PRINCIPAL FINANCIAL GROUP INC

Previous wording

The following analysis discusses our financial condition as of March 31, 2024, compared with December 31, 2023, and our consolidated results of operations for the three months ended March 31, 2024 and 2023, 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, 2023, 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, 2024, compared with December 31, 2023, and our consolidated results of operations for the three and six months ended June 30, 2024 and 2023, 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, 2023, 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

Factors Affecting Comparability of Results of Operations

Current wording

Other Factors Affecting Comparability of Results of Operations

Previous wording

Foreign currency exchange rate fluctuations create variances in our financial statement line items. The most significant impact occurs within our Principal International operations where pre-tax operating earnings were negatively impacted $1.1 million for the three months ended March 31, 2024, 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 International operations where pre-tax operating earnings were negatively impacted $6.2 million and $7.3 million for the three and six months ended June 30, 2024, 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 increased $182.9 million for the Retirement and Income Solutions segment primarily due to higher sales of single premium group annuities with life contingencies. The single premium group annuity product, which is typically used to fund defined benefit plan terminations, can generate large premiums from very few customers and therefore premiums tend to vary from period to period. Premiums and other considerations increased $57.5 million for the Benefits and Protection segment primarily due to growth in the Specialty Benefits business.

Current wording

Premiums and other considerations increased $380.2 million for the Retirement and Income Solutions segment primarily due to higher sales of single premium group annuities with life contingencies. The single premium group annuity product, which is typically used to fund defined benefit plan terminations, can generate large premiums from very few customers and therefore premiums tend to vary from period to period.

Previous wording

Benefits, claims and settlement expenses increased $266.4 million for the Retirement and Income Solutions segment primarily due to an increase in reserves, stemming from higher sales of single premium group annuities with life contingencies.

Current wording

Benefits, claims and settlement expenses increased $457.3 million for the Retirement and Income Solutions segment primarily due to an increase in reserves, stemming from higher sales of single premium group annuities with life contingencies. This increase was partially offset by a $202.7 million decrease for the Benefits and Protection segment primarily due to the one-time impact of the YRT Reinsurance Transactions in 2024.

Previous wording

Operating expenses increased primarily due to growth in the business.

Current wording

Operating expenses increased primarily due to a $30.2 million increase in compensation costs and a $20.6 million increase in nondeferrable commission expense.

Previous wording

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

Current wording

Net income attributable to Principal Financial Group, Inc. increased primarily due to a $760.5 million favorable change in fair value of the funds withheld embedded derivative. This increase was partially offset by a $158.1 million unfavorable one-time impact of the YRT Reinsurance Transactions in 2024.

Previous wording

Fees and other revenues increased $29.6 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 resulted from more favorable financial markets. Fees and other revenues increased $11.0 million for the Benefits and Protection segment primarily due to growth in the Life Insurance business. Fees and other revenues increased $7.9 million for the Principal Asset Management segment primarily due to higher management fee revenue as a result of higher average AUM by our Principal Global Investors operations.

Current wording

Fees and other revenues increased $51.1 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 resulted from more favorable financial markets. Fees and other revenues increased $21.1 million for the Principal Asset Management segment largely due to higher management fee revenue as a result of higher average AUM managed by our Principal Global Investors operations. Fees and other revenues increased $15.3 million for the Benefits and Protection segment primarily due to growth in our Life Insurance business.

Previous wording

The change in the fair value of the funds withheld embedded derivative resulted in a gain in first quarter of 2024 due primarily to an increase in interest rates as compared to a loss in first quarter of 2023 driven by a decrease in interest rates.

Current wording

The change in fair value of the funds withheld embedded derivative resulted in a gain in 2024 due primarily to an increase in interest rates as compared to a loss in 2023 driven by a decrease in interest rates and tightening of credit spreads.

Previous wording

Operating expenses increased primarily due to a $48.9 million increase in amounts credited to employee accounts in a nonqualified defined contribution pension plan and a $28.2 million increase in compensation costs.

Current wording

Operating expenses increased primarily due to a $58.4 million increase in compensation costs, a $54.9 million increase in amounts credited to employee accounts in a nonqualified defined contribution pension plan and a $38.3 million increase in nondeferrable commission expense.

Previous wording

The effective income tax rate of 15% for the three months ended March 31, 2024, changed from 37% for the three months ended March 31, 2023, primarily due to an increase in pre-tax income in first quarter of 2024 as compared to pre-tax losses in first quarter of 2023 with no proportionate change in permanent tax differences. See Item 1. “Financial Statements, Notes to Unaudited Condensed Consolidated Financial Statements, Note 11, Income Taxes” for a reconciliation of the corporate income tax rate to the effective income tax rate.

Current wording

The effective income tax rate increased to 17% for the six months ended June 30, 2024 from (8)% for the six months ended June 30, 2023, primarily due to a 14% impact from an increase in pre-tax income and an 8% impact from state income taxes. See Item 1. “Financial Statements, Notes to Unaudited Condensed Consolidated Financial Statements, Note 11, Income Taxes” for a reconciliation between the U.S. corporate income tax rate and the effective income tax rate.

Previous wording

Pre-tax operating earnings increased due to an increase in our net revenue partially offset by an increase in operating expenses as described below.

Current wording

Pre-tax operating earnings increased due to an increase in our net revenue, which was partially offset by an increase in operating expenses as described below.

Previous wording

Net revenue increased primarily due to a $30.1 million increase in fee revenue stemming from an increase in average monthly account values, which resulted from more favorable financial markets and a $16.3 million increase in variable investment income.

Current wording

Net revenue increased primarily due to a $23.4 million increase in variable investment income and a $22.5 million increase in fee revenue stemming from an increase in average monthly account values, which resulted from more favorable financial markets.

Previous wording

Operating expenses increased $25.5 million primarily due to growth and investments in the business.

Current wording

Operating expenses increased $23.2 million primarily due to growth and investments in the business.

Previous wording

Pre-tax operating earnings decreased in our Principal International operations primarily due to a $6.6 million decrease in earnings from our equity method investments in China. Pre-tax operating earnings increased in our Principal Global Investors operations primarily due to a $12.6 million increase in management fee revenue as a result of higher average AUM, which was partially offset by $7.3 million in higher operating expenses.

Current wording

Pre-tax operating earnings increased in our Principal Global Investors operations primarily due to a $26.9 million increase in management fee revenue as a result of higher average AUM. This improvement was partially offset by a $21.9 million increase in operating expenses and a $4.7 million decrease in performance fee revenue primarily in our real estate business.

Previous wording

Benefits, claims and settlement expenses in our Specialty Benefits business increased $36.3 million from growth in the business, offset by $6.9 million from improved claims experience. Benefits, claims and settlement expenses in our Life Insurance business increased $7.2 million from growth in the business and $6.6 million from reserves and interest credited associated with our indexed universal life business.

Current wording

Benefits, claims and settlement expenses in our Specialty Benefits business increased $39.2 million from growth in the business, offset by $4.9 million from improved claims experience. Benefits, claims and settlement expenses in our Life Insurance business decreased $58.0 million due to the one-time impact of the YRT Reinsurance Transactions in 2024, offset by $7.0 million due to growth in the business.

Previous wording

Pre-tax operating earnings in our Specialty Benefits business increased $8.7 million due to higher variable investment income and $7.0 million due to growth in the business. Pre-tax operating earnings in our Life Insurance business decreased $8.1 million due to an increase in the policyholder dividend obligation resulting from lower claims in our Closed Block.

Current wording

Pre-tax operating earnings in our Specialty Benefits business increased $15.2 million due to growth in the business and $11.8 million from improved claims experience. Pre-tax operating earnings in our Life Insurance business decreased $10.5 million primarily due to an increase in the policyholder dividend obligation resulting from lower claims in our Closed Block.

Previous wording

Dividends to policyholders in our Life Insurance business increased primarily due to an increase in the policyholder dividend obligation resulting from lower claims in our Closed Block.

Current wording

Dividends to policyholders in our Life Insurance business increased $6.9 million primarily due to an increase in the policyholder dividend obligation resulting from lower claims in our Closed Block.

Previous wording

We also manage liquidity risk by limiting the sales of liabilities with features such as puts or other options that can be exercised at inopportune times. For example, as of March 31, 2024, approximately $15.3 billion, or 99%, of our institutional guaranteed investment contracts and funding agreements cannot be redeemed by contractholders prior to maturity. Our individual annuity liabilities also contain surrender charges and other provisions limiting early surrenders.

Current wording

We also manage liquidity risk by limiting the sales of liabilities with features such as puts or other options that can be exercised at inopportune times. For example, as of June 30, 2024, approximately $14.7 billion, or 99%, of our institutional guaranteed investment contracts and funding agreements cannot be redeemed by contractholders prior to maturity. Our individual annuity liabilities also contain surrender charges and other provisions limiting early surrenders.

Previous wording

We had the following short-term credit available with various financial institutions as of March 31, 2024:

Current wording

We had the following short-term credit financing structures available with various financial institutions as of June 30, 2024:

Previous wording

Total stockholder dividends paid by Principal Life to its parent for the three months ended March 31, 2024, were $440.0 million, all of which was extraordinary and approved by the Commissioner. As of March 31, 2024, we had $2,214.6 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.

Current wording

Total stockholder dividends paid by Principal Life to its parent for the six months ended June 30, 2024, were $540.0 million, all of which was extraordinary and approved by the Commissioner. As of June 30, 2024, we had $2,417.0 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 $584.2 million and $695.3 million for the three months ended March 31, 2024 and 2023, respectively. Our insurance business typically generates positive cash flows from operating activities, as premiums collected from our insurance products and income received from our investments 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 was primarily due to fluctuations in receivables and payables associated with the timing of settlements in 2024 as compared to 2023.

Current wording

Net cash provided by operating activities was $2,015.9 million and $1,797.8 million for the six months ended June 30, 2024 and 2023, 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 was primarily due to a one-time impact of the YRT Reinsurance Transactions in 2024.

Previous wording

Net cash used in investing activities was $1,343.2 million and $1,104.1 million for the three months ended March 31, 2024 and 2023, respectively. The increase in cash used in investing activities was due to net acquisitions and originations of mortgage loans in 2024 as compared to net sales of mortgage loans in 2023. These were partially offset by lower net purchases of available-for-sale securities in 2024 as compared 2023.

Current wording

Net cash used in investing activities was $1,631.0 million and $1,082.4 million for the six months ended June 30, 2024 and 2023, respectively. The increase in cash used in investing activities was due to higher net purchases of available-for-sale securities and higher net acquisitions and originations of mortgage loans in 2024 as compared to 2023. These were partially offset by higher net sales of real estate in 2024 as compared 2023.

Previous wording

Net cash provided by financing activities was $219.7 million and $201.7 million for the three months ended March 31, 2024 and 2023, respectively. The increase in cash provided by financing activities was due to an increase in banking operations net deposits in 2024 as compared to 2023. The increase in cash provided was partially offset by proceeds from long-term debt issued in 2023 with no corresponding activity in 2024.* *

Current wording

Net cash used in financing activities was $276.0 million and $1,489.5 million for the six months ended June 30, 2024 and 2023, respectively. The decrease in cash used by financing activities was due to an increase in banking operations net deposits and net investment contract deposits in 2024 compared to net investment contract withdrawals in 2023.

Previous wording

As of March 31, 2024, 48% of our net assets (liabilities) were Level 1, 49% were Level 2 and 3% were Level 3. Excluding separate account assets as of March 31, 2024, 3% of our net assets (liabilities) were Level 1, 88% were Level 2 and 9% were Level 3.

Current wording

As of June 30, 2024, 47% of our net assets (liabilities) were Level 1, 50% were Level 2 and 3% were Level 3. Excluding separate account assets as of June 30, 2024, 3% of our net assets (liabilities) were Level 1, 87% were Level 2 and 10% 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, 2024, were $7,593.7 million as compared to $7,447.8 million as of December 31, 2023. The increase was primarily related to an increase in the funds withheld payable embedded derivative net asset.

Current wording

Net assets (liabilities) measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of June 30, 2024, were $8,020.1 million as compared to $7,447.8 million as of December 31, 2023. The increase was primarily due to an increase in the funds withheld payable embedded derivative net asset.

Previous wording

We had total consolidated assets as of March 31, 2024, of $308,683.5 million, of which $98,912.7 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, 2024, of $308,777.3 million, of which $99,157.3 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 income associated with derivatives in fair value hedges and higher yields and average invested assets in fixed maturities and cash in our U.S. operations. These increases were partially offset by lower inflation-based investment returns on Latin America average invested assets, foreign currency headwinds and lower income from our equity method investments in Brazil.

Current wording

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

Previous wording

Net realized capital losses decreased primarily due to gains versus losses on non-hedged interest rate derivatives due to changes in rates and reduced losses on fixed maturity credit impairments. These decreases were partially offset by net losses versus gains on currency derivatives, increased losses due to commercial mortgage loan reserve changes, and reduced gains on equity securities and sponsored investment funds due to equity market changes.

Current wording

Net realized capital losses decreased primarily due to gains versus losses on currency derivatives due to changes in rates and reduced losses on fixed maturity credit impairments. These decreases were partially offset by increased losses due to commercial mortgage loan reserve changes, increased fixed maturity noncredit losses and decreased gains on interest rate swaps not designated as hedging instruments due to changes in rates.

Previous wording

Of our invested assets, $74,195.9 million were held by our U.S. operations as of March 31, 2024. Our U.S. invested assets are managed primarily by Principal Global Investors. 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, $74,988.7 million were held by our U.S. operations as of June 30, 2024. Our U.S. invested assets are managed primarily by Principal Global Investors. 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

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 $2,222.8 million and 4.0%, respectively, as of March 31, 2024, and $2,159.0 million and 4.0%, respectively, as of December 31, 2023. 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 $7,550.5 million and 3.9%, respectively, as of March 31, 2024, and $6,959.0 million and 3.7%, respectively, as of December 31, 2023.

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 $2,186.5 million and 4.0%, respectively, as of June 30, 2024, and $2,159.0 million and 4.0%, respectively, as of December 31, 2023. 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 $7,704.9 million and 4.0%, respectively, as of June 30, 2024, and $6,959.0 million and 3.7%, respectively, as of December 31, 2023.

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, 2024 and December 31, 2023, our investments in Canada totaled $939.4 million and $958.0 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, 2024 and December 31, 2023, our investments in Canada totaled $968.3 million and $958.0 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 4.8% of single-name credit fixed maturity exposures as of both March 31, 2024 and December 31, 2023.

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 5.1% of single-name credit fixed maturity exposures as of June 30, 2024, and 4.8% as of December 31, 2023.

Previous wording

Fixed maturities included 42 securities with an amortized cost of $476.9 million, gross gains of $22.2 million, gross losses of $0.9 million, valuation allowance of $0.0 million and a carrying amount of $498.2 million as of March 31, 2024, 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 47 securities with an amortized cost of $601.4 million, gross gains of $7.4 million, gross losses of $16.6 million, valuation allowance of $0.0 million and a carrying amount of $592.2 million as of June 30, 2024, 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 $8.1 million and $15.7 million for the three months ended March 31, 2024 and 2023, 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 $0.6 million and $26.3 million for the three months ended June 30, 2024 and 2023, respectively, and $8.7 million and $42.0 million for the six months ended June 30, 2024 and 2023, respectively.

Previous wording

Of the $4,161.7 million in gross unrealized losses as of March 31, 2024, $12.2 million in losses were attributed to securities scheduled to mature in one year or less, $253.8 million attributed to securities scheduled to mature between one to five years, $672.5 million attributed to securities scheduled to mature between five to ten years, $2,113.0 million attributed to securities scheduled to mature after ten years and $1,110.2 million related to mortgage-backed and other ABS that are not classified by maturity year. As of March 31, 2024, we were in a $3,738.9 million net unrealized loss position as compared to a $3,542.9 million net unrealized loss position as of December 31, 2023. The $196.0 million increase in net unrealized loss for the three months ended March 31, 2024, can be attributed an increase in interest rates partially offset by a tightening of credit spreads.

Current wording

Of the $4,379.2 million in gross unrealized losses as of June 30, 2024, $14.5 million in losses were attributed to securities scheduled to mature in one year or less, $262.6 million attributed to securities scheduled to mature between one to five years, $662.2 million attributed to securities scheduled to mature between five to ten years, $2,316.7 million attributed to securities scheduled to mature after ten years and $1,123.2 million related to mortgage-backed and other ABS that are not classified by maturity year. As of June 30, 2024, we were in a $4,028.6 million net unrealized loss position as compared to a $3,542.9 million net unrealized loss position as of December 31, 2023. The $485.7 million increase in net unrealized loss for the six months ended June 30, 2024, can be attributed an increase in interest rates partially offset by a tightening of credit spreads.

Previous wording

Included in the public category as of March 31, 2024 and December 31, 2023, were $12,595.8 million and $12,017.4 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, 2024 and December 31, 2023, were $13,045.2 million and $12,017.4 million, respectively, of securities subject to certain holding periods and resale restrictions pursuant to Rule 144A of the Securities Act of 1933.

Previous wording

The typical borrower in our commercial mortgage loan portfolio is a single purpose entity or single asset entity. As of March 31, 2024 and December 31, 2023, the total number of commercial mortgage loans outstanding were 604 and 596, of which 37% and 38% were for loans with principal balances less than $10.0 million as of March 31, 2024 and December 31, 2023, respectively. The average loan size of our commercial mortgage portfolio was $23.2 million and $22.9 million as of March 31, 2024 and December 31, 2023, respectively.

Current wording

The typical borrower in our commercial mortgage loan portfolio is a single purpose entity or single asset entity. As of June 30, 2024 and December 31, 2023, the total number of commercial mortgage loans outstanding were 607 and 596, of which 37% and 38% were for loans with principal balances less than $10.0 million as of June 30, 2024 and December 31, 2023, respectively. The average loan size of our commercial mortgage portfolio was $23.1 million and $22.9 million as of June 30, 2024 and December 31, 2023, respectively.

Previous wording

We had two restructured problem commercial mortgage loans with a carrying amount of $92.8 million for which we had a valuation allowance of $34.2 million and three delinquent problem commercial mortgage loan with a carrying amount of $103.1 million for which we had a valuation allowance of $38.6 million as of March 31, 2024. We had two potential problem commercial mortgage loans with a carrying amount of $95.4 million for which we had a valuation allowance of $11.9 million as of December 31, 2023. We also had two restructured problem commercial mortgage loan with a carrying amount of $92.7 million for which we had a valuation allowance of $34.1 million and one delinquent problem commercial mortgage loan with a carrying amount of $7.9 million for which we had a valuation allowance of $7.9 million as of December 31, 2023.

Current wording

We had four delinquent problem commercial mortgage loans with a carrying amount of $150.8 million for which we had a valuation allowance of $45.0 million as of June 30, 2024. We also had one potential problem commercial mortgage loan with a carrying amount of $75.0 million for which we had a valuation allowance of $0.0 million and two restructured problem commercial mortgage loans with a carrying amount of $74.5 million for which we had a valuation allowance of $34.2 million as of June 30, 2024. We had one delinquent problem commercial mortgage loan with a carrying amount of $7.9 million for which we had a valuation allowance of $7.9 million as of December 31, 2023. We also had two potential problem commercial mortgage loans with a carrying amount of $95.4 million for which we had a valuation allowance of $11.9 million and two restructured problem commercial mortgage loans with a carrying amount of $92.7 million for which we had a valuation allowance of $34.1 million as of December 31, 2023.

Previous wording

Real estate consists primarily of commercial equity real estate. As of March 31, 2024 and December 31, 2023, the carrying amount of our equity real estate investment was $2,361.7 million and $2,343.4 million, respectively. Our commercial equity real estate is held in the form of wholly owned real estate, real estate acquired upon foreclosure of commercial mortgage loans and majority owned interests in real estate joint ventures.

Current wording

Real estate consists primarily of commercial equity real estate. As of June 30, 2024 and December 31, 2023, the carrying amount of our equity real estate investment was $2,432.5 million and $2,343.4 million, respectively. Our commercial equity real estate is held in the form of wholly owned real estate, real estate acquired upon foreclosure of commercial mortgage loans and majority owned interests in real estate joint ventures.