PRINCIPAL FINANCIAL GROUP INC

Previous wording

The following analysis discusses our financial condition as of March 31, 2025, compared with December 31, 2024, and our consolidated results of operations for the three months ended March 31, 2025 and 2024, 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, 2024, 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, 2025, compared with December 31, 2024, and our consolidated results of operations for the three and six months ended June 30, 2025 and 2024, 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, 2024, 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

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 during the first quarter of 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 is expected to close during the first half of 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.

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 negatively impacted $6.0 million for the three months ended March 31, 2025, 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 negatively impacted $2.9 million and $8.9 million for the three and six months ended June 30, 2025, 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

Fees and other revenues increased $15.5 million for the Principal Asset Management segment primarily due to higher management fee revenue as a result of increased average AUM managed by our Investment Management operations. Fees and other revenues increased $5.5 million for the Benefits and Protection segment primarily due to growth in our Life Insurance business.

Current wording

Fees and other revenues increased for the Principal Asset Management segment due to $13.8 million higher management fee revenue as a result of increased average AUM managed by our Investment Management operations and $8.2 million higher performance fee revenue primarily in our real estate business.

Previous wording

Benefits, claims and settlement expenses increased $109.2 million for the Retirement and Income Solutions segment primarily due to an increase in reserves, largely stemming from higher sales of single premium group annuities with life contingencies. Benefits, claims and settlement expenses increased for the Benefits and Protection segment primarily due to an $18.3 million increase from growth in our Specialty Benefits business and a $13.9 million increase due to unfavorable claims experience in our Life Insurance business.

Current wording

Benefits, claims and settlement expenses decreased $486.4 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. Benefits, claims and settlement expenses increased $276.2 million for the Benefits and Protection segment primarily due to the one-time impact of the YRT Reinsurance Transactions in 2024.

Previous wording

Net income (loss) attributable to Principal Financial Group, Inc. decreased $321.4 million due to the change in the 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.

Current wording

Net income attributable to Principal Financial Group, Inc. decreased $489.2 million due to the change in the 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. These decreases were partially offset by the $158.1 million unfavorable one-time impact of the YRT Reinsurance Transactions in 2024.

Previous wording

Net realized capital gains on funds withheld assets decreased due to $38.5 million lower net gains on sales of funds withheld assets as a result of reduced sales in 2025 by an external reinsurer partially offset by a $15.4 million increase due to net unrealized gains on funds withheld assets in 2025 as compared to net unrealized losses in 2024.

Current wording

Net realized capital gains on funds withheld assets decreased due to $52.9 million lower net gains on sales of funds withheld assets as a result of reduced sales in 2025 by an external reinsurer partially offset by a $12.5 million increase due to net unrealized gains on funds withheld assets in 2025 as compared to net unrealized losses in 2024.

Previous wording

The change in the fair value of the funds withheld embedded derivative resulted in a loss in 2025 compared to a gain in 2024 driven by changes in interest rates.

Current wording

The change in fair value of the funds withheld embedded derivative resulted in a loss in 2025 compared to a gain in 2024 driven by changes in interest rates.

Previous wording

The market risk benefit remeasurement (gain) loss change is primarily due to a $154.6 million unfavorable impact from the change in fair value of the MRB asset (liability), excluding impacts of nonperformance risk, primarily driven by changes in market movements. This change was partially offset by a $105.4 million favorable impact from periodic and final settlements for derivatives used to hedge MRBs. See Item 1. “Financial Statements, Notes to Unaudited Condensed Consolidated Financial Statements, Note 10, Market Risk Benefits” for further information on market effects.

Current wording

The market risk benefit remeasurement (gain) loss change was due to a $160.4 million unfavorable impact from the change in fair value of the MRB asset (liability), excluding impacts of nonperformance risk, primarily driven by changes in market movements. This change was partially offset by a $96.5 million favorable impact from periodic and final settlements for derivatives used to hedge MRBs. See Item 1. “Financial Statements, Notes to Unaudited Condensed Consolidated Financial Statements, Note 10, Market Risk Benefits” for further information on market effects.

Previous wording

Operating expenses increased primarily due to $65.4 million of impairments of our distribution agreement intangible asset and contract cost asset in Hong Kong, a $34.2 million increase in compensation costs and an $18.3 million increase in nondeferrable commission expense. These increases were partially offset by a $65.6 million decrease in amounts credited to employee accounts in a nonqualified defined contribution pension plan.

Current wording

Operating expenses increased primarily due to a $70.6 million increase in compensation costs and $65.4 million of impairments of our distribution agreement intangible asset and contract cost asset in Hong Kong. These increases were partially offset by a $75.3 million decrease in amounts credited to employee accounts in a nonqualified defined contribution pension plan and a $41.0 million decrease resulting from a one-time expense accrual release in 2025.

Previous wording

The effective income tax rate of (118)% for the three months ended March 31, 2025, changed from 15% for the three months ended March 31, 2024, primarily due to a decrease in pre-tax income with no proportionate change in permanent tax differences. See Item 1. “Financial Statements, Notes to Unaudited Condensed Consolidated Financial Statements, Note 13, Income Taxes” for a reconciliation of the corporate income tax rate to the effective income tax rate.

Current wording

The effective income tax rate decreased to 7% for the six months ended June 30, 2025 from 17% for the six months ended June 30, 2024, primarily due to a decrease in pre-tax income with no proportionate changes in permanent tax differences. See Item 1. “Financial Statements, Notes to Unaudited Condensed Consolidated Financial Statements, Note 13, 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, along with a decrease in operating expenses as described below.

Previous wording

Operating expenses increased primarily due to an increase in staff-related costs.

Current wording

Operating expenses decreased primarily due to a $19.4 million impact from a one-time expense accrual release in 2025, partially offset by an $11.6 million increase in staff-related costs.

Previous wording

Net revenue increased primarily due to growth in the business.

Current wording

Net revenue increased primarily due to a $44.3 million impact resulting from growth in the business.

Previous wording

(1)Includes the divestment of Origin Asset Management.

Current wording

(1)Second quarter 2025 includes the held-for-sale treatment of Post Advisory Group and first quarter 2025 includes the divestment of Origin Asset Management.

Previous wording

Pre-tax operating earnings increased in our International Pension operations primarily due to $4.8 million of lower expenses in Asia. Pre-tax operating earnings decreased in our Investment Management operations due to a $19.7 million increase in variable compensation expense and a $2.4 million decrease in borrower fees revenue related to lower production in 2025. These decreases were partially offset by $18.5 million higher management fee revenue as a result of increased average AUM.

Current wording

Pre-tax operating earnings increased in our Investment Management operations due to $32.4 million higher management fee revenue as a result of increased average AUM and $8.2 million higher performance fee revenue primarily in our real estate business. These improvements were partially offset by $20.2 million increase in variable compensation expense. Pre-tax operating earnings increased in our International Pension operations due to $17.5 million of favorable variable interest income and $15.3 million of favorable relative market performance on our required regulatory investments. These improvements were partially offset by $10.3 million of foreign currency headwinds.

Previous wording

Pre-tax operating earnings in our Specialty Benefits business increased $4.2 million primarily due to growth in the business. Pre-tax operating earnings in our Life Insurance business increased $12.9 million due to a change in the policyholder dividend obligation and $6.6 million due to higher yields on invested assets. These increases were offset by a $13.9 million impact from unfavorable claims experience.

Current wording

Pre-tax operating earnings in our Specialty Benefits business increased $11.7 million from improved claims experience, $4.8 million due to higher yields on invested assets and $3.3 million due to growth in the business. Pre-tax operating earnings in our Life Insurance business decreased $3.6 million primarily due to the one-time impact of the YRT Reinsurance Transactions in 2024.

Previous wording

Net investment income in our Specialty Benefits business increased $2.9 million due to higher yields on invested assets and $2.5 million due to growth in invested assets. Net investment income in our Life Insurance business decreased $16.1 million from mark-to-market changes on options associated with our indexed universal life insurance, partially offset by a $6.6 million increase due to higher yields on invested assets.

Current wording

Net investment income in our Specialty Benefits business increased $4.8 million due to higher yields on invested assets and $2.4 million due to growth in invested assets. Net investment income in our Life Insurance business increased $7.7 million from mark-to-market changes on options associated with our indexed universal life insurance and $6.2 million due to growth in invested assets.

Previous wording

Dividends to policyholders in our Life Insurance business decreased $12.9 million due to a change in the policyholder dividend obligation, partially offset by a $2.6 million increase due to higher dividends on our Closed Block business.

Current wording

Dividends to policyholders in our Life Insurance business decreased $15.2 million due to a change in the policyholder dividend obligation, partially offset by a $4.1 million increase due to higher dividends on our Closed Block business.

Previous wording

Pre-tax operating losses increased primarily due to $10.4 million lower net investment income largely resulting from mark-to-market losses on investments in 2025 relative to mark-to-market gains in 2024 and an $8.4 million increase in compensation costs.

Current wording

Pre-tax operating losses decreased primarily due to $13.8 million in interest income related to tax settlements and $10.0 million higher net investment income largely resulting from mark-to-market gains on investments.

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, 2025, approximately $14.6 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, 2025, approximately $13.9 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

Total stockholder dividends paid by Principal Life to its parent for the three months ended March 31, 2025, were $350.0 million, all of which was extraordinary and approved by the Commissioner. As of March 31, 2025, we had $1,599.4 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, 2025, were $555.0 million, all of which was extraordinary and approved by the Commissioner. As of June 30, 2025, we had $1,622.4 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 $977.3 million and $584.2 million for the three months ended March 31, 2025 and 2024, 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 2025 compared to 2024 was primarily due to fluctuations in receivables and payables associated with the timing of settlements.

Current wording

Net cash provided by operating activities was $1,789.2 million and $2,015.9 million for the six months ended June 30, 2025 and 2024, 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 2025 compared to 2024 was primarily due to fluctuations in receivables and payables associated with the timing of settlements.

Previous wording

Net cash used in investing activities was $952.7 million and $1,343.2 million for the three months ended March 31, 2025 and 2024, respectively. The decrease in cash used in investing activities was primarily due to higher net sales of mortgage loans in 2025 as compared to 2024.

Current wording

Net cash used in investing activities was $1,202.4 million and $1,631.0 million for the six months ended June 30, 2025 and 2024, respectively. The decrease in cash used in investing activities was primarily due to lower net purchases of available-for-sale securities in 2025 as compared to 2024.

Previous wording

Net cash used in financing activities was $360.8 million for the three months ended March 31, 2025, compared to net cash provided by financing activities of $219.7 million for the three months ended March 31, 2024. The increase in cash used in financing activities was due to lower net investment contract deposits in 2025 as compared to 2024 and a net decrease in banking operation deposits in 2025 as compared to an increase in 2024.

Current wording

Net cash used in financing activities was $1,139.7 million and $276.0 million for the six months ended June 30, 2025 and 2024, respectively. The increase in cash used in financing activities was due in equal parts to a lower increase in banking operation deposits in 2025 as compared to 2024 and a $400.0 million repayment of long-term debt that matured during 2025.

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, 2024.

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, 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, 2024.

Previous wording

Long-Term Debt. On March 14, 2025, we exercised our rights in full under the 2028 P-Caps to issue senior notes in exchange for Eligible Assets. For long-term debt information, see Item 1. “Financial Statements, Notes to Unaudited Condensed Consolidated Financial Statements, Note 12, Long-Term Debt.”

Current wording

Long-Term Debt. On March 14, 2025, we exercised our rights in full under the 2028 P-Caps to issue senior notes in exchange for Eligible Assets. Proceeds from the sale of Eligible Assets were used to repay our senior 2025 Notes that matured on May 15, 2025. For long-term debt information, see Item 1. “Financial Statements, Notes to Unaudited Condensed Consolidated Financial Statements, Note 12, Long-Term Debt.”

Previous wording

In March 2018, we entered into two contingent funding agreements that give us the right at any time over a ten-year or thirty-year period to issue up to $400.0 million or $350.0 million, respectively, of senior notes. In March 2025, we exercised our right to issue $400.0 million of senior notes under one of the agreements.

Current wording

In March 2018, we entered into two contingent funding agreements that give us the right at any time over a ten-year or thirty-year period to issue up to $400.0 million or $350.0 million, respectively, of senior notes. In March 2025, we exercised our right to issue $400.0 million of senior notes under the ten-year contingent funding agreement.

Previous wording

As of March 31, 2025, 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, 2025, 4% of our net assets (liabilities) were Level 1, 87% were Level 2 and 9% were Level 3.

Current wording

As of June 30, 2025, 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, 2025, 2% of our net assets (liabilities) were Level 1, 89% were Level 2 and 9% 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, 2025, were $7,736.7 million as compared to $8,046.3 million as of December 31, 2024. The decrease was primarily related to a decrease 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, 2025, were $7,740.2 million as compared to $8,046.3 million as of December 31, 2024. The decrease was primarily related to issuances of investment and universal life contracts, a decrease in the funds withheld payable embedded derivative net asset and settlements of mortgage loans. These decreases were partially offset by net purchases and transfers into Level 3 for certain fixed maturities, available-for-sale.

Previous wording

We had total consolidated assets as of March 31, 2025, of $313,003.3 million, of which $105,294.6 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 11, 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, 2025, of $323,103.8 million, of which $106,126.8 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 11, 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 and yields in fixed maturities for our U.S. operations. These increases were partially offset by lower income in other investments, particularly related to hedge funds for our U.S. operations.

Current wording

Net investment income increased primarily due to higher average invested assets and yields in fixed maturities for our U.S. operations. These increases were partially offset by lower income associated with derivatives in fair value hedges for our U.S. operations.

Previous wording

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

Current wording

Net realized capital losses increased primarily due to a held-for-sale write-down of an intangible asset in 2025, increased losses on non-hedged interest rate derivatives due to changes in rates, losses versus gains on currency derivatives, decreased gains on equity real estate sales and increased non-credit losses on available-for-sale fixed maturities. These increases were partially offset by gains versus losses on GMWB/RILA activities, decreased losses on commercial mortgage loan reserve changes and decreased gains on equity securities and sponsored investment funds due to equity market movement.

Previous wording

Of our invested assets, $81,720.7 million were held by our U.S. operations as of March 31, 2025. 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, $82,044.5 million were held by our U.S. operations as of June 30, 2025. 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 $155.0 million as of both March 31, 2025 and December 31, 2024. 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 5, 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 $105.0 million and $155.0 million as of June 30, 2025 and December 31, 2024, 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 5, 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 $2,344.8 million and 4.3%, respectively, as of March 31, 2025, and $2,091.5 million and 4.0%, respectively, as of December 31, 2024. 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 $8,637.1 million and 4.2%, respectively, as of March 31, 2025, and $8,401.9 million and 4.1%, respectively, as of December 31, 2024.

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 $3,226.7 million and 4.8%, respectively, as of June 30, 2025, and $2,091.5 million and 4.0%, respectively, as of December 31, 2024. 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 $8,756.6 million and 4.2%, respectively, as of June 30, 2025, and $8,401.9 million and 4.1%, respectively, as of December 31, 2024.

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, 2025 and December 31, 2024. 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 15% of total fixed maturities as of June 30, 2025, and 14% as of December 31, 2024. 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, 2025 and December 31, 2024, our investments in Canada totaled $969.5 million and $966.1 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, 2025 and December 31, 2024, our investments in Canada totaled $944.2 million and $966.1 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 5.4% of single-name credit fixed maturity exposures as of both March 31, 2025 and December 31, 2024.

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, 2025, and 5.4% as of December 31, 2024.

Previous wording

Fixed maturities included 59 securities with an amortized cost of $785.8 million, gross gains of $7.9 million, gross losses of $6.5 million, valuation allowance of $0.0 million and a carrying amount of $787.2 million as of March 31, 2025, 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 46 securities with an amortized cost of $478.4 million, gross gains of $9.2 million, gross losses of $2.1 million, valuation allowance of $0.0 million and a carrying amount of $485.5 million as of June 30, 2025, 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.