Context

  • Q3 EPS: Actual $2.10 vs S&P Primary EPS consensus $2.200* — modest miss. Q2 EPS: Actual $2.16 vs $1.971* — beat. Q1 EPS: Actual $1.81 vs $1.829* — slight miss. Values retrieved from S&P Global.
  • Q3 Revenue: Actual $3,681.6M vs S&P consensus $4,138.1M* — miss. Q2: $3,671.3M vs $3,982.95M* — miss. Q1: $3,695.9M vs $3,989.1M* — miss. Values retrieved from S&P Global.
  • Implications: Expect modest downward revisions to revenue where VII timing and GAAP-only adjustments affect optics; margin resilience and dividend/buyback signals could support EPS stability. Values retrieved from S&P Global.

Key Takeaways for Investors

  • Margin-led EPS strength with broad segment expansion provides quality of earnings; Specialty Benefits’ underwriting and RIS discipline are core drivers .
  • Capital return trajectory is a near-term catalyst: dividend raised to $0.79 and management signaling elevated Q4 buybacks supported by $1.6B excess capital and ~400% RBC .
  • Asset management turning the corner: positive net flows, fee rate stability, and rising transaction activity in real estate underpin 2026 fee upside; monitor performance fees trajectory .
  • Life Insurance remains a watch item: mortality volatility and GAAP model refinements weighed on results; management asserts impacts are non-cash and immaterial to run-rate .
  • Expect EPS optics to improve with VII normalization and buyback uplift; non-GAAP operating EPS ex SV (+13% YoY) evidences underlying momentum .
  • Near-term trading: dividend/buyback announcements and margin commentary are supportive; estimate misses on revenue could cap upside until asset management flows and real estate transactions further rebound .
  • Medium-term thesis: diversified profit pools (retirement ecosystem, SMB, global asset management) and disciplined capital allocation sustain ROE at high end of target range .

Appendix: Source Cross-References

  • Q3 2025 8-K 2.02 and Exhibit 99 press release: key EPS, segment, and capital data .
  • Q3 2025 press release (public): same metrics and segment details .
  • Q3 2025 earnings call transcript: prepared remarks and Q&A insights –.
  • Prior quarters for trend: Q2 press release and call – –; Q1 press release –.