Q3 2025 Principal Financial Group Inc Earnings Call

And your telephone to withdraw your question. Please press star one again.

We would ask that you'd be respectful of others and limit yourself to one question and a follow up so we can get through everyone. In the queue I would now like to turn the conference over to Humphrey Lee Vice President of Investor Relations. Please go ahead.

Thank you and good morning.

Welcome to principal financial group's third quarter 2025 earnings conference call.

Materials related to today's call are available on our website at investors <unk> principal dot com.

Following a reading of the safe Harbor provision CEO.

Diana stable and CFO, Joel Pitts will deliver our prepared remarks.

We'll then open the call for questions.

Members of senior management are also available for Q&A.

Some of the comments made during this conference call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act the.

The company does not revise or update them to reflect new information subsequent events or changes in strategy risks and uncertainties that could cause actual results to differ materially from those expressed or implied are discussed in the company's most recent annual report on Form 10-K filed by the company with.

The U S Securities and Exchange Commission. Additionally, some of the comments made during this conference call may refer to non-GAAP financial measures.

Installations of the non-GAAP financial measures to the most directly comparable U S. GAAP financial measures may be found in our earnings release financial supplement and slide presentation.

Deanna.

Thanks, Tom and good morning to everyone on the call. This morning, I'll discuss our strong third quarter performance and the continued execution of our strategy focused on delivering sustained growth across our diversified businesses.

Joe will then provide additional details on our financial results and capital position.

Turning to slide two our third quarter results build on the momentum of the first half of the year and demonstrate another period of strong performance towards our financial targets.

We delivered 13% adjusted earnings per share growth year over year, and 14% year to date above our target range.

Our return on equity expanded significantly the last year and is now at the high end of our target range.

And our year to date free capital flow conversion ratio of over 90% is tracking above target.

Additionally, we returned $400 million of capital to shareholders in the quarter, including $225 million of share repurchases.

We also raised our common stock dividend for the ninth consecutive quarter, an 8% increase on both a quarterly and full year basis.

These results were driven by strong business fundamentals across the company, including enterprise net revenue growth of 4% margin expansion of 180 basis points and positive enterprise net cash flow.

Given the strong performance through the first three quarters and our business momentum, we fully expect to deliver on our full year enterprise financial targets.

Moving to slide three we continue to make progress on our strategic priorities highlighted at our 2020 for Investor Day.

As a reminder, we're focused on three significant profit pools, where we are uniquely positioned to win.

Broad retirement ecosystem, small and midsize businesses and global asset management.

Let's start with our retirement ecosystem in which we offer a comprehensive suite of capabilities across record keeping asset management wealth management and income solutions.

We're seeing strong momentum across key metrics.

Workplace savings and retirement solutions, our WSI Rs transfer deposits grew 13% year over year.

Demonstrating the strength of our retirement record keeping platform and Nebraska, our distribution reach.

We're serving an increasing number of participants and the participants we serve are saving more.

This is evidenced by a 3% increase in the number of participants deferring into their retirement plans compared to the year ago quarter with average deferrals up 2%.

Total <unk> sales of $7 billion increased 8% year over year with strong growth in Ws Rs and pension risk transfer.

On a year to date basis, nearly one third of our PRT premiums came from existing defined benefit clients.

Additionally, nearly half of our year to date Nonqualified life insurance sales are part of a total retirement solution with RIS.

Our retirement investment expertise in important growth driver within the retirement ecosystem continues to gain traction with third party retirement platforms as.

As evidenced by D C I O sales of $2 billion in the quarter.

These connections within and across businesses demonstrate our power across retirement and reinforced our unique competitive advantage in delivering retirement solutions to employers and their employees.

Moving to our small and midsize business segment, our differentiated capabilities and deep expertise in this attractive segment continues to drive results.

Srs SMB recurring deposits grew 8% and transfer deposits increased 27% compared to the year ago quarter.

And benefits and protection, our business continues to show growth and resiliency.

Employment growth for our block was nearly 2% on a trailing 12 month basis, and we're seeing continued success and deepening relationships based on our latest insights employee retention remains a top priority for small business owners and executives and we're well positioned to help them achieve their goals with our comprehensive suite of solutions.

In global asset management, we're generating strong momentum with gross sales and investment management of $32 billion up 19% year over year.

Revenue on these sales is up even more.

Our private markets capabilities remain attractive to clients globally generating net inflows of $1 $7 billion in the quarter.

Private AUM grew 9% year over year as strong demand continues across our real estate infrastructure and private credit strategies.

Additionally, our ETF business delivered net inflows of $500 million in the quarter and $1 3 billion year to date.

These results reflect the strength of our diversified business mix across asset class geography and client base.

Looking across our three long term strategic focus areas I'm encouraged by the momentum the breath of our retirement solutions, our leadership position in serving small and midsize businesses and our expanding global asset management capabilities create multiple paths for sustained growth.

These competitive advantages combined with our integrated business model and strong execution position us well to capitalize on the significant opportunities ahead, while creating value for our customers shareholders and employees.

Before I turn this over to Joel I want to acknowledge our recent release of the fourth annual global financial inclusion index, which tracks how governments employers and financial systems around the globe are advancing financial inclusion.

Since the index launch we've seen how digital solutions have emerged as a powerful driver of progress, helping people make informed choices and achieve greater financial security.

Markets, making the fastest gains are embracing fintech solutions that expand access while embedding financial education and safeguards.

While current economic uncertainty has temporarily impacted employer financial inclusion programs, it's encouraging to see governments and financial systems stepping up.

The findings highlight the tremendous opportunities ahead and reinforce our important mission to help people feel more confident in their financial decisions Joel.

Thanks, Deanna this morning, I'll share the key contributors to our strong financial performance for the quarter as well as details of our capital position.

As shown on slide four we reported non-GAAP operating earnings of $474 million.

Or $2 10 per share.

A 19% increase year over year.

And on a year to date basis reported EPS increased 21%.

Excluding significant variances non-GAAP operating earnings were $523 million.

An increase of 9% year over year.

And EPS of $2.32 increased.

Increased 13%.

On a year to date basis, adjusted EPS increased 14%.

While not on the slide third quarter reported net income excluding exited business was $466 million.

An increase of 11% over the prior year quarter with minimal credit losses.

Turning to capital and liquidity, we ended the quarter in a strong position with $1 6 billion of excess and available capital.

This includes 800 million at the holding company at our targeted level.

$350 million in our subsidiaries.

And $400 million in excess of our targeted 375% risk based capital ratio, which was estimated at 400% at quarter end.

We returned approximately 400 million to shareholders in the third quarter, including $225 million of share repurchases and $173 million of common stock dividends.

We are confident we will deliver on our full year capital return target of 1.4 to $1 7 billion.

<unk> $700 million 1 billion of share repurchases.

Last night, we announced a 79 common stock dividend payable in the fourth quarter.

This is a one cent increase from the dividend paid in the third quarter.

And an 8% increase over both the year ago quarter, and trailing 12 month period.

This aligns with our targeted 40% dividend payout ratio and demonstrates our confidence in continued growth and strong capital generation.

Moving to AUM and net cash flow markets create a tailwind in the quarter.

With positive results across U S and international equities fixed income and real estate.

Total company managed AUM of 784 billion increased 4% sequentially driven.

Driven primarily by strong market performance, along with positive net cash flow.

Total company net cash flow was $400 million in the quarter.

The sequential and year over year improvement driven by investment management flows.

At the Ana mentioned this was largely driven by strong private inflows.

Moving to the businesses. The following commentary excludes significant variances, which can be found on slide 10.

Significant variances. This quarter include a net unfavorable impact to GAAP earnings from our actuarial assumption review.

Primarily driven by model refinements.

It is important to note the actuarial assumption review impacts our GAAP only and noncash.

And therefore has no impact on free capital flow for the enterprise.

The remaining significant variances are a slight net positive.

Starting with RIS and as shown on slide five third quarter topline growth was 4% towards the upper end of our target range driven by growth in the business and favorable markets.

This coupled with expense discipline, while investing in our business resulted in a 42% margin.

A 130 basis point improvement over the third quarter of 2024.

Pre tax operating earnings of $315 million increased 8% from the prior year quarter.

And by growth in the business and margin expansion.

As Deanna noted fundamentals across the business remain healthy.

Total Ws R. S recurring deposits grew 5% on a trailing 12 month basis.

With our SMB segment, continuing to outperform at 8% growth over the same period.

<unk> consistent with the first half of the year withdrawal rates in the quarter remained stable.

Turning to slide six principal asset management delivered strong earnings on revenue growth and margin expansion.

Within investment management pre tax operating earnings increased 9% from the prior year quarter.

Management fees increased 5% year over year, driven by higher AUM and a stable fee rate against the backdrop of industry fee pressure.

This along with continued expense discipline contributed to a 180 basis point improvement and investment management's quarterly operating margin.

Net cash flow was $800 million in the quarter supported by inflows in privates with two large wins in private real estate equity.

As well as positive flows in high yield emerging market fixed income and active equity ETF strategies.

a 130 basis point improvement over the third quarter of 2024

Moving to international pension, we delivered record reported AUM of 151 billion.

pre-tax, operating earnings of 315 million increase 8% from the prior year quarter.

An increase of 9% year over year.

Driven by growth in the business and margin expansion.

Operating margin of 47% expanded 180 basis points from the prior year quarter.

As Diana, noted fundamentals, across the business, remain healthy.

It remains comfortably within our targeted range.

Total WSRs recurring deposits grew 5% on a trailing 12-month basis.

Turning to slide seven specialty benefits pre tax operating earnings were $147 million a record quarter.

With our SMB segment continuing to outperform at 8% growth over the same period.

This was an increase of 28% compared to the year ago quarter, driven by more favorable underwriting results and business growth.

Additionally, consistent with the first half of the year, withdrawal rates in the quarter remain stable.

These results reflect our focus on pricing discipline and profitable growth.

Turning to slide 6 principal Asset Management, delivered strong earnings on Revenue, growth and margin expansion.

Total SPD loss ratio improved 340 basis points compared to the year ago quarter and was below our target range.

Within Investment Management pre-tax operating earnings increased 9% from the prior year quarter.

Management fees increased 5% year-over-year driven by higher AUM.

These results were driven by favorable group life and group disability underwriting as well as a 100 basis point improvement in a dental loss ratio.

And a stable fee rate against the backdrop of industry fee pressure.

Operating margin of 17% expanded 330 basis points compared to the year ago quarter and is above the high end of our target range.

This along with continued expense discipline, contribute to a 180 basis, point Improvement in investment Management's, quarterly operating margin.

Net cash flow is 800 million in the quarter supported by inflows and privates.

And life insurance premium fees increased 3% compared to the third quarter of 2024.

Our strong business market growth of 11% continues to outpace the runoff of the legacy life insurance business.

with 2, large winds in private real estate Equity as well as positive flows in high yield Emerging Market, fixed income and active Equity, ETF strategies,

Mortality in the quarter was better than expected, but slightly less favorable than a year ago quarter.

Moving to International Pension, we delivered record reported AUM of $151 billion.

An increase of 9% year-over-year.

In closing our strong enterprise performance reflects successful execution of our strategy and strong fundamentals.

47% expanded 180 basis points from the prior year quarter.

Our diversified business demonstrated strength through profitable growth and expanded margins.

It remains comfortably within our targeted range.

As Deanna highlighted this momentum coupled with our year to date performance reinforces our confidence in delivering on full year enterprise financial targets and positions us well for sustained long term performance.

Turning to slide 7 specially benefits pre-tax, operating earnings were 147 million, a record quarter.

this was an increase of 28% compared to the year ago, quarter driven by more favorable underwriting results and business growth

This concludes our prepared remarks, operator, please open the call for questions.

These results, reflect our focus on pricing discipline and profitable growth.

Thank you at this time I would like to remind everyone that to ask a question. Please press star one on your telephone we will pause for just a moment to compile the Q&A roster.

total SPD loss ratio improved 340 basis points compared to the year ago quarter,

And was below our target range.

Our first question comes from Jack <unk> with BMO capital markets. Your line is open.

Hey, good morning.

These results were driven by fairbow group life and group disability underwriting as well as a 100 basis, point Improvement in a dental loss ratio.

First question on margins I was wondering if you would expect to continue seeing strong margin expansion kind of in line with 180 basis points this quarter.

Operating margin of 17% expanded 330 basis points. Compared to the year ago quarter and is above the high end of our target range.

Market performance remained strong I guess related can you discuss areas, where principal unless either accelerating or expanding its investments in growth initiatives.

in life insurance premium and fees, increased 3%, compared to the third quarter of 2024

Yeah. Thanks, Jack for the question, obviously the margin expansion in the current quarter was impacted by both strong underwriting results as well as very disciplined expense management I'll have Joe talk about that and then maybe ask.

As a strong business market, the growth of 11% continues to outpace the runoff of the legacy life insurance business.

Mortality in the quarter was better than expected, but slightly less favorable than in the same quarter a year ago.

Presidents to maybe highlight a few areas, where we're investing in the business.

In closing our strong Enterprise performance reflects successful, execution of our strategy and strong fundamentals.

Yeah. Thanks for the questions Yeah from a margin perspective, we certainly expect margins to continue to expand.

Our Diversified business demonstrates, its strength through profitable growth and expanded margins.

But importantly, while investing in the business as you said.

So this quarter was no different than we've done in the past, but we're going to make sure that we ensure that expenses grow at a much slower pace than revenues.

And as you said, we had margin expansion of 180 basis points at the enterprise level.

As Diana highlighted this momentum coupled with our year-to-date performance, reinforces our confidence and delivering on full year Enterprise Financial targets and positions us well for sustained long-term performance.

TTM basis was 100 basis point improvement.

So again, we'll continue to actively and responsibly manage expenses in particular in the fee based businesses, where you do see some macro benefits emerging we're going to continue to invest meaningfully on.

This concludes our prepared remarks operator, please open the call for questions.

Thank you at this time. I'd like to remind everyone that to ask a question. Please press star, 1, 1 1 on your telephone, we will pause for just a moment to compile the Q&A roster.

In that regard.

Chris maybe highlight a few investments that you guys are focused.

Yeah sure. Good morning, Jack obviously margin was strong for Ferrari this quarter and we continue to guide toward the upper end of our margin range.

Our first question comes from Jack Madden with BMO Capital Market, your line is open.

And despite that strong margin performance, we're making a lot of significant investments both in modernizing our recordkeeping capabilities as well as building out our capabilities to serve individual customers and retirement plans.

So, we're making very significant investments and still being able to deliver on.

Its investments in growth initiatives.

Yeah.

Thanks, Jack and so obviously margin for the SPD businesses with exceptional this quarter and then.

When you look across the margin for life that was within the range as well so.

I'd Echo what Chris said again, we're meeting our margin targets or exceeding them in one of the businesses and we're still investing for the business. So when I think of those key investments, we're making a lot of them are multiyear in nature. So we've been working on some multiyear investments related to our front end acquisition systems for our group benefits business.

Yeah, thanks, Jack, for the question. Obviously, the margin expansion in the current quarter was impacted by both strong underwriting results as well as very disciplined expense management. I'll have Joel talk about that, and then maybe ask each of the presidents to highlight a few areas where we're investing in the business.

It.

After some increased data exchange capabilities and those are going to benefit our employer customers as well as the brokers and advisers, who really have to recommend us for that business. So I'm excited to see those capabilities coming to the marketplace in late 'twenty early 'twenty six.

Yeah, thanks for the question Jack. Um, for my margin perspective, we certainly expect margins to continue to expand importantly while investing in a business as you said. Um, so this quarter was no different, it was done in the past where we're going to make sure that we ensure that expenses, go in a much slower Pace than revenues. And as you said, we had margin expansion of 180 basis points at the Enterprise level and on ttm's basis with a 100 basis point Improvement.

Um, so again, we'll continue to actively responsibly manage expenses in particular, in the fee based businesses where you do see some mackerel benefits emerging. Um, we're going to continue investing weekly, um, in that regard.

Sure Jack Good morning, just I'll highlight both I am an IP for you.

Chris may be highlighted, a few Investments that you guys are focusing.

Both had excellent quarters on margin.

<unk> them to continue on the margin is around 36%.

Largely aided by the results we highlighted in our cash flow, but also market and then IP, where net fluids may not be that strong we still have excellent margin and the drivers of our margin in both those businesses.

In investment management, our investments continue to be around building, new investment capabilities that will generate higher fee revenue.

Uh yeah sure uh good morning Jack you know obviously margin was strong for for our ISS score and we continue to sort of guide toward the upper end of our marketing range. Um and despite that strong marginal performance, we're making a lot of significant Investments both in modernizing our record, keeping capabilities as well as building out our capabilities to serve the individual customers in retirement plans. Um, so we're making very significant Investments and still being able to deliver our work.

You've seen that in our private markets continue to do that now in public markets as well, particularly global equities, which we believe will actually.

Our growth potential.

Our focus continues to be to optimize our sales distribution network across the various regions and leveraging the collaboration between I am an IP in those regions. So that is probably the biggest area that's been denied.

<unk> will follow up.

Yes very helpful. Thank you.

They've been free capital flow conversion and it's been running at healthy levels over 90% I think even if you back out the GAAP assumption review.

Was there anything notably you'd call that is driving that and how you would expect that to trend over the near term.

I'll ask <unk> to address that yeah. Thanks, Jack we are at a very strong capital position as we enter third quarter.

Yeah, thanks Jack. Um, so obviously margin for the SPD businesses with uh, exceptional this quarter. And then, um, when we look across the margin for life that was within the range as well. So, um, I I'd Echo what Chris said. Again, we're meeting our margin targets. We're receiving them in 1 of the businesses and we're still investing for the business. So, when I think of those key Investments, we're making a lot of them are multi-year in nature. So, we've been working on some multi-year Investments related to our front-end acquisition systems for a group benefits business. Um, also some increased data exchange capabilities and those are going to benefit our employer customers as well as the Brokers and advisors who really have to recommend us for that business. So I'm excited to see those capabilities coming to the marketplace in late 25 and early 26th.

We have the luxury of a very capital efficient mix of business, which affords us the ability to organically invest in our business again was pretty meaningful capital up for the benefit of shareholders.

As such we have and will continue to operate from a position of capital strength.

In the south of our disclosure at the end of the third quarter, we do have $1 6 billion of excess and available capital.

$150 million higher than we had coming into the third quarter.

While investing in organic growth and deploying approximately $400 million of capital in the form of share buybacks and dividends during the quarter.

Sure sure. Good morning. Uh, just I'll highlight both. I am an IP for you. Um, both had excellent Quarters on margin and I expect them to continue on. In the margin is around 36% and it's largely aided by the results. We highlighted in our cash flow but also markets. And in IP where net flows may not be that strong. And still, I have excellent margin and the drivers of our margin in. Both those businesses are slightly different in in restaurant management. Our investments continue to be around building new investment capabilities that

Staying on the Carter last call, we expected and are deploying elevated levels of capital and latter part of the year.

And you saw it in the third quarter with the $400 million of capital deployed in the course of the quarter.

$225 million, which was in share buyback activity.

We sit here today, we feel really good about our share buyback activity and positioning for fourth quarter, Yes, we had.

That will generate higher fees revenue for us. You've seen that in our private markets area and you continue to do that now in public markets as well. Particularly Global equities, which we believe will actually add to our growth potential. In IP our Focus continues to be to optimize our sales distribution Network across the various regions and leveraging, the collaboration between IM and IP in those regions.

<unk> third quarter deployment, we expect fourth quarter to be even further elevated.

So, that is probably the bigger area for investment in the IP area.

Check to follow up.

And so we feel really good about our prospects for deploying capital in an optimal and strategic way from this point forward.

But at least as we announced last night with the dividend that continues to be a priority for us we increased our quarterly dividend by a penny.

Again, that's a testament to our commitment to growing our dividend and maintaining that 40% dividend payout ratio.

Yes, very helpful. Thank you. Um, if follow up, um, we've been free Capital flow conversion. Um, it's been running it at healthy levels over 90%. I think even if you back out the the Gap assumption review, um, is there anything notable that you've called? That's driving that and, and how you would expect that to to Trend over the near term.

I'll ask Joel to address that.

So Jack I hope that helps Jeff.

Yeah, thanks, Jack. We are at a very strong capital position as we end the third quarter.

The only thing I'd add to that is obviously as we grow our fee based businesses across the enterprise that will provide some tailwind to that pre capital percentage as well.

Um, we had the luxury of a very capital-efficient mix of business.

Which is for a disability to organically invest our business again while spring meaningful Capital up for the benefit of shareholders.

Got it thank you.

One moment for our next question.

As such we have and will continue to operate from position of capital strength.

Our next question comes from Ryan Krueger with <unk>. Your line is open.

somebody sophomore disclosure at the end of third quarter, we do have 1.6 billion of excess and available capital

Hey, Thanks. Good morning first question is on the investment management flows can you talk a little bit about any changes you're seeing in investor's sentiment from your clients.

This is $150 million higher than we had coming into the third quarter.

While investing in organic growth and deploying approximately 400 million of capital in the form of share, BuyBacks, and dividends during the quarter.

In particular appetite for the areas that you're focused on in that business.

Maybe a little bit of perspective on how the pipeline looks going forward as well.

A signal in the car. Last call, um, we expected, and are deploying elevated levels of capital in the latter part of the year.

and you saw this in the third quarter, with the, the 400 million of capital deployed in the course of the quarter,

Sure. Good morning, Ryan So I think let me just start with the strong results. This quarter I think as Deanna mentioned in her remarks, we had positive net cash flow of $800 million.

Um, 225 million of which was in share buyback activity.

So as we sit here today, you know, we feel really good about our share buyback activity and positioning for fourth quarter.

I think equally impressive is if you look at the non.

Expect fourth quarter, even further elevated.

Non affiliated Mcf It was $1 8 billion positive, which is largely with long term mandates in private markets.

And so we feel really good about our prospects for deploying capital in an optimal and strategic way from this point forward.

It only contributes to the fee rate, but also revenue growth.

The other dynamic I would highlight for you is as we had net cash flow growth this quarter across multiple channels.

And last but not least, as we announced last night with the dividend, that continues to be a priority for us. We increased our quarterly dividend by a penny, and again, that's a testament to our commitment to growing our dividend and maintaining that 40% dividend payout ratio.

We had wins in <unk>.

So Jack, I hope that helps.

Mobile introduced and we have highlighted in the past, we actually had positive net cash flow across our U S retail platform, where we are.

Change of trend as well as in our local language products across Asia and Latam. So I think the key observation I would give you is that.

Jack. The only thing I'd add to that is obviously as we grow our feedback businesses across the Enterprise, that will um provide some Tailwind to that free Capital percentage as well.

Got it. Thank you.

Our focus on having scale in global distribution.

Again, and I expect that to continue over a period of time, if I, even look at other active ETF business over 2025 by net AUM growth has been over $3 billion in the last two.

Our next question comes from Ryan Krueger with KBW, your line is open.

So we continue to excel.

Expanding that business.

What I would highlight for you with respect to the areas, where we are seeing continued momentum.

Hey thanks. Good morning. First question is on investment management flows. Can you talk a little bit about any changes you're seeing in investors sentiment from your clients, um, in, in particular appetite for, um, say areas that you're focused on in that business and um, maybe a little bit of perspective on how the pipeline looks going forward as well.

Third as I have highlighted for you than the prior few quarters is actually seeing increased momentum I think the cycle is slowly turning back the board impressive piece for US is we are actually gaining market share, which I expect to continue as we expand our product lineup and then the results in fixed income continued to be quite impressive, particularly.

Growth.

In emerging markets fixed income.

And highlight where we continue to win mandates across the world.

So valuable fleet that answers the question you had.

Yes, Thank you Kevin.

Just a quick one.

Our performance fees still expected to be fairly modest in the fourth quarter has anything changed.

Yeah. That's a great question I'll have <unk> address that.

Yes, Ryan so yes performance fees.

Probably still expected to be the same level as they were in 2020 for the area that I would highlight for you is we've actually seen an uptick in transactions in March.

Sure, good morning Ryan. Um, so I think let me just first start with with the strong results this quarter. I think as Diana mentioned in her remarks we we had positive net, cash flow of 800 million. I think equally impressive is, if you look at our non-affiliated ncf, it was 1.8 billion positive, which which is largely with, with long-term mandates and private markets that that not only contributes to the fee rate, but also Revenue growth. Um, the other Dynamic I would highlight for you is, is we had net cash flow growth. This quarter across multiple channels. We actually had wins uh, in global institutional, which have highlighted to you. In the past. We actually had positive net. Cash flow across our us retail platform where we have had a change of Trends, as well as in our local manage products across, uh, Asia and Latin. So I think the key observation I will give you is that our our focus on having skill.

I think as the market have unclothed here, a little bit when I looked at transaction volume <unk>.

Does the slight improvement in there of 10% to 20%, but they are still below their long term potential longer term I would expect performance fees to pick up.

Scale in global distribution is really kicking in and I expect that to continue over a period of time. If I even look at our activity app Business, over 2025 our next AUM, growth has been over 3 billion dollars in the last.

We continue to.

Not yet.

We are in the market cycle.

Yes, Ryan.

You know pharmacies borrower fees transaction fees can be volatile quarter to quarter, but it's great to see the 5% increase in management fees year over year, because again, that's the momentum of that business, that's going to drive margin and growth across the enterprise.

Okay.

Thank you one moment for our next question.

Our next question comes from John Barnidge with Piper Sandler Your line is open.

Okay.

Good morning, Thanks for the opportunity.

Uh, expand in that business. Um, what I would highlight for you, with respect to the areas where we are seeing continued momentum. Uh, real estate, as I've highlighted for you in the entire few quarters, is actually seeing increased momentum. I think the cycle is slowly turning, but the more impressive piece for us is we are actually gaining market share, which I expect to continue as we expand our product lineup. And then the results in fixed income continue to be quite impressive, particularly our growth EFC in Emerging Markets. Fixed income is an area I would highlight where we continue to win mandates across the world.

The bearings strategic partnership do you have any visibility into whether that relationship fee rate enhancing versus the blended fee rate at principal asset management and possible other similar opportunities. Thank you.

so, alright, hopefully that answers the question you have

Yes, find yourself.

Um, just a quick 1, um, our performance fees, still expected to be fairly modest and the fourth quarter is anything changed.

Yeah, I'll, maybe ask Jon Carmel to add to that.

Yeah, that's a great question. I'll have Como address that.

Obviously, a large proportion of our general account.

Bye.

Our internal asset management business, but we have for a long time also use third party providers in areas that we feel are critical for us meeting our strategic asset allocation, but also meet our return and risk thresholds as well and so we were happy to announce the Barron partnership.

And it gave us a unique offering.

Opportunity to partner with them, but also have some co investment opportunity as well so maybe I'll have com I'll address that and then.

Yes Brian. So yeah performance fees uh are probably still expected to be the same level as they were in 2024. The area that I would highlight for you is we've actually seen an uptick in transactions on borrower fees activity. I think as the markets have unclogged here a little bit when I looked at transaction borrower fee here over here there's a slight Improvement in their of 10 to 20% but they're still below their long-term potential longer term. I would expect performance fees to take up uh but

Not yet, uh, where we are in the market cycle?

Has anything to add as well.

Good morning, John.

Thanks for highlighting that partnership.

It's part of our strategy to continue expanding our private market expertise as Dan highlighted part of this partnership is to assist on the general account side, but what's most unique about this.

Yeah, Ryan and and as, you know, pharmacies borrow fees, transaction fees can be volatile quarter to quarter, but it's great to see the 5% increase in management fees year-over-year because again, that that's the momentum of the business that's going to drive margin and growth across the Enterprise.

It is.

Thank you. One moment for our next question.

We have historically done with both our origination and portfolio managers in the private markets area and the <unk> partnership is unique because they had a unique strength in origination in an asset class that they had an engine and we continue to play the role of being the portfolio manager the underwriter of those transactions.

Our next question comes from John Barnes with Piper Sandler. Your line is open.

Good morning, thanks for the opportunity.

Which also is our expertise. So we are looking at unique opportunities that expand our business base, but also creates value for principal world. So did you have anything to add John just to comment that we have the luxury of great in house capabilities. So within our general account, we can meet the needs through our investment capabilities, where we manage about 95.

The bearing strategic partnership. Do you have any visibility into whether that relationship? See rate, enhancing versus the Blended fee rate at principal Asset Management. Impossible, other similar opportunities, thank you.

<unk> of the general account portfolio and we'll continue to look at collaborative ways and whereby we can partner with others in order to augment those capabilities that we need to support our general account and bearings is a great example of that.

Okay.

John did you have a follow up it.

Yeah. Thank you my follow ups on the 401k business.

And with the baby Boomer generation more and more retiring and pulling down on those retirement dollars.

Is managed by um, our internal asset management business, but we have for a long time. Also use third-party providers in areas that we feel are critical for us meeting our, our strategic asset, allocation. But also we are, uh, return and risk thresholds as well. And so we were happy to announce the baron, um, partnership and it gave us a unique op. Um, opportunity to partner with them, but also, um, have some co-investment opportunity as well. So maybe I'll have KL, um, address that and then ultimately until

Flows might not be the best metric to look at it as much as profit growth.

Questions on that secular headwind to flows what does that make you think about the consolidation in 401K more broadly given the leading position. The company has or is it really just more about winning business that comes to market. Thank you.

Yes, I'll have Chris address that.

Yeah. Good morning, John Thanks will thanks for the question. So I think as I've mentioned in prior quarters consolidations is definitely happening in the industry.

There's two ways that consolidation happens right. It's happened through a large M&A transactions, which we saw a few years ago.

And you've seen more muted activity on the inorganic side over the last couple of years.

What's really happening is theres been a real shakeout.

Our scale players and so we are seeing the benefits from being able to win more plans on those players and I don't think over the long term the market is going to be able to sustain what is the current about 40 different record keepers in the industry. We believe that that's going to shrink closer to single digits.

To add as well, sure, good morning John, um, Depends for highlighting that partnership. So it's it's it's part of our strategy to continue expanding our private Market expertise. Uh his DNA, highlighted part of this partnership is to assist on the general account side. But what's most unique about this partnership is it is we've historically done both origination and portfolio Management in the private markets area and the bearing partnership is unique because if they had a unique strengths in origination in an asset class uh that they had an edge in and we continue to play the role of the portfolio manager, the underwriter of those transactions which also is our expertise. So we're looking at new opportunities that expands our our business based, but also creates value for principal overall. So did you have anything to add? Yeah. And John just a comment that we had the luxury of great in-house capabilities. So within our general account

Sometime over the next 10 years and as the number three player we expected to be a real beneficiary from that consolidation, which is at an overall result, so we will continue to scale is important we will continue to evaluate our position we're comfortable with our position now and we're focused more on how do we continue to drive organic growth in our business than on any.

We can meet the needs through our investment capabilities, where we manage about 95% of the general account portfolio. And we'll continue to look at collaborative ways and where way we can partner with others in order to augment those capabilities that we need to support our general account. And bearings is a great example of that.

John, did you have a follow-up?

Large.

Transaction at this point in time, yes, the other thing I would say Jon and you started your question out here, Chris has continued there yet.

Yeah, thank you. Um my follow-ups on the 401K business with the baby boomer generation more and more retiring and pulling down on those retirement dollars.

Flows, might not be the best metric to look at as much as profit growth.

Iterate that revenue growth is focused on.

Obviously, there are some dynamics within just looking at flows whether it be the market impact.

The baby Boomer generation is you talked about and just the overall factset.

But my questions on that secular headwind to flows. What does that make you think about the consolidation in 401(k) more broadly? Given the leading position the company has, or is it really just more about winning business that comes to market? Thank you.

Positive macro even though positive to our overall business can be punitive to that cash flow and so ultimately that team has been very focused on driving profitable revenue growth and I think this quarter is another great demonstration of that success.

Yeah.

Thank you.

One moment for our next question.

Our next question comes from Jimmy Mueller with JP Morgan Your line is open.

Hey, Good morning, first just had a question for <unk> on net flows in asset management.

If you look at your commentary over the over the past year, it's been fairly positive.

Yeah, I'll have Chris address that. Yeah, good morning, John, thanks for. Thanks for the question. You know, I think, as I've mentioned in in Prior quarters, consolidation is definitely happening in the industry. Um, and there's 2 ways to consolidation happens, right? It's happened through a large m&a transactions, which we saw a few years ago, um, and you've seen more muted activity on the inorganic side over the last couple of years. Um, but what's really happening is there's been a real shake out of the lower scale players and so we are seeing the benefits from being able to win more plans from those players. And I don't think over the long term, the Market's going to be able to sustain what is the current about 40? Different record Keepers in the industry. We believe that.

Flows had been weak, but this quarter, obviously showed a turnaround to what extent do you think it's the beginning of a trend to given the favorable market backdrop that you have and how do you think about like the weaker investment performance that <unk> seen recently factoring into your Netflix.

Ah patients over the next year.

Sure.

Go ahead a comma.

Good morning, and thanks for highlighting the turnaround has always been a believer in that so I appreciate that.

With respect to your question around the sustainability of the trend and what's driving.

Okay.

I will tell you that the quality of flows we are actually seeing this quarter is actually quite high when I look at the clients, who are giving us the mandate they tend to be more longer term in nature and they are also putting in areas that got in the trough of the market cycle.

Those will be quite strong in those areas as we move forward certainly helps with the sustainability of our flows.

That's going to shrink closely to single digits um, sometime over the next 10 years. And as the number 3 player, we expected be a real beneficiary from that consolidation and we see that in overall results. So we will continue. Scale is important. Uh, we will continue evaluate our position, we're comfortable with our position now and we're focused more on. How do we continue to drive organic growth in our business than on any large? Uh, transaction at this point in time? Yeah, the other thing I'd say, John and you, um, started your question out here, Chris has continued to re reiterate. That Revenue growth is his Focus. Um, obviously there's some Dynamics within just looking at flows. Um, whether it be the market impact, um, the baby boomer generation as you talked about and just the overall fact that, um, you know, positive macro even though positive to our overall business, can be punitive to that cash flow. And so ultimately, that team has been very focused on driving profitable Revenue growth.

And I think this quarter is another great demonstration of that success.

Thank you.

I think as Deanna highlighted.

1 moment for our next question.

One of the other thing we did this quarter is not only were cash flow positive our management fee rate was 5% higher which is generally bucket.

Our next question comes from Jimmy Bueller with JP Morgan, your line is open.

Industry trend and something we're continuing to focus on so when I look forward I think for Q has always been an active quarter for rebalancing and a lot of strategic allocation happens this year given the strength of the marketplace. It could be more active than usual and that is something that other peers.

Also going to experian, so there will be higher volatility of allocation changes happening.

<unk> sentiment cyclical I could give you to your question that we continue to track is the questions. We get are not audit fees.

Hey, good morning. Um, first just had a question for kaml on uh, net flows and asset management. Um, I think if we look at your commentary over the over the past year, it's been fairly positive, uh, and flows had been weak, but this quarter, uh, obviously showed a turnaround to what extent do you think? It's the beginning of a trend given, um, the favorable Market backdrop that that you have and how do you think about like the weaker investment performance that you've seen recently factoring in to, uh, your net flow expectations over the next year?

Overall RFP volume.

As we enter <unk> here is lower than it is in 2024 generally across the industry and for US we're sort of starting to see a shift in the type of questions. We get they're shifting to focus more on exploration and new ideas request rather than active allocation among the existing mandates. So I do believe the investors.

After the run up in markets that are looking for new products, new ideas or areas that have generally been under allocated to <unk>.

Highlighted global equities is one of those.

But.

There'll be more allocation coming with respect to timing of flows it can be very difficult to predict but what I can tell you I remain very very confident that the second half for asset management and inflows will be much stronger than the first half for our business.

Let me just follow up.

And then on.

Just the part about performance is that factoring into because I think if I look across your various asset classes. The performance recently the numbers seem a little weaker than they have been in the past is that factoring into your floating net flows and pipeline.

Good morning and and thanks for highlighting uh, the turnaround. You've always been a believer in us, so I appreciate that. Um, with respect to your question around the sustainability of the trend and was driving it. Um, I will tell you that the quality of flows we are actually seeing this quarter is actually quite High. Uh, when I look at the clients who are giving us the Mandate, they tend to be more longer term in nature and they're also, uh, putting it in areas that are in the trough of a market cycle. So I expect returns to be quite strong in those areas as we move forward and certainly helps with the sustainability of our flows. Uh, I think as Diana highlighted, uh, 1 of the other things, we we did. This quarter is not only were cash flows positive, our management fee rate was 5% higher which is generally bucking the industry Trend and something we continue to focus on. So when I look forward, I think pure queue has always been an active quarter for rebalancing and

So if you decompose the performance drivers.

Very large part of what a good performance has come in our multi asset products in certain target date funds are hybrid target date fund continues to perform very well, but the active product has underperformed and yes. It does have impact in both on and off platform retirement flows, particularly.

And a lot of strategic allocation happens this year, given the strength of the marketplace, it could be more active than than usual and that is something that other peers are also going to experience. So there will be higher volatility of of allocation changes happening 1 sentiment signal. I could give you to your question that we continue to track is the questions we get in our rfps uh while overall RFP volume uh in as we enter 4 q. Here is lower than it is.

In our off platform business.

Certainly an area, we continue to pay a lot of attention.

Our performance in other areas like international equity has become stronger over time, So I would I would highlight that for you.

And our performance, we actually are just hitting a three year number of my data center projects that we launched which continues to have very very strong performance. So there are certain areas that continue to do well in the areas that are weak we continue to enhance the management talent and tools and we continue to add new talent in areas where perf.

<unk>.

Really been on the equity side.

Yes, I think Jeremy obviously, it's kind of a reiterated delivering alpha generation as a long term priority.

In 2024 generally across the industry. And for us we are sort of starting to see a shift in the type of questions we get they're shifting to focus more on exploration and new idea request rather than active allocation among existing mandates. So I do believe the investors after the run-up in markets are looking for new products, new ideas or areas that have generally been under allocated to. Hi I highlighted Global equities as 1 of those areas where I do believe I think there will be more allocation coming with respect to timing of flows. It can be very difficult to predict but what I can tell you, I remain very very confident that the second half for asset management. And I am close will be much stronger than the first half for our business.

Obviously end markets like we've seen where equity performance has been concentrated in a few number of names you can see some volatility quarter to quarter, but ultimately again, our focus is staying close to our customers, making sure. We understand is important to them and delivering alpha Alpha generation. So we'll stay focused there and ultimate.

Yeah, we did some follow-up. Yeah, no on on, on. Just the, the part about performance is that factoring into because I think, if I look across your, um, various asset classes, the performance recently, the numbers seem a little weaker than they've been in the past is that factoring into your, um, flow, net flows and pipeline.

We continue to focus on driving revenue growth for our clients and for our shareholders.

Okay. Thank you.

One moment for our next question.

It, it is. So if you decompose the performance, uh, drivers, a very large part of our render performance has come in our multi-asset products in certain Target date funds. Our hybrid Target date fund continues to perform very well.

Our next question comes from Raimo <unk> with Raymond James Your line is open.

Yes.

Hey, good morning could you talk a little bit more about where you are on a growing the spread based balances in RIS.

And which products.

You're most focused on to grow that spread business.

And what Youre, finding most favorable today.

Yeah, well thanks for the question, obviously, there's a number of categories of types of sales within the spread business, including supporting our WSI RF platform as well, but I'll have Chris get into some more details on where our focus is yeah. Good morning. Thanks Shlomo. Thanks for the thanks for the question.

I mean, we've seen really nice performance in spread based over the last several quarters and our emphasis as we've talked about in prior quarters is really continuing to figure out how to drive revenue growth within our retirement plans, which includes how do we sell our guaranteed products at a faster pace, we've seen very nice inflows and growth in our ws arrest.

But the active product has underperformed and yes, it has had impact in both on and off platform, retirement flows, particularly business business center off platform business. So certainly an area, we continue to pay a lot of attention. Um, our performance in other areas, like International Equity has become stronger over time. So I would, I would highlight that for you uh and our performance. We actually are just hitting a 3 year number on our data center product that we launched which continues to have very, very strong performance. So there are certain areas that continue to do well and the areas that that are weak we continue to enhance our risk management talent and tools and we continue to add new talent in areas where performance has been weak. And that's generally been on the equity side for us.

GE products sold through retirement plan.

And we also have seen nice performance over the last several years in PRT, we had a very strong quarter. This year and as we've talked about we're not so much bulk stump volume there will focus more on returns, but despite the industry backdrop of declines we continue to see strong performance in PRT and we're going to be continue to be discipline, there and focus.

Yeah, I think Jimmy obviously is KL reiterated, delivering Alpha generation is a long-term priority um obviously in in markets like we've seen where Equity performance has been concentrated in a few number of names. You can see some volatility um, quarter to quarter but ultimately again our focus is staying close to our customers. Making sure we understand what's important to them and delivering Al Alpha generation. So we'll stay focused there and ultimately continue to focus on driving Revenue growth. Um for our clients and for our shareholders,

Okay, thank you.

1 moment for our next question.

Our target market, which is in the smaller segments of the market not the jumbo side, which is where most of the pressure has been felt on PRT and then lastly, with respect to our annuities business, we've seen very nice growth in the wild.

Our next question comes from Wilma. Bertis with Raymond James, your line is open.

The business over the last several years that provides a lifetime income product for our customers. We focused primarily on serving the lifetime income needs of our retirement customers.

Um, hey, good morning. Could you talk a little bit more about where you are on, uh, growing the spread-based balance, as an RIS?

And which products uh, you're most focused on to grow that spread business.

And uh, which which you're finding most favorable today. Thanks.

And so that is why that exists there so in across all of those we've seen really nice growth on the spread based side and not just growth, but growth that really nice returns.

Well, maybe you have a follow up.

Oh, Yes, and then <unk>.

Maybe you could talk a little bit about what drove the favorable loss ratios in specialty benefits and what you're seeing there as far as the upcoming quarters. Thanks.

I'll have to Amy address that one yes. Thanks for the question.

It was a fantastic quarter.

In terms of underwriting results and so I think the first thing I would note.

Really there is not one particular product thats driving it we're seeing really nice performance from group disability that is specifically driven by lower LTV incidents and this quarter. We're also seeing really nice performance from group life, that's driven by lower frequency.

As Joe noted in his opening comments, we had a 100 basis point improvement.

In our loss ratio also for dental so we're seeing a nice return an improvement kind of back to the path that we want for a dental business for us.

Supplemental health again, I would say that one is performing as we expected we want that business on a run rate basis to perform a little bit higher in terms of the loss ratio than it had been doing earlier in the year or late into last year. So I would say the types of loss ratios that business is putting down is kind of what we would.

Details on where our focus is. Yeah, good morning. Thanks for. Thanks for the, thanks for the question. Um, yeah, I mean we've seen really nice uh, performance in in spread-based over the last several quarters and our emphasis as we've talked about in Prior quarters is really continuing to figure out how to drive Revenue growth within our retirement plans, which includes how do we sell our guaranteed products, uh, at a faster Pace, we seem very nice inflows and growth in our wsrs, G products sold through retirement plans. Um, we also have seen nice performance over the last several years. In PRT, we had a very strong PRT quarter of this year and as we've talked about, we're not so much about volume there. We're focused more on returns but despite the industry backdrop of declines, we continue to see strong performance in PRT. And we're going to be, uh, continue to be disciplined there and focus in our target market, which is in the smaller segments of the market, not at the jumbo side, which is where most of the pressure has been felt on PRT. And then lastly, with respect to our newbies business, we've seen very

And then there's also the individual disability business, which performed very well. So I think the driver is we're focused on the right marketplaces, where in that small to medium sized business marketplace.

Nice growth in the Wilder business. Over the last several years. That provides a lifetime income product for our customers. We focused primarily on serving the lifetime income needs of our retirement customers. Um, and so that is why that uh, exists there. So, and across all of those, we've seen really nice growth on the spread day side and not just growth, but growth at really nice returns.

Well, maybe you have a follow-up.

Yes.

and then,

No they have needs, we're able to grow in that marketplace, and we're able to do that in a rate that we can drive both great benefits that we put in the handset business owners, but also appropriate profit for us. So I see the balance of that paying out we don't have to necessarily go outside of our underwriting guidelines very often we don't have.

Amy, maybe you could talk a little bit about um the what drove the favorable loss ratios and Specialty benefits.

And what you're seeing there. Uh, as far as the upcoming quarters, thanks.

To put planned maximum maximum in that we're uncomfortable and we're growing the right pieces of the business. The last piece I would note there is that our worksite business and our voluntary practices voluntary participation.

Worksite our array of products that we offer we're really growing that piece as well that piece gives us a nice bit of margin expansion over time as the shift of business begins to be a bit more voluntary and it's helping our results as that supplemental health line begins to grow.

So I'll answer those questions.

Thank you.

One of them for our next question.

Our next question comes from Joel Hertz with Dowling Partners. Your line is open.

Hey, good morning, So first wanted to get an update on the capital deployment outlook. Joe you mentioned the pace should increase again in Q4, but I guess, what would drive you guys towards the higher end of that one four to $1 seven capital return range right because if I. If I just look at your your excess capital position is very strong and in Q4 as our typically strong.

I'll have Amy address that 1. Yeah, thanks for the question. Um, if it was a fantastic quarter um in terms of underwriting results and so I I think the first thing I would note is really there's not 1 particular product, that's driving it. We're seeing really nice performance from Google disability. That is specifically driven by lower LTD incidents in this quarter. We're also seeing really nice performance from group life that's driven by lower frequency. Um, as Joel noted in his opening comments, we had a 100 basis point Improvement um in our loss ratio also for dental. So we're seeing a nice return and Improvement kind of back to the path that we want for our Dental business. For a supplemental health. Again, I would say that 1 is performing as we expected, we want that business on a run rate basis to perform a little bit higher in terms of loss ratio than it had been doing uh earlier in the year or late into last year. So I would say the types of loss ratios.

<unk> capital generation quarter, any reason why you wouldnt really accelerating lean into buybacks, where the stocks at now.

Yes, John Thanks for the question I think if you have followed US for years, you know that we have a very balanced and disciplined approach to capital deployment and ultimately also want to make sure that we're delivering consistent and growing capital.

It returned to our shareholders over time, and so it can be volatile quarter to quarter, but ultimately we are focused on delivering strong returns.

Turns to our shareholders and returning excess capital to shareholders over time, but I'll have Joe I'll address your specific question and Joe you raise a good point, we are sitting in a great position from a capital perspective at $1 6 billion that you mentioned and as we signaled on last quarter's call. We did do outside our higher I guess third quarter share buybacks than we did in the first half of the year.

Uh, that business is putting down is kind of what we would expect. And then there's also the individual disability business which performs very well. So, I think the driver is we're focused on the right marketplaces. We're in that small to medium-sized business Marketplace. They know they have needs were able to grow in that Marketplace and we're able to do that in a rate that we can drive both great benefits that we put in the hands of those business owners, but also appropriate profit for us. So, I see the balance of that paying out. We don't have to necessarily go outside of our underwriting guidelines. Very often. We don't have to put plan maximum in maximums in that we're uncomfortable and we're growing the right pieces of business. The last piece I would note there is that our work site business and our voluntary practices, voluntary participation um work site uh array of products that we offer. We're really growing that piece as well. That piece gives us a nice bit of margin expansion over time as the shift.

The business begins to be a bit more voluntary, and it’s helping our results. Is that supplemental? Health line begins to grow.

Thanks Wilma for those questions.

So as you know the first half of the year, we did about $350 million share buybacks, we had $225 million in the third quarter and we certainly expect elevated levels from there in the fourth quarter and so what happened in the third quarter as we did have very positive free capital flow conversion.

Thank you. 1 moment for our next question.

Our next question comes from Joel Pitz with Dialing Partners. Your line is open.

I'll still investing in the business and we just feel really good about the Optionality, where Florida as it relates to investing for organic growth as well as delivering meaningful share meaningful capital back to shareholders.

So again, you will see some outsized.

Fourth quarter share buybacks relative to what you saw in third quarter.

Okay.

That helps thank you and then just shifting back to specialty benefits Amy.

Hey, good morning. Uh, so. So first, want to get an update on the capital deployment? I will look, Joel, you mentioned, the pace should increase again in Q4, but I guess what, what would drive you guys towards the higher, end of that 1.4 to 1.7 Capital return range, right? Because if I if I just look at your your excess Capital position and is very strong and then Q4 is our our typically the strongest Capital generation quarter. And any reason why you wouldn't really accelerate and lean into BuyBacks for the stocks at now,

Any early outlook on how one one renewals and new business is shaping up just how is the competitive landscape looking at this point and do you see a path to have top line return back to that long term growth range in 'twenty six.

Yeah, I'll ask Amy to address that.

I think so.

So that's where I directly get back after it and until they have a really nice job covering it in his opening comments, but when you look at the stats.

Earnings up 28% year over year margins expanded by 230 basis points.

Focused on delivering um, strong returns to our shareholders and returning excess Capital shareholders over time, but I'll have Joel address, share specific questions.

Underwriting improving at 340 basis point I think the trade off we have been talking about it sometimes a bit slower growth is what you do to drive the profitability that you need for the business. So I feel like that trade off is working really really well that said.

Yeah, and Joel, you raised a good point. We are sending a great position from a capital perspective, at 1.6 billion, as you mentioned. And as we signed on last quarter's call, we did do outside or higher, I guess, third quarter, share BuyBacks, and we did in the first half of the year.

When I look ahead at one one business I think we're seeing more opportunities to write profitable business and we saw at the same time last year. So we are seeing things come to market that look attractive to us.

We're winning against some of those.

Those bids and I like what we're doing with respect to both renewals and new sale as I look ahead. So I haven't lifted before a couple of those multiyear technology initiative. Those are really starting to bear fruit and will in late yet in fourth quarter 2005 and into 'twenty, six and I feel like.

Um, so if, you know, well, the first half of the year we did about 350 million in share BuyBacks. We did 225 million in the third quarter. And we certainly expect elevated levels from there in the fourth quarter. And so what happened in the third quarter is we did have very positive free Capital flow conversions. Um, but while still investing in the business and we just feel really good about the optionality, where a Ford as relates to investing for organic growth, as well as delivering meaningful share of meaningful Capital back to shareholders. Um, so again, you will see some outsized, um, fourth quarter, share BuyBacks relative to what you saw in third quarter.

Those investments are really positioning us to move closer to that low end of that range. Now I know, we'll have more to say about that in our next earnings and outlook call, but I feel good about the volume right.

Right now.

Yes, Joe and I think kind of as Amy highlighted we continue to balance pricing discipline with our competitive positioning and ultimately we aren't going to chase growth for the sake of growth and we've done that successfully for decades, and I don't see that not continuing as we look out into the future.

Does that help? Okay. That that helps. Thank you. Uh and then just shifting back to Specialty. Benefits a Amy. Uh any early outlook on how 1 1 renewal is in new business is shaping up. Just how is the competitive landscape looking at this point and and do you see a path to have Topline return back to that? Uh long-term growth range in 26

Okay.

Got it thank you.

One moment for our next question.

Yeah, I'll ask games to address that. Yeah, thanks. So, um, so just before I directly get back after it and Joel did a really nice job covering this in his opening comments. But when you look at the stats, like, you know, earnings up 28% year-over-year, margins expanding, and by 330 days,

Yeah.

Our next question comes from Sidney Congrats with Jefferies. Your line is open.

Great. Thanks, I wanted to ask about private credit obviously, we've had some flare ups here in the past couple of weeks and I know your portfolio is a little maybe a little bit different than other companies given its tilt towards real estate, but really just curious what youre seeing in terms of the private credit markets. Both in terms of performance competition and just overall credit quality.

<unk>.

Yes, let me. Thanks for the question I think there's two aspects of our private credit perspective, one is within our general account lets ill ask Joel to address them and one with us within how we think about private credit with our third party investors as well so I'll, maybe ask Joel to start and Carmel to add onto that.

Yeah. So thanks for the question a really good proof point for our our managing credit losses as a testament to our third quarter losses, which is about $8 million. After tax as you can see within the financial supplement.

Um, underwriting improving at 340 basis points. I think the trade-off we've been talking about is sometimes a bit slower growth is what you do to drive the profitability that you need for the business. So I feel like that trade-off is working really, really well. That said, um, when I look ahead at 1 1 business, I think we're seeing more opportunities to write profitable business than we saw at the same time last year, so we are seeing things come to Market that look attractive to us. Uh, we're winning uh, against some of those uh, those those bids. And I like what we're doing with respect to both renewals and new sale as I look ahead. So, I had listed before a couple of those multi-year technology initiative. Those are really starting to bear fruit and will in late, yet in fourth quarter, 25 and into 26. And I feel like those Investments are really positioning us to move closer to that low end of that range. Now, I know we'll have more to say about that in our next earnings and Outlook,

The credit losses from Securities were at very low levels, and <unk> 25 as well.

Call, but I feel good about the volume that I'm seeing right now.

So what you saw a little bit in <unk> with a few impair.

Impairments, what was very de Minimis no commonality of reason within the industry as it relates to those credits.

And importantly, the portfolio credit loss remains below our model long term run rate estimate.

Yeah, Joel and I think as Amy highlighted, we continue to balance pricing discipline with our competitive positioning and ultimately, we aren't going to chase growth for the sake of growth and we've done that successfully for decades and I don't see that um not continuing as we look out into the future.

Success of any underwriting depends on the quality of the underwriting that we're real proud of our practices in that regard, whether it's public or private.

Got it. Thank you.

1 moment for our next question.

So we remain really confident in our underwriting standards, we continue to focus on diversification quality and liquidity profiles that meet our liability needs.

Our next question comes from Sunni kamath, the Jeffrey your line is open.

As you know are very conducive to investing in private given our liability profile.

So given our quality and well diversified portfolio. The credit risk is very manageable and as I said before remains below long term expectations and it's certainly factored into our capital deployment expectation.

Great, thanks. Um, I wanted to ask about, uh, private credit. Obviously, we've had some flare-ups here in the past couple of weeks. And I know your portfolio is a little, maybe a little bit different than other companies, given its tilt towards real estate. But really, I'm just curious what you're seeing in terms of the private credit markets, both in terms of performance, competition, and just overall credit quality.

Comma.

Good morning.

So I'll.

We go through the two points you raised which is how are we done from a performance perspective, what are my overall observations about the industry and the market dynamics. So first I think as John highlighted our own exposures in private credit is relatively modest.

Yes, thanks for the question. I think there are two aspects of our private credit perspective. One is within our general account, which I'll ask Joel to address, and one is how we think about private credit with our third-party investors as well. So, I'll maybe ask Joel to start and then Kl to add on to that.

And it's quite aligned with our risk parameters.

One of the highlights I would give you is we've had no direct exposure to some of the needs that have been mentioned in the news recently.

The quality of the holdings, we have in our business.

Largely underpinned by the extreme focus on underwriting in fact, we have already high selection ratio. The number of deals we look at the number of because of the underwriting environment.

Yeah, so neat. Thanks for the question. A really good proof point for our. Our managing credit losses is a testament to our third quarter losses, which is about 8 million after tax, as you can see, within the financial supplement. Um, the credit losses from Securities were at very low levels in 2225 as well.

So what you saw a little bit in 3Q, was a few, um, impairments. What was very dim, Minimus? Um no commonality or Reason within the industry as it relates to those credits.

Somewhere one of several deals only makes it through the funnel and then the other thing I would highlight for you is most of our verticals have very low leverage ratio one of the challenges in the industry has been is a lot of way it goes.

And importantly, the portfolio credit loss remains below our model long term run rate estimate.

Um success of any underwriting, depends on the quality of the underwriting and we're real proud of our practices in that regard. Whether it's public or private.

The industry has very high leverage ratios just by the way they were designed.

So I would I would say we remain we remain quite focused on underwriting and the portfolio is doing quite well when I, even look at <unk>, we had lower non accrual rates and higher quality loan distribution compared to the rest of the industry now going back to the industry dynamic I do think it deserves some.

Um, so we may be really confident in our underwriting standards. We continue to focus on diversification, quality, and liquidity profiles that meet our liability needs, which, as you know, are very conducive to investing in private equity, given our liability profile.

Credit risk is very manageable, and as I said before, remains below launch from expectations. It's certainly factored into our capital and deployment expectation.

The asset class is growing quite rapidly.

Comma.

Out of capital that is expected to invest has also grown quite rapidly and my personal view on this remains the risk of accident. In this space is really around the entities that have to deploy a very large amounts of capital very quickly and constantly.

Hope that helps me, yes, that's very helpful. And then my second question is just on the wealth management opportunity that you guys have talked about I think you've mentioned having.

It's 500 advisers that are.

Helping your plan participants to handle retirement can you just maybe provide some metrics on that what sort of penetration are you having is it leading to better asset retention within the franchise. Just I don't think we've seen any metrics. So I'm just curious if theres any willing to share.

Yes, thanks for recognizing that we did highlight that our 2024 Investor day that this was a priority for us, but we also highlighted that it was.

Build and it would take time before it actually moved in.

Sure. Good morning to me. Uh, so I I'll go to the 2.0 raise, which is, uh, how are we done from a performance perspective? And what are my overall observations about the industry and the market dynamics? So first, I think as Joel highlighted our own exposure in private credit is is relatively modest and it's quite uh aligned with our risk and Alm parameters. Uh, 1 of the highlights, I would give you is, we've had no direct exposure to some of the names that have been mentioned in the news. Recently, uh, the quality of the Holdings, we have in our business are largely underpinned by the extreme focus on underwriting. In fact, we have a very high selection ratio the number of deals. We look at the number of deals and the right and part of the payment, uh, somewhere 1 out of 7 deals, only makes it through the funnel. And then the other thing, I would highlight for you is most of our vehicles have very low leverage ratio, 1 of the challenges in the industry has been is a lot of vehicles today. In the industry, we have very high

Critical metrics that that we were tracking and share, but I'll ask Chris just to talk about some of the things that we're watching I think its 200 advisors that we have a license to actually have the advice.

Conversations, but Chris can you add some additional color yes, yes, thanks for that to me, yes SDN.

You mentioned.

It is going to be a long term build and we did at the end of last year. So fourth quarter last year begin the introduction of our advisory services with 200 salary based advisors and we've seen very nice early indications of the success of that program first of all.

Have about 90% planned sponsor adoption of the service so making it available to participants that call and they need help so very strong plan sponsor adoption. We've also seen a very nice increase in this year of the number of clients that we're serving individuals reserving and so we've seen about a double digit increase.

Ratio just by the way they were designed. Uh so I would I would say we remain remain quite focused on underwriting. And the portfolio is is is is doing quite well when I even look at 3 queue, we had lower non-equal rates and higher quality loan distribution compared to the rest of the industry. Now, going back to the industry Dynamic, I do think it deserves some caution. The asset class has grown quite rapidly. The amount of capital that is being expected to invest, has also grown quite rapidly and my personal view on this remains that the risk of accident in the space is really around entities that have to deploy a very large amounts of capital very quickly and constantly

In our advisory and retail customers served through our workplace personal investing solutions and then another sort of green shoots I would say is that we've also seen a nearly 20% increase in roll ins. This year. So people that have a prior plan and then moving to an employer sponsored by principle, we've seen a 20% increase in.

Hope that helps me. Yeah. That that was very helpful and then my second question is just on the wealth management opportunity that you guys have talked about. I I think you've mentioned having um I think it's 500 advisors that are um helping your plan, participants to handle retirement. Can you just maybe provide some metrics on that? What sort of penetration are you having? Is it leading to better asset retention within the, the franchise? Just I don't think we've seen any metrics. I was just curious if there's any willing to share.

The amount of their rollover transfers of lull in transfers into physical plant. So we're early days, but those are good early metrics and we remain very optimistic about the long term value, but the short term is going to be a bit more muted.

These are capable.

Got it thank you.

Well thanks, Anthony for the question.

Alright, one moment for our next question.

Our next question comes from Tom Gallagher with Evercore ISI. Your line is open.

Good morning first question for <unk>.

It's really a question on CRE.

Alt returns flows in asset management and commercial mortgage loan exposure to your general account.

Those all look pretty good this quarter.

And I've kind of viewed that we'll call. It overall market exposure as being very important for principal as a firm.

Yes, Cindy thanks for for recognizing that we did highlight at our 2024 investor day that this was a priority for us but we also highlighted that it was a long-term build and it would take time before it actually moved into to a critical metrics that that we would track and share. But I'll ask Chris just to talk about some of the things that we're watching. I think it's 200 advisors that we have licensed to actually have the advice, um, conversations. But Chris, can you add some additional colors? Yeah, yeah, thanks. Thanks for that to me. Yes, it's Deanna. Uh, mentioned. Um, it is going to be a long-term Bill. And, uh, we did at the end of last year, so fourth quarter last year. Begin the introduction of our advisory services with 200 salary based, advisors, and we've seen very nice, uh, early indications of the success of that program. First of all, we have about 90% plan, sponsor adoption of the service, so making it available to participants that call in and need

And seeing everything.

Being more choppy in the past all looking better this quarter do you think we're at a better inflection point here.

Broadly on those issues because I look at our.

Mega CRE investor like Blackstone, and they had I would say more mixed results. This quarter I look at your results kind of look better across the board. So curious what you're thinking there.

Help, so very strong plan sponsor adoption. We've also seen a very nice increase this year in the number of clients that we're serving, individuals are serving. And so we've seen about a double-digit increase in our advisory and retail customers served through our workplace personal investing solutions. And then another sort of green truth, I would say, is that there's also seen a nearly 20% increase in rollovers this year, so people that have a prior plan.

Yeah.

We have been a leader in real estate for decades.

We're proud of our long term position and when you are a leader for decades that means you know you have navigated multiple economic cycles.

As for our own balance sheet as well as well as our clients. It's been a tough couple of years from a real estate perspective, but I think we're feeling better relative to where we are in the cycle, but all of that.

I'm moving to an employer that's served by principal. We've seen a 20% increase in the amount of their rollover transfer to roll in transfers in the visible plans. So those are early days but those are good early metrics and we remain very optimistic about the long-term value. But the short term is going to be a bit more muted. Uh, as we continue to build our capabilities

Got it. Thank you.

For the question.

Sorry, one moment for our next question.

Personal perspective that.

Thank you Deanna Tom Good morning, it's a great question and very timely.

Our next question comes from Tom Gallagher with aicore isi, your line is open.

I think two things one is just our own one.

Real estate book, and where it will be.

And the strong results, we continue to deliver and the inflection point question. So first I would say when I look back over three years, I would say CRE or commercial real estate is probably the strongest position over the last three years, it's obviously coming off of a trough and I would say as the year has gone by we've seen more stability.

Both on the occupancy side, but more importantly for somebody like us on the pricing power of many of the properties, we manage around there right.

Exposure is very important for Principal as a firm, and seeing everything has been more choppy in the past. However, it is looking better this quarter. Do you think we're at a better inflection point here?

The more important thing over the last few quarters has been dead capital.

Improving as well so our own adhere to the private market cash flow is going to be $3 billion.

And I, certainly expect that to improve over time.

Broadly on those issues because I look at a, a mega CRA investor like Blackstone. And they had, I would say more mixed results. This quarter, I look at your results, it kind of looked better across the board so curious what you're thinking there.

The big change more recently, probably has been the transaction volume compared to last year. We're at about 17% up year to date comparison <unk> tends to be a little bit more last year <unk> was very very strong. So you may see a slight lowering of transaction volume, but still up 10%.

Yeah, you know, obviously we have been a leader in.

I think that the question you raise there is going to be a big dispersion in real estate.

I'm very proud of our long-term position and when you're a leader for decades, that means, you know, you have navigated multiple economic Cycles. Um, both for our own balance sheet as well as well as our clients, it's been a tough couple of years from a real estate perspective, but, you know, I think we're feeling better relative to where we are in the cycle. But all at once,

This market cycle, one of the things that we see.

it's a great question, and

Is that the people who wouldn't have any redemption in Q in their products.

Very Timely.

Going to have a benefit of putting fresh capital to work.

And much more.

Better valuation and they will get back to getting higher <unk> from the refresh of the book.

I believe those managers will outperform and get market share and that's where I see the sense of the principle franchise being positioned the other benefit. We have is our book is largely institutional or come from our insurance company, which provides us the right match to where the market opportunity is and the liability needs are.

So I think you asked two things. One is just our own, our own, uh, the real estate book and where do we see it and the strong results we continue to deliver, and the inflection point question. So first, I would say when I look back over three years, I would say the CA solution real estate is probably in the strongest position over the last three years, obviously coming off of a trough. And I would say as the year has gone by.

I think those two forces are definitely going to help our business and our market position.

Thanks, Tom do you have an additional question.

I do Deanna.

This one's for you just.

And I think you and Chris have both sort of answered the question, but I just wanted to rephrase. It just view of M&A.

Because if I go back several years ago principal was very we'll call. It M&A focused from a capital deployment and now it's mainly <unk>.

Just see more stability, both on the occupancy side. But more importantly, for somebody, like us on the rising power of of, of many of the properties we manage or on the right. Um, the more important thing over the last few quarters has been that Capital flows are improving as well. So our own here today private Market cash flow is only is going to reach 3 billion dollars and and I certainly expect that to improve over time. Um, the big change more recently, probably has been the transaction volume compared to last year, we are about 17% up year to date comparisons

Common dividends and buybacks and minimal M&A.

Would you still you know it was your philosophy still.

Much along those lines or would you consider if they were lumpy defined contribution type assets that came to the market would you still take a hard look at those because I think there might be some more lumpy larger properties that are coming to market in the next year or two so just curious what your philosophy on those situations.

It might be.

So the first thing I would say is.

4 q tends to be a little bit more last year. 4K was very, very strong. So you may see a slight lowering of transaction volume, but still up 10%. I think this is a question, you raised. Uh, there is going to be a big dispersion in real estate winners and losers. In this market cycle, 1 of the things that we see is is that the people who don't have any Redemption cues in their products are actually going to have a benefit of putting fresh Capital to work at much more uh uh better valuations and they will get back to getting higher IRS from that refresh of the book.

Just because I'm sitting in a different seats, our philosophy here at principal around how we approach and organic opportunities isn't changing we're going to continue to be really disciplined and focused and ensure that anything that we would take a run at one has strategic alignment one can give us capabilities that allow us to even.

<unk> increased our growth potential has to meet our financial targets and if we're bringing on people. It has to be very culturally aligned with how we function on a day to day basis.

I believe those managers will allow perform and get market share and that's where I see the strength of the principal franchise being positioned. The other benefit we have is our book is largely institutional or comes from our insurance company. Which provides us the right match to where the market opportunity is and the liability needs are. So I think those 2 forces are definitely going to help our business and our Market position.

Thanks, Tom. Do you have an additional question?

The first thing I would point out that we can meet our financial targets on an organic basis, and so first and foremost that's our focus of our team has to execute.

I I do Deanna um, and this this 1's uh, for you just

Without at very high level to ensure that we're focused on that we will be inquisitive and we have the capital flexibility to look at opportunities that are out there, but there is a high bar and that high bar exists, whether it's an organic deployment of capital or an inorganic deployment of capital we recognize that.

Scale is going to be critical, especially in some of our businesses and so it's important for us to be inquisitive around those opportunities.

And ultimately lean into those that come our way that does meet those financial strategic and.

Cultural thresholds.

And ultimately I think you'll see the same level of discipline.

As we've had in the past.

As I sit here today, we've had three or four years, where we were we were integrating successfully the wells Fargo acquisition. We are then focused on divesting of a few of our perspective sitting here today, we can be on our front foot being being able to lean into growth opportunities both.

Operator: Completed their prepared remarks. To ask a question during the session, you'll need to press star one-one on your telephone. To withdraw your question, please press star one-one again. We would ask that you be respectful of others and limit yourself to one question and a follow-up so we can get through everyone in the queue. I would now like to turn the conference over to Humphrey Lee, Vice President of Investor Relations. Please go ahead.

Okay.

So it's the same.

Level of discipline that we've had in the past.

Increase our growth potential has to meet our financial targets. And if we're bringing on people, it has to be very culturally aligned

Great. Thanks for that color Dan.

Okay.

One moment for our next question.

Humphrey Lee: Thank you and good morning. Welcome to Principal Financial Group Inc.'s third quarter 2025 earnings conference call. As always, materials related to today's call are available on our website at investors.principal.com. Following a reading of the safe harbor provision, CEO Deanna Strable and CFO Joel Pitz will deliver prepared remarks. We will then open the call for questions. Members of Senior Management are also available for Q&A. Some of the comments made during this conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. The company does not revise or update them to reflect new information, subsequent events, or changes in strategy. Risks and uncertainties that could cause actual results to differ materially from those expressed or implied are discussed in the company's most recent annual report on Form 10-K filed by the company with the U.S. Securities and Exchange Commission.

Our final question comes from West Carmichael with Autonomous Research Your line is open.

Hey, good morning.

Wanted to come back to the assumption review in the life insurance segment, just curious if there's any colors color on the drivers of experience related assumptions, that's lapse or mortality.

Just how should we think about the model refinements is that in the rearview mirror should that kind of continue going forward.

Yes, maybe <unk> can add some color there.

Think this is something we do with discipline on an annual basis.

And ultimately we also then take the opportunity to step back to say, there's anything that we found as part of that review change how we think about our business on a go forward basis and I think the answer to that second question is there was nothing that we saw are put through our GAAP financials. So that makes us think differently about our business or the ability to meet our.

with how we function on a day-to-day basis. Um, the first thing I'd I'd point out that we can meet our financial Targets on an organic basis. And so, first and foremost, that's our focus of our team is to execute um, with without um at a very high level to ensure that we're focused on that, we will be inquisitive and we have the capital flexibility to look at opportunities that are out there. But there's a high bar and that high bar exists, whether it's an organic deployment or of capital or an inorganic employment of capital. We recognize that scale is going to be critical especially in some of our businesses and some important for us to be inquisitive around those opportunities. Um, and ultimately lean into those, that come our way that does meet those financial strategic and, um, cultural talk thresholds. And ultimately, I think you'll see the same level of discipline. Um, as we've had in the past, you know, as I sit here today

Financial targets going forward, but I'll, maybe ask Joe I'll give a little more double click on the life impacts in the corner.

Humphrey Lee: Additionally, some of the comments made during this conference call may refer to non-GAAP financial measures. Reconciliations of the non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures may be found in our earnings release, financial supplement, and slides presentation. Deanna?

Thanks for that question with Andina said exactly right the impact as I noted in my opening remarks reflect a range of tactical model updates and experience as you mentioned.

We've had 3 or 4 years where we were that we were integrating successfully. The Wells Fargo acquisition. We were then focused on devest of a few of our perspectives and sitting here. Today we can be on our front foot being being able to lean into growth opportunities. Both our

These are normal course refinements to this long term business and we remain confident in the second important that to take that away as well the life impact is modest in scale relative to overhaul sides of our business.

It's the same level of discipline that we've had in the past.

Great. Thanks for that caller de.

Deanna Strable: Thanks, Humphrey, and good morning to everyone on the call. This morning, I'll discuss our strong third-quarter performance and the continued execution of our strategy, focused on delivering sustained growth across our diversified businesses. Joel will then provide additional details on our financial results and capital position. Turning to slide two, our third-quarter results build on the momentum of the first half of the year and demonstrate another period of strong performance toward our financial targets. We delivered 13% adjusted EPS growth year over year and 14% year to date, above our target range. Our return on equity expanded significantly the last year and is now at the high end of our target range. Our year-to-date free capital flow conversion ratio of over 90% is tracking above target. Additionally, we returned $400 million of capital to shareholders in the quarter, including $225 million of share repurchases.

For our next question.

The model refinement, specifically that was two thirds of the impact not only the enterprise, but also right.

Our final question comes from West Carmichael with the town of Research. Your line is open.

Thats really reflects refinement on how policyholder behavior and product cash flows are reflecting the models across a number of products.

So think about like as added sophistication of our models of how I view refinement.

That's what they experience that was about one third of the impact in life and there was not a single driver behind the change.

Hey, good morning. Um, I just wanted to come back to the Assumption review in in the Life Insurance segment. Just just curious if there's any colors color on the drivers of experience related assumptions, if that's the laps or mortality. Um, and just how should we think about the model refinements is that in the rear view mirror, or should that kind of continued going going forward?

This outcome reflects our disciplined process of updating your assumptions based on our own experience and industry experience.

And importantly, there, Jeff and span across multiple products rather than be concentrated in any one area.

So I know in the prepared remarks, and also to reinforce here, it's reflective of a broad range of model refinements and experience.

It's GAAP only noncash it has no impact on our free capital flow for the enterprise.

And importantly, it's immaterial to the ongoing run rate, which is actually reflected in our third quarter results.

Yeah, maybe see if Joel can add some color there. You know, I, I think, um, you know, this is something we do with discipline on an annual basis, um, and ultimately, we also then take the opportunity to step back to say, does anything that we found as part of that review, change how we think about our our business on a go forward basis and I think the answer to that second question is there was nothing that we saw or, or put through our gaap financials. So that makes us think differently about our our business or the ability to move.

So it certainly does not impact our outlook or expectations on the future growth and profitability and not only like business, but also the enterprise in total.

Deanna Strable: We also raised our common stock dividend for the ninth consecutive quarter, an 8% increase on both a quarterly and full-year basis. These results were driven by strong business fundamentals across the company, including enterprise net revenue growth of 4%, margin expansion of 180 basis points, and positive enterprise net cash flow. Given the strong performance through the first three quarters and our business momentum, we fully expect to deliver on our full-year enterprise financial targets. Moving to slide three, we continue to make progress on our strategic priorities highlighted at our 2024 Investor Day. As a reminder, we're focused on three significant profit pools where we are uniquely positioned to win: the broad retirement ecosystem, small and mid-sized businesses, and global asset management. Let's start with the retirement ecosystem, in which we offer a comprehensive suite of capabilities across record keeping, asset management, wealth management, and income solutions.

Thank you have a follow up question.

I do thank you.

Just one quick one maybe but any insight into how <unk>.

Variable investment income are shaping up for the fourth quarter, a good sound <unk> remarks, like maybe there's a bit of real estate transaction momentum. So just curious if there's any any.

Meet our financial targets going forward, but I'll maybe ask Joel Pitz to give a little more detail on the life impacts in the quarter. Yeah, thanks for the question, Wes, and Deanna Strable said exactly right. You know, the impact, as I noted in my opening remarks, reflects the range of technical model updates and experience, as you mentioned, and these are normal course refinements to this long-term business. We remain confident in the business. I think it's important to take that away as well. The life impact is modest in scale relative to the overall size of our business.

Any foresight into that.

I'll ask Joe address that yes, so VII performed very well in the third quarter amongst all asset classes.

Model refinement, specifically that was 2/3 of the impact, not only the Enterprise, but also life.

From a reporting perspective, the real estate was.

And this really reflects, uh, refinements on how policy will behave and product cash flows are reflected in the models.

Reason why we're below long term expectations with an operating earnings.

Across a number of products.

But importantly, within our real estate portfolio, we did have a gain manifest itself below the line or an NRC G about $25 million due to a transaction that occurred in the third quarter, but doesn't get OA treatment.

So think about like as added sophistication to our models is how I view refinement.

That's what the experience, um, that was about 1 third of the impact in life and there was not a single driver behind the change.

Um, this again, the South can reflect our discipline process of updating the assumptions.

When you look at that in conjunction with what we reported above the line were very much aligned not only for all other asset classes, but also real estate as well.

Based on our own experience and Industry experience.

And importantly, the adjustment span across multiple products rather than be concentrated at any 1 area.

And so in last quarter, we signaled that there would be more transaction activity in the latter half of the year that certainly manifest itself in the third quarter and we expect more of the same in the fourth quarter. So our VII outlet remains yes that was going into third quarter very optimistic for the latter half of the year.

Deanna Strable: We're seeing strong momentum across key metrics. Workplace Savings and Retirement Solutions, or WSRS, transfer deposits grew 13% year over year, demonstrating the strength of our retirement record keeping platform and the breadth of our distribution reach. We're serving an increasing number of participants, and the participants we serve are saving more. This is evidenced by a 3% increase in the number of participants deferring into their retirement plans compared to the year-ago quarter, with average deferrals up 2%. Total RIS sales of $7 billion increased 8% year over year, with strong growth in WSRS and pension risk transfer. On a year-to-date basis, nearly one-third of our PRT premiums came from existing defined benefit clients. Additionally, nearly half of our year-to-date non-qualified life insurance sales are part of a total retirement solution with RIS.

So, no. One, that prepared remarks and officers are reinforced here. Um, it's reflective of a broad range of model refinements and experience updates.

This Gap only.

Thanks for those questions so much.

Non-cash. It has no impact on our free Capital flow for the Enterprise and importantly, it's immaterial to the ongoing run rate, which is actually reflected in our third quarter recall.

We have reached the end of our Q&A Mr. <unk> Your closing comments please.

Thank you as we close today's call I want to thank all of you for your time your questions and your team.

certainly does not impact our Outlook or expectations on the future growth of probability of not only life business, but also the Enterprise and total

Think West, do you have a follow-up?

Question.

Our strong third quarter and year to date results reaffirm the strength of our strategy and our discipline around execution, which is driving strong profitable growth expanded ROE and robust free capital flow, we continue to see momentum across our strategic priorities our position across the retirement ecosystem is strong.

I do thank you. Um just just 1 quick 1 maybe but any insight into how uh viable investment income is shaping up for the fourth quarter. I did sound some combos remarks like maybe there's a bit of real estate transaction momentum. So just curious if there's any any uh

Any foresight into that?

S&P relationships are growing and deepening and our global asset management platform is scaling with purpose.

I'm thankful everyday to our almost 20000 employees that wake up committed to serving our customers. We're focused on providing long term value to our customers as well as our shareholders and remain well positioned to deliver on our full year financial commitments. We look forward to connecting with many of you in the months of Pet ahead have a great day.

Deanna Strable: Our retirement investment expertise, an important growth driver within the retirement ecosystem, continues to gain traction with third-party retirement platforms, as evidenced by DCIO sales of $2 billion in the quarter. These connections within and across businesses demonstrate our power across retirement and reinforce our unique competitive advantage in delivering retirement solutions to employers and their employees. Moving to our small and mid-sized business segment, our differentiated capabilities and deep expertise in this attractive segment continue to drive results. WSRS SMB recurring deposits grew 8%, and transfer deposits increased 27% compared to the year ago quarter. In benefits and protection, our business continues to show growth and resiliency. Employment growth for our block was nearly 2% on a trailing 12-month basis, and we're seeing continued success in deepening relationships.

Oh, that's still the um address that. Yeah, so V performed very well in the third quarter, amongst all asset classes. Um, from a reporting perspective, the real estate was the reason why we were below long-term expectations with operating earnings.

Manifest itself below the line or an nrcg about 25 million due to a transaction that occurred in the third quarter. That doesn't get OE treatment.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

That's when you look at that in conjunction with low report above the line would have very much aligned not only for all other asset classes but also real estate as well.

And so on last quarter, we said know that there would be more transaction activity in the latter half of the year that certainly manifests itself in the third quarter and we expect more of the same in the fourth quarter. So our V Outlook remains just as it was going into third quarter. Um very optimistic for the latter, half of the year.

Thanks West for those questions. Thank you so much.

We have reached the end of our Q&A M stable, your closing comments, please.

Thank you, as we close today's call. I want to thank all of you for your time, your questions, and your engagement.

Deanna Strable: Based on our latest insights, employee retention remains a top priority for small business owners and executives, and we're well positioned to help them achieve their goals with our comprehensive suite of solutions. In global asset management, we're generating strong momentum with gross sales in investment management of $32 billion, up 19% year over year. Revenue on these sales is up even more. Our private markets capabilities remain attractive to clients globally, generating net inflows of $1.7 billion in the quarter. Private's AUM grew 9% year over year, as strong demand continues across our real estate, infrastructure, and private credit strategies. Additionally, our ETF business delivered net inflows of $500 million in the quarter and $1.3 billion year to date. These results reflect the strength of our diversified business mix across asset class, geography, and client base. Looking across our three long-term strategic focus areas, I'm encouraged by the momentum.

Our strong third quarter, and your date results, reaffirm the strength of our strategy, and our discipline around execution which is driving strong profitable growth expanded, Roe and robust free Capital flow. We continue to see a momentum across our strategic priorities. Our positions across the retirement, ecosystem is strong. Our SMB relationships are growing and deepening, and our Global Asset Management platform is scaling with purpose.

I'm thankful every day to our almost 20,000 employees who wake up committed to serving our customers. We're focused on providing long-term value to our customers as well as our shareholders and remain well positioned to deliver on our full-year financial commitment.

We look forward to connecting with many of you in the months ahead ahead, have a great day.

Ladies and gentlemen, this concludes today's presentation, you may now disconnect and have a wonderful day.

Deanna Strable: The breadth of our retirement solutions, our leadership position in serving small and mid-sized businesses, and our expanding global asset management capabilities create multiple paths for sustained growth. These competitive advantages, combined with our integrated business model and strong execution, position us well to capitalize on the significant opportunities ahead while creating value for our customers, shareholders, and employees. Before I turn this over to Joel, I want to acknowledge our recent release of the fourth annual Global Financial Inclusion Index, which tracks how governments, employers, and financial systems around the globe are advancing financial inclusion. Since the index launch, we've seen how digital solutions have emerged as a powerful driver of progress, helping people make informed choices and achieve greater financial security. Markets making the fastest gains are embracing fintech solutions that expand access while embedding financial education and safeguards.

Deanna Strable: While current economic uncertainty has temporarily impacted employer financial inclusion programs, it's encouraging to see governments and financial systems stepping up. The findings highlight the tremendous opportunities ahead and reinforce our important mission to help people feel more confident in their financial decisions. Joel.

Joel Pitz: Thanks, Deanna. This morning, I'll share the key contributors to our strong financial performance for the quarter, as well as details of our capital position. As shown on slide four, we reported non-GAAP operating earnings of $474 million, or $2.10 per share, a 19% increase year over year. On a year-to-date basis, reported EPS increased 21%. Excluding significant variances, non-GAAP operating earnings were $523 million, an increase of 9% year over year, and EPS of $2.32 increased 13%. On a year-to-date basis, adjusted EPS increased 14%. While not on the slide, third-quarter reported net income, excluding exited business, was $466 million, an increase of 11% over the prior year quarter, with minimal credit losses. Turning to capital liquidity, we ended the quarter in a strong position with $1.6 billion of excess and available capital.

Joel Pitz: This includes $800 million at the holding company at our targeted level, $350 million in our subsidiaries, and $400 million in excess of our targeted 375% risk-based capital ratio, which was estimated at 400% at quarter end. We returned approximately $400 million to shareholders in the third quarter, including $225 million of share repurchases and $173 million of common stock dividends. We are confident we will deliver on our full-year capital return target of $1.4 to $1.7 billion, including $700 million to $1 billion of share repurchases. Last night, we announced a $0.79 common stock dividend payable in the fourth quarter. This is a $0.01 increase from the dividend paid in the third quarter and an 8% increase over both the year-ago quarter and trailing 12-month period. This aligns with our targeted 40% dividend payout ratio and demonstrates our confidence in continued growth and strong capital generation.

Joel Pitz: Moving to AUM and net cash flow, markets created tailwinds in the quarter with positive results across U.S. and international equities, fixed income, and real estate. Total company managed AUM of $784 billion increased 4% sequentially, driven primarily by strong market performance along with positive net cash flow. Total company net cash flow was $400 million in the quarter, a sequential and year-over-year improvement driven by investment management flows. As Deanna mentioned, this was largely driven by strong private inflows. Moving to the businesses, the following commentary excludes significant variances, which can be found on slide 10. Significant variances this quarter include a net unfavorable impact to GAAP earnings from our actuarial assumption review, primarily driven by model refinements. It is important to note the actuarial assumption review impacts our GAAP only and non-cash and therefore has no impact on free capital flow for the enterprise.

Mhm.

Joel Pitz: The remaining significant variances are a slight net positive. Starting with RIS, and as shown on slide five, third quarter top line growth was 4% towards the upper end of our target range, driven by growth in the business and favorable markets. This, coupled with expense discipline while investing in the business, resulted in a 42% margin, a 130 basis point improvement over the third quarter of 2024. Pre-tax operating earnings of $315 million increased 8% from the prior year quarter, driven by growth in the business and margin expansion. As Deanna Strable noted, fundamentals across the business remain healthy. Total WSRS recurring deposits grew 5% on a trailing 12-month basis, with our SMB segment continuing to outperform at 8% growth over the same period. Additionally, consistent with the first half of the year, withdrawal rates in the quarter remain stable.

Joel Pitz: Turning to slide six, Principal Asset Management delivers strong earnings on revenue growth and margin expansion. Within investment management, pre-tax operating earnings increased 9% from the prior year quarter. Management fees increased 5% year over year, driven by higher AUM and a stable fee rate against the backdrop of industry fee pressure. This, along with continued expense discipline, contributed to a 180 basis point improvement in investment management's quarterly operating margin. Net cash flow was $800 million in the quarter, supported by inflows in privates with two large wins in private real estate equity, as well as positive flows in high yield, emerging market fixed income, and active equity ETF strategies. Moving to international pension, we delivered record reported AUM of $151 billion, an increase of 9% year over year. Operating margin of 47% expanded 180 basis points from the prior year quarter and remains comfortably within our targeted range.

Joel Pitz: Turning to slide seven, specialty benefits pre-tax operating earnings were $147 million, a record quarter. This was an increase of 28% compared to the year-ago quarter, driven by more favorable underwriting results and business growth. These results reflect our focus on pricing discipline and profitable growth. Total SBD loss ratio improved 340 basis points compared to the year-ago quarter and was below our target range. These results were driven by favorable group life and group disability underwriting, as well as a 100 basis point improvement in the dental loss ratio. Operating margin of 17% expanded 330 basis points compared to the year-ago quarter and is above the high end of our target range. In life insurance, premium fees increased 3% compared to the third quarter of 2024, as strong business market growth of 11% continues to outpace the runoff of the legacy life insurance business.

Joel Pitz: Mortality in the quarter was better than expected, but slightly less favorable than a year-ago quarter. In closing, our strong enterprise performance reflects successful execution of our strategy and strong fundamentals. Our diversified business demonstrates its strength through profitable growth and expanded margins. As Deanna Strable highlighted, this momentum, coupled with our year-to-date performance, reinforces our confidence in delivering on full-year enterprise financial targets and positions us well for sustained long-term performance. This concludes our prepared remarks. Operator, please open the call for questions.

Operator: Thank you. At this time, I would like to remind everyone that to ask a question, please press star one-one on your telephone. We'll pause for just a moment to compile the Q&A roster. Our first question comes from Jack Madden with BMO Capital Markets. Your line is open.

[Analyst 1]: Good morning. The first question on margins. I'm just wondering if you'd expect to continue seeing strong margin expansion, kind of in line with the 180 basis points this quarter, if market performance remains strong. I guess relatedly, can you discuss areas where Principal is either accelerating or expanding its investments in growth initiatives?

Chris Littlefield: Yeah, thanks, Jack, for the question. Obviously, the margin expansion in the current quarter was impacted by both strong underwriting results as well as very disciplined expense management. I'll have Joel talk about that and then maybe ask each of the Presidents to maybe highlight a few areas where we're investing in the business.

Joel Pitz: Yeah, thanks for the question, Jack. From a margin perspective, we certainly expect margins to continue to expand, but importantly, while investing in a business, as you said. This quarter was no different than what we've done in the past. We're going to make sure that we ensure that expenses grow at a much slower pace than revenues. As you said, we had margin expansion of 180 basis points at the enterprise level, and on a PTM basis, it was a 100 basis point improvement. We'll continue to actively and responsibly manage expenses, in particular in the fee-based businesses where you do see some macro benefits emerging. We're going to continue to invest meaningfully in that regard.

Chris Littlefield: Chris, maybe highlight a few investments that you guys are focusing on.

[Analyst 1]: Yeah, sure. Good morning, Jack. Obviously, margin was strong for RIS this quarter, and we continue to sort of guide toward the upper end of our margin range. Despite that strong margin performance, we're making a lot of significant investments both in modernizing our record-keeping capabilities as well as building out our capabilities to serve the individual customers in retirement plans. We're making very significant investments and still being able to deliver on our margin.

Chris Littlefield: Amy?

Amy Friedrich: Yeah. Thanks, Jack. Obviously, margin for the SBD businesses was exceptional this quarter. When we look across the margin for life, that was within the range as well. I'd echo what Chris said. We're meeting our margin targets, or we're exceeding them in one of the businesses, and we're still investing for the business. When I think of those key investments we're making, a lot of them are multi-year in nature. We've been working on some multi-year investments related to our front-end acquisition systems for our group benefits business, also some increased data exchange capabilities. Those are going to benefit our employer customers as well as the brokers and advisors who really have to recommend us for that business. I'm excited to see those capabilities coming to the marketplace in late 2025 and early 2026.

Chris Littlefield: Tom?

Kamal Bhatia: Sure. Jack, good morning. I'll highlight both IM and IP for you. Both had excellent quarters on margin, and I expect them to continue on IM. The margin is around 36%, and it's largely aided by the results we highlighted in our cash flow, but also markets. In IP, where net flows may not be that strong, we still have excellent margin. The drivers of our margin in both those businesses are slightly different. In investment management, our investments continue to be around building new investment capabilities that will generate higher fee revenue for us. You've seen that in our private markets area, and we continue to do that now in public markets as well, particularly global equities, which we believe will actually add to our growth potential.

Kamal Bhatia: In IP, our focus continues to be to optimize our sales distribution network across the various regions and leveraging the collaboration between IM and IP in those regions. That is probably the bigger area for investment in the IP area.

Chris Littlefield: Jack, did you have a follow-up?

[Analyst 1]: Yes, very helpful. Thank you. Yeah, follow-up. We've done free capital flow conversion. It's been running at healthy levels over 90%. I think even if you back out the GAAP assumption review, is there anything notable that you'd call that's driving that and how you would expect that to trend over the near term?

Chris Littlefield: I'll ask Joel Pitz to address that.

Joel Pitz: Yeah, thanks, Jack. We are at a very strong capital position as we end third quarter. We have the luxury of a very capital-efficient mix of business, which affords us the ability to organically invest our business, again, while freeing meaningful capital up for the benefit of shareholders. As such, we have and will continue to operate from a position of capital strength. As you saw from our disclosure at the end of third quarter, we do have $1.6 billion of excess and available capital. This is $150 million higher than we had coming into the third quarter, while investing in organic growth and deploying approximately $400 million of capital in the form of share buybacks and dividends during the quarter. As signaled in the quarter last call, we expected and are deploying elevated levels of capital in the latter part of the year.

Joel Pitz: You saw this in the third quarter with the $400 million of capital deployed in the course of the quarter, $225 million of which was in share buyback activity. As we sit here today, you know we feel really good about our share buyback activity and positioning for the fourth quarter. Just as we had elevated third quarter deployment, we expect the fourth quarter to be even further elevated. We feel really good about our prospects for deploying capital in an optimal and strategic way from this point forward. Last but not least, as we announced last night with the dividend, that continues to be a priority for us. We increased our quarterly dividend by a penny. Again, that's a testament to our commitment to growing our dividend and maintaining that 40% dividend payout ratio. Jack, I hope that helps.

Chris Littlefield: Jack, the only thing I'd add to that is obviously as we grow our fee-based businesses across the enterprise, that will provide some tailwinds to that free capital percentage as well.

[Analyst 1]: Got it. Thank you.

Operator: One moment for our next question. Our next question comes from Ryan Krueger with KBW. Your line is open.

[Analyst 2]: Hey, thanks. Good morning. First question is on investment management flows. Can you talk a little bit about any changes you're seeing in investor sentiment from your clients, in particular appetite for the areas that you're focused on in that business, and maybe a little bit of perspective on how the pipeline looks going forward as well?

Chris Littlefield: Tom?

Kamal Bhatia: Sure. Good morning, Ryan. I think let me just first start with the strong results this quarter. I think as Deanna mentioned in her remarks, we had positive net cash flow of $800 million. I think equally impressive is if you look at our non-affiliated NCF, it was $1.8 billion positive, which is largely with long-term mandates in private markets that not only contributes to the fee rate but also revenue growth. The other dynamic I would highlight for you is we had net cash flow growth this quarter across multiple channels. We actually had wins in global institutions, which I've highlighted to you in the past. We actually had positive net cash flow across our U.S. retail platform where we have had a change of trend, as well as in our local managed products across Asia and LatAm.

Kamal Bhatia: I think the key observation I would give you is that our focus on having scale in global distribution is really kicking in, and I expect that to continue over a period of time. If I even look at our active ETF business, over 2025, our net AUM growth has been over $3 billion in the last 12 months. We continue to expand in that business. What I would highlight for you with respect to the areas where we are seeing continued momentum, real estate, as I've highlighted for you in the prior few quarters, is actually seeing increased momentum. I think the cycle is slowly turning, but the more impressive piece for us is we are actually gaining market share, which I expect to continue as we expand our product lineup. The results in fixed income continue to be quite impressive.

Kamal Bhatia: Particularly, our growth we have seen in emerging market fixed income is an area I would highlight where we continue to win mandates across the world. Ryan, hopefully, that answers the question you had.

[Analyst 2]: Yes.

Chris Littlefield: Ryan, did you have a follow-up?

[Analyst 2]: Just a quick one. Are performance fees still expected to be fairly modest in the fourth quarter? Has anything changed?

Chris Littlefield: Yeah, that's a great question. I'll have Kamal Bhatia address that.

Kamal Bhatia: Yes, Ryan. Performance fees are probably still expected to be the same level as they were in 2024. The area that I would highlight for you is we've actually seen an uptick in transaction and borrower fee activity. I think as the markets have unclogged here a little bit, when I looked at transaction borrower fee year over year, there's a slight improvement in there of 10% to 20%, but they're still below their long-term potential. Longer term, I would expect performance fees to take up, but not yet where we are in the market cycle.

Chris Littlefield: Yeah, Ryan. As you know, performance fees, borrower fees, transaction fees can be volatile quarter to quarter, but it's great to see the 5% increase in management fees year over year because, again, that's the momentum of the business that's going to drive margin and growth across the enterprise.

Operator: Thank you. One moment for our next question. Our next question comes from John Varnish with Piper Sandler. Your line is open.

[Analyst 1]: Good morning. Thanks for the opportunity. The Bering Strategic Partnership, do you have any visibility into whether that relationship's fee rate enhancing versus a blended fee rate at Principal Asset Management and possible other similar opportunities? Thank you.

Chris Littlefield: Yeah, I'll maybe ask Joel and Kamal to add to that. Obviously, a large proportion of our general account is managed by our internal asset management business, but we have for a long time also used third-party providers in areas that we feel are critical for us meeting our strategic asset allocation, but also meet our return and risk thresholds as well. We were happy to announce the Bering Partnership, and it gave us a unique opportunity to partner with them, but also have some co-investment opportunity as well. Maybe I'll have Kamal address that, and then ultimately, if Joel has anything to add as well.

Kamal Bhatia: Sure. Good morning, John. Thanks for highlighting that partnership. It is part of our strategy to continue expanding our private market expertise. As Deanna highlighted, part of this partnership is to assist on the general account side. What is most unique about this partnership is we have historically done both origination and portfolio management in the private markets area. The Bering Partnership is unique because they had a unique strength in origination in an asset class that they had an edge in. We continue to play the role of being the portfolio manager, the underwriter of those transactions, which also is our expertise. We are looking at unique opportunities that expand our business base, but also create value for Principal overall.

Chris Littlefield: Joel, did you have anything to add?

Joel Pitz: Yeah, John, just to comment that we have the luxury of great in-house capabilities. Within our general account, we can meet the needs through our investment capabilities, where we manage about 95% of the general account portfolio. We'll continue to look at collaborative ways in what way we can partner with others in order to augment those capabilities that we need to support our general account. Bering is a great example of that.

Chris Littlefield: John, did you have a follow-up?

[Analyst 1]: Thank you. My follow-up is on the 401(k) business. With the Baby Boomer generation more and more retiring and pulling down on those retirement dollars, flows might not be the best metric to look at as much as profit growth. My question is on that secular headwind to flows. What does that make you think about the consolidation in 401(k) more broadly, given the leading position the company has, or is it really just more about winning business that comes to market? Thank you.

Chris Littlefield: Yeah, I'll have Chris address that.

[Analyst 1]: Yeah. Good morning, John. Thanks for the question. I think as I mentioned in prior quarters, consolidation is definitely happening in the industry. There are two ways that consolidation happens, right? It's happening through large M&A transactions, which we saw a few years ago. You've seen more muted activity on the inorganic side over the last couple of years. What's really happening is there's been a real shakeout of the lower scale players. We are seeing the benefits from being able to win more plans from those players. I don't think over the long term, the market's going to be able to sustain what is the current about 40 different record keepers in the industry. We believe that that's going to shrink closer to single digits sometime over the next 10 years.

[Analyst 1]: As the number three player, we expect to be a real beneficiary from that consolidation, and we see that in the overall results. We will continue. Scale is important. We will continue to evaluate our position. We're comfortable with our position now, and we're focused more on how do we continue to drive organic growth in our business than on any large transaction at this point in time.

Chris Littlefield: Yeah, the other thing I'd say, John, you started your question out here, Chris has continued to reiterate that revenue growth is his focus. Obviously, there's some dynamics within just looking at flows, whether it be the market impact, the Baby Boomer generation, as you talked about, and just the overall fact that, you know, positive macro, even though positive to our overall business, can be punitive to net cash flow. Ultimately, that team has been very focused on driving profitable revenue growth. I think this quarter is another great demonstration of that success.

[Analyst 1]: Thank you.

Operator: One moment for our next question. Our next question comes from Jimmy Bueller with JPMorgan. Your line is open.

Joel Pitz: Hey, good morning. First, just had a question for Kamal on net flows and asset management. I think if you look at your commentary over the past year, it's been fairly positive. Flows had been weak, but this quarter obviously showed a turnaround. To what extent do you think it's the beginning of a trend given the favorable market backdrop that you have? How do you think about the weaker investment performance that you've seen recently factoring into your net flow expectations over the next year?

[Analyst 1]: Sure.

Chris Littlefield: Go ahead, Kamal.

Kamal Bhatia: Sure. Jimmy, good morning, and thanks for highlighting the turnaround. You've always been a believer in us, so I appreciate that. With respect to your question around the sustainability of the trend and what's driving it, I will tell you that the quality of flows we are actually seeing this quarter is quite high. When I look at the clients who are giving us the mandates, they tend to be more longer-term in nature. They're also putting it in areas that are in a trough of a market cycle. I expect returns to be quite strong in those areas as we move forward. It certainly helps with the sustainability of our flows.

Kamal Bhatia: I think, as Deanna Strable highlighted, one of the other things we did this quarter is not only were cash flows positive, our management fee rate was 5% higher, which is generally bucking the industry trend and something we continue to focus on. When I look forward, I think Q4 has always been an active quarter for rebalancing, and a lot of strategic allocation happens. This year, given the strength of the marketplace, it could be more active than usual. That is something that other peers are also going to experience. There will be higher volatility of allocation changes happening. One sentiment signal I could give you to your question that we continue to track is the questions we get in our RFPs.

Kamal Bhatia: While overall RFP volume as we enter Q4 here is lower than it is in 2024, generally across the industry and for us, we are sort of starting to see a shift in the type of questions we get. They're shifting to focus more on exploration and new idea requests rather than active allocation among existing mandates. I do believe the investors, after the run-up in markets, are looking for new products, new ideas, or areas that have generally been under-allocated to. I highlighted global equities as one of those areas where I do believe there'll be more allocation coming. With respect to timing of flows, it can be very difficult to predict. What I can tell you, I remain very, very confident that the second half for asset management and IM flows will be much stronger than the first half for our business.

Chris Littlefield: Jimmy, did you have a follow-up?

Joel Pitz: Yeah, on just the part about performance, is that factoring into because I think if I look across your various asset classes, the performance recently, the numbers seem a little weaker than they've been in the past. Is that factoring into your net flows and pipeline?

Kamal Bhatia: If you decompose the performance drivers, a very large part of our underperformance has come in our multi-asset products. In certain target date funds, our hybrid target date fund continues to perform very well. The active product has underperformed. Yes, it has had impact in both on and off-platform retirement flows, particularly in business and our off-platform business. Certainly an area we continue to pay a lot of attention. Our performance in other areas like international equity has become stronger over time. I would highlight that for you. Our performance, we actually are just hitting a three-year number on our data center product that we launched, which continues to have very, very strong performance. There are certain areas that continue to do well. The areas that are weak, we continue to enhance our risk management talent and tools.

Kamal Bhatia: We continue to add new talent in areas where performance has been weak. That's generally been on the equity side for us.

Chris Littlefield: I think, Jimmy, obviously, as Kamal reiterated, delivering alpha generation is a long-term priority. Obviously, in markets like we've seen where equity performance has been concentrated in a few number of names, you can see some volatility quarter to quarter. Ultimately, again, our focus is staying close to our customers, making sure we understand what's important to them, and delivering alpha generation. We'll stay focused there and ultimately continue to focus on driving revenue growth for our clients and for our shareholders.

Kamal Bhatia: Okay, thank you.

Operator: One moment for our next question. Our next question comes from Wilma Bertus with Raymond James. Your line is open.

Chris Littlefield: Hey, good morning. Could you talk a little bit more about where you are on growing the spread-based balance as in RIS and which products you're most focused on to grow that spread business and which you're finding most favorable today? Thanks. Yeah, Wilma, thanks for the question. Obviously, there's a number of categories of types of sales within the spread business, including supporting our WSRS platform as well. I'll have Chris get into some more details on where our focus is.

[Analyst 1]: Good morning. Thanks, Wilma. Thanks for the question. We've seen really nice performance in spread-based over the last several quarters. Our emphasis, as we've talked about in prior quarters, is really continuing to figure out how to drive revenue growth within our retirement plans, which includes how do we sell our guaranteed products at a faster pace. We've seen very nice inflows and growth in our WSRS GA products sold through retirement plans. We also have seen nice performance over the last several years in PRT. We had a very strong PRT quarter this year. As we've talked about, we're not so much focused on volume there. We're focused more on returns. Despite the industry backdrop of declines, we continue to see strong performance in PRT.

[Analyst 1]: We're going to continue to be disciplined there and focus in our target market, which is in the smaller segments of the market, not at the jumbo side, which is where most of the pressure has been felt on PRT. Lastly, with respect to our annuities business, we've seen very nice growth in the RILA business over the last several years. That provides a lifetime income product for our customers. We focus primarily on serving the lifetime income needs of our retirement customers. That is why that exists there. Across all of those, we've seen really nice growth on the spread-based side. Not just growth, but growth at really nice returns.

Chris Littlefield: Wilma, do you have a follow-up? Yes. Amy, maybe you could talk a little bit about what drove the favorable loss ratios in specialty benefits and what you're seeing there as far as the upcoming quarters. Thanks. I'll have Amy address that one.

Amy Friedrich: Yeah, thanks for the question. It was a fantastic quarter in terms of underwriting results. I think the first thing I would note is really there's not one particular product that's driving it. We're seeing really nice performance from group disability. That is specifically driven by lower LTD incidents in this quarter. We're also seeing really nice performance from group life. That's driven by lower frequency. As Joel noted in his opening comments, we had a 100 basis point improvement in our loss ratio also for dental. We're seeing a nice return and improvement, kind of back to the path that we want for our dental business. For our supplemental health, again, I would say that one is performing as we expected.

Amy Friedrich: We want that business on a run-rate basis to perform a little bit higher in terms of loss ratio than it had been doing earlier in the year or late into last year. I would say the types of loss ratios that business is putting down is kind of what we would expect. There's also the individual disability business, which performs very well. I think the driver is we're focused on the right marketplaces. We're in that small to medium-sized business marketplace. They know they have needs. We're able to grow in that marketplace, and we're able to do that in a rate that we can drive both great benefits that we put in the hands of those business owners, but also appropriate profit for us. I see the balance of that paying out. We don't have to necessarily go outside of our underwriting guidelines very often.

Amy Friedrich: We don't have to put planned maximums in that we're uncomfortable, and we're growing the right pieces of business. The last piece I would note there is that our worksite business and our voluntary practices, voluntary participation, worksite array of products that we offer, we're really growing that piece as well. That piece gives us a nice bit of margin expansion over time as the shift to business begins to be a bit more voluntary. It's helping our results as that supplemental health line begins to grow.

Chris Littlefield: Thanks, Wilma, for those questions.

Amy Friedrich: Thank you.

Operator: One moment for our next question. Our next question comes from Joel Herwitz with Dowling Partners. Your line is open.

[Analyst 1]: Good morning. First, I wanted to get an update on the capital deployment outlook. Joel, you mentioned the pace should increase again in Q4. What would drive you guys towards the higher end of that $1.4 to $1.7 billion capital return range? If I just look at your excess capital position, it's very strong. Q4s are typically the strongest capital generation quarter. Any reason why you wouldn't really accelerate and lean into buybacks where the stock's at now?

Chris Littlefield: Yeah, Joel, thanks for the question. I think if you have followed us for years, you know that we have a very balanced and disciplined approach to capital deployment. Ultimately, we also want to make sure that we're delivering consistent and growing capital return to our shareholders over time. It can be volatile quarter to quarter, but ultimately, we are focused on delivering strong returns to our shareholders and returning excess capital to shareholders over time. I'll have Joel address your specific question.

Joel Pitz: Yeah, and Joel, you raised a good point. We are sitting in a great position from a capital perspective at $1.6 billion, as you mentioned. As we signaled in last quarter's call, we did do outsized or higher, I guess, third-quarter share buybacks than we did in the first half of the year. As you know well, the first half of the year, we did about $350 million in share buybacks. We did $225 million in the third quarter. We certainly expect elevated levels from there in the fourth quarter. What happened in the third quarter is we did have very positive free capital flow conversion, but while still investing in the business. We just feel really good about the optionality we're afforded as it relates to investing for organic growth as well as delivering meaningful capital back to shareholders.

Joel Pitz: You will see some outsized fourth-quarter share buybacks relative to what you saw in third quarter. Does that help, Joel?

[Analyst 1]: That helps. Thank you. Just shifting back to specialty benefits, Amy, any early outlook on how one-one renewals and new business is shaping up? How's the competitive landscape looking at this point? Do you see a path to have top-line return back to that long-term growth range in 2026?

Chris Littlefield: I'll ask Amy to address that.

Amy Friedrich: Yeah, thanks, Joel. Just before I directly get back after it, and Joel did a really nice job covering this in his opening comments. When you look at the stats, like you know earnings up 28% year over year, margins expanding by 330 basis points, underwriting improving at 340 basis points. I think the trade-off we've been talking about is sometimes a bit slower growth is what you do to drive the profitability that you need for the business. I feel like that trade-off is working really, really well. That said, when I look ahead at one-one business, I think we're seeing more opportunities to write profitable business than we saw at the same time last year. We are seeing things come to market that look attractive to us. We're winning against some of those bids.

Amy Friedrich: I like what we're doing with respect to both renewals and new sale as I look ahead. I had listed before a couple of those multi-year technology initiatives. Those are really starting to bear fruit and will in late, yet in fourth quarter 2025 and into 2026. I feel like those investments are really positioning us to move closer to that low end of that range. I know we'll have more to say about that in our next earnings and outlook call, but I feel good about the volume that I'm seeing right now.

Chris Littlefield: Yeah, Joel, I think as Amy highlighted, we continue to balance pricing discipline with our competitive positioning. Ultimately, we aren't going to chase growth for the sake of growth. We've done that successfully for decades, and I don't see that not continuing as we look out into the future.

[Analyst 1]: Got it. Thank you.

Operator: One moment for our next question. Our next question comes from Sunita Kamath with Jefferies. Your line is open.

[Analyst 1]: Great, thanks. I wanted to ask about private credit. Obviously, we've had some flare-ups here in the past couple of weeks. I know your portfolio is maybe a little bit different than other companies, given its tilt towards real estate. I'm really just curious what you're seeing in terms of the private credit markets, both in terms of performance, competition, and just overall credit quality.

Chris Littlefield: Yeah, Sunita, thanks for the question. I think there's two aspects of our private credit perspective. One is within our general account, which I'll ask Joel to address. One is within how we think about private credit with our third-party investors as well. I'll maybe ask Joel to start and Kamal to add onto that.

Joel Pitz: Yeah, Sunita, thanks for the question. A really good proof point for our managing credit losses is a testament to our third-quarter losses, which is about $8 million after tax, as you can see within the financial supplement. The credit losses from securities were at very low levels in Q2 2025 as well. What you saw a little bit in Q3 was a few impairments, which was very de minimis. No commonality or reason within the industry as it relates to those credits. Importantly, the portfolio credit loss remains below our model long-term run-rate estimate. Success of any underwriting depends on the quality of the underwriting. We're real proud of our practices in that regard, whether it's public or private. We remain really confident in our underwriting standards.

Joel Pitz: We continue to focus on diversification, quality, and liquidity profiles that meet our liability needs, which, as you know, are very conducive to investing in privates, given our liability profile. Given our quality and well-diversified portfolio, the credit risk is very manageable. As I said before, it remains below long-term expectations and has certainly factored into our capital and deployment expectations.

Chris Littlefield: Kamal?

Kamal Bhatia: Sure. Good morning, Sunita. I'll go to the two points you raised, which is how have we done from a performance perspective and what are my overall observations about the industry and the market dynamics. First, I think as Joel highlighted, our own exposure in private credit is relatively modest, and it's quite aligned with our risk and ALM parameters. One of the highlights I would give you is we've had no direct exposure to some of the names that have been mentioned in the news recently. The quality of the holdings we have in our business are largely underpinned by the extreme focus on underwriting. In fact, we have a very high selection ratio. The number of deals we look at, the number of deals we underwrite and participate in, somewhere one out of seven deals only makes it through the funnel.

Kamal Bhatia: The other thing I would highlight for you is most of our vehicles have very low leverage ratio. One of the challenges in the industry has been a lot of vehicles today in the industry have very high leverage ratios just by the way they were designed. I would say we remain quite focused on underwriting, and the portfolio is doing quite well. When I even look at Q3, we had lower non-accrual rates and higher quality loan distribution compared to the rest of the industry. Going back to the industry dynamic, I do think it deserves some caution. The asset class has grown quite rapidly. The amount of capital that is being expected to invest has also grown quite rapidly.

Kamal Bhatia: My personal view on this remains that the risk of accident in this space is really around entities that have to deploy very large amounts of capital very quickly and constantly.

Chris Littlefield: Hope that helps, Sunita.

Joel Pitz: That was very helpful. My second question is just on the wealth management opportunity that you guys have talked about. I think you've mentioned having, I think it's 500 advisors that are helping your plan participants handle retirement. Can you just maybe provide some metrics on that? What sort of penetration are you having? Is it leading to better asset retention within the franchise? I don't think we've seen any metrics, so I'm just curious if there's anything you're willing to share.

Chris Littlefield: Yeah, Sunita, thanks for recognizing that. We did highlight at our 2024 Investor Day that this was a priority for us, but we also highlighted that it was a long-term build and it would take time before it actually moved into critical metrics that we would track and share. I'll ask Chris just to talk about some of the things that we're watching. I think it's 200 advisors that we have licensed to actually have the advice conversations. Chris, can you add some additional color?

[Analyst 1]: Yeah, thanks for that, Sunita. As Deanna mentioned, it is going to be a long-term build. We did, at the end of last year, so fourth quarter last year, begin the introduction of our advisory services with 200 salary-based advisors. We've seen very nice early indications of the success of that program. First of all, we have about 90% plan sponsor adoption of the service, making it available to participants that call in and need help. Very strong plan sponsor adoption. We've also seen a very nice increase this year in the number of clients that we're serving, individuals we're serving. We've seen about a double-digit increase in our advisory and retail customers served through our workplace personal investing solutions. Another sort of green tooth I would say is that we've also seen a nearly 20% increase in roll-ins this year.

[Analyst 1]: People that have a prior plan and then are moving to an employer that's served by Principal, we've seen a 20% increase in the amount of their rollover transfers or roll-in transfers into Principal plans. Those are early days, but those are good early metrics. We remain very optimistic about the long-term value, but the short term is going to be a bit more muted as we continue to build our capabilities.

Joel Pitz: Got it. Thank you.

Chris Littlefield: Thanks, Sunita, for the question.

Operator: One moment for our next question. Our next question comes from Tom Gallagher with Evercore ISI. Your line is open.

[Analyst 1]: Morning. First question for Kamal. The real question on CRE, alt returns, flows in asset management, and the commercial mortgage loan exposure to your general account. Those all look pretty good this quarter. I've kind of viewed that, we'll call it overall market exposure as being very important for Principal as a firm. Seeing everything kind of being more choppy in the past, all looking better this quarter, do you think we're at a better inflection point here broadly on those issues? I look at a mega CRE investor like Blackstone, and they had, I would say, more mixed results this quarter. I look at your results. They kind of look better across the board. Curious what you're thinking there.

Chris Littlefield: Yeah, you know, obviously, we have been a leader in real estate for decades. I'm very proud of our long-term position. When you're a leader for decades, that means you know you have navigated multiple economic cycles, both for our own balance sheet as well as our clients. It's been a tough couple of years from a real estate perspective, but I think we're feeling better relative to where we are in the cycle. I'll let Kamal add some additional perspective.

Kamal Bhatia: Thank you, Deanna. Tom, good morning. It's a great question and very timely. I think you asked two things. One is just our own real estate book and where do we see it and the strong results we continue to deliver and the inflection point question. First, I would say when I look back over three years, I would say CRE or commercial real estate has probably been in the strongest position over the last three years. It's obviously coming off of a trough. I would say as the year has gone by, we have seen more stability both on the occupancy side, but more importantly for somebody like us on the pricing power of many of the properties we manage or underwrite. The more important thing over the last few quarters has been that capital flows are improving as well.

Kamal Bhatia: Our own year-to-date private market cash flow is going to reach $3 billion. I certainly expect that to improve over time. The big change more recently probably has been the transaction volume. Compared to last year, we are about 17% up year-to-date comparison. Q4 tends to be a little bit more. Last year, Q4 was very, very strong. You may see a slight lowering of transaction volume, but still up 10%. I think to the question you raised, there is going to be a big dispersion in real estate winners and losers in this market cycle. One of the things that we see is that the people who don't have any redemption queues in their products are actually going to have a benefit of putting fresh capital to work at much more better valuations. They will get back to getting higher IRRs from that refresh of the book.

Kamal Bhatia: I believe those managers will outperform and get market share. That's where I see the strength of the Principal franchise being positioned. The other benefit we have is our book is largely institutional, all comes from our insurance company, which provides us the right match to where the market opportunity is and the liability needs are. I think those two forces are definitely going to help our business and our market position.

Chris Littlefield: Thanks, Tom. Do you have an additional question?

[Analyst 1]: I do, Deanna. This one's for you. I think you and Chris have both sort of answered the question, but I just wanted to rephrase it. The view of M&A, because if I go back several years ago, Principal was very, we'll call it M&A focused from a capital deployment. Now it's mainly common dividends and buybacks and minimal M&A. Would you still, you know, is your philosophy still very much along those lines, or would you consider if there were lumpy defined contribution type assets that came to the market, would you still take a hard look at those? I think there might be some more lumpy larger properties that are coming to market in the next year or two. Just curious what your philosophy on those situations might be.

Chris Littlefield: The first thing I would say is, just because I'm sitting in a different seat, our philosophy here at Principal around how we approach inorganic opportunities isn't changing. We're going to continue to be really disciplined and focused and ensure that anything that we take a run at, one, has strategic alignment, one, can give us capabilities that can allow us to even increase our growth potential, has to meet our financial targets. If we're bringing on people, it has to be very culturally aligned with how we function on a day-to-day basis. The first thing I'd point out is that we can meet our financial targets on an organic basis. First and foremost, that's our focus of our team, to execute at a very high level to ensure that we're focused on that.

Chris Littlefield: We will be inquisitive, and we have the capital flexibility to look at opportunities that are out there. There's a high bar, and that high bar exists whether it's an organic deployment of capital or an inorganic deployment of capital. We recognize that scale is going to be critical, especially in some of our businesses. It's important for us to be inquisitive around those opportunities and ultimately lean into those that come our way that do meet those financial, strategic, and cultural thresholds. Ultimately, I think you'll see the same level of discipline as we've had in the past. As I sit here today, we've had three or four years where we were integrating successfully the Wells Fargo acquisition. We were then focused on divesting of a few of our perspectives.

Chris Littlefield: Sitting here today, we can be on our front foot, being able to lean into growth opportunities, both organic and strategic, and still do it with the same level of discipline that we've had in the past.

[Analyst 1]: Great. Thanks for that color, Deanna.

Operator: One moment for our next question. Our final question comes from Wes Carmichael with Autonomous Research. Your line is open.

[Analyst 1]: Hey, good morning. I just wanted to come back to the assumption review in the life insurance segment. Just curious if there's any color on the drivers of experience-related assumptions, if that's lapses or mortality. How should we think about the model refinements? Is that in the rearview mirror, or should that kind of continue going forward?

Chris Littlefield: Yeah, I'll maybe see if Joel can add some color there. I think you know this is something we do with discipline on an annual basis. Ultimately, we also then take the opportunity to step back to say, does anything that we found as part of that review change how we think about our business on a go-forward basis? I think the answer to that second question is there was nothing that we saw or put through our GAAP financials that makes us think differently about our business or the ability to meet our financial targets going forward. I'll maybe ask Joel to give a little more double-click on the life impacts in the quarter.

Joel Pitz: Yeah, thanks for the question, Wes. Deanna said exactly right. The impact, as I noted in my opening remarks, reflects a range of technical model updates and experiences you mentioned. These are normal course refinements to this long-term business. We remain confident in the business. I think it's important to take that away as well. The life impact is modest in scale relative to overall size of our business. As it relates to model refinements specifically, that was two-thirds of the impact, not only the enterprise, but also life. This really reflects refinements on how policyholder behavior and product cash flows are reflected in the models across a number of products. Think about it like it is added sophistication to our models, is how I view refinements. As for the experience, that was about one-third of the impact in life, and there was not a single driver behind the change.

Joel Pitz: This outcome reflects our discipline process of updating the assumptions based on our own experience and industry experience. Importantly, the adjustments span across multiple products rather than be concentrated in any one area. As noted in the prepared remarks and also to reinforce here, it's reflective of a broad range of model refinements and experience updates. It's GAAP only, non-cash. It has no impact on our free capital flow for the enterprise. Importantly, it's immaterial to the ongoing run rate, which is actually reflected in our third-quarter results. It certainly does not impact our outlook or expectations on the future growth and profitability of not only a life business, but also the enterprise in total.

Chris Littlefield: Thanks, Wes. Do you have a follow-up question?

[Analyst 1]: I do. Thank you. Just one quick one, maybe. Any insight into how VII, variable investment income, is shaping up for the fourth quarter? It did sound from Kamal's remarks like maybe there's a bit of real estate transaction momentum. Just curious if there's any foresight into that.

Chris Littlefield: I'll ask Joel Pitz to address that.

Joel Pitz: Yeah, so VII performed very well in the third quarter amongst all asset classes. From a reporting perspective, the real estate was the reason why we were below long-term expectations within operating earnings. Importantly, within the real estate portfolio, we did have a gain manifest itself below the line or in NRCG, about $25 million due to a transaction that occurred in the third quarter that doesn't get OE treatment. When you look at that in conjunction with what we report above the line, we're very much aligned not only for all other asset classes, but also real estate as well. In last quarter, we signaled that there would be more transaction activity in the latter half of the year. That certainly manifests itself in the third quarter, and we expect more of the same in the fourth quarter.

Joel Pitz: Our VII outlook remains, just as it was going into the third quarter, very optimistic for the latter half of the year.

Chris Littlefield: Thanks, Wes, for those questions.

[Analyst 1]: Thank you so much.

Operator: We have reached the end of our Q&A. Ms. Strable, your closing comments, please.

Chris Littlefield: Thank you. As we close today's call, I want to thank all of you for your time, your questions, and your engagement. Our strong third quarter and year-to-date results reaffirm the strength of our strategy and our discipline around execution, which is driving strong profitable growth, expanded return on equity, and robust free capital flow. We continue to see momentum across our strategic priorities. Our position across the retirement ecosystem is strong. Our SMB relationships are growing and deepening, and our global asset management platform is scaling with purpose. I am thankful every day to our almost 20,000 employees that wake up committed to serving our customers. We're focused on providing long-term value to our customers as well as our shareholders and remain well-positioned to deliver on our full-year financial commitment. We look forward to connecting with many of you in the months ahead. Have a great day.

Operator: Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day.