Executive Summary

Q4 delivered solid underlying earnings with EPS excluding significant variances up 16% year over year to $2.10, supported by fee growth and expense discipline, while reported GAAP EPS was $3.92 on exited-business marks and derivative impacts .
Segment mix skewed positive: Investment Management margin expanded to 38.3% (from 32.6%) and Specialty Benefits margin to 17.9% (from 15.1%); International Pension was a drag on revenue/earnings given encaje and FX; Life saw higher mortality and a GAAP-only closed block adjustment .
Capital return remains a key catalyst: dividend raised to $0.75 for Q1 2025, new $1.5B buyback authorization, and $1.6B of excess/available capital; year-end RBC at 404% .
2025 outlook reaffirms long-term targets (EPS growth 9–12%, FCF conversion 75–85%, ROE 14–16%) and $1.4–$1.7B of capital deployment; RIS margin guidance raised; Specialty Benefits narrows growth/margin targets amid dental repricing; VII expected to improve with some quarterly volatility tied to real estate sales .

What Went Well and What Went Wrong

What Went Well

Investment Management operating margin expanded to 38.3% (from 32.6%) on higher management fees and scale leverage; pre-tax operating earnings rose 27% YoY .
Specialty Benefits posted strong underwriting: operating margin 17.9% (from 15.1%) and incurred loss ratio improved to 56.5% (from 61.0%), driving 23% YoY growth in pre-tax operating earnings .
Management tone on 2025: “We are well positioned to deliver on our enterprise long-term financial targets again in 2025… 9% to 12% growth in earnings per share… 75% to 85% free capital flow conversion… 14% to 16% return on equity” .

What Went Wrong

International Pension: net revenue down 25% and pre-tax operating earnings down 42% on encaje performance and FX; margin compressed to 38.1% (from 49.1%) .
Life Insurance earnings fell on higher mortality severity and a GAAP-only closed block dividend adjustment; margin dropped to 3.3% (from 11.1%) .
Variable investment income (VII) below long-term run rate across multiple businesses in Q4; management flagged quarterly volatility with real estate sale timing even as 2025 improves overall .

Financial Results

EPS, Income and Operating Earnings (Consolidated)

Metric	Q4 2023	Q3 2024	Q4 2024
GAAP EPS ($)	(3.66)	(0.95)	3.92
Non-GAAP Operating EPS ($)	1.83	1.76	1.94
Non-GAAP Operating EPS, excl. Significant Variances ($)	1.81	2.05	2.10
GAAP Net Income ($M)	(871.7)	(220.0)	905.4
Non-GAAP Net Income ex Exited Business ($M)	299.1	419.1	353.5
Non-GAAP Operating Earnings ($M)	440.5	412.0	448.1
Weighted Avg Diluted Shares (M)	241.3	233.8	231.2

Notes: Company press materials emphasize non-GAAP operating earnings to depict ongoing operations; “significant variances” detail non-core items each period .

Key AUM/AUA and Capital Metrics

Metric	Q4 2023	Q3 2024	Q4 2024
Assets under Administration (AUA) ($B)	1,578.7	1,691.0	1,663.9
Assets under Management (AUM) ($B)	694.5	740.6	712.1
AUM Net Cash Flow ($B)	(4.0)	—	(1.2)

Point-in-time capital (YE 2024): Excess & available capital $1.6B; RBC ratio 404% . Book value per share $49.01 (ex-items $53.69) vs $46.18 (ex-items $53.87) in FY23; end-of-period common shares 226.2M (vs 236.4M) .

Segment Performance (Q4 year-over-year unless noted)

Segment	Q4 2023	Q4 2024
RIS – Pre-tax Operating Earnings ($M)	264.6	280.1
RIS – Net Revenue ($M)	690.5	729.2
RIS – Operating Margin (%)	38.3%	38.4%
Investment Mgmt – Pre-tax Op Earnings ($M)	129.2	163.9
Investment Mgmt – Operating Revenues less Pass-through ($M)	397.9	435.7
Investment Mgmt – Operating Margin (%)	32.6%	38.3%
International Pension – Pre-tax Op Earnings ($M)	90.1	52.1
International Pension – Net Revenue ($M)	183.5	136.8
International Pension – Operating Margin (%)	49.1%	38.1%
Specialty Benefits – Pre-tax Op Earnings ($M)	119.3	147.2
Specialty Benefits – Premium & Fees ($M)	791.4	823.6
Specialty Benefits – Operating Margin (%)	15.1%	17.9%
Specialty Benefits – Incurred Loss Ratio (%)	61.0%	56.5%
Life Insurance – Pre-tax Op Earnings ($M)	25.1	7.5
Life Insurance – Premium & Fees ($M)	226.6	225.4
Corporate – Pre-tax Op Losses ($M)	(88.5)	(103.9)

Additional Q4 operating KPIs:

RIS transfer deposits up 57% to $8.8B, including $0.9B of PRT sales .
Investment Management had a record quarter in retirement investment sales driven by a $1.0B off-platform mandate .
Life Insurance business-market premium & fees +17% YoY .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Non-GAAP EPS Growth	FY 2025	Long-term 9–12%	9–12% (reaffirmed)	Maintained
Free Capital Flow Conversion	FY 2025	75–85%	75–85% (reaffirmed)	Maintained
Non-GAAP ROE	FY 2025	14–16%	14–16% (reaffirmed)	Maintained
Capital Deployment	FY 2025	N/A	$1.4–$1.7B	New/Specified
Share Repurchases	FY 2025	35–45% payout framework	$700M–$1B (target within $1.4–$1.7B)	Clarified
Dividend	Q1 2025	$0.73 (Q4’24)	$0.75 per share	Raised
Buyback Authorization	Multi-year	Prior program (~$0.8B remaining)	New $1.5B authorization (with ~$0.8B under prior remaining at YE)	Increased capacity
RIS Margin	Medium-term/Q25	Prior range	Margin guidance revised upward; net revenue growth 2–5% intact	Raised margin
Specialty Benefits	2025/Medium-term	Premium & fees prior > industry	Premium & fees 6–9% (2025 near low end); improved loss ratio and margin targets (loss ratio to 64%, margin lower-end raised to 13%)	Growth tempered; margins improved
International Pension	2025	Prior PI framework	Net revenue midpoint on constant currency; below range reported due to stronger USD; margin at low end in 2025, improving thereafter	FX-adjusted outlook
Investment Management	2025	Within ranges	Revenue growth & margin within medium-term ranges	Maintained
Life Insurance	2025	Prior range	Premium & fees growth at/above high end; revised margin guidance improved vs 2024	Improved

Seasonality/modeling notes: Investment Management expects ~$40M higher expenses in Q1 (deferred comp/payroll taxes); Specialty Benefits dental claims higher in 1H; earnings/FCF weighted to 2H .

Earnings Call Themes & Trends

Topic	Q2 2024 (Prior-2)	Q3 2024 (Prior-1)	Q4 2024 (Current)	Trend
Variable Investment Income (VII)	Pressure persisted; real estate transactions minimal; improvement tied to 2025 rate path	Mixed; negative PE returns pressured VII in Q3; improvement vs 2023	Expect improved VII in 2025 with volatility from real estate sale timing	Gradual improvement with timing volatility
RIS flows/withdrawals	Elevated withdrawals on higher account values; strong SMB deposits; PRT momentum	Slight uptick in withdrawal rate; fee compression managed; strong margins	Withdrawal rates stabilizing; expect a $2.3B large outflow in Q1’25; prioritize profitable revenue	Stabilizing; focus on margin over flows
Specialty Benefits—Dental	Elevated utilization; repricing underway	Loss ratio improved sequentially; guided normalization	Underwriting discipline continues; 2025 growth at low end; margin/loss ratio targets raised	Margin focus; growth moderated
PRT (Pension Risk Transfer)	~$1B sales in Q2; 2024 target near $3B	Robust pipeline; on track for $3B	$0.9B in Q4; 2024 >$3B; 2025 robust; no impact from litigation to SMB market	Sustained opportunity
International Pension/FX	Latin America strength; Asia softer; FX headwind	Record AUM, strong flows; FX headwinds; margin expansion	Encaje/FX weighed; Chile reform seen as positive over time; Hong Kong MPF transition planned with BCT	FX/encaje headwinds; strategic repositioning
Real estate market	Transactional activity muted; 2025 expected to improve	Signs of bottoming; improving sentiment, but slower transactional recovery	Increased activity and credit availability; VII uplift expected in mid-to-late 2025	Cautious recovery
Retirement innovation	ESOP acquisition expanded SMB offering	In-plan annuity options evolving; aim to embed into QDIA/managed accounts	Increased focus on private assets in 401(k) over time; in-plan annuities still early	Product evolution ongoing

Management Commentary

CEO on strategy and performance: “We are well positioned to deliver on our enterprise long-term financial targets again in 2025… 9% to 12% growth in earnings per share… 75% to 85% free capital flow conversion and 14% to 16% return on equity” .
Capital deployment: “We returned $1.7 billion to shareholders in 2024… Board… approved a new… $1.5 billion… share repurchase [authorization]” .
Asset management momentum: “Off-platform retirement investment mandate win of nearly $1 billion… highlights our opportunity to unlock incremental value at the intersection of our businesses” .
VII outlook: “We do expect improved returns in 2025… with key asset classes at or approaching long-term expectations… weighted towards the middle and latter half of the year” .

Q&A Highlights

RIS flows and withdrawals: Management expects stabilization in participant withdrawal rates, strong recurring and transfer deposits, but flagged a specific ~$2.3B large-market outflow in Q1’25 with minimal fee revenue impact; emphasis remains on profitable revenue and margin, not flows .
Specialty Benefits—Dental: Underwriting discipline prioritized; dental loss ratio expected to normalize in 2025; updated targets: loss ratio to 64%, margin floor to 13%; 2025 growth near low end of 6–9% range .
International Pension/Chile reform: Reform reaffirming defined contribution system and reducing encaje viewed as constructive; management confident navigating changes with long-term optimism .
Real estate and VII: Transaction activity improving; VII expected to rise in 2025 with quarterly volatility from timing of property sales .
Capital returns: Strong excess capital ($1.6B) supports aggressive buybacks ($700M–$1B targeted in 2025) alongside a 40% dividend payout ratio .

Estimates Context

S&P Global consensus estimates for Q4 2024 (EPS, revenue, EBITDA, net income) could not be retrieved at this time due to a data access limit. As a result, we have not presented beat/miss vs. consensus for this quarter. We will update this section when S&P Global data access is restored.

Key Takeaways for Investors

Margin-led story: Investment Management and Specialty Benefits margins expanded meaningfully in Q4, offsetting FX/encaje pressure internationally and mortality noise in Life .
Capital deployment remains a core pillar: dividend increased to $0.75, new $1.5B buyback authorization, and 2025 plan for $1.4–$1.7B capital return provide ongoing support for TSR .
2025 setup is constructive: enterprise guidance reaffirmed; RIS margin guidance raised; VII expected to improve with timing variability; specialty dental repricing should bolster profitability over growth near term .
Retirement ecosystem momentum: Strong SMB recurring deposits, PRT sales, and cross-business wins (off-platform mandate) support durable top-line and fee revenue—despite flow headwinds tied to market-driven withdrawals .
Watch items: International Pension sensitivity to FX/encaje; Life mortality variance; Q1 seasonal expense spikes in Investment Management; expected Q1’25 large-case outflow in RIS .
Trading lens: The combination of a dividend increase, stepped-up buyback capacity, and raised segment margin targets could act as near-term sentiment tailwinds; realization of VII improvement and sustained margin execution are likely catalysts into mid-2025 .

PRINCIPAL FINANCIAL GROUP INC (PFG)·Q4 2024 Earnings Summary