Principal Financial Group (NASDAQ:PFG) reported third-quarter 2026 non-GAAP operating earnings of $482 million, up 2% from a year earlier, while earnings per share rose 6% to $2.22. Excluding significant variances related to lower-than-expected variable investment income and encaje performance, operating earnings were $541 million, up 3%, and adjusted EPS was $2.49, up 7%.
Chief Executive Officer Deanna Strable said the company’s year-to-date adjusted non-GAAP EPS increased 12%, placing results at the high end of its 9% to 12% target range. Year-to-date adjusted pre-tax operating earnings rose 10%, supported by 5% net revenue growth and 120 basis points of margin expansion.
“Underlying performance in the quarter remained strong against an environment that was volatile and dynamic,” Strable said, citing higher revenue and expense discipline in Retirement and Income Solutions, improved mortality experience in Life, and growth in International Pension.
Capital returns and financial position
The company returned $429 million to shareholders during the third quarter, including $250 million in share repurchases and $179 million in dividends. Year-to-date capital deployment exceeded $1.2 billion, and Principal said it remains positioned to meet its full-year capital-deployment target of $1.5 billion to $1.8 billion.
Chief Financial Officer Joel Pitz said the company ended the quarter with more than $1.5 billion of excess and available capital, including $1.15 billion at the holding company and $300 million in subsidiaries. Its risk-based capital ratio was about 380%, compared with a 375% target.
Principal also announced an $0.85-per-share fourth-quarter dividend, a one-cent sequential increase and an 8% increase from a year earlier. Pitz said the increase was consistent with the company’s 40% dividend payout-ratio commitment.
Trailing 12-month free capital flow conversion was 77%, within the company’s 75% to 85% target range, while adjusted non-GAAP operating return on equity excluding significant variances was 16.6%, up 110 basis points year over year.
Retirement business posts deposit and sales growth
In Retirement and Income Solutions, pre-tax operating earnings increased 5% year over year, driven by 4% net revenue growth and expense discipline. The segment’s operating margin was 42%, above the high end of its target range, according to Pitz.
Recurring retirement-plan deposits increased 8% to nearly $13 billion. The company reported record client retention and stable withdrawal rates. Participants’ roll-ins totaled $1.8 billion in the quarter and $7.4 billion over the trailing 12 months, increases of 9% and 15%, respectively.
Principal recorded $1.5 billion of defined-contribution investment-only sales and $900 million of pension risk transfer sales during the quarter. Strable said the company is expanding investment options on its retirement platform, including private-market strategies through its featured partner program.
Chris Littlefield, president of Retirement and Income Solutions, said the company is seeing early progress in efforts to capture a greater share of participant assets through roll-ins, managed accounts, advice and financial-planning capabilities. He said the company expects to continue rolling out advisory capabilities through 2027.
Asset-management flows remain pressured
Total company net cash flow was negative $11 billion during the quarter, primarily due to outflows from select active equity strategies in investment management. Strable said active-equity flows remain challenged across the industry and that near-term pressure is expected to continue.
Principal Asset Management President and CEO Kamal Bhatia said the outflows were concentrated in U.S. retail active-equity strategies, with some institutional withdrawals overseas. Still, the company reported positive flow trends in other areas:
- Private markets generated $800 million of positive net cash flow in the quarter and about $2 billion over the trailing 12 months.
- Active exchange-traded funds generated more than $500 million of positive quarterly flows and about $2 billion over the trailing 12 months.
- ETF assets under management reached $14 billion, up 84% year over year.
- International Pension generated more than $400 million of positive net cash flow, with assets under management up 10% from a year earlier to $166 billion.
Principal Asset Management’s quarterly revenue declined 2% year over year, though it increased 1% excluding divestitures. Pre-tax operating earnings in the segment declined 3% in the quarter but increased 2% year to date, with a 40-basis-point improvement in margin.
Bhatia said management fees have been affected by the concentration of outflows in higher-fee active equity strategies, but he highlighted growth in transaction fees, borrower fees, custom mandates, private markets and ETFs.
Beam acquisition and Benefits performance
Principal completed its acquisition of Beam Benefits on Sept. 1, adding more than 26,000 small-business customers and a digital-first, cloud-native platform. The company said the acquisition supports its strategy of expanding in the small and midsize business market.
Specialty Benefits sales increased 10% from the prior-year quarter and 15% over the trailing 12 months. Premium and fees increased 6% year over year, aided by core business momentum and one month of Beam contributions. Specialty Benefits operating earnings were relatively stable, as strong current-quarter underwriting results were compared with a favorable prior-year period.
Amy Friedrich, president of Benefits and Protection, said Beam reduced quarterly earnings by about $1 million to $2 million. The acquired block currently operates at a modest loss, but Principal plans to move policies to its own paper and dental network beginning Jan. 1, 2027. Friedrich said the repapering process is at or ahead of plan and should begin to materially reduce the earnings drag in the first half of 2027.
The Specialty Benefits loss ratio was 59%, better than the company’s 60% to 64% long-term target range. Improved dental and group-life results were partly offset by higher group-disability claims volatility. Life adjusted pre-tax operating earnings rose 29% to $39 million, driven by improved mortality experience.
Principal also completed the sale of its Chile annuity business on Sept. 1. Pitz said the Chile business had generated about $30 million in annual pre-tax earnings but was a closed block with limited growth prospects. He said the capital received from the Chile sale largely offset the capital deployed for Beam, while Beam offers greater long-term growth potential.
About Principal Financial Group (NASDAQ:PFG)
Principal Financial Group, Inc is a global financial services company that helps individuals and businesses build, protect and manage wealth. Its offerings include retirement plans, individual retirement accounts, investment products, life and disability insurance, and financial wellness solutions. The company also provides institutional investment management and pension-risk transfer services.
Principal serves employers, institutions and individual investors through a range of retirement and workplace benefits solutions.
