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November 19, 2025 • 4 min read
Principal Financial Group (PFG), a major player in retirement services, investment management, and insurance, recently released its financial results for the third quarter of 2025. For those looking to understand the company's current health and trajectory, digging into its quarterly 10-Q filing with the SEC provides crucial insights. This quarter's report reveals a significant return to profitability, driven by complex financial dynamics that are worth unpacking.
At first glance, Principal's performance marks a dramatic turnaround from the same period last year. The company reported net income attributable to shareholders of $213.8 million for Q3 2025, a stark contrast to the net loss of $220.0 million in Q3 2024. Total revenues also saw a healthy climb, reaching $3.7 billion compared to last year's $3.0 billion.
The following flow diagram provides a visual breakdown of the company's revenues and expenses for the quarter, illustrating how it arrived at its net income.
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The primary driver behind this impressive swing isn't from a surge in core business sales, but rather from a change in a highly technical accounting item: the "fair value of funds withheld embedded derivative." This line item, which generated a massive $777 million loss in Q3 2024, posted a much smaller loss of $266 million this quarter. This derivative is tied to reinsurance agreements for business lines PFG has exited, and its value fluctuates with market conditions, creating significant volatility in the company's GAAP earnings. While the improvement is positive, it's important to look at the underlying performance of Principal's core business segments to get a clearer picture.
To better understand the company's operational health, we can look at the pre-tax operating earnings of its main divisions, which strip out some of the market-related volatility.
Retirement and Income Solutions: This segment, which offers products like 401(k) plans and annuities, performed well, with pre-tax operating earnings rising to $310.3 million from $246.1 million a year ago. The company attributes this to business growth and favorable updates to its long-term financial assumptions, known as actuarial updates.
Principal Asset Management: This global investment arm reported stable pre-tax operating earnings of $274.7 million. Higher management fees, driven by an increase in assets under management (AUM), were offset by lower performance-based fees and headwinds in its international pension operations.
Benefits and Protection: This segment, providing products like dental, life, and disability insurance, saw its pre-tax operating earnings increase to $86.5 million from $64.4 million. Strong performance in its Specialty Benefits division, thanks to improved claims experience, drove the growth, though this was partially offset by challenges in the Life Insurance division.
Overall, the core businesses are demonstrating resilience and growth, even if the headline profit numbers are heavily influenced by market-sensitive accounting adjustments.
A key highlight from the report is Principal's continued commitment to returning capital to its shareholders. For the first nine months of 2025, the company:
In total, PFG has returned over $1.1 billion to its shareholders so far this year. The company's board also authorized a new $1.5 billion share repurchase program in February 2025, signaling continued confidence in its financial position.
Furthermore, the company maintains a healthy balance sheet. Its debt-to-capitalization ratio improved slightly, moving from 27% at the end of 2024 to 25% as of September 30, 2025.
Principal Financial Group's third-quarter results tell a story of recovery and underlying stability. While the swing from a significant loss to a solid profit is eye-catching, it's largely due to the volatile nature of derivative accounting tied to past business decisions. A closer look reveals that the company's core segments are performing steadily, and its robust capital return program continues to be a central part of its strategy. For investors, this quarter highlights the importance of looking beyond the headline numbers to understand the true operational strength of a complex financial services company.
Last updated: November 19, 2025