Principal Financial Group Q2 Earnings Call Highlights

Key Points

• Principal Financial delivered strong Q2 results: Adjusted earnings per share rose 17% year over year to $2.50, while operating margin expanded 200 basis points to 32%. Retirement and Benefits and Protection results were key growth drivers.
• Capital returns remained robust: Principal returned $427 million to shareholders during the quarter and remains on track to deploy $1.5 billion to $1.8 billion for the full year. The company also raised its quarterly dividend 8% year over year to $0.84 per share.
• Asset-management outflows remain a challenge: The company reported approximately $11 billion in net outflows, concentrated in U.S. active-equity strategies, although private markets, international pensions and active ETFs continued to attract assets. Principal also agreed to acquire Beam Benefits to expand its small- and midsize-business employee-benefits presence.

Principal Financial Group NASDAQ: PFG reported second-quarter 2026 results marked by double-digit earnings growth, margin expansion and continued capital returns, while executives also addressed concentrated investment-management outflows and an agreement to acquire employee benefits provider Beam Benefits.

Chair, President and CEO Deanna Strable said adjusted non-GAAP earnings per share increased 17% from a year earlier and 15% year to date, exceeding the high end of the company’s target range. Enterprise earnings grew 13%, supported by 6% net revenue growth and 200 basis points of margin expansion.

Strable said favorable underwriting and improved mortality in the Benefits and Protection segment, strong Retirement and Income Solutions fundamentals, and positive market conditions for fee-based businesses more than offset the effect of investment-management net cash outflows.

Second-Quarter Financial Results and Capital Position

CFO Joel Pitz said non-GAAP operating earnings totaled $547 million in the quarter, up 12% year over year, while earnings per share rose 16% to $2.50. Excluding significant variances, operating earnings were $529 million, up 13%, and earnings per share were $2.42, up 17% from a year earlier.

Total company operating margin reached 32%, expanding 200 basis points from the prior-year period. Non-GAAP operating return on equity, excluding significant variances, was 16.4%, up 120 basis points year over year and above the midpoint of Principal’s 15% to 17% target range. Net income excluding exit business was $535 million, a 24% increase from the year-ago quarter, with minimal credit losses, Pitz said.

Managed assets under management ended the quarter at $808 billion, up 5% from the first quarter and 7% from the second quarter of 2025.

Principal returned $427 million to shareholders during the quarter, comprising $250 million in share repurchases and $177 million in dividends. Year-to-date shareholder returns totaled $800 million. The company said it remains on track for full-year capital deployment of $1.5 billion to $1.8 billion.

The company also raised its common-stock dividend for the 13th consecutive quarter. It announced a third-quarter dividend of $0.84 per share, up $0.02 sequentially and 8% from a year earlier.

Pitz said Principal ended the quarter with more than $1.6 billion in excess and available capital, including $950 million at the holding company, $300 million at subsidiaries and $350 million above its targeted risk-based capital ratio. Its risk-based capital ratio was approximately 400% at quarter-end.

Retirement, Benefits Results Drive Growth

In Retirement and Income Solutions, pre-tax operating earnings increased 8% from a year earlier, supported by 5% net revenue growth and expense discipline. Operating margin expanded 120 basis points to 41%.

Strable said retirement transfer deposits rose 30% year over year and recurring deposits increased 6%. Roll-ins reached $1.7 billion during the quarter and more than $7 billion over the trailing 12 months, with both measures up nearly 20%. The company also reported $2 billion in defined-contribution investment-only sales and $500 million of pension risk transfer sales during the quarter.

Chris Littlefield, president of Retirement and Income Solutions, said the company continued to see growth in participants with account balances, higher deferrals and strong retention. Plan counts were flat to slightly down as Principal de-emphasized the micro-plan market in favor of plans with greater assets and investment-mandate opportunities, he said.

Benefits and Protection generated pre-tax operating earnings of $191 million, up 29% year over year. Specialty Benefits earnings rose 29% to a record $162 million, while the loss ratio improved 280 basis points to 57.4%. Specialty Benefits operating margin increased 360 basis points to 19%.

Amy Friedrich, president of Benefits and Protection, attributed the improvement to favorable results across product lines, including dental-network optimization, past pricing actions, lower disability incidence and lower group life frequency. She said Principal now expects full-year Specialty Benefits underwriting results to emerge below the low end of its previously communicated 60% to 64% loss-ratio range.

Asset Management Outflows Remain a Headwind

Principal Asset Management’s earnings increased 6% year over year, aided by assets under management growth and margin expansion. Investment-management earnings rose 4%, as slightly higher revenue and expense discipline offset elevated severance costs. The company said severance expenses across investment management and international pension were about $7 million during the quarter.

However, the company recorded approximately $11 billion in total-company net outflows, concentrated in a small number of U.S. active equity strategies. Kamal Bhatia, president and CEO of Principal Asset Management, said those strategies represent slightly more than 5% of firm assets under management and have faced an “acute and unusual” market environment that has not rewarded quality-oriented, valuation-aware stock selection.

Bhatia said management expects net flows to remain somewhat challenged in the second half, though the committed but unfunded pipeline increased to roughly $10 billion from the first quarter. He also cited growth in other areas, including private markets, international pension assets and active ETFs.

Private markets assets under management increased 10% year over year, while international pension assets under management climbed 18% to a record $169 billion. Active ETFs generated $500 million in quarterly net inflows and $2 billion over the trailing 12 months.

Beam Benefits Acquisition and Portfolio Actions

Principal announced earlier in July that it agreed to acquire Beam Benefits, a digital-first employee benefits company serving small and midsize businesses. Beam has more than 25,000 employer customers, about 400,000 members and generated $175 million of premium in 2025, according to Friedrich.

Management said the transaction would expand Principal’s SMB reach and add digital quoting, underwriting and distribution capabilities. Friedrich said potential benefits include eliminating certain leased dental-network costs and extending Beam’s technology across Principal’s broader small-case business.

Pitz said the acquisition is not expected to change the company’s 2026 capital-deployment plan, earnings outlook, free-cash-flow outlook or return-on-equity outlook. Strable said Principal views acquisitions as opportunistic accelerators rather than a replacement for organic growth and will continue to apply financial, strategic and cultural criteria to potential deals.

The company also completed the transition of its Hong Kong pension business to BCT and said its pending sale of the Chile annuity business remains part of efforts to optimize its portfolio.

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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