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Principal Financial Group (PFG) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Financials· Apr 24, 2026

Source: earnings call transcript

Executive summary

Principal Financial Group Q1 FY26 — Strong Earnings Growth and Capital Returns

Principal Financial Group delivered a strong Q1 FY26, marked by double-digit adjusted EPS growth and significant capital returns, underscoring the resilience of its diversified business model. The company saw broad-based momentum across its strategic growth drivers, including record sales in Investment Management and Specialty Benefits, alongside robust retirement transfer deposits. While overall net cash flow remained negative and variable investment income was lower, management expressed confidence in achieving full-year financial targets, driven by disciplined execution and strategic investments.

Highlights

5

  • Adjusted non-GAAP earnings per share grew 13% in Q1 FY26.

  • Approximately $375 million of capital was returned to shareholders in the quarter, including $200 million of share repurchases.

  • Common stock dividend increased by 8% year-over-year for the 12th consecutive quarter.

  • Total retirement transfer deposits grew 35% year-over-year to $12 billion.

  • Investment Management achieved record gross sales of $37 billion, up 21% year-over-year.

Concerns

4

  • Total company net cash flow was negative $1.5 billion in the quarter.

  • Lower variable investment income had an after-tax impact of $23 million in Q1 FY26, primarily due to timing of real estate transactions.

  • Redemption activity in Investment Management was concentrated among a small number of U.S. active equity mutual funds.

  • First quarter losses in the Corporate segment were elevated due to timing of expenses.

Guidance & targets

CategoryTargetConfidence
Full-year Variable Investment Income
Improve relative to 2025
medium materiality
High
Dividend Payout Ratio
40%
low materiality
High
Specialty Benefits Premium Fees Growth
Trend higher throughout the year, most notably in the second half
medium materiality
Medium
Specialty Benefits Loss Ratio
Low end or even slightly below the low end of the range communicated at outlook
high materiality
High
Individual Life Operating Margin
Towards the lower end of 12%-16% range for full year
medium materiality
Medium
RIS Net Cash Flow Pattern
Follow historical pattern: Q1 strongest, remaining quarters impacted by strong markets and lumpiness
medium materiality
Medium
International Pension Earnings Run Rate
Mid-$70 million range
medium materiality
Medium
Investment Management Performance Fees
Similar to 2025
low materiality
Medium
Corporate Segment Results
Within target range
low materiality
Medium
PRT Sales
Fairly similar to 2025, with lighter first half and accelerated second half
medium materiality
Medium

Segment performance

SegmentRevenueYoYQoQMargin
Retirement and Income Solutions (RIS)
Pretax operating earnings increased 4% year-over-year, driven by 3% net revenue growth and margin expansion. Operating margin expanded 60 basis points, reflecting disciplined focus on profitable revenue growth and expense management, along with favorable seasonality. Strong transfer and recurring deposits, plus favorable retention, drove significant net cash flow.
Operating margin: 41.5%Operating margin change: +60 bps YoYRIS account value net cash flow: $1.8BTotal retirement transfer deposits: $12BTotal retirement transfer deposits growth: +35% YoYRecurring deposits growth: +7% YoYParticipants deferring growth: +3%Average deferrals growth: +3%Roll-ins: $1.7BDCIO sales (Q1): $2BDCIO sales (TTM): $8BSMB recurring deposits growth (Q1): +6% YoYSMB recurring deposits growth (TTM): +7%SMB account value net cash flow: $600M
—4%—$318M pretax operating earnings
Principal Asset Management
Delivered 10% earnings growth year-over-year on 5% revenue growth and margin expansion. Investment Management pretax operating earnings increased 8% from the prior year quarter. Record gross sales highlight the attractiveness of solutions and global distribution. Demand remains strong in private markets, ETFs, and UCITS.
Investment Management pretax operating earnings growth: +8% YoYInvestment Management adjusted revenue growth: +2% YoYInvestment Management operating margin improvement: +100 bpsGross sales: $37BGross sales growth: +21% YoYPrivate markets AUM growth: +11% YoYPrivate markets net inflows (Q1): $400MPrivate markets net inflows (TTM): $3BActive ETF net inflows (Q1): $400MActive ETF net inflows (TTM): $1.8BNet cash flow from clients outside U.S.: $1.5B
5% growth10%——
International Pension
Pretax operating earnings increased 14% year-over-year, driven by higher performance fees, favorable foreign currency impacts, and business growth. AUM reached a record $160 billion, primarily due to positive market performance and net cash flow. Net cash flow was positive $500 million, with $700 million from Brazil. Operating margin remains comfortably within target range.
AUM: $160BAUM growth sequentially: +4%AUM growth YoY: +20%Net cash flow: $500MNet inflows in Brazil: $700MOperating margin: 48.5%Pretax operating earnings (Q1): $80MPerformance fee (China): $7M
—14%——
Benefits and Protection
Delivered a very strong quarter with pretax operating earnings of $177 million, an increase of 41% year-over-year, driven by more favorable Specialty Benefits underwriting, improved life mortality, and business growth.
—41%—$177M pretax operating earnings
Specialty Benefits
Premium fees increased 4% year-over-year, supported by record sales up 24%. Pretax operating earnings increased 26% year-over-year, reflecting strong underwriting experience and business growth. Total loss ratio improved due to improved Group Life and Group Dental results, along with continued strong results in group disability, leading to margin expansion.
Pretax operating earnings growth: +26% YoYTotal loss ratio: 58.5%Total loss ratio improvement: 220 bps YoYOperating margin: 16.2%Operating margin improvement: +290 bps YoY
4% premium fees growth24% sales growth—$140M pretax operating earnings
Life Insurance
Pretax operating earnings increased $23 million year-over-year, driven by improved mortality experience due to lower frequency and severity. This contributed to a 15.6% operating margin in the quarter, at the high end of the target range.
Pretax operating earnings increase: +$23M YoYOperating margin: 15.6%
———$37M pretax operating earnings
Corporate
First quarter losses were elevated due to timing of expenses. On a full year basis, the segment is expected to be within its target range.
———Elevated losses

PFG operating KPIs by quarter

PFG operating KPIs stated on its earnings calls, by fiscal quarter
KPIThis call Mar 2026 Q1 FY26 Jun 2026 Q2 FY26Change vs prior quarter
Employees
19K Our strong performance this quarter reflects the dedication of our 19,000 employees around the world. Source: earnings call transcript
19K In closing, we have momentum across the business, supported by disciplined execution and the dedication of our 19,000 employees around the world. Source: earnings call transcript
0%
Assets under management (AUM)
$770B Total company managed AUM ended the quarter at $770 billion, modestly lower sequentially due to market performance and up 7% year-over-year. Source: earnings call transcript
$808B Total company managed AUM ended the quarter at $808 billion, an increase of 5% from first quarter 2026 and 7% from the year ago quarter. Source: earnings call transcript
+4.9%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Deals & partnerships

Undisclosed Acquisition of a small dental network and renewal rights for a block of Group Benefits business.

Acquired a small dental network in Alabama, which also included renewal rights for a block of Group Benefits business. The transaction was not yet reflected in Q1 FY26 results.

Risks & headwinds

Lower Variable Investment Income Q1 FY26

-$23M after-tax impact in Q1 FY26

Mitigation:Full year 2026 variable investment income is still expected to improve relative to 2025, with some pickup in activity expected in Q2-Q4.

Redemption Activity in Investment Management Q1 FY26

Concentrated among a very small number of U.S. active equity mutual funds

Mitigation:Management expects non-affiliated net cash flow profile to improve for the balance of the year as redemption activity normalizes; future pipeline is very strong.

Elevated Corporate Segment Losses Q1 FY26

Elevated losses in Q1 FY26

Mitigation:On a full year basis, the Corporate segment results are expected to be within the target range.

Private Credit Exposure Current

Vast majority of private fixed income securities are investment grade with minimal exposure to direct lending.

Mitigation:Over 60 years of experience underwriting and managing private assets; portfolio performing better than long-term expectations; well-constructed and diversified, aligned with liability liquidity profile.

PRT Sales Pipeline Q2 FY26

Pipeline remains a little light in Q2 FY26

Mitigation:Expects 2026 PRT sales to be similar to 2025, with a lighter first half and more accelerated sales in the second half, similar to prior year trends. Company is disciplined on capital deployment and will not chase sales.

Economic Uncertainty in SMB Market Current

Uncertainty in sentiment, but employment and wage growth holding steady in block.

Mitigation:Broad-based employer base (180,000 across RIS and Group Benefits) provides diversity; regular surveys with SMB employers show optimism; no significant lag effect observed in their block.

What to watch in Q2 FY26

Specialty Benefits Loss Ratio

Q2 FY26 / FY26
Current 58.5% (Q1 FY26)
Target Rise slightly in Q2, but full-year at or below low end of outlook range

Why it matters

This metric indicates underwriting profitability and is a key driver of Specialty Benefits earnings, impacting the overall company's financial performance.

second quarter does tend to be the seasonally highest for Dental. So that means that the overall SBD loss ratio does rise a bit in second quarter. But when I look at full year outlook, I look at it very favorably with loss ratios expected to emerge at the low end or even slightly below the low end of the range we communicated at outlook.

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Q&A highlights

Asked for more color on favorable underwriting in Specialty Benefits across Dental, Life, and Disability, and the outlook from here.

Management attributed strong underwriting to low frequency in Group Life and past pricing actions/network optimization in Dental. Group Disability remained strong. While Q2 is seasonally highest for Dental, the full-year loss ratio outlook is very favorable, expected at or below the low end of the communicated range.

“But when I look at full year outlook, I look at it very favorably with loss ratios expected to emerge at the low end or even slightly below the low end of the range we communicated at outlook.”

asked by Ryan Krueger · answered by Amy Friedrich

2 min read 6 chapters

Detailed narrative

Strategic Growth Drivers and Momentum

Principal Financial Group is executing on its strategy focused on three key growth drivers: the broad retirement ecosystem, small and midsized businesses (SMB), and global asset management. The company reported broad-based momentum, including a 35% year-over-year increase in total retirement transfer deposits to $12 billion and record gross sales of $37 billion in Investment Management, up 21% year-over-year. Private markets AUM also grew 11% year-over-year, driven by demand for real estate, infrastructure, and private credit strategies.

Strong Capital Position and Shareholder Returns

The company ended the quarter with a strong capital position, boasting over $1.4 billion of excess and available capital, including $800 million at the holding company and a Risk-Based Capital (RBC) ratio of approximately 400%. This robust capital generation enabled the return of $374 million to shareholders in Q1 FY26, comprising $200 million in share repurchases and $174 million in common stock dividends. The common stock dividend was raised for the 12th consecutive quarter, an 8% increase year-over-year, aligning with the targeted 40% payout ratio.

Specialty Benefits and Individual Life Performance

Specialty Benefits delivered a very strong quarter with pretax operating earnings up 41% year-over-year to $177 million, driven by favorable underwriting and record sales, which increased 24% year-over-year. The total loss ratio improved by 220 basis points to 58.5%, primarily due to strong Group Life and Dental results. Individual Life also saw a significant increase in pretax operating earnings, up $23 million year-over-year to $37 million, attributed to improved mortality experience from lower frequency and severity.

SMB Market Resilience and Outlook

The small and midsized business segment continues to perform well, with recurring deposits in Retirement growing 6% year-over-year and positive account value net cash flow of $600 million. The company's latest well-being index confirmed steady employment trends, with 90% of SMB owners maintaining or increasing staff. While acknowledging some market uncertainty, management noted that SMB owners tend to be optimistic and are holding steady on their plans, with no significant lag effect observed in their block of business.

Investment Management Flows and Pipeline

Investment Management reported record gross sales, but net cash flow was negative $1.5 billion for the total company, although improved sequentially and year-over-year. Redemptions were concentrated in U.S. active equity mutual funds due to asset allocation shifts. However, the company highlighted strong net inflows from clients outside the U.S. ($1.5 billion) and in specific areas like private markets, ETFs, and UCITS ($1.2 billion). The asset management commitment pipeline has grown to over $9 billion in unfunded mandates, diversified across public and private markets globally.

Private Credit Exposure and Investment Portfolio

Management addressed heightened attention on the insurance industry's private credit exposure, emphasizing Principal's over 60 years of experience in underwriting and managing private assets. The vast majority of their private fixed income securities are investment grade with minimal direct lending exposure. The portfolio is performing well, exceeding long-term expectations, and is appropriately aligned with the liquidity profile of liabilities, reinforcing confidence in its well-constructed and diversified nature.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.