PRINCIPAL FINANCIAL GROUP INC

Previous wording

The following analysis discusses our financial condition as of March 31, 2026, compared with December 31, 2025, and our consolidated results of operations for the three months ended March 31, 2026 and 2025, prepared in conformity with U.S. GAAP. The discussion and analysis includes, where appropriate, factors that may affect our future financial performance. The discussion should be read in conjunction with our Form 10-K, for the year ended December 31, 2025, filed with the SEC and the unaudited condensed consolidated financial statements and the related notes to the financial statements and the other financial information included elsewhere in this Form 10-Q.

Current wording

The following analysis discusses our financial condition as of June 30, 2026, compared with December 31, 2025, and our consolidated results of operations for the three and six months ended June 30, 2026 and 2025, prepared in conformity with U.S. GAAP. The discussion and analysis includes, where appropriate, factors that may affect our future financial performance. The discussion should be read in conjunction with our Form 10-K, for the year ended December 31, 2025, filed with the SEC and the unaudited condensed consolidated financial statements and the related notes to the financial statements and the other financial information included elsewhere in this Form 10-Q.

Previous wording

Actual results may differ materially from those included in the forward-looking statements as a result of risks and uncertainties including, but not limited to, the following: (1) adverse capital and credit market conditions may significantly affect our ability to meet liquidity needs, as well as our access to capital and cost of capital; (2) conditions in the global capital markets, including the equity, bond or real estate markets and the economy generally may materially and adversely affect our business and results of operations; (3) changes in interest rates or credit spreads or a prolonged low interest rate environment may adversely affect our results of operations, financial condition and liquidity and our net income can vary from period to period; (4) our investment portfolio’s risks may reduce asset values, credited returns and overall financial performance; (5) our valuation of investments and the determinations of the amount of allowances and impairments taken on our investments may include methodologies, estimations and assumptions that are subject to differing interpretations and, if changed, could materially adversely affect our results of operations or financial condition; (6) any impairments of, or valuation allowances against, our deferred tax assets could adversely affect our results of operations and financial condition; (7) we may face losses on our insurance and annuity products if our actual experience differs significantly from our pricing and reserving assumptions; (8) the pattern of amortizing our DAC asset and other actuarial balances may change, impacting both the level of our DAC asset and other actuarial balances and the timing of our net income; (9) changes in laws or regulations may reduce our profitability or impact how we do business; (10) our ability to pay stockholder dividends, make share repurchases and meet our obligations may be constrained by the limitations on dividends or other distributions Iowa insurance laws impose on Principal Life; (11) changes in accounting standards may adversely affect our reported results of operations and financial condition; (12) litigation and regulatory investigations may affect our financial strength or reduce our profitability; (13) damage to our reputation may adversely affect our revenues and profitability; (14) we may not be able to protect our intellectual property and may be subject to infringement claims; (15) from time to time, we may become subject to tax audits, tax litigation or similar proceedings, and as a result we may owe additional taxes, interest and penalties in amounts that may be material; (16) applicable laws and our certificate of incorporation and by-laws may discourage takeovers and business combinations that some stockholders might consider in their best interests; (17) our risk management framework may not identify or mitigate all risks, potentially leading to unexpected losses; (18) competition, including from companies that may have greater financi…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Actual results may differ materially from those included in the forward-looking statements as a result of risks and uncertainties including, but not limited to, the following: (1) adverse capital and credit market conditions may significantly affect our ability to meet liquidity needs, as well as our access to capital and cost of capital; (2) conditions in the global capital markets, including the equity, bond or real estate markets and the economy generally may materially and adversely affect our business and results of operations; (3) changes in interest rates or credit spreads or a prolonged low interest rate environment may adversely affect our results of operations, financial condition and liquidity and our net income can vary from period to period; (4) our investment portfolio’s risks may reduce asset values, credited returns and overall financial performance; (5) our valuation of investments and the determinations of the amount of allowances and impairments taken on our investments may include methodologies, estimations and assumptions that are subject to differing interpretations and, if changed, could materially adversely affect our results of operations or financial condition; (6) any impairments of, or valuation allowances against, our deferred tax assets could adversely affect our results of operations and financial condition; (7) we may face losses on our insurance and annuity products if our actual experience differs significantly from our pricing and reserving assumptions; (8) the pattern of amortizing our DAC asset and other actuarial balances may change, impacting both the level of our DAC asset and other actuarial balances and the timing of our net income; (9) changes in laws or regulations may reduce our profitability or impact how we do business; (10) our ability to pay stockholder dividends, make share repurchases and meet our obligations may be constrained by the limitations on dividends or other distributions Iowa insurance laws impose on Principal Life; (11) changes in accounting standards may adversely affect our reported results of operations and financial condition; (12) litigation and regulatory investigations may affect our financial strength or reduce our profitability; (13) damage to our reputation may adversely affect our revenues and profitability; (14) we may not be able to protect our intellectual property and may be subject to infringement claims; (15) we may become subject to tax audits, tax litigation or similar proceedings, and as a result we may owe additional taxes, interest and penalties in amounts that may be material; (16) applicable laws and our certificate of incorporation and by-laws may discourage takeovers and business combinations that some stockholders might consider in their best interests; (17) our risk management framework may not identify or mitigate all risks, potentially leading to unexpected losses; (18) competition, including from companies that may have greater financial resources, broad…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

On January 16, 2025, we announced the signing of an agreement with BCT to expand our investment management capabilities and exit our sponsor and trustee (pension) roles in Hong Kong for MPF Schemes. BCT will be assuming the role as sponsor and trustee for the Principal MPF Schemes. The transaction is expected to close in 2026, subject to regulatory approval; however, certain transaction impacts were recognized in first quarter 2025. We impaired our distribution agreement intangible asset and contract cost asset, resulting in a $65.4 million loss reported in operating expenses on our consolidated statements of operations. Additionally, we classified our customer relationship intangible asset as held-for-sale, resulting in a $77.0 million loss reported in net realized capital gains (losses) on our consolidated statements of operations. For segment reporting, the impairments are reflected in loss from exited business and the held-for-sale write-down is reflected in net realized capital losses. As such, they had no impact on our Principal Asset Management segment pre-tax operating earnings.

Current wording

On January 16, 2025, we announced the signing of an agreement with BCT to expand our investment management capabilities and exit our sponsor and trustee (pension) roles in Hong Kong for MPF Schemes. BCT will be assuming the role as sponsor and trustee for the Principal MPF Schemes. The transaction closed in the third quarter of 2026; however, certain transaction impacts were recognized in first quarter 2025. We impaired our distribution agreement intangible asset and contract cost asset, resulting in a $65.4 million loss reported in operating expenses on our consolidated statements of operations. Additionally, we classified our customer relationship intangible asset as held for sale, resulting in a $77.0 million loss reported in net realized capital gains (losses) on our consolidated statements of operations. For segment reporting, the impairments are reflected in loss from exited business and the held for sale write-down is reflected in net realized capital losses. As such, they had no impact on our Principal Asset Management segment pre-tax operating earnings.

Previous wording

Foreign currency exchange rate fluctuations create variances in our financial statement line items. The most significant impact occurs within our Principal Asset Management segment where pre-tax operating earnings were positively impacted $8.0 million for the three months ended March 31, 2026, as a result of fluctuations in foreign currency to U.S. dollar exchange rates. This impact was calculated by comparing (a) the difference between current year results and prior year results to (b) the difference between current year results and prior year results translated using current year exchange rates for both periods. We use this approach to calculate the impact of exchange rates on all revenue and expense line items. For a discussion of our approaches to managing foreign currency exchange rate risk, see Item 3. “Quantitative and Qualitative Disclosures About Market Risk — Foreign Currency Risk.”

Current wording

Foreign currency exchange rate fluctuations create variances in our financial statement line items. The most significant impact occurs within our Principal Asset Management segment where pre-tax operating earnings were positively impacted $7.9 million and $15.9 million for the three and six months ended June 30, 2026, respectively, as a result of fluctuations in foreign currency to U.S. dollar exchange rates. This impact was calculated by comparing (a) the difference between current year results and prior year results to (b) the difference between current year results and prior year results translated using current year exchange rates for both periods. We use this approach to calculate the impact of exchange rates on all revenue and expense line items. For a discussion of our approaches to managing foreign currency exchange rate risk, see Item 3. “Quantitative and Qualitative Disclosures About Market Risk — Foreign Currency Risk.”

Previous wording

Premiums and other considerations decreased $638.4 million for the Retirement and Income Solutions segment primarily due to lower sales of single premium group annuities with life contingencies. Premiums and other considerations increased $37.1 million for the Benefits and Protection segment primarily due to growth in the Specialty Benefits business.

Current wording

Premiums and other considerations increased $40.7 million for the Retirement and Income Solutions segment primarily due to higher sales of single premium group annuities with life contingencies. Premiums and other considerations increased $27.7 million for the Benefits and Protection segment primarily due to growth in our Specialty Benefits business.

Previous wording

Net realized capital gains on funds withheld assets decreased primarily due to net unrealized losses on funds withheld assets in 2026 as compared to net unrealized gains in 2025.

Current wording

Net realized capital gains (losses) on funds withheld assets changed primarily due to an increase in net unrealized losses on funds withheld assets in 2026 compared to 2025.

Previous wording

Net income attributable to Principal Financial Group, Inc. increased primarily due to the change in fair value of the funds withheld embedded derivative.

Current wording

Net income attributable to Principal Financial Group, Inc. increased $207.3 million due to the change in fair value of the funds withheld embedded derivative and $119.7 million due to the impact from asset write-downs related to exiting our sponsor and trustee (pension) roles in Hong Kong for MPF Schemes in 2025.

Previous wording

Fees and other revenues increased $17.9 million for the Corporate segment primarily due to commission income related to the affiliated distribution realignment in 2026. Fees and other revenues increased $14.8 million for the Principal Asset Management segment primarily due to foreign currency tailwinds. Fees and other revenues increased $9.7 million for the Retirement and Income Solutions segment primarily due to an increase in fee revenue stemming from an increase in average monthly account values, which largely resulted from more favorable financial markets.

Current wording

Fees and other revenues increased $47.2 million for the Retirement and Income Solutions segment primarily due to an increase in fee revenue stemming from an increase in average monthly account values, which largely resulted from more favorable financial markets. Fees and other revenues increased $42.0 million for the Corporate segment primarily due to commission income related to the affiliated distribution realignment in 2026.

Previous wording

Benefits, claims and settlement expenses decreased $575.4 million for the Retirement and Income Solutions segment primarily due to a decrease in reserves, largely stemming from lower sales of single premium group annuities with life contingencies.

Current wording

Benefits, claims and settlement expenses decreased primarily due to a decrease in reserves in the Retirement and Income Solutions segment, largely stemming from lower sales of single premium group annuities with life contingencies.

Previous wording

Dividends to policyholders increased in Benefits and Protection segment primarily due to a higher policyholder dividend obligation in the closed block from improved claims experience.

Current wording

Dividends to policyholders increased in Benefits and Protection segment primarily due to a change in the policyholder dividend obligation.

Previous wording

The effective income tax rate of 14% for the three months ended March 31, 2026 changed from (118)% for the three months ended March 31, 2025, primarily due to an increase in pre-tax income with no proportionate change in permanent tax differences.

Current wording

The effective income tax rate increased to 14% for the six months ended June 30, 2026, from 7% for the six months ended June 30, 2025, primarily due to a 6% impact from an increase in pre-tax income with no proportionate increase in permanent tax differences and a 4% impact from releasing unrecognized tax benefits in the prior year period. These increases were partially offset by a 1% impact from interest exclusion from taxable income and a 2% impact from all other permanent tax adjustments in aggregate.

Previous wording

Net revenue and average monthly account values are key metrics used to understand Retirement and Income Solutions earnings growth. Net revenue, which is used only at the segment level, is defined as operating revenues less benefits, claims and settlement expenses; liability for future policy benefits remeasurement (gain) loss; market risk benefit remeasurement (gain) loss and dividends to policyholders. Net revenue is impacted by: (1) changes in the equity markets and interest rates and (2) the difference between investment income earned on the underlying general account assets and the interest rate credited to the contracts. Average monthly account values include the net balances that customers have accumulated within their account, along with future policy benefits for retirement payout products. Average monthly account values are primarily impacted by net customer cash flows and credit market performance.

Current wording

Net revenue and average monthly account values are key metrics used to understand Retirement and Income Solutions earnings growth. Net revenue, which is used only at the segment level, is defined as operating revenues less benefits, claims and settlement expenses; liability for future policy benefits remeasurement (gain) loss; market risk benefit remeasurement (gain) loss and dividends to policyholders. Net revenue is impacted by: (1) changes in the equity markets and interest rates and (2) the difference between investment income earned on the underlying general account assets and the interest rate credited to the contracts. Average monthly account values include the net balances that customers have accumulated within their account, along with future policy benefits for retirement payout products. Average monthly account values are primarily impacted by net customer cash flows and performance of financial markets.

Previous wording

Net revenue increased primarily due to a $14.0 million increase resulting from growth in the business, a $9.3 million increase in fee revenue primarily due to an increase in average monthly account values, which largely resulted from more favorable financial markets and an $8.0 million increase in variable investment income.

Current wording

Net revenue increased primarily due to a $36.7 million increase in fee revenue primarily due to an increase in average monthly account values, which largely resulted from more favorable financial markets, and a $27.6 million increase in variable investment income.

Previous wording

Pre-tax operating earnings increased in our Investment Management operations primarily due to $9.5 million higher management fee revenue as a result of increased average AUM. Pre-tax operating earnings increased in our International Pension operations due to $12.8 million higher earnings from our equity method investments in Brazil and $6.8 million of foreign currency tailwinds. These improvements were partially offset by $8.8 million of unfavorable relative market performance on our required regulatory investments.

Current wording

Pre-tax operating earnings increased in our Investment Management operations due to $18.2 million higher management fee revenue as a result of increased average AUM net of associated fee compression. This improvement was partially offset due to $6.2 million lower performance fee revenue. Pre-tax operating earnings increased in our International Pension operations due to $16.4 million higher earnings from our equity method investments in Brazil and $14.0 million of foreign currency tailwinds.

Previous wording

Net investment income in our Specialty Benefits business increased $3.1 million due to higher yields on invested assets. Net investment income in our Life Insurance business increased $1.8 million from growth in invested assets and $1.6 million from mark-to-market changes on options associated with our indexed universal life insurance.

Current wording

Net investment income in our Specialty Benefits business increased $2.8 million due to higher yields on invested assets and $0.8 million from growth in invested assets. Net investment income in our Life Insurance business increased $4.8 million primarily due to mark-to-market changes on options associated with our indexed universal life insurance.

Previous wording

Benefits, claims and settlement expenses in our Specialty Benefits business decreased $23.3 million due to improved claims experience offset by $18.1 million due to growth in the business.

Current wording

Benefits, claims and settlement expenses in our Specialty Benefits business decreased $21.3 million due to improved claims experience offset by $19.8 million due to growth in the business. Benefits, claims and settlement expenses in our Life Insurance business decreased $16.3 million due to improved claims experience offset by $5.2 million from changes in reserves and interest credited associated with our indexed universal life business.

Previous wording

Liability for future policy benefits remeasurement gain was driven by improvements in underlying claims experience, resulting in a $12.6 million increased gain in our Life Insurance business partially offset by a $2.4 million increased loss in our Specialty Benefits business.

Current wording

The liability for future policy benefits remeasurement change was driven by underlying claims experience, resulting in a $3.6 million loss in 2026 compared to a $4.8 million gain in 2025 in our Life Insurance business. This was partially offset by a $2.4 million improvement in underlying claims experience in our Specialty Benefits business, resulting in a remeasurement gain in 2026 compared to remeasurement loss in 2025.

Previous wording

The liability for future policy benefits remeasurement (gain) loss change was primarily due to improvements in underlying claims experience in the Benefits and Protection segment.

Current wording

The liability for future policy benefits remeasurement change was driven by underlying claims experience, resulting in an increased gain in our Life Insurance business.

Previous wording

Dividends to policyholders in our Life Insurance business increased primarily due to a higher policyholder dividend obligation in the closed block from improved claims experience.

Current wording

Dividends to policyholders increased primarily due to a change in the policyholder dividend obligation in our Life Insurance business.

Previous wording

Total stockholder dividends paid by Principal Life to its parentfor the three months ended March 31, 2026, were$232.0 million, all of which was extraordinary and approved by the Commissioner. As of March 31, 2026, we had$1,802.6 million ofcash and liquid assets held in our holding companies and other subsidiaries, which is available for corporate purposes. Corporate balances held in foreign holding companies meet the indefinite reinvestment exception.

Current wording

Total stockholder dividends paid by Principal Life to its parent for the six months ended June 30, 2026, were $365.2 million, of which $232.0 million was extraordinary and approved by the Commissioner. As of June 30, 2026, we had $2,562.7 million of cash and liquid assets held in our holding companies and other subsidiaries, which is available for corporate purposes. Corporate balances held in foreign holding companies meet the indefinite reinvestment exception.

Previous wording

Net cash provided by operating activities was $187.1 million and $977.3 million for thethree months ended March 31, 2026 and 2025, respectively. Our insurance business typically generates positive cash flows from operating activities, as premiums collected from our insurance products and investment income received exceed acquisition costs, benefits paid, redemptions and operating expenses. These positive cash flows are then invested to support the obligations of our insurance and investment products and required capital supporting these products. Our cash flows from operating activities are affected by the timing of premiums, fees and investment income received and benefits and expenses paid. The decrease in cash provided by operating activities in 2026 compared to 2025 was primarily due to fluctuations in receivables and payables associated with the timing of settlements.

Current wording

Net cash provided by operating activities was $2,264.5 million and $1,789.2 million for the six months ended June 30, 2026 and 2025, respectively. Our insurance business typically generates positive cash flows from operating activities, as premiums collected from our insurance products and investment income received exceed acquisition costs, benefits paid, redemptions and operating expenses. These positive cash flows are then invested to support the obligations of our insurance and investment products and required capital supporting these products. Our cash flows from operating activities are affected by the timing of premiums, fees and investment income received and benefits and expenses paid. The increase in cash provided by operating activities in 2026 compared to 2025 was primarily due to fluctuations in receivables and payables associated with the timing of settlements. Additionally, cash received from sales of mortgage loans held for sale increased $300.0 million in 2026 as compared to 2025.

Previous wording

Net cash used in investing activities was $959.8 million and $952.7 million for thethree months ended March 31, 2026 and 2025, respectively. The increase in cash used in investing activities was due to net acquisitions and originations of mortgage loans in 2026 compared to net sales of mortgage loans in 2025, which were mostly offset by lower net purchases of available-for-sale securities in 2026 as compared to 2025.

Current wording

Net cash used in investing activities was $2,381.0 million and $1,202.4 million for the six months ended June 30, 2026 and 2025, respectively. The increase in cash used in investing activities was primarily due to higher net purchases of available-for-sale securities in 2026 as compared to 2025.

Previous wording

Net cash provided by financing activities was $395.7 million for the three months ended March 31, 2026, compared to net cash used in financing activities of $360.8 million for the three months ended March 31, 2025. The increase in cash provided by financing activities was due to an increase in banking operations net deposits and net investment contract deposits in 2026 as compared to 2025.

Current wording

Net cash provided by financing activities was $945.0 million for the six months ended June 30, 2026, compared to net cash used in financing activities of $1,139.7 million for the six months ended June 30, 2025. The increase in cash provided by financing activities was primarily due to net investment contract deposits in 2026 as compared to withdrawals in 2025, the proceeds from long-term debt issued in 2026 with no corresponding activity in 2025, the repayment of long-term debt in 2025 with no corresponding activity in 2026 and an increase in banking operation net deposits.

Previous wording

Guarantors and Issuers of Guaranteed Securities. PFG has issued certain notes pursuant to transactions registered under the Securities Act of 1933. Such notes include all currently outstanding senior notes (the “registered notes”). For additional information on the senior notes, see Item 8. “Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements, Note 13, Debt” in our Annual Report on Form 10-K for the year ended December 31, 2025.

Current wording

Guarantors and Issuers of Guaranteed Securities. PFG has issued certain notes pursuant to transactions registered under the Securities Act of 1933. Such notes include all currently outstanding senior notes (the “registered notes”). For additional information on the senior notes, see item 1. "Financial Statements, Notes to Unaudited Condensed Consolidated Financial Statements, Note 11, Long-Term Debt" included herein, and Item 8. “Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements, Note 13, Debt” in our Annual Report on Form 10-K for the year ended December 31, 2025.

Previous wording

As of March 31, 2026, 46% of our net assets (liabilities) were Level 1, 51% were Level 2 and 3% were Level 3. Excluding separate account assets as of March 31, 2026, 4% of our net assets (liabilities) were Level 1, 88% were Level 2 and 8% were Level 3.

Current wording

As of June 30, 2026, 48% of our net assets (liabilities) were Level 1, 50% were Level 2 and 2% were Level 3. Excluding separate account assets as of June 30, 2026, 4% of our net assets (liabilities) were Level 1, 90% were Level 2 and 6% were Level 3.

Previous wording

Net assets (liabilities) measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of March 31, 2026, were $7,308.9 million as compared to $7,042.6 million as of December 31, 2025. The increase was primarily due to an increase in the funds withheld payable embedded derivative net asset and an increase in fixed maturities, available-for-sale resulting from net purchases and net transfers into Level 3.

Current wording

Net assets (liabilities) measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of June 30, 2026, were $6,028.0 million as compared to $7,042.6 million as of December 31, 2025. The decrease was primarily due to an increase in the fair value of investment and universal life contract embedded derivative liabilities and a decrease in fixed maturities, available-for-sale and trading resulting from net settlements and net transfers out of Level 3.

Previous wording

We had total consolidated assets as of March 31, 2026, of$332,704.5 million, of which$110,857.6 million were invested assets. A portion of our invested assets represent funds withheld backing reserves as part of coinsurance with funds withheld reinsurance agreements. The funds withheld assets and associated net investment income and net realized capital gains (losses) are not included in the discussions below as the investment risk is passed to the reinsurer. See Item 1. “Financial Statements, Notes to Unaudited Condensed Consolidated Financial Statements, Note 10, Reinsurance” for more information on the funds withheld assets. The rest of our total consolidated assets are comprised primarily of separate account assets for which we do not bear investment risk; therefore, the discussion and financial information below does not include such assets.

Current wording

We had total consolidated assets as of June 30, 2026, of $352,752.3 million, of which $113,001.6 million were invested assets. A portion of our invested assets represent funds withheld backing reserves as part of coinsurance with funds withheld reinsurance agreements. The funds withheld assets and associated net investment income and net realized capital gains (losses) are not included in the discussions below as the investment risk is passed to the reinsurer. See Item 1. “Financial Statements, Notes to Unaudited Condensed Consolidated Financial Statements, Note 10, Reinsurance” for more information on the funds withheld assets. The rest of our total consolidated assets are comprised primarily of separate account assets for which we do not bear investment risk; therefore, the discussion and financial information below does not include such assets.

Previous wording

Net investment income increased primarily due to higher average invested assets in fixed maturities, derivatives in fair value hedges, and other investments for our U.S. operations. These increases were partially offset by lower inflation-based returns on average invested assets and cash in Latin America.

Current wording

Net investment income increased primarily due to higher average invested assets in fixed maturities and residential mortgages, derivatives in fair values hedges for our U.S. operations and higher inflation-based returns on average invested assets and cash in Latin America. These increases were partially offset by lower yields in fixed maturities and decreases in federal fund rates tied to our short-term investments.

Previous wording

The following table presents the contributors to net realized capital gains and losses for the periods indicated. The amounts below do not include net realized capital gains (losses) on funds withheld assets that are not passed to the reinsurer, which are separately reported on the consolidated statements of operations.

Current wording

The following table presents the contributors to net realized capital gains and losses for the periods indicated. The amounts below do not include net realized capital gains (losses) on funds withheld assets, which are separately reported on the consolidated statements of operations.

Previous wording

Net realized capital losses increased primarily due to losses versus gains on GMWB/RILA activities and increased credit losses from available-for-sale fixed maturities. These increases were partially offset by a held-for-sale write-down of an intangible asset in 2025, increased gains on currency derivatives, reduced losses from noncredit available-for-sale fixed maturities and reduced losses on non-hedged interest rate derivatives due to changes in rates.

Current wording

Net realized capital losses decreased primarily due to a held for sale write-down of an intangible asset in 2025, gains versus losses on non-hedged interest rate derivatives due to changes in rates and gains versus losses on currency derivatives. These decreases were partially offset by losses vs gains on GMWB/RILA activities and increased credit losses from available-for-sale fixed maturities.

Previous wording

Of our invested assets, $87,685.4 million were held by our U.S. operations as of March 31, 2026. Our U.S. invested assets are managed primarily by Principal Asset Management–Investment Management. Our Investment Committee, appointed by our Board, is responsible for establishing investment policies and monitoring risk limits and tolerances. Our primary investment objective is to maximize after-tax returns consistent with acceptable risk parameters. We seek to protect customers’ benefits by optimizing the risk/return relationship on an ongoing basis, through asset/liability matching, reducing credit risk, avoiding high levels of investments that may be redeemed by the issuer, maintaining sufficiently liquid investments and avoiding undue asset concentrations through diversification. We are exposed to two primary sources of investment risk:

Current wording

Of our invested assets, $90,404.9 million were held by our U.S. operations as of June 30, 2026. Our U.S. invested assets are managed primarily by Principal Asset Management–Investment Management. Our Investment Committee, appointed by our Board, is responsible for establishing investment policies and monitoring risk limits and tolerances. Our primary investment objective is to maximize after-tax returns consistent with acceptable risk parameters. We seek to protect customers’ benefits by optimizing the risk/return relationship on an ongoing basis, through asset/liability matching, reducing credit risk, avoiding high levels of investments that may be redeemed by the issuer, maintaining sufficiently liquid investments and avoiding undue asset concentrations through diversification. We are exposed to two primary sources of investment risk:

Previous wording

We purchase credit default swaps to hedge certain credit exposures in our investment portfolio. We economically hedged credit exposure in our portfolio by purchasing credit default swaps with a notional amount of $84.9 million and $85.0 million as of March 31, 2026 and December 31, 2025, respectively. We sell credit default swaps and total return swaps to offer credit protection to investors when entering into synthetic replicating transactions. When selling credit protection, if there is an event of default by the referenced name, we are obligated to pay the counterparty the referenced amount of the contract and receive in return the referenced security. When selling total return swaps, if there is an event of default by the referenced name, we are obligated to compensate the protection buyer for any decline in the price of the referenced security. For further information on credit derivatives sold, see Item 1. “Financial Statements, Notes to Unaudited Condensed Consolidated Financial Statements, Note 4, Derivative Financial Instruments” under the caption, “Credit Derivatives Sold.”

Current wording

We purchase credit default swaps to hedge certain credit exposures in our investment portfolio. We economically hedged credit exposure in our portfolio by purchasing credit default swaps with a notional amount of $85.0 million and $85.0 million as of June 30, 2026 and December 31, 2025, respectively. We sell credit default swaps and total return swaps to offer credit protection to investors when entering into synthetic replicating transactions. When selling credit protection, if there is an event of default by the referenced name, we are obligated to pay the counterparty the referenced amount of the contract and receive in return the referenced security. When selling total return swaps, if there is an event of default by the referenced name, we are obligated to compensate the protection buyer for any decline in the price of the referenced security. For further information on credit derivatives sold, see Item 1. “Financial Statements, Notes to Unaudited Condensed Consolidated Financial Statements, Note 4, Derivative Financial Instruments” under the caption, “Credit Derivatives Sold.”

Previous wording

The amortized cost and weighted average yield, calculated using amortized cost, of non-structured fixed maturity securities that will be callable at the option of the issuer, excluding securities with a make-whole provision, were $4,249.1 million and 4.8%, respectively, as of March 31, 2026, and $3,990.4 million and 4.8%, respectively, as of December 31, 2025. In addition, the amortized cost and weighted average yield of RMBS, residential collateralized mortgage obligations, and asset-backed securities - home equity with material prepayment risk were $9,156.1 million and 4.2%, respectively, as of March 31, 2026, and $9,021.4 million and 4.2%, respectively, as of December 31, 2025.

Current wording

The amortized cost and weighted average yield, calculated using amortized cost, of non-structured fixed maturity securities that will be callable at the option of the issuer, excluding securities with a make-whole provision, were $4,047.1 million and 4.7%, respectively, as of June 30, 2026, and $3,990.4 million and 4.8%, respectively, as of December 31, 2025. In addition, the amortized cost and weighted average yield of RMBS, residential collateralized mortgage obligations, and asset-backed securities - home equity with material prepayment risk were $9,125.1 million and 4.2%, respectively, as of June 30, 2026, and $9,021.4 million and 4.2%, respectively, as of December 31, 2025.

Previous wording

The international exposure held in our U.S. operation’s fixed maturities portfolio was 14% of total fixed maturities as of both March 31, 2026, and December 31, 2025. It is comprised of corporate and foreign government fixed maturities.

Current wording

The international exposure held in our U.S. operation’s fixed maturities portfolio was 13% and 14% of total fixed maturities as of June 30, 2026, and December 31, 2025, respectively. It is comprised of corporate and foreign government fixed maturities.

Previous wording

International fixed maturities exposure is determined by the country of risk of the obligor entity. All international fixed maturities held by our U.S. operations are either denominated in U.S. dollars or have been swapped into U.S. dollar equivalents. Our international investments are analyzed internally by country and industry credit investment professionals. We control concentrations using issuer and country level exposure benchmarks, which are based on the credit quality of the issuer and the country. Our investment policy limits total international fixed maturities investments and we are within those internal limits. Exposure to Canada is not included in our international exposure. As of March 31, 2026 and December 31, 2025, our investments in Canada totaled $929.0 million and $938.0 million, respectively.

Current wording

International fixed maturities exposure is determined by the country of risk of the obligor entity. All international fixed maturities held by our U.S. operations are either denominated in U.S. dollars or have been swapped into U.S. dollar equivalents. Our international investments are analyzed internally by country and industry credit investment professionals. We control concentrations using issuer and country level exposure benchmarks, which are based on the credit quality of the issuer and the country. Our investment policy limits total international fixed maturities investments and we are within those internal limits. Exposure to Canada is not included in our international exposure. As of June 30, 2026 and December 31, 2025, our investments in Canada totaled $898.8 million and $938.0 million, respectively.

Previous wording

Fixed Maturities Credit Concentrations. One aspect of managing credit risk is through industry, issuer and asset class diversification. Our credit concentrations are managed to established limits. The top 10 exposures comprised 5.5% of single-name credit fixed maturity exposures as of March 31, 2026, and 5.5% as of December 31, 2025.

Current wording

Fixed Maturities Credit Concentrations. One aspect of managing credit risk is through industry, issuer and asset class diversification. Our credit concentrations are managed to established limits. The top 10 exposures comprised 5.6% of single-name credit fixed maturity exposures as of June 30, 2026, and 5.5% as of December 31, 2025.

Previous wording

Fixed maturities included 77 securities with an amortized cost of $854.4 million, gross gains of $12.5 million, gross losses of $6.0 million, valuation allowance of $2.2 million and a carrying amount of $858.7 million as of March 31, 2026, that were still pending a review and assignment of a designation by the SVO or NRSRO ratings to be assigned. Due to the timing of when fixed maturities are purchased, legal documents are filed and the review by the SVO is completed, or NRSRO ratings that have expired or been withdrawn, we will always have securities in our portfolio that are unrated over a reporting period. In these instances, an equivalent designation is assigned based on our fixed income analyst’s assessment.

Current wording

Fixed maturities included 131 securities with an amortized cost of $1,518.8 million, gross gains of $22.1 million, gross losses of $5.1 million, valuation allowance of $2.2 million and a carrying amount of $1,533.6 million as of June 30, 2026, that were still pending a review and assignment of a designation by the SVO or NRSRO ratings to be assigned. Due to the timing of when fixed maturities are purchased, legal documents are filed and the review by the SVO is completed, or NRSRO ratings that have expired or been withdrawn, we will always have securities in our portfolio that are unrated over a reporting period. In these instances, an equivalent designation is assigned based on our fixed income analyst’s assessment.

Previous wording

The net realized loss relating to the change in the allowance for credit loss and credit related sales of fixed maturities was $32.4 million and $5.0 million for the three months ended March 31, 2026 and 2025, respectively.

Current wording

The net realized loss relating to the change in the allowance for credit loss and credit related sales of fixed maturities was $8.9 million and $5.0 million for the three months ended June 30, 2026 and 2025, respectively, and $41.3 million and $10.0 million for the six months ended June 30, 2026 and 2025, respectively.

Previous wording

Of the $3,586.4 million in gross unrealized losses as of March 31, 2026, $17.6 million in losses were attributed to securities scheduled to mature in one year or less, $220.7 million attributed to securities scheduled to mature between one to five years, $309.9 million attributed to securities scheduled to mature between five to ten years, $2,293.6 million attributed to securities scheduled to mature after ten years and $744.6 million related to mortgage-backed and other ABS that are not classified by maturity year. As of March 31, 2026, we were in a $2,975.8 million net unrealized loss position as compared to a $2,448.0 million net unrealized loss position as of December 31, 2025. The $527.8 million increase in net unrealized losses for the three months ended March 31, 2026, can be attributed to an increase in interest rates and widening of credit spreads.

Current wording

Of the $3,423.9 million in gross unrealized losses as of June 30, 2026, $21.1 million in losses were attributed to securities scheduled to mature in one year or less, $231.0 million attributed to securities scheduled to mature between one to five years, $275.6 million attributed to securities scheduled to mature between five to ten years, $2,133.2 million attributed to securities scheduled to mature after ten years and $763.0 million related to mortgage-backed and other ABS that are not classified by maturity year. As of June 30, 2026, we were in a $2,760.0 million net unrealized loss position as compared to a $2,448.0 million net unrealized loss position as of December 31, 2025. The $312.0 million increase in net unrealized losses for the six months ended June 30, 2026, can be attributed to an increase in interest rates.

Previous wording

Included in the public category carrying amount as of March 31, 2026 and December 31, 2025, were $16,440.9 million and $16,411.2 million, respectively, of securities subject to certain holding periods and resale restrictions pursuant to Rule 144A of the Securities Act of 1933.

Current wording

Included in the public category carrying amount as of June 30, 2026 and December 31, 2025, were $16,824.4 million and $16,411.2 million, respectively, of securities subject to certain holding periods and resale restrictions pursuant to Rule 144A of the Securities Act of 1933.