Principal Financial Group (PFG) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Financials· Jul 28, 2026

Source: earnings call transcript

Executive summary

Principal Financial Group Q2 FY26 — Strong Earnings and Strategic Portfolio Optimization

Principal Financial Group delivered a strong Q2 FY26, driven by robust earnings growth, favorable underwriting, and strategic capital deployment. The company optimized its portfolio through the acquisition of Beam Benefits and divestiture of its Hong Kong pension business, while navigating significant net outflows in specific active equity strategies. Management remains focused on sustained growth and shareholder value.

Highlights

Adjusted non-GAAP EPS increased 17% year-over-year and 15% on a year-to-date basis, both above the high end of our target range.
Enterprise earnings grew 13% with 6% net revenue growth and 200 basis points of margin expansion.
Returned nearly $430 million of capital to shareholders in Q2 FY26, including $250 million in share repurchases and nearly $180 million in common stock dividends.
Raised common stock dividend for the 13th consecutive quarter, an 8% increase on both a quarterly and trailing 12-month basis.
Specialty Benefits pretax operating earnings increased 29% year-over-year, with the loss ratio improving 280 basis points to 57.4%.

Concerns

Total company net outflows of approximately $11 billion in the quarter, concentrated in a small number of U.S. active equity strategies.
Corporate segment losses were elevated due to continued investment in the business, expected to be at the high end of the targeted range for the full year.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year performance fees (Investment Management)	in line with 2025 medium materiality	FY26	Medium
Full-year capital deployment	$1.5 billion to $1.8 billion high materiality	FY26	High
Corporate segment losses	high end of our targeted range medium materiality	FY26	Medium
Specialty Benefits premium fees growth	increase medium materiality	H2 FY26	Medium
Specialty Benefits loss ratios	below the low end of the guidance range for the full year high materiality	FY26	High
Dental underwriting results	improve medium materiality	H2 FY26	High
Specialty Benefits total premium and growth	accelerate medium materiality	H2 FY26	Medium
Investment Management net flows	somewhat challenged high materiality	H2 FY26	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
RIS Pretax operating earnings increased 8% year-over-year, supported by 5% net revenue growth and continued expense discipline. Operating margin of 41% expanded 120 basis points, slightly above the high end of the target range. Fundamentals remain healthy with robust transfer deposits and steady recurring deposit growth. Net revenue growth: 5%Operating margin expansion: 120 bps	—	8%	—	41%
Principal Asset Management - Investment Management Pretax operating earnings increased 4% from the prior year quarter. Slightly higher revenue along with expense discipline more than offset elevated severance of $7 million. Operating margin improved 110 basis points. Performance fees were muted in the quarter but are expected to be in line with 2025 for the full year. Elevated severance: $7MOperating margin improvement: 110 bps	—	4%	—	—
Principal Asset Management - International Pension Pretax operating earnings increased 11% year-over-year, driven by favorable foreign currency impacts and business growth. Operating margin improved 50 basis points to over 47%, well within the target range. AUM increased 6% from the prior quarter and 18% year-over-year to a record $169 billion. AUM growth QoQ: 6%AUM growth YoY: 18%Record AUM: $169BOperating margin improvement: 50 bps	—	11%	—	over 47%
Benefits and Protection Generated strong pretax operating earnings of $191 million, a 29% year-over-year increase. This was driven by favorable Specialty Benefits underwriting results and improved Life mortality.	—	29%	—	$191M
Benefits and Protection - Specialty Benefits Premium fees increased 4% year-over-year. Record pretax operating earnings of $162 million, up 29% year-over-year, reflecting more favorable underwriting experience and business growth. The loss ratio of 57.4% improved 280 basis points compared to the year ago quarter, with better results across all products, driving improved operating margin of 19%. Loss ratio: 57.4%Loss ratio improvement: 280 bpsOperating margin: 19%Operating margin improvement: 360 bps	increased 4% year-over-year	29%	—	$162M
Benefits and Protection - Life Insurance Pretax operating earnings of $29 million increased 29% year-over-year, driven by improved mortality experience. This contributed to a 13% operating margin, up 350 basis points year-over-year, within the target range. Operating margin: 13%Operating margin improvement: 350 bps	—	29%	—	$29M
Corporate Losses were elevated due to continued investment in the business. The segment is expected to come in at the high end of its targeted range for the full year.	—	—	—	Losses were elevated

PFG operating KPIs by quarter

PFG operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Mar 2026 Q1 FY26	This call Jun 2026 Q2 FY26	Change 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.

Product announcements

Product	Type	Timeline	Details
Lifetime Income Builder CITs	expansion	Q2 FY26
Fixed Income ETF suite	launch	Q2 FY26

Deals & partnerships

Beam Benefits Agreement to acquire a digital-first employee benefits company focused on the SMB market. generated $175 million of premium in 2025 (for Beam Benefits)

Beam Benefits has over 25,000 employer customers. The acquisition strengthens Principal's position in the SMB segment by expanding customer reach and adding digital-first distribution capabilities.

BCT Transition of Hong Kong pension business.

This move strengthens Principal's focus as a top provider of retirement investment solutions to the region.

Undisclosed Pending sale of Chile annuity business.

The sale further optimizes Principal's portfolio.

Risks & headwinds

Net outflows in U.S. active equity strategies Q2 FY26

$11 billion in Q2 FY26

Mitigation:Investment teams maintain a disciplined approach and have a track record of navigating market dislocation. Underlying momentum in private markets, international, and institutional solutions. Committed not funded pipeline grown to $10 billion.

Unusual market environment not rewarding high-quality companies last year

U.S. high-quality companies returned 4% vs. low-quality companies returned 70% (period ending 6/30)

Mitigation:Expectation for market normalization over time, belief in the long-term track record of their investment strategies. New niche ETFs exploiting anomalies could prolong the trend.

Elevated Corporate segment losses Q2 FY26

elevated

Mitigation:Due to continued investment in the business; expected to be at the high end of the targeted range for the full year.

What to watch in Q3 FY26

Specialty Benefits loss ratio

Full year FY26 / H2 FY26

Current 57.4% (Q2 FY26)

Target Below the low end of the guidance range for the full year (60-64%)

Why it matters

Indicates sustained underwriting discipline and profitability in a key growth segment.

I now expect loss ratios to emerge below the low end of the guidance range for the full year.

Find out whether PFG delivers this. Inve re-checks your case every morning.

Q&A highlights

Seeking more detail on the strategic rationale for the Beam Benefits acquisition and its potential impact on 2027 capital deployment plans.

Amy Friedrich highlighted Beam's technology, 25,000 employers, 400,000 members, and $175M premium in 2025, emphasizing its role in expanding SMB reach and bringing efficiency. Joel Pitz confirmed no change to 2026 capital deployment target or outlook guidance, citing $1.6B in excess capital and proceeds from the Chile sale.

“Beam Benefits has really interesting technology. They've got some great things they've done with their underwriting and quoting. But what they've also got is a great relationship with 25,000 small business employers and they have 400,000 members across the U.S.”

asked by Wesley Carmichael · answered by Amy Friedrich

2 min read 5 chapters

Detailed narrative

Strategic Priorities and Retirement Ecosystem Momentum

Principal demonstrated strong momentum across its strategic priorities, particularly within the retirement ecosystem. Transfer deposits increased 30% year-over-year, and recurring deposits grew 6%. The company saw significant customer consolidation, with $1.7 billion in roll-ins during Q2 and over $7 billion over the trailing 12 months, both up nearly 20%. DCIO sales reached $2 billion in Q2 and $8 billion over the trailing 12 months, while PRT sales were $500 million for the quarter.

SMB Segment Growth and Enhanced Capabilities

The small and midsized business (SMB) segment continues to be a key growth driver. Transfer deposits in SMB grew 16% over the trailing 12 months, and recurring deposits increased 6% on both a year-over-year and trailing 12-month basis. Specialty Benefits sales to SMBs rose 11% year-over-year. The company is deepening client relationships, with products per customer increasing steadily from 2.9 three years ago to nearly 3.2 today, reflecting successful cross-selling and bundled offerings.

Asset Management Dynamics and Outflows

Global Asset Management experienced total company net outflows of approximately $11 billion in Q2, primarily concentrated in a few U.S. active equity strategies. These strategies faced headwinds in an 'unusual market environment' that did not reward high-quality companies. Despite this, the broader platform showed strength, with Private Markets assets under management increasing 10% year-over-year and International Pension AUM growing 18% to a record $169 billion. The active ETF business also saw healthy growth, generating $500 million of net inflows in Q2 and $2 billion over the trailing 12 months.

Beam Benefits Acquisition and Portfolio Optimization

Principal announced an agreement to acquire Beam Benefits, a digital-first employee benefits company serving the SMB market. Beam has over 25,000 employer customers and generated $175 million in premium in 2025. This acquisition is expected to strengthen Principal's SMB position, expand customer reach, and add digital distribution capabilities without impacting 2026 capital deployment plans or EPS targets. Additionally, the company completed the transition of its Hong Kong pension business to BCT and has a pending sale of its Chile annuity business, further optimizing its portfolio.

Strong Underwriting Performance in Specialty Benefits

The Benefits and Protection segment delivered strong results, with Specialty Benefits pretax operating earnings up 29% year-over-year. This was driven by favorable underwriting experience and improved Life mortality. The Specialty Benefits loss ratio improved 280 basis points to 57.4%, with better results across all products. Improvements in dental were attributed to network optimization and past pricing actions, while disability and group life benefited from lower incidence and frequency, respectively. Full-year loss ratios for Specialty Benefits are now expected to be below the low end of the guidance range.

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