Principal Financial Group, Inc. (PFG) Earnings & Analysis

Latest quarter

Principal Financial’s third-quarter revenue missed the consensus by 0.8% on the consensus measure, while adjusted earnings of $2.22 per share missed the $2.46 estimate. The company reported total revenue of $4.6 billion, up from $3.7 billion a year earlier, and diluted earnings per share of $2.75, versus $0.95.

The filing attributed the increase in net income partly to a gain in the value of a funds-withheld embedded derivative, offset in part by the impact of selling the Chilean annuities business. It also said higher single-premium group annuity sales lifted Retirement and Income Solutions premiums, while growth in Specialty Benefits raised premiums and fees.

Principal’s operating margin rose to 18.2% from 6.75% a year earlier. The filing said benefits, claims and settlement expenses increased primarily as reserves rose alongside the annuity sales. Free cash flow was $1.5 billion, compared with $979.8 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Deanna Strable said total company net cash flow was negative $11 billion in the quarter, largely because of select active-equity strategies. She said private markets generated $800 million of positive net cash flow and active ETFs generated $500 million, while international pension had more than $400 million of positive flow.

Asked about flows and fees, Principal Asset Management CEO Kamal Bhatia said withdrawals had been concentrated in higher-fee active-equity strategies, pressuring the published fee rate. He said transaction and borrower fees, along with custom mandates, also contribute to revenue and are not fully captured by a single management-fee statistic. On the pipeline, Bhatia said it increased by another 700 million during the quarter even as Principal put committed capital to work.

In retirement, Strable said recurring deposits rose 8% year over year and the company received $1.8 billion of retirement savings roll-ins during the quarter. CFO Joel Pitz said Retirement and Income Solutions’ pre-tax operating earnings rose 5% year over year, excluding significant variances, with a 42% operating margin.

Strable said the Beam Benefits acquisition added more than 26,000 small-business customers. Responding to a question about its earnings impact, Benefits and Protection President Amy Friedrich said Beam reduced quarterly earnings by about one or two million. Friedrich said moving policies onto Principal’s contracts and dental network would initially reduce and eliminate those losses, with the process taking place throughout 2027.

Pitz said lower-than-expected variable investment income and NCAHE performance contributed to a $59 million after-tax impact in the quarter. He also said Principal returned 429 million to shareholders through repurchases and dividends.

Guidance

Pitz said Principal expects full-year share repurchases toward the low end of its target range because the Beam acquisition was not included in its 2026 outlook. He also said corporate-segment losses were expected to finish at or above the high end of the full-year target range.