Principal Financial (PFG) Q2 2025: How Profits Grew Despite Falling Revenue

Principal Financial Group (PFG), a major player in retirement services, insurance, and global asset management, recently released its financial results for the second quarter of 2025. Today, we'll dive into their latest 10-Q filing to understand how the company is performing and what the numbers reveal about its strategy and outlook. At first glance, the report presents a mixed picture: total revenues are down, yet net income is up significantly, suggesting some interesting dynamics at play beneath the surface.

A Tale of Two Bottom Lines: Revenue vs. Profit

For the second quarter ending June 30, 2025, Principal's total revenues came in at $3.7 billion, a noticeable drop from $4.3 billion in the same period last year. The main driver of this decline was a $530 million decrease in "Premiums and other considerations," primarily due to lower sales of single premium group annuities.

However, the profit story is quite different. Net income attributable to the company rose to $406.2 million, up from $353.1 million in Q2 2024. How did profits go up while revenue went down? The answer lies largely on the expense side of the ledger. A key item, "Liability for future policy benefits remeasurement," swung from a massive $445 million expense in Q2 2024 to a $4.3 million gain in Q2 2025. This accounting line item reflects changes in the estimated costs of future insurance claims and is influenced by factors like interest rates and reinsurance transactions. The filing notes a significant one-time impact from a Yearly Renewable Term (YRT) reinsurance deal in 2024, which helps explain this dramatic year-over-year change.

To better understand the flow from revenue to profit, this chart visualizes the company's income statement for the last six months.

Segment Spotlight: Asset Management Shines

A closer look at Principal's business segments reveals where the company is finding its strength.

• Retirement and Income Solutions: Despite the lower premium revenue, this core segment saw its pre-tax operating earnings increase to $292.1 million from $267.8 million a year ago. The company attributes this to business growth and a one-time expense release, showcasing underlying operational health.
• Principal Asset Management: This segment was a standout performer. Its pre-tax operating earnings jumped to $236.4 million from $189.4 million. The growth was fueled by higher management fees, thanks to an increase in Assets Under Management (AUM) which reached $723 billion, and strong performance fees from its real estate business.
• Benefits and Protection: This segment, which includes life and disability insurance, also posted a solid increase in pre-tax operating earnings, rising to $147.6 million from $132.3 million, largely due to improved claims experience.

Strategic Pruning and Shareholder Returns

Principal is also making strategic adjustments to its global footprint. The company is exiting its role as a sponsor and trustee for pension plans in Hong Kong, a move that led to impairment charges earlier in the year but sharpens its focus on core investment management capabilities in the region.

The company continues to prioritize returning capital to its shareholders. In the first half of 2025, Principal returned $732.2 million to common stockholders through a combination of dividends ($338.7 million) and share repurchases ($393.5 million). Backed by a new $1.5 billion share repurchase authorization from February 2025, this signals strong confidence from management in the company's financial stability and cash-generating power.

Conclusion

Principal Financial Group's second-quarter results paint a picture of a company effectively managing its portfolio for profitability. While headline revenue was down due to lower annuity sales, the core fee-based businesses, particularly asset management, are performing well. The significant jump in net income, driven by accounting changes related to reinsurance, underscores the importance of digging into the details of financial reports. With a clear focus on its strengths and a continued commitment to shareholder returns, Principal appears to be navigating the current economic landscape with a steady hand.