• Adjusted Non-GAAP Earnings: $439 million or $1.92 per diluted share, a 10% increase in EPS over the first quarter of 2024.
• Capital Returned to Shareholders: $370 million, including $200 million of share repurchases.
• Total Company Managed AUM: Increased to $718 billion at the end of the quarter.
• Net Cash Flow: Negative $4 billion, driven by two low fee institutional fixed income withdrawals.
• Retirement Account Value Net Cash Flow: Positive $400 million after adjustments.
• Pension Risk Transfer Volume: Reached $800 million in the quarter.
• Specialty Benefits Premium Fees Growth: 4% compared to the year ago quarter.
• Non-GAAP Operating ROE: 14%, a 100-basis point improvement from a year ago.
• RAS Margin: 41%, a 120-basis point improvement over the prior year quarter.
• Recurring Deposit Growth: 9% in the quarter.
• Investment Management Revenue: Increased 4% compared to the year ago quarter.
• International Pension Net Revenue: Increased 4% year over year on a constant currency basis.
• SPD Loss Ratio: Improved by 40 basis points year over year to 60.7%.
• Excess and Available Capital: $1.8 billion at the end of the quarter.
• Common Stock Dividend: $0.76, a $0.01 increase over the prior quarter's dividend.

• Warning! GuruFocus has detected 1 Warning Sign with PFG.

Release Date: April 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Principal Financial Group Inc (NASDAQ:PFG) reported a 10% increase in EPS over the first quarter of 2024, demonstrating strong financial performance.
• The company returned $370 million of capital to shareholders, including $200 million in share repurchases and an increase in common stock dividends.
• Total company managed AUM increased to $718 billion, reflecting positive market performance and favorable exchange rates.
• Strong local investment management flows were observed in Mexico and Southeast Asia, reinforcing the company's global business reach.
• Principal Financial Group Inc (NASDAQ:PFG) was named one of the 2025 world's most ethical companies by Ethisphere, highlighting its commitment to ethical practices.

Negative Points

• Market volatility is expected to persist, impacting fee revenue in retirement and asset management, making future quarters difficult to predict.
• Net cash flow was negative $4 billion in the quarter, driven by low fee institutional fixed income withdrawals.
• The company experienced elevated seasonal expenses in investment management, impacting first quarter earnings.
• Lower dental sales and the absence of new PFML markets impacted growth in specialty benefits.
• The company faced a $6 million FX headwind in international pension, affecting net revenue.

Q & A Highlights

Q: How does Principal Financial Group feel about their 9% to 12% EPS growth target given the current macroeconomic environment? A: Deanna Strable, President and CEO, emphasized the dynamic and unpredictable market environment, but highlighted the company's diverse and resilient business portfolio. Joel Pitz, Interim CFO, noted a strong start to the year with 10% EPS growth in Q1, aligning with their guidance. They remain focused on expense management and are confident in their ability to achieve the target, depending on market conditions.

Q: What flexibility does Principal Financial Group have on the expense side, and what actions have been taken in Q2? A: Deanna Strable stated that aligning expenses with revenue is critical, especially given recent volatility. Joel Pitz added that they focus on expense management activities such as travel restrictions, delayed hiring, and consulting spend to align expenses with revenue, reflecting a 40-basis point improvement in margins year over year.

Q: How is client behavior in the asset management business amidst market volatility? A: Kamal Bhatia, CEO of Principal Asset Management, noted increased volatility due to rebalancing but highlighted a material improvement in their pipeline. Clients are improving business fundamentals, with mandates bringing higher net revenue rates, particularly in private markets and international strategies.

Q: Are there any changes in participant behavior in the retirement segment, particularly regarding hardship withdrawals? A: Christopher Littlefield, President of Retirement and Income Solutions, reported no significant increase in loans or hardship withdrawals. Participant withdrawal rates have stabilized, and while the dollar amount of withdrawals is up, it aligns with increased average account values.

Q: What were the drivers of mortality in the life business, and how does it compare to industry trends? A: Amy Friedrich, President of U.S. Insurance Solutions, explained that individual life business can be volatile, with recent results driven by severity and a single large claim. Group life, covering working-age populations, showed strong results. Over a longer term, mortality aligns with expectations.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.