Principal Financial Group NASDAQ: PFG reported a strong start to 2026, highlighting double-digit earnings growth, margin expansion, and improved underwriting and mortality experience in its first-quarter earnings call. Management also pointed to momentum across its strategic growth drivers—retirement, small and mid-sized businesses (SMB), and global asset management—while returning substantial capital to shareholders.
First-quarter results and capital return
Chair, President, and CEO Deanna Strable said the company delivered “13% adjusted non-GAAP earnings per share growth” in the first quarter, above the high end of its target range. She attributed the performance primarily to “favorable underwriting results and improved mortality” in Benefits and Protection, along with “positive market conditions for our fee-based businesses,” which contributed to revenue growth and margin expansion.
Chief Financial Officer Joel Pitz reported non-GAAP operating earnings of $456 million, up 10% from the prior-year quarter, or $2.07 per share, an increase of 14%. Excluding significant variances, operating earnings were $479 million, up 9% year-over-year, or $2.17 per share, a 13% increase. Non-GAAP operating return on equity was 16.1%, improving 140 basis points year-over-year and landing at the midpoint of the company’s 15% to 17% target range.
Pitz also said operating margin expanded 190 basis points to 30% on “6% year-over-year net revenue growth and disciplined expense management while investing in the business.”
Capital and liquidity remained solid, with Pitz noting more than $1.4 billion of excess and available capital at quarter-end. The company returned $374 million to shareholders in the quarter, including $200 million in share repurchases and $174 million in common stock dividends. Strable said capital return totaled “approximately $375 million,” and noted the company raised its dividend for the twelfth consecutive quarter, describing it as an 8% increase on both a quarterly and trailing 12-month basis.
Pitz announced a $0.82 common stock dividend payable in the second quarter, a 2-cent increase from the first quarter and up 8% year-over-year. He said the dividend remains aligned with the company’s targeted 40% payout ratio.
Retirement and Income Solutions: strong deposits, lumpiness expected
Strable highlighted “broad-based momentum” in the retirement ecosystem, including $12 billion of total retirement transfer deposits in the quarter, up 35% year-over-year, and 7% growth in recurring deposits. She also pointed to a 3% increase in the number of participants deferring into their plans and average deferrals up over 3%, alongside $1.7 billion of roll-ins as participants consolidated assets onto Principal’s platform.
Pitz said Retirement and Income Solutions (RIS) generated pre-tax operating earnings of $318 million, up 4% year-over-year, driven by 3% net revenue growth and margin expansion. Operating margin of 41.5% rose 60 basis points and was “slightly above the high end of our target range,” helped by expense management and “some favorable seasonality and timing impacts.” RIS produced $1.8 billion of account value net cash flow in the quarter, supported by fee-based net cash flow in both large and SMB segments.
Asked about the outlook for transfer deposits, RIS President Christopher J. Littlefield said the business benefited from strong transfer deposits and contract retention in the quarter, supported by healthy recurring deposits and stable withdrawal rates. However, he cautioned that transfer deposits, especially in the large market, can be “lumpy,” and that the company expects the year to follow a historical pattern where the first quarter is strongest for sales and transfers, while later quarters can be influenced by market-driven withdrawals.
Asset Management: record gross sales, redemptions concentrated in U.S. equities
Principal Asset Management posted earnings growth and continued to build its pipeline, even as net flows were pressured by redemption activity in certain U.S. equity products.
Pitz reported that Principal Asset Management delivered 10% earnings growth year-over-year on 5% revenue growth and margin expansion. Within investment management, pre-tax operating earnings increased 8% and adjusted revenue rose more than 2% year-over-year “despite the impact of our recent divestiture.” The segment’s gross sales were a record, up 21% from the prior-year quarter, and demand included $1.2 billion of net cash flow “spread equally across private markets, ETFs, and UCITS.”
Responding to questions about higher redemptions, Principal Asset Management President and CEO Kamal Bhatia said the firm generated record investment management gross sales, driven by “our new product focus” and “continuing to grow the number of distribution relationships across the globe.” He noted Asia had a “standout quarter” with $1.1 billion of positive net cash flow and said international clients delivered more than $1.5 billion of positive net cash flow.
On the redemption side, Bhatia said activity was concentrated among “a very small number of U.S. equity, active equity mutual funds in the U.S. wealth channel,” driven by changes in asset allocation and advisory business models. He said that as redemption activity normalizes, he expects the non-affiliated net cash flow profile to improve through the balance of the year and added that the “future pipeline is very strong.”
Later in the call, Bhatia provided more detail on that pipeline, stating the “committed pipeline has now grown to over $9 billion,” describing it as mandates that have been won but not yet funded. He said it is diversified across public and private markets and supported by a growing global client base.
Benefits and Protection: underwriting strength, improved mortality
Benefits and Protection was a key driver of the quarter’s results. Pitz said the segment delivered pre-tax operating earnings of $177 million, up 41% year-over-year, due to “more favorable specialty benefits underwriting, improved life mortality, and business growth.”
Within specialty benefits, premium and fees increased 4% year-over-year and were supported by record sales in the quarter. Pre-tax operating earnings were $140 million, up 26% year-over-year, reflecting underwriting strength and growth. Pitz said the total loss ratio improved 220 basis points year-over-year on better group life and dental results and continued strong group disability performance, driving margin expansion to 16.2% (up 290 basis points).
During Q&A, management said the favorable specialty benefits underwriting was “primarily group life and dental,” citing low frequency in group life and the impact of past pricing actions and dental network optimization. Management also noted group disability performance remained strong and consistent with expectations. Looking ahead, management said the second quarter is typically seasonally highest for dental, which tends to lift the overall loss ratio, but said the full-year outlook is favorable, with loss ratios expected to emerge at the low end or slightly below the low end of the range provided previously.
In life insurance, Pitz said pre-tax operating earnings rose to $37 million, up $23 million year-over-year, driven by improved mortality from lower frequency and severity, producing a 15.6% operating margin at the high end of the company’s target range. Asked whether the quarter reflected a change in earnings power, management characterized the result as favorable mortality volatility, while still pointing to the previously communicated full-year margin guidance range of 12% to 16% and indicating expectations nearer the lower end for the full year.
International pension and investment portfolio commentary
International pension also contributed to results. Pitz said international pension AUM increased 4% sequentially and 20% year-over-year to a record $160 billion, driven by positive market performance and net cash flow, along with foreign currency tailwinds. Net cash flow was positive $500 million, including $700 million of net inflows in Brazil. Pre-tax operating earnings increased 14% year-over-year, aided by higher performance fees, favorable FX, and business growth, with an operating margin of 48.5% within the company’s target range.
In response to a question about sustainability, Pitz said the quarter included a roughly $7 million performance fee in the company’s China Construction Bank pension business, which he described as volatile. Excluding that, he characterized a run rate that would be “more in the mid-70s” (in millions), and also noted it was “nice to say FX tailwinds as opposed to headwinds.”
Pitz also addressed heightened industry attention on insurers’ exposure to private credit, stating the company has “over 60 years of experience underwriting and managing private assets.” He said the “vast majority” of private fixed income holdings are investment grade with “minimal exposure to direct lending,” and added that the portfolio is performing better than long-term expectations and is aligned with the liquidity profile of liabilities.
For variable investment income, Pitz said first-quarter results were affected by the timing of real estate transactions, noting there was no real estate transaction activity in the quarter. He said the company sees some pickup in activity in the second through fourth quarters and continues to expect full-year 2026 variable investment income to improve relative to 2025.
Total company managed AUM ended the quarter at $770 billion, modestly lower sequentially due to market performance and up 7% year-over-year. Total company net cash flow was negative $1.5 billion, which Pitz said was a “meaningful improvement” sequentially and year-over-year, driven by positive net cash flow in international pension and improved investment management results.
Strable closed by reiterating confidence in the company’s ability to deliver on its 2026 financial targets, citing the “strength of our diversified business model” and continued focus on execution, growth, and long-term discipline.
About Principal Financial Group NASDAQ: PFG
Principal Financial Group NASDAQ: PFG is a global financial services company headquartered in Des Moines, Iowa, that provides a range of retirement, investment and insurance solutions to individuals, employers and institutional clients. The firm's business is organized around retirement services, asset management, and insurance products designed to help clients plan, invest for, and protect income over the long term.
Principal's product and service offerings include retirement plan recordkeeping and administration for employer-sponsored plans, individual and group retirement annuities, life and disability insurance, employee benefits solutions, and wealth management services.
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