Principal Financial Swings to Profit on Derivative Gains, Assets Climb

TL;DR

**PFG's Q3 comeback is a strong buy signal, as derivative gains and asset growth point to a robust financial future.**

AI Summary

Principal Financial Group Inc. (PFG) reported a significant turnaround in net income attributable to PFG, reaching $213.8 million for the three months ended September 30, 2025, compared to a net loss of $220.0 million in the same period of 2024. For the nine months, net income attributable to PFG increased slightly to $668.1 million in 2025 from $665.6 million in 2024. Total revenues for the three months ended September 30, 2025, surged to $3,681.6 million, up from $3,011.6 million in 2024, primarily driven by a substantial reduction in the change in fair value of funds withheld embedded derivative, which improved from a negative $776.8 million in 2024 to a negative $265.9 million in 2025. Premiums and other considerations also increased to $1,532.8 million from $1,412.9 million year-over-year for the quarter. Total assets grew to $334,491.8 million as of September 30, 2025, from $313,663.6 million at December 31, 2024, largely due to an increase in separate account assets from $173,327.1 million to $189,251.5 million. Key risks include the impact of estimates and assumptions on financial reporting, particularly regarding investment fair values and actuarial balances, and evolving regulatory and accounting guidance. The strategic outlook appears stable with continued growth in assets and a strong recovery in quarterly profitability.

Why It Matters

This turnaround in PFG's net income, driven by improved derivative valuations, signals a more stable financial environment for the company, which is crucial for investor confidence. For employees and customers, a financially healthier PFG means greater security and potentially enhanced services. In the broader market, PFG's performance, especially its asset growth to over $334 billion, reflects resilience in the financial services sector amidst market fluctuations. Competitively, PFG's ability to manage complex financial instruments and grow its asset base positions it favorably against peers in the insurance and asset management space, demonstrating effective risk management and investment strategies.

Risk Assessment

Risk Level: medium — The company's financial statements rely heavily on estimates and assumptions, particularly for the fair value of investments and market risk benefits, as noted in 'Nature of Operations and Significant Accounting Policies'. The 'change in fair value of funds withheld embedded derivative' significantly impacted quarterly revenues, swinging from a negative $776.8 million in Q3 2024 to a negative $265.9 million in Q3 2025, indicating volatility and sensitivity to market conditions.

Analyst Insight

Investors should consider PFG's improved net income and asset growth as a positive indicator, but remain mindful of the inherent volatility in derivative valuations. A deeper dive into the stability of their investment portfolio and the long-term trends of their core insurance and asset management businesses is warranted before making significant investment decisions.

Financial Highlights

revenue

$3,681.6M

total Assets

$334,491.8M

total Debt

$3,937.6M

net Income

$213.8M

eps

$0.95

cash Position

$5,137.1M

revenue Growth

+22.2%

Revenue Breakdown

Key Numbers

• $213.8M — Net Income Attributable to PFG (Q3 2025) (Significant turnaround from a $220.0M loss in Q3 2024.)
• $3,681.6M — Total Revenues (Q3 2025) (Increased from $3,011.6M in Q3 2024, a 22.2% increase.)
• $334.5B — Total Assets (Sept 30, 2025) (Increased from $313.7B at Dec 31, 2024, representing a 6.6% growth.)
• $1,532.8M — Premiums and Other Considerations (Q3 2025) (Up from $1,412.9M in Q3 2024, indicating core business growth.)
• -$265.9M — Change in Fair Value of Funds Withheld Embedded Derivative (Q3 2025) (Improved significantly from -$776.8M in Q3 2024, driving revenue recovery.)
• $0.95 — Diluted EPS (Q3 2025) (Positive earnings per share compared to -$0.95 in Q3 2024.)
• $1,529.9M — Net Unrealized Gains on Available-for-Sale Securities (9 months 2025) (Increased from $1,235.6M in 9 months 2024, contributing to comprehensive income.)
• $189,251.5M — Separate Account Assets (Sept 30, 2025) (Increased from $173,327.1M at Dec 31, 2024, reflecting strong client asset growth.)

Key Players & Entities

• PRINCIPAL FINANCIAL GROUP INC (company) — registrant
• PFG (company) — ticker symbol
• SEC (regulator) — filing authority
• $213.8 million (dollar_amount) — Net income attributable to Principal Financial Group, Inc. for Q3 2025
• $220.0 million (dollar_amount) — Net loss attributable to Principal Financial Group, Inc. for Q3 2024
• $3,681.6 million (dollar_amount) — Total revenues for Q3 2025
• $3,011.6 million (dollar_amount) — Total revenues for Q3 2024
• $334,491.8 million (dollar_amount) — Total assets as of September 30, 2025
• $313,663.6 million (dollar_amount) — Total assets as of December 31, 2024
• $189,251.5 million (dollar_amount) — Separate account assets as of September 30, 2025

FAQ

Risk Factors

• Estimates and Assumptions [high — financial]: Financial reporting relies heavily on estimates and assumptions, particularly for investment fair values and actuarial balances. Changes in these estimates, driven by market volatility or updated actuarial data, can materially impact reported financial results. For instance, the change in fair value of funds withheld embedded derivative significantly improved, highlighting sensitivity to valuation changes.
• Evolving Regulatory and Accounting Guidance [medium — regulatory]: The company faces risks from evolving regulatory and accounting standards. New guidance, such as 'Disaggregation of income statement expenses' effective December 31, 2027, requires ongoing evaluation and potential adjustments to financial reporting. Compliance with new standards can be complex and costly.
• Investment Valuation and Market Volatility [high — market]: The value of PFG's investment portfolio, including fixed maturities and equity securities, is subject to market fluctuations. Net unrealized gains on available-for-sale securities increased to $1,529.9M for the nine months of 2025 from $1,235.6M in 2024, indicating a positive but volatile market impact. Significant declines in investment values could negatively affect financial position and results.
• Variable Interest Entities (VIEs) [medium — operational]: PFG consolidates several variable interest entities, impacting various asset and liability accounts. For example, VIEs represent $180.6 million of fixed maturities, trading, and $403.5 million of equity securities as of September 30, 2025. Managing the risks and financial reporting associated with these entities is crucial.

Industry Context

The life insurance and retirement services industry is characterized by intense competition, evolving customer needs for retirement solutions, and sensitivity to interest rate environments. Companies like PFG focus on managing investment portfolios, product innovation, and operational efficiency to maintain profitability. Regulatory oversight is significant, requiring robust compliance frameworks.

Regulatory Implications

PFG operates within a highly regulated environment. Changes in accounting standards, such as those related to income tax disclosures and expense disaggregation, require continuous adaptation. Compliance with solvency requirements and consumer protection regulations are ongoing priorities that impact operational costs and strategic decisions.

What Investors Should Do

1. Monitor the impact of interest rate changes on investment portfolio performance and profitability, given the significant holdings in fixed maturities.
2. Analyze the drivers of the improved 'Change in fair value of funds withheld embedded derivative' to assess the sustainability of this positive impact on net income.
3. Evaluate the growth trajectory of 'Separate account assets' as a key indicator of client acquisition and retention in PFG's core businesses.
4. Assess the company's ability to navigate evolving accounting and regulatory landscapes, particularly new disclosure requirements impacting financial reporting.
5. Track the performance of PFG's various business segments (disclosed in Note 18) to understand the sources of revenue growth and profitability beyond the headline figures.

Key Dates

• 2025-09-30: Q3 2025 Financial Reporting — Reported a significant turnaround in net income to $213.8M from a $220.0M loss in Q3 2024, driven by improved fair value adjustments and premium growth. Total assets grew to $334.5B.
• 2024-12-31: Year-End 2024 Financial Position — Total assets stood at $313.7B, with separate account assets at $173.3B. This serves as the comparative baseline for the current period's growth.
• 2027-12-31: Effective Date for Disaggregation of Income Statement Expenses Guidance — PFG is evaluating the impact of this new accounting standard, which will require more granular expense disclosures, potentially affecting reporting complexity.
• 2025-12-31: Effective Date for Improvements to Income Tax Disclosures Guidance — This guidance will enhance income tax disclosures, particularly regarding rate reconciliation and taxes paid, but is not expected to materially impact financial statements.

Glossary

Funds withheld payable

Represents liabilities arising from agreements where PFG holds assets on behalf of another party, often related to reinsurance or other financial arrangements, and is obligated to pay those amounts back. (A significant liability ($18,113.2M as of Sept 30, 2025), its management and associated embedded derivative valuations are critical to financial performance.)

Separate account assets

Assets held by PFG on behalf of its customers, typically in connection with investment and retirement products, where the investment risk is borne by the contractholder. (These assets grew substantially to $189,251.5M as of Sept 30, 2025, indicating strong client asset growth and a key driver of the company's scale.)

Fixed maturities, available-for-sale

Debt securities (like bonds) that PFG holds with the intention of selling them before maturity, but not necessarily immediately. Their unrealized gains and losses are reported in Other Comprehensive Income. (A major asset class ($71,322.9M as of Sept 30, 2025), its valuation directly impacts PFG's equity and comprehensive income.)

Variable interest entities (VIEs)

Entities for which PFG has a significant financial interest and may be required to consolidate onto its balance sheet, even if it doesn't have majority voting control. (PFG consolidates several VIEs, impacting various investment and liability accounts, requiring careful financial reporting and risk management.)

Deferred acquisition costs

Costs incurred in acquiring new insurance contracts that are capitalized and amortized over the expected life of the contracts. (Represents a significant asset ($4,057.3M as of Sept 30, 2025), its valuation and amortization schedule affect profitability over time.)

Year-Over-Year Comparison

Compared to the prior year's comparable period, PFG has demonstrated a remarkable financial recovery. Total revenues surged by 22.2% to $3,681.6M in Q3 2025, primarily due to a significant improvement in the fair value of funds withheld embedded derivative, which swung from a negative $776.8M loss to a $265.9M reduction in loss. This revenue enhancement, coupled with a modest increase in premiums, led to a dramatic turnaround in net income, shifting from a $220.0M loss in Q3 2024 to a $213.8M profit in Q3 2025. Total assets also saw healthy growth, increasing by 6.6% to $334.5B, largely driven by a rise in separate account assets.

Key Financial Figures

• $0.01 — hares of the registrant's Common Stock, $0.01 par value, outstanding as of October 22

Filing Documents

• pfg-20250930x10q.htm (10-Q) — 15948KB
• pfg-20250930xex31d1.htm (EX-31.1) — 11KB
• pfg-20250930xex31d2.htm (EX-31.2) — 11KB
• pfg-20250930xex32d1.htm (EX-32.1) — 5KB
• pfg-20250930xex32d2.htm (EX-32.2) — 5KB
• pfg-20250930x10q061.jpg (GRAPHIC) — 32KB
• 0001104659-25-103708.txt ( ) — 70139KB
• pfg-20250930.xsd (EX-101.SCH) — 203KB
• pfg-20250930_cal.xml (EX-101.CAL) — 184KB
• pfg-20250930_def.xml (EX-101.DEF) — 1027KB
• pfg-20250930_lab.xml (EX-101.LAB) — 1563KB
• pfg-20250930_pre.xml (EX-101.PRE) — 1323KB
• pfg-20250930x10q_htm.xml (XML) — 23734KB

- FINANCIAL INFORMATION

Part I - FINANCIAL INFORMATION Item 1.

Financial Statements

Financial Statements 3 Condensed Consolidated Statements of Financial Position as of September 30, 2025 (Unaudited) and December 31, 2024 3 Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2025 and 2024 4 Unaudited Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2025 and 2024 5 Unaudited Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended September 30, 2025 and 2024 6 Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024 8 Notes to Unaudited Condensed Consolidated Financial Statements — September 30, 2025 9 1. Nature of Operations and Significant Accounting Policies 9 2. Other Intangible Assets 12 3. Variable Interest Entities 12 4. Investments 16 5. Derivative Financial Instruments 39 6. Deferred Acquisition Costs and Other Actuarial Balances 53 7. Separate Account Balances 56 8. Contractholder Funds 60 9. Future Policy Benefits and Claims 65 10. Market Risk Benefits 75 11. Reinsurance 78 12. Long-Term Debt 80 13. Income Taxes 82 14. Employee and Agent Benefits 83 15. Contingencies, Guarantees and Indemnifications 84 16. Stockholders' Equity 86 17. Fair Value Measurements 90 18. Segment Information 110 19. Revenues from Contracts with Customers 119 20. Stock-Based Compensation Plans 123 21. Earnings Per Common Share 125 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 126 Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures about Market Risk 159 Item 4.

Controls and Procedures

Controls and Procedures 165

— OTHER INFORMATION

Part II — OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 166 Item 1A.

Risk Factors

Risk Factors 166 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 166 Item 6. Exhibits 167 Signature 168 2 Table of Contents

— FINANCIAL INFORMATION

PART I — FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements Principal Financial Group, Inc. Condensed Consolidated Statements of Financial Position September 30, December 31, 2025 2024 (Unaudited) (in millions, except share amounts) Assets Fixed maturities, available-for-sale (1) $ 71,322.9 $ 68,251.0 Fixed maturities, trading (2025 and 2024 include $ 180.6 million and $ 205.9 million related to consolidated variable interest entities) 1,356.8 1,023.3 Equity securities (2025 and 2024 include $ 403.5 million and $ 367.9 million related to consolidated variable interest entities) 1,649.0 2,295.0 Mortgage loans (2025 and 2024 include $ 746.1 million and $ 944.5 million related to consolidated variable interest entities and $ 0.0 million and $ 140.6 million measured at fair value under the fair value option) 20,681.2 20,484.2 Real estate (2025 and 2024 include $ 816.9 million and $ 781.8 million related to consolidated variable interest entities) 2,387.1 2,464.5 Policy loans 870.7 867.5 Other investments (2025 and 2024 include $ 763.4 million and $ 625.6 million related to consolidated variable interest entities and $ 136.3 million and $ 129.0 million measured at fair value under the fair value option) 9,340.4 7,990.3 Total investments 107,608.1 103,375.8 Cash and cash equivalents (2025 and 2024 include $ 106.7 million and $ 86.1 million related to consolidated variable interest entities) 5,137.1 4,211.9 Accrued investment income (2025 and 2024 include $ 39.4 million and $ 19.1 million related to consolidated variable interest entities) 899.0 828.6 Reinsurance recoverable and deposit receivable 19,257.6 19,490.1 Premiums due and other receivables 3,771.7 3,771.5 Deferred acquisition costs 4,057.3 4,006.9 Market risk benefit asset 187.5 199.5 Property and equipment 716.2 769.4 Goodwill 1,577.6 1,549.7 Other intangibles 1,268.5 1,389.9 Separate account assets (2025 and 2024 incl

financial statements or other

financial statements or other significant matters Standards not yet adopted: Accounting for internal-use software This authoritative guidance aligns the accounting for internal-use software with the method used to develop the software, which will lead to consistency in determining when software capitalization should begin. December 31, 2028 We are currently evaluating the impact this guidance will have on our consolidated financial statements. Disaggregation of income statement expenses This authoritative guidance expands the disclosures about a public entity's expenses and addresses requests for more granular information about the types of expenses in commonly presented expense categories. December 31, 2027 We are currently evaluating the impact this guidance will have on our notes to the consolidated financial statements. Improvements to income tax disclosures This authoritative guidance provides improvements to income tax disclosures for annual periods primarily related to the rate reconciliation and income taxes paid information. December 31, 2025 This guidance will not have a material impact on our notes to the consolidated financial statements when the new annual disclosures are included in our notes to the consolidated financial statements. Standards adopted: Improvements to reportable segments disclosures This authoritative guidance enhances the disclosures about a public entity's reportable segments and addresses requests from investors for additional, more detailed information about a reportable segment's expenses. December 31, 2024 The enhanced disclosures can be found in Note 18, Segment Information. Facilitation of the effects of reference rate reform on financial reporting This authoritative guidance provided optional expedients and exceptions for contracts and hedging relationships affected by reference rate reform. An entity could elect not to apply certain modification accounting requirements to contracts affected by ref

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