Principal Financial Group, Inc. Q4 FY2025 earnings call

• Strong full-year 2025 performance with adjusted non-GAAP earnings per share growth of 12% and reported EPS growth of nearly 20%.
• Diversified business mix positioned well for 2026, expecting performance within target ranges for EPS growth, free capital flow conversion, and ROE.
• Progress in retirement ecosystem: broad-based momentum in transfer deposits, WSRS, and participant engagement; strong pension risk transfer and DCIO sales.
• SMB market: strong growth in WSRS deposits, deepened customer relationships in benefits and protection.
• Global Asset Management: strong new business momentum in investment management and private markets, AUM growth.
• Sale of runoff annuities business in Chile to focus on higher growth, higher return, and more capital-efficient businesses.
• Recognitions: Principal Asset Management named best place to work in money management for 14th consecutive year, military-friendly employer, and Equality 100 award recipient.

Retirement Ecosystem

• Total retirement transfer deposits: $35 billion, grew 9% year over year.
• Workplace Savings and Retirement Solutions (WSRS) recurring deposits: increased 5%.
• WSRS deferring participants: grew over 3%, average deferrals per member increased over 2%.
• Participant roll-ins: $6.5 billion in 2025, up 15% over 2024.
• Pension risk transfer sales: $3 billion across 70 cases, nearly a quarter of premiums from existing clients.
• DCIO sales: nearly $8 billion in 2025.

Small and Mid-Sized Businesses

• WSRS recurring deposits in SMB: grew 8% in 2025, transfer deposits +32%.
• Account value net cash flow: positive $1.5 billion.
• Group benefits customers: average 3.13 products, up nearly 3% y/y.
• Employment growth for block: nearly 2% ttm.
• Life business market premium and fees: +15% in 2025.

Global Asset Management

• Investment Management gross sales: $127 billion in 2025, up 16% y/y, private markets sales +50%.
• Private markets net cash flow: $3.5 billion across real estate, infrastructure, and private credit.
• ETF platform net cash flow: nearly $2 billion.
• Private markets AUM: +12% y/y.
• ETF platform AUM: record $9 billion.
• International pension AUM: +24% to record levels.

• 2026 outlook includes 9%-12% EPS growth, 75%-85% free capital flow conversion, and 15%-17% ROE.
• Targets assume normal market conditions, with revised margin targets for segments: RIS margin target 38%-41%, investment management margin target 35%-39%, international pension margin target 46%-50%, specialty benefits premium/fees target 5%-9% and margin target 14%-17%, life margin target 12%-16%.
• Targets $1.5 billion to $1.8 billion of capital deployments in 2026, including $800 million to $1.1 billion in share repurchases and increased common stock dividend.

Q: How are you thinking about the outlook for performance fees in 2026?

A: Kamal Bhatia expects 2026 to be very similar to 2025, with performance fees typically in $30 million to $40 million range.

Q: Curious about redefining operating earnings related to real estate and outlook for VII in 2026?

A: Joel Pitz says they reflect real estate properties in operating earnings, expect improvements in VII for 2026 relative to 2025, and may contemplate changes for first quarter 2026.

Q: Thoughts on SMB employee employment growth and expectations for 2026?

A: Deanna Strable says no near-term impact seen, 85% of SMB employers expect staffing levels to stay same or increase, 95% expect wages to stay stable or increase.

Q: How differentiate in institutional retirement business and avoid channel conflict?

A: Christopher Littlefield says focused on existing Principal 401(k) plan customers, partnering with advisers to provide advice and figure out economics.

Q: Strategy for small divestitures in international and confidence in raising ROE target?

A: Deanna Strable says divestitures are part of portfolio optimization, Joel Pitz says ROE target increase is due to competitive positioning, differentiated business model, and capital-light businesses.