PRINCIPAL FINANCIAL GROUP INC

Effective Income Tax Rate

The provision for income taxes for interim periods is based on an estimated annual effective tax rate. Excluded from the estimated annual effective tax rate are discrete items occurring during the period, including those which do not relate to ordinary operating income.

The effective tax rate for the three months ended March 31, 2026 was 14%. The effective tax rate differed from the U.S. federal statutory tax rate of 21% due primarily to tax benefits from the dividends received deduction, interest exclusion from taxable income and the impact of equity method presentation.

The effective tax rate for the three months ended March 31, 2025 was (118)%. The negative effective tax rate differed from the U.S. federal statutory tax rate of 21% due primarily to modest pre-tax income with no proportionate change in beneficial permanent tax differences such as foreign tax credits and the dividends received deduction.

Pillar Two Model Rules

We are currently monitoring global enactments of the Pillar Two model rules proposed by the Organisation for Economic Co-operation and Development (“OECD”), which brings forward a 15% global minimum tax. Generally, a company is required to consider the impact of new tax law on realizability of its deferred tax assets (“DTAs”), including determination of whether a change to its valuation allowance amounts is necessary. We made an accounting policy election to disregard the Pillar Two model rules when evaluating DTAs and rather recognize a current period tax expense when incurred.

Certain foreign jurisdictions have enacted, or are in the process of enacting, legislation implementing Income Inclusion Rules or Undertaxed Profits Rules, which may result in additional tax liabilities for multinational companies. On January 5, 2026, the OECD released administrative guidance for a “Side-by-Side” agreement that addresses the interaction of Pillar Two with the U.S. tax system. We recognize the effect of income tax legislation in the period of enactment; therefore, we will monitor the legislative enactment of the “Side-by-Side” agreement on a jurisdiction-by-jurisdiction basis.

Income taxes for the three months ended March 31, 2026, reflect the impact of enacted Pillar Two legislation in applicable jurisdictions based on management’s current interpretation of each jurisdiction’s tax law.