Principal Financial Q3 2026 EPS Rises 7%, Capital Returns Hit $429 Million

Principal Financial Group (NASDAQ: PFG) reported third-quarter 2026 non-GAAP operating earnings per diluted share of $2.49 excluding significant variances, up 7% from a year earlier, as growth in retirement and protection businesses offset weaker results in parts of investment management. The company returned $429 million to shareholders during the quarter and announced a higher fourth-quarter dividend.

Non-GAAP operating earnings excluding significant variances rose 3% to $540.6 million from $523.3 million in the prior-year quarter. On a reported non-GAAP basis, operating earnings increased 2% to $481.8 million, while operating EPS rose 6% to $2.22. Net income attributable to Principal was $631.9 million, or $2.91 per diluted share, compared with $213.8 million, or $0.95 per share, a year earlier.

Third-quarter significant variances reduced after-tax operating earnings by $58.8 million, or $0.27 per share. These included lower-than-expected variable investment income, weaker encaje performance, higher-than-expected Latin American inflation and integration costs. Beginning in 2026, Principal excludes its annual actuarial assumption review from operating earnings; the 2026 review reduced after-tax net income by an immaterial $5 million.

Retirement earnings rise on revenue growth

Retirement and Income Solutions generated $330.3 million of pre-tax operating earnings excluding significant variances, up 5% year over year. Net revenue increased 4.4%, while disciplined expense management helped the operating margin expand 20 basis points to 41.8%.

Recurring deposits rose 8% to $13 billion, while pension risk transfer sales totaled $900 million. Retirement participant roll-ins reached $1.8 billion during the quarter and $7.4 billion over the trailing 12 months. Transfer deposits across the broader retirement platform declined 5% year over year but were up 24% on a trailing-12-month basis. Within the small and midsize business segment, transfer deposits increased 21% and recurring deposits grew 7%.

Asset management faces investment outflows

Principal Asset Management’s pre-tax operating earnings excluding significant variances were broadly stable, increasing 1% to $248.5 million. International Pension earnings rose 11% to $80.4 million as net revenue grew 5.4% and its operating margin expanded 240 basis points to 49.5%.

Investment Management earnings declined 3% to $168.1 million. Operating revenue excluding pass-through expenses fell 1.8%, and the unit’s operating margin narrowed to 39.1% from 39.8%.

Investment Management recorded $12 billion of net outflows, primarily from selected active equity strategies. Those outflows were partially offset by $500 million of net inflows into active exchange-traded funds and $800 million into private markets. International Pension generated $400 million of positive net cash flow, with inflows across all locations.

Total company assets under management stood at $785 billion, while companywide net cash flow was negative $10.7 billion. Private-markets assets under management increased 6% year over year, and International Pension assets rose 10%. The presentation also showed that 34% of rated fund-level assets under management carried four- or five-star Morningstar ratings as of Sept. 30, 2026.

Improved life mortality supports protection results

Benefits and Protection posted pre-tax operating earnings excluding significant variances of $182.9 million, up 3%. The increase was primarily attributed to improved mortality experience in Life Insurance, where earnings climbed 29% to $39.1 million and the operating margin expanded 420 basis points to 16.4%.

Specialty Benefits earnings declined 2% to $143.8 million, although premiums and fees rose 5.9%. That growth included a modest contribution from the Beam Benefits acquisition completed Sept. 1. The unit’s loss ratio was 59%, below Principal’s long-term target range of 60% to 64%, while its operating margin was 16.1%.

Capital returns and financial position

Principal repurchased $250 million of shares and paid $179 million in common-stock dividends during the quarter. It announced a fourth-quarter dividend of $0.85 per share, 8% above the fourth quarter of 2025.

The company ended the period with $1.5 billion of excess and available capital, including $1.15 billion at the holding company. Its estimated Principal Life Insurance Co. risk-based capital ratio was 380%, and its debt-to-capital ratio was 24.7%. The presentation noted that $350 million of debt matures in the fourth quarter of 2026.

Trailing-12-month free cash flow represented 77% of non-GAAP net income attributable to Principal, excluding exited businesses, within the company’s 75% to 85% target. Non-GAAP return on equity excluding significant variances was 16.6%, also within its 15% to 17% target range.

Principal identified market movements as a continuing source of earnings uncertainty. The company estimated that a 10% change in equity markets could alter annual non-GAAP pre-tax operating earnings by 5% to 8%, while a 10% change in certain alternative-asset valuations could produce an 8% change. Currency movements, particularly in Latin American and Asian currencies, and changes in interest rates could also affect results. These sensitivity estimates exclude potential management expense actions.