PFG 10-K & 10-Q changes, risk factors and insider trading

We maintain a level of cash and securities which, combined with expected cash inflows from investments and operations, is believed adequate to meet anticipated short-term and long-term benefit and expense payment obligations. However, withdrawalWithdrawal and surrender levels may differvary fromdue anticipated levels for a variety of reasons, such as changes into economic conditions or changes in our claims paying ability and financial strength ratings. For additional information regarding our exposure to interest rate risk and the impact of a downgrade in our financial strength ratings, see risk factors entitled “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,liquidity and our net income can vary from period to period” and “A downgrade in our financial strength or credit ratings may increase policy surrenders and withdrawals, reduce new sales, terminate relationships with distributors, impact existing liabilities and increase our cost of capital, any of which could adversely affect our profitability and financial condition.” In addition, mark-to-market adjustments on our investments and derivative instruments may lead to fluctuations in our reported capital. Volatility, uncertainty or disruptions in the capital or credit markets may result in the need for additional capital to maintain a targeted level of U.S. statutory capital relative to the NAIC’s RBC requirements. In the event our currentIf internal sources of liquidity doare not satisfy our needs,insufficient, we may haveneed toexternal seekfinancing, additional financing and, in such case, wewhich may not be able to successfully obtain additional financingavailable on favorable terms or at all.terms. The availability of additional financing will depend on a variety of factors such as market conditions, the general availability of credit, the volume of trading activities, the overall availability of credit to the financial services industry, our credit ratings and credit capacity, as well as customers’ or lenders’ perception of our long- or short-term financial prospects. Similarly,Negative regulatory authority or rating agency actions may impair our access to fundsexternal may be impaired if regulatory authorities or rating agencies take negative actions against us.funds.

Disruptions, uncertainty or volatility in the capital and credit markets may limit our access to capital required to operate our business, most significantly our insurance operations. Such marketMarket conditions may limithinder our ability to replace,meet in a timely manner, maturing liabilities;obligations, satisfy statutory capital requirements; fund redemption requests on insurance or other financial products; generate fee income and market-related revenue to meet liquidity needsrequirements, and access the capital necessaryneeded to grow our business. As such, weWe may beface forcedhigher tocapital delay raising capital, issue shorter tenor securities than we prefer, utilize available internal resourcescosts or bearreduced anflexibility, unattractiveimpacting cost of capital, which could decrease our profitabilityliquidity and significantly reduce our financial flexibility and liquidity.profitability.

In addition, we maintain credit facilities with various financial institutions as a potential source of excess liquidity. These facilities are in place to bridge timing in cash flows to minimize the cost of meeting our obligations, particularly during periods when alternative sources of liquidity are limited. Our ability to borrow fundsBorrowing under these facilities is conditioneddepends on our satisfaction ofmeeting covenants and other requirements contained in the facilities.requirements. Our failure to comply with these covenants, or the failure of lenders to fund their lending commitments, would restrict our ability to access these credit facilities and, consequently, could limit our flexibility in meeting our cash flow needs.

Conditions in the global capital markets, including the equity, bond or real estate markets,markets and the economy generally may materially and adversely affect our business and results of operations.

Our results of operations are materially affected by conditions in the global capital marketsmarket and theeconomic economy generally, both in the U.S. and elsewhere around the world.conditions. Continued adverse economic conditions may result in a decline in our AUM, AUA and revenues and erosion of our profit margins. A prolonged downturn in economic conditions could adversely impact the earnings of our borrowers and, therefore, their ability to honor their debt obligations, while also reducing the returns from our equity investments. In addition, in the event of extremeextreme, prolonged market events and economic downturns, we could incur significant losses. Even in the absence of a market downturn, we are exposed to substantial risk of loss of income due to market volatility.

Because the revenues of our asset accumulation and management businesses are largely based on the value of AUM and AUA, a decline in domestic and global equity, bond or real estate markets will decrease our revenues. TurmoilMarket inturmoil these markets could lead investorsleading to withdrawinvestor withdrawal from these markets, decrease their rates of investment or refrain from making new investments, whichmarkets may reduce our AUM, AUA, revenues and net income.

FactorsMacroeconomic suchfactors, asincluding consumer spending, business investment, government spending, themarket volatilityvolatility, inflation and strength of the capital markets, investor and consumer confidence, foreign currency exchange rates, inflationaffect levelsour business volume and ourprofitability. abilityEconomic todownturns managemay inflation risk effectively all affect the business and economic environment and, ultimately, the amount and profitability of our business. In an economic downturn characterized by higher unemployment, lower family income, lower corporate earnings, lower business investment, negative investor sentiment and lower consumer spending, thereduce demand for our financial and insurance productsproducts. We may bealso adverselyface affected. In addition, we may experience an elevated incidence ofincreased claims and lapsespolicy or surrenders of policies.lapsation. Our policyholders may choose to defer paying insurance premiums or stop paying insurance premiums altogether. In addition, reductions in employment levels of our existing employer customers may result in a reduction in membership levels and premium income for our specialty benefits products. ParticipantsReduced withinpayroll thedeferrals in retirement plans forand whichincreased wewithdrawals provideof administrativeinvestment servicesaccounts may elect to reduce or stop their payroll deferrals to these plans, which would reducelower AUM, AUA and revenues. In addition, reductionsReductions in employment levels may result in a decline in employee deposits into retirement plans. Adverse economic changes inmay thematerially economyimpact could affectour net income negatively and could have a material adverse effect on our business, results of operations and financial condition. In addition, increased reliance on passive investment strategies, including target date funds, may amplify market volatility impacts and reduce flexibility in responding to adverse economic conditions.

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,liquidity and our net income can vary from period to period.

DuringProlonged periods of declininglow interest rates or prolonged low interest rates, the interest rates we earn on our assets may bereduce lowerasset thanyields the rates assumed inbelow pricing ourassumptions, products, thereby reducing ourlowering profitability. For some of ourcertain products, such as GICs and funding agreements, we are unable tocannot lower thecrediting raterates, weeven creditwhen toinvestment customersreturns in response to the lower return we will earn on our investments.decline. In addition, guaranteed minimum interest rates on our life insurance and annuity products may constrain our ability to lower the rate we credit to customers. Declining interestLower rates may also lead to a reduction in revenues related to ourreduce trust and custody business.revenues. Declining interest rates may result in increases in our reserves and other actuarial balances, potentially reducing net income or other comprehensive income (“OCI”). During periods of declining interest rates, borrowers may prepay or redeem mortgages and bonds that we own, which would force us to reinvest the proceeds at lower interest rates. Furthermore,Lower declining interestsurrender rates may reduceextend theliability rate of policyholder surrenders and withdrawals on our life insurance and annuity products, thus increasing the duration of the liabilities andduration, creating asset and liability durationasset-liability mismatches. Low interest rates may also increase the cost of hedging certain product features or riders. Declining interestLow rates or a prolonged low interest rate environment may alsoaffect result in changes to the discount rate used for valuing our pension,pension and other postretirement employee benefit (“OPEB”) obligations,valuations, which could negatively impact our results of operations andimpacting financial condition.results. In addition, certain statutory capital and reserve requirements are based on formulas or models that consider interest ratesrates, and a prolonged period of low interest rates may increase the statutory capital we are required to hold as well as the amount of assets we must maintain to support statutory reserves. Declining interest rates may cause a decrease in the value of market risk benefit (“MRB”) assets and an increase in the value of MRB liabilities and other liabilities held at fair value on our consolidated statements of financial position, potentially reducing net income or OCI.

Increases in marketRising interest rates may also adverselynegatively affect our results of operations, financial condition and liquidity. During periods of increasing market interest rates, we may offer higher crediting rates on our insurance and annuity products to keep these products competitive. BecauseAsset returns on our portfolio of invested assets may notlag increase as quickly as current interestrising rates, wecompressing mayspreads have to accept lower spreads, thusand reducing our profitability. Rapidly rising interest rates may also result in an increase in policy surrenders, withdrawals and requests for policy loans as customers seek to achieve higher returns. In addition, rising interest rates may cause a decrease in the value of financial assets held at fair value on our consolidated statements of financial position. We may be required to sell assets to raise the cash necessary to respond to an increase in surrenders, withdrawals and loans, thereby realizing capital losses on the assets sold. AnProlonged increasehigh ininterest policy surrenders and withdrawalsrates may alsoadversely requireimpact usthe to accelerate amortizationability of our borrowers to service their debt, leading to outcomes that are more adverse than modeled. Higher surrenders may accelerate deferred acquisition cost (“DAC”) asset relating to these products.amortization. Rising interest rates may also cause a decline in the value of the fixed income assets we manage, resulting in a reduction in our fee revenue in the short term. In addition, a significant increase in interest rates may cause a reduction in the fair value of intangible assets in our reporting units, potentially leading to an impairment of goodwill or other intangible assets.

OurCredit exposurespread tochanges credit spreads primarily relates toaffect market price variabilityprices and reinvestment risk associated with changes in credit spreads.risk. A widening of credit spreads would cause unrealized losses in our investment portfolio, would increase losses associated with credit-based derivatives we have sold that do not qualify or have not been designated for hedge accounting where we assume credit exposure and, if issuer credit spreads increase as a result of fundamental credit deterioration, would likely result in higher allowances. CreditTighter spread tightening willspreads reduce net investment income associated withfrom new purchases of fixed maturities.maturity investments. Credit spread tightening may also cause an increase in the reported value of certain liabilities that are valued using a discount rate that reflects our own credit spread. InVolatile addition, market volatilitymarkets may makeimpair it difficult to value certainvaluation of ourthinly securitiestraded if trading becomes less frequent.securities. As such, valuations may include assumptions or estimates that may have significant period-to-period changes from market volatility, which could have a material adverse effect on our results of operations or financial condition.

WeAn areincrease subject toin the risk that the issuers of the fixed maturities we own will default on principal and interest payments. As of December 31, 2024, our U.S. investment operations held $53.0 billionrate of fixed maturities,maturity orissuers 66%could ofharm totalour U.S.financial invested assets, of which approximately 5% were below investment grade,strength and $164.8 million, or 0.31% ofdecrease our total fixed maturities, were classified as either “problem,” “potential problem” or “restructured.”profitability. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — U.S. Investment Operations — Fixed Maturities.”

Our investment portfolio includes equity securities, trading securities and derivative instruments that are reported at fair value on the consolidated statements of financial position with changes in fair value reported in net income. Mark-to-marketFair adjustmentsvalue on these investmentschanges may reduce our profitability orand cause our netincrease income tovolatility. varyFuture fromacquisitions periodmay expand exposure to period.mark-to-market We anticipate that acquisition and investment activities may increase the number and magnitude of these investments in the future.volatility.

We hold certain investments that may be less liquid thaninvestments, our publicly traded fixed maturities, such asincluding privately placed fixed maturities, mortgage loansloans, and real estate investments.estate. These asset classes represented approximately 40%41% of the value of our total invested assets as of December 31, 2024.2025.

We use derivative instrumentsderivatives to hedge variousbusiness risks we face in our businesses.risks. See Item 7A. “Quantitative and Qualitative Disclosures About Market Risk.” We enter into a variety of derivative instruments with a number ofseveral counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, clearinghouses, exchanges and other institutions. ForWe transactionsface where we are in-the-money, we are exposed tocounterparty credit risk inon thein-the-money eventderivative of default of our counterparty.positions. We establishmitigate exposure through collateral agreements with nominalmost thresholdscounterparties. for a large majority of our counterparties to limit our exposure. However, our creditCredit risk may beincrease exacerbated when theif collateral heldproves by us cannotto be realizedinsufficient or isunrecoverable. liquidated at prices not sufficient to recover the full amount of the derivative exposure. With regard toRegarding our derivative exposure, we have over-collateralization requirements on the portion of collateral we hold, based on the risk profile of the assets posted as collateral. We may also havehold unsecured debt and equity investments, increasing exposure to these financial institutions in the form of unsecured debt instruments and equity investments.institutions. Such losses or impairments to the carrying value of these assets may materially and adversely affect our business and results of operations.

ManyDerivative ofagreements ourmay derivativerequire transactionscollateral with financial and other institutions specify the circumstancesposting under whichcertain the parties are required to post collateral.conditions. We are also required to post collateral in connection with funding agreements with the FHLB Des Moines, reinsurance agreements,agreements and various other transactions. TheUnder amountcertain ofconditions collateral werequirements may berise, required to post under these agreements may increase under certain circumstances, which could adversely affectreducing our liquidity. In addition, under the terms of some of our transactions we may be required to make payment to our counterparties related to any decline in the market value of the specified assets. Such payments could have an adverse effect on our liquidity. Furthermore,Such withpayments respectcarry unsecured counterparty risk due to anylack suchof payments,segregation we will have unsecured risk to the counterparty as these amounts are not required to be segregated from the counterparty’s other funds, are not held in a third partyor custodial account and are not required to be paid to us by the counterparty until the termination of the transaction.safeguards.

LiabilityEnvironmental under environmental protection laws resultingliabilities from our commercial mortgage loan portfolio and real estate investments may harmimpact our financial strength and reduce our profitability. Under the laws of several states and other jurisdictions, contamination of a property may give rise to a lien on the property to secure recovery of the costs of cleanup. In some states,jurisdictions, thisenvironmental kindliens ofmay lientake has priorityprecedence over the lien of an existing mortgage against the property, which would impair our abilitymortgage, toimpairing forecloseforeclosure on that property should the related loan be in default.rights. In addition, under the laws of some states and under the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980, we may be liable for costs of addressing releases or threatened releases of hazardous substances that require remedy at a property securing a mortgage loan held by us, if our agents or employees have become sufficiently involved in the hazardous waste aspects of the operations of the related obligor on that loan, regardless of whether or not the environmental damage or threat was caused by the obligor. We also may faceincur this liability even after foreclosing on a property securing a mortgage loan held by us.foreclosure. This may harm our financial strength and decrease our profitability.

Commercial mortgage lending in the state ofOur California accounted for 24%, or $3.4 billion, of our U.S. investment operations commercial mortgage loan portfolioconcentration beforeexposes valuation allowance as of December 31, 2024. Dueus to this concentration of commercial mortgage loans in California, we are exposed to potential losses resulting from the risk of anregional economic downturnand incatastrophe California as well as to catastrophes,risks, including but not limited to earthquakes, fires, drought, extreme heat, flooding,flooding and tsunamis, that may affect the region.tsunamis. Like other lenders, property insurance is required for all borrowers on which we make commercial mortgage loans. Insurance coverage typically includes real property, business interruption, terrorism, wind, hail, fire, named storm, flood and others as applicable. Earthquake insurance is required for those California assets with a high-risk scenario expected loss percentage as determined by an engineering report we obtain for each property. MaintainingWe require and monitor appropriate insurance coverage is a requirement by us as the lender and is monitored appropriately.coverage. If economic conditions in California deteriorate or catastrophes occur, we may in the future experience delinquencies or defaults on the portion of our commercial mortgage loan portfolio located in California, which may harm our financial strength and reduce our profitability. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — U.S. Investment Operations — Mortgage Loans.”

Fixed maturities that are classified as available-for-sale (“AFS”) are reported on the consolidated statements of financial position at fair value. Unrealized AFS gains orand losses onare AFS securities, excluding thoserecorded in fair value hedging relationships, are recognized as a component of accumulated other comprehensive income (“AOCI”) andwhich are, therefore,is excluded from net income. Our U.S. investment operations had gross unrealized losses on fixed maturities of $4,246.2 million pre-tax as of December 31, 2024, and the component of gross unrealized losses for securities in a continuous unrealized loss position for over twelve months and for which an allowance for credit loss has not been recorded was $4,081.7 million pre-tax. The accumulated change in fair value of the AFS securities is recognized in net income when the gain or loss is realized upon the sale of the asset or in the event thatif the decline in fair value requires an allowance for credit loss. Realized losses or credit losses may have a material adversematerially impact on our net incomeincome. inSee aItem particular7. quarterly“Management’s orDiscussion annualand period.Analysis of Financial Condition and Results of Operations — Investments — U.S. Investment Operations — Fixed Maturities Available-For-Sale.”

We are exposed toface foreign currency risk in ourfrom international operations as we sell products denominated in variousand local currenciescurrency and generally invest the associated assets in local currencies.investments. For diversification purposes, assets backing the products may be partially invested in non-local currencies. In our U.S. operations, we may also issue foreign currency-denominated funding agreements to nonqualified investors in the institutional market or invest in foreign currency-denominated investments. The associated foreign currency exchange risk in each instance is hedged or managed to specific risk tolerances. AlthoughDespite ourhedging, investment and hedging strategies limit the effect offoreign currency exchangefluctuations rate fluctuation on operating results, weakening of foreign currencies againstto the U.S. dollar wouldmay adverselyreduce affecttranslated the translation of the results of our international operations into our consolidated financial statements.earnings. For further discussion on foreign currency exchange risk, see Item 7A. “Quantitative and Qualitative Disclosures About Market Risk — Foreign Currency Risk.”

Fixed maturities, equity securities and derivatives represent most assets and liabilities reported at fair value on our consolidated statements of financial position, excluding separate account assets and market risk benefit assets and liabilities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Fair value estimates are made basedrely on available market informationdata and judgmentsjudgment. about the financial instrument at a specific point in time. Considerable judgment is often required to develop estimates of fair value, and the use of differentDifferent assumptions or valuation methodologiesmethods may havematerially a material effect on the estimatedaffect fair value amounts.estimates.

DuringMarket periodsdisruptions may impair valuation of market disruption including periods of significantly rising or high interest rates, rapidly widening credit spreads or illiquidity, it may be difficult to value certain securities, for example collateralized mortgage obligations and collateralized debt obligations, if trading becomes less frequent and/or market data becomes less observable.securities. There may be certain asset classes that were in active markets with significant observable data that become illiquid due to the current financial environment. InSuch suchconditions cases,increase thereliance valuationon process may require more subjectivityjudgment and managementsubjective judgment.inputs. As such, valuations may include inputs and assumptions that are less observable or require greater estimation as well as valuation methods that require greater estimation, which could result in values that are different from the value at which the investments may be ultimately sold. Further, rapidly changing credit and equity market conditions could materially impact the valuation of securities as reported within our consolidated financial statements and the period-to-period changes in value could vary significantly. Decreases in value may have a material adverse effect on our results of operations or financial condition.

The determination of the amount of allowancesAllowance and impairmentsimpairment varieslevels by investment type and isare based upon ouron periodic evaluationrisk andassessments assessment of known and inherent risks associated with the respectiveby asset class. Such evaluations and assessments require significant judgment and are revised as conditions changechange, and new information becomes available. AdditionalFuture impairments may need to be taken or allowances provided for in the future, and the ultimate loss may exceed management’s current loss estimates.

Any impairments ofof, or valuation allowances againstagainst, our deferred tax assets could adversely affect our results of operations and financial condition.

InherentTax inprovisions the provision for income taxes areinvolve estimates regardingon the deductibility of certain items, thedeductibility, timing of income and expense recognition and the current or future realization of operating losses, capital losses and certain tax credits. In the event these estimates differ from our prior estimates due to the receipt of new information, we may be required to significantly change the provision for income taxes recorded in the consolidated financial statements. Any such change could significantly affect the amounts reported in the consolidated financial statements in the year these estimates change. Future enacted changes in applicable tax rates as well as the tax base could lead to adverse effects in the consolidated financial statements within the year of enactment. A significant decline inAsset value ofdeclines assets incorporated into our tax planning strategies could lead to anmay increase of our valuation allowanceallowances, onadversely deferred tax assets having an adverse effect on current and futureaffecting results.

The profitability of our insurance and annuity productsProfitability depends significantly upon the extent to which ouron actual experience is consistentaligning with the assumptions used in setting prices for our productspricing and establishingreserving liabilities for future insurance and annuity policy benefits and claims.assumptions. The premiums we charge and the liabilities we hold for future policy benefits are based on assumptions reflecting several factors, including the amount of premiums we will receive in the future, rate of return on assets we purchase with premiums received, expected claims, mortality, morbidity, lapse rates and expenses. However, due to the nature of the underlying risks and the high degree of uncertainty associated with the determination of the liabilities for unpaid policy benefits and claims,Because we cannot precisely determine the amounts we will ultimately pay to settle these liabilities, the timing of such payments, or whether the assets supporting the liabilities, together with anypredict future premiums,claims willpatterns, beactual sufficientclaim topayments satisfymay thediffer liabilities.from assumptions used in establishing reserves. As a result, we may experience volatility in the level of our profitability and our reserves from period to period. To the extent that actualEmerging experience is less favorable than our underlying assumptions, we may haverequire toassumption update our assumptions and increase our liabilities,updates which may harmincrease ourliabilities, financial strength and reduce ourreducing profitability.

Our results of operations may also be adversely impacted if our actual investment earnings differ from our pricing and reserve assumptions. ChangesEconomic in economic conditionsshifts may lead to changes in market interest rates or changes in ouralter investment strategies,earnings, either of which could cause our actual investment earnings to differ from our pricing andimpacting reserve assumptions.

Amortization of our DAC asset and other actuarial balances depends on several assumptions, including but not limited to, mortality and policy lapse. Due to the uncertainty associated with establishing these assumptions, we cannot, with precision, determine the exact pattern of amortization. To the extent actual experience emerges less favorably than expected, the amortization pattern of our DAC asset and other actuarial balances may be adjusted, which may impact the timing of our net income.

Our businesses are subject to comprehensive regulation and supervision throughout the U.S. and in the international markets in which we operate. We are also impacted by federal legislation and administrative policies in areas such as securities laws, employee benefit plan regulations, financial services regulations, U.S. federal taxation and international taxation. ChangesRegulatory inchanges or new interpretations of existing laws or regulations or the interpretation thereof could significantlymay increase our compliance costs and reduce our profitability. Failure to comply with applicable regulationsNoncompliance may exposeresult us to significantin penalties, thelicense suspension or revocation of licenses to conduct businessloss and reputational damage.harm. Certain Executive orders could affect our business, operations, regional footprint, risk management strategies and investments and increase our costs of compliance.

The NAIC implemented a principle-based reserving (“PBR”) approach to valuation of life insurance and variable annuities. Regulators plan to implementimplemented a new economic scenario generator for use in PBR models as early asof 2026. In addition, PBR for non-variable annuities may be implemented as early as 2026.2026 and is mandatory in 2029. The ultimate financial impact of these changes is uncertain, but they could result in more volatile and less predictable reserve and capital levels for these products.

The International Association of Insurance Supervisors has adopted its common framework for the supervision of Internationally Active Insurance Groups (“IAIGs”). WeCurrently currentlywe are not designated as an IAIG. If we were so designated in the future, we may be subject to supervision and capital requirements beyond those applicable to any competitors without those designations. These international frameworks may influence the regulatory capital requirements in the jurisdictions in which we operate, potentially leading to an increase in our capital requirements.

Positive market performance and foreign currency tailwinds led to an increase in AUM in our Principal Asset Management segment in 2024,2025, which was partially offset by foreignoperations currency headwinds.disposed. Since AUM is the base by which this business generates revenues, market performance and fluctuations in foreign currency exchange rates may impact our revenues in future quarters. Also included in revenues are borrower fees, transaction fees and performance fees, which can fluctuate between years.

The $227.0$1,321.9 million increasedecrease in net unrealized losses from U.S. investment operations for the year ended December 31, 2024,2025, can primarily be attributed to ana increasedecrease in interest rates, which was partially offset by a tighteningwidening of credit spreads. For additional information about interest rate risk see Item 7A. “Quantitative and Qualitative Disclosures About Market Risk.”

MRBs are contracts or contract features that provide protection to the policyholder from capital market risk such as equity, interest rate or foreign exchange risk and expose us to other-than-nominal capital market risk. We have certain annuity and other investment contracts that have GMWB and GMDB riders or a guarantee on theguaranteed minimum accountdeath balancebenefit under(“GMDB”) certain qualifying events.riders. These MRBs have been bifurcated from the host contract and are measured at fair value. The change in fair value is recognized in net income, with the exception of the change in fair value related to our own nonperformance risk, which is recognized in OCI. We use various derivative instruments to hedge against changes in fair value of MRBs related to market risk.

We periodically review and update actuarial assumptions that are used to project cash flows that are used to compute reserves. For more information see ‘‘“Transactions Affecting Comparability of Results of Operations — Actuarial Assumption Updates.”

We provide for income taxes based on our estimate of the liability for taxes due. Our tax accounting represents management’s best estimate of various events and transactions, such as completion of tax audits or establishment of, or changes to, a valuation allowance associated with certain deferred tax assets, which could affect our estimates and effective income tax rate in a particular quarter or annual period. Deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities reflect differences between financial and tax bases, using enacted future tax rates expected to be in effect during the years in which the basis differences reverse.rates. We are required to evaluate the recoverability of ourassess deferred tax assetsasset eachrecoverability quarterquarterly and establish a valuation allowance,allowances ifas necessary,needed. to reduce our deferred tax assets to an amount that is more-likely-than-not to be realizable. In determining the need for a valuation allowance, weWe consider many factors, including future reversals of existing taxable temporary differences, future taxableincome, income exclusive of reversing temporary differencescarrybacks, and carryforwards, taxable income in prior carryback years and implementation of any feasible and prudent tax planning strategies managementwhen would employ to realizeevaluating the taxneed benefit.for valuation allowances.

Deferred income taxes (including federal, state and foreign withholding) have not been provided on approximately $1,276.3 million of accumulated but undistributed earnings from operations of foreign subsidiaries as of December 31, 2024.2025. We do not record deferred income taxes on foreign earnings not expected to be distributed to the U.S. We apply an exception to the general rule, which under U.S. GAAP otherwise requires the recording of deferred income taxes on the anticipated repatriation of foreign earnings as recognized for financial reporting purposes. The exception permits us to not record a deferred income tax liability on foreign earnings we expect to be indefinitely reinvested in our foreign operations. The related deferred income taxes will be recorded in the period it becomes apparent we can no longer positively assert some or all the undistributed earnings will remain invested into the foreseeable future.

NetThe most significant items that contributed to the decrease in net income attributable to Principal Financial Group, Inc. increasedwere primarilya $654.5 million decrease due to a $1,211.2 million after-tax favorablethe change in fair value of the funds withheld embedded derivative.derivative Thisand increasea was$119.7 million decrease 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 athe $170.4 million unfavorable one-time impact of the YRT Reinsurance Transactions in 2024. Net increases in segment earnings are discussed in “Results of Operations by Segment.”

Premiums and other considerations increaseddecreased $201.9$157.8 million for the Retirement and Income Solutions segment primarily due to higherlower sales of single premium group annuities with life contingencies. ThePremiums singleand premiumother groupconsiderations annuitydecreased product,$22.8 whichmillion isfor typicallythe usedPrincipal Asset Management segment primarily due to fundlower definedsales benefitof planannuities terminations,in canour generateChile largeclosed premiums from very few customers and therefore premiums tend to vary from period to period.block. Premiums and other considerations increased $168.4$111.0 million for the Benefits and Protection segment primarily due to growth in the Specialty Benefits business.

Fees and other revenues increased $109.6$64.8 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 for the Principal Asset Management segment primarily due to $92.7 million higher management fee revenue as a result of increased average AUM managed by our Investment Management operations,operations. whichFees wasand partiallyother offsetrevenues byincreased $24.2$21.5 million lower performance fee revenue for ourthe InvestmentBenefits Managementand operationsProtection segment primarily due to growth in our realLife estateInsurance business.

For net investment income and net realized capital gains (losses) variance information, see “Investments — Investment Results” under the captions “Net Investment Income” and “Net Realized Capital Gains (Losses),” respectively.

Net realized capital gains on funds withheld assets decreased primarily due to $70.6 million lower net gains on sales of funds withheld assets as a result of lowerreduced sales in 2024 resulting from less portfolio re-positioning2025 by an external reinsurer.reinsurer partially offset by a $25.9 million change due to net unrealized gains on funds withheld assets in 2025 as compared to net unrealized losses in 2024.

The change in fair value of the funds withheld embedded derivative resulted in a gainloss in 2024 due primarily to an increase in interest rates2025 as compared to a lossgain in 20232024 due primarily to achanges tighteningin ofinterest rates and credit spreads.

Benefits, claims and settlement expenses increased $530.0$108.1 million for the Retirement and Income Solutions segment primarily due to an increase in reserves,interest stemmingcredited to policyholders, which resulted from higheran increase in average monthly account values. Benefits, claims and settlement expenses decreased for the Principal Asset Management segment $49.3 million due to lower interest credited to customers, $26.6 million primarily due to the closure of our Hong Kong guaranteed constituent funds in the prior year and $23.1 million due to lower new sales of single premium group annuities within lifeour contingencies.Chile closed block. Benefits, claims and settlement expenses increased $122.0 million for the Benefits and Protection segment due to growth in the Specialty Benefits business. This increase was partially offset by a $345.4 million decrease for the Benefits and Protection segment due to a favorablethe one-time impact of the YRT Reinsurance Transactions in 2024.2024 and $49.7 million due to unfavorable claims experience in our Life Insurance business.

The liability for future policy benefits remeasurement (gain) loss change was primarily due to the unfavorable effect of changes in cash flow assumptions related to a $544.5one-time million one-timeunfavorable impact of the YRT Reinsurance Transactions in 2024 and a $131.6 million impact driven by actuarial assumption updates and model refinements.2024.

Operating expenses increased primarily due to a $148.4$95.3 million increase in compensation costs, an$65.4 $85.9million of impairments of our distribution agreement intangible asset and contract cost asset in Hong Kong and a $64.6 million increase in nondeferrable commission expenseexpense. andThe anincreases $81.4were partially offset by a $78.1 million increasedecrease in amounts credited to employee accounts in a nonqualified defined contribution pension plan.plan, a $41.0 million decrease resulting from a one-time expense accrual release in 2025 and a $21.1 million decrease in management fees.

The effective income tax rate increaseddecreased to 11% for the year ended December 31, 2025 from 15% for the year ended December 31, 2024 from 9% for the year ended December 31, 2023,2024, primarily due to ana increase2% impact from a decrease in pre-tax incomeincome, witha no1% proportionateimpact changefrom inour permanentforeign valuation allowance and a 1% impact from foreign tax differences.credits. See Item 8. “Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements, Note 14, Income Taxes” under the caption, “Effective Income Tax Rate” for further discussion.

The following table presents the Retirement and Income Solutions segment net revenue and average monthly account values for the years indicated:

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

Net revenue increased primarily due to aan $115.4$82.7 million increase indue feeto revenue stemming from an increasegrowth in averagethe monthly account values, which largely resulted from more favorable financial markets, andbusiness, a $62.1 million increase in variable investment income. These increases were partially offset by a $70.1$28.7 million impact associated with actuarial assumption updates and model refinements, which waswere favorable in 2025 compared to unfavorable in 20242024, comparedand toa favorable$12.9 million increase in 2023.variable investment income.

The following table presents the AUM rollforward for assets managed by the Principal Asset Management segment for the periods indicated.

Pre-tax operating earnings increased in our Investment Management operations primarily due to $92.7$58.3 million higher management fee revenue as a result of increased average AUM. This was partially offset by $24.2an $11.4 million lower performance fee revenue primarilyincrease in ournon-variable realstaff estatecosts business,and a $17.0$6.2 million increase in variable compensation expense, a $10.9 million increase in variable AUM expenses and a $5.8 million increase in non-variable staff costs.expense. Pre-tax operating earnings increased in our International Pension operations primarily due to $33.2 million of increased earnings from our equity method investments in Brazil primarily as a result of our actuarial assumption review and other updates and $7.4$29.6 million of favorable relative market performance on our required regulatory investments.investments and $19.4 million increased variable investment income. These improvements were partially offset by $25.7$7.5 million of foreign currency headwinds.

Pre-tax operating earnings in our Specialty Benefits business increased $28.2$40.0 million from improved claims experience, $16.2 million due to growthfavorable actuarial assumption updates in the2025 business,compared partiallyto offsetunfavorable byin $10.92024 and $13.0 million due to unfavorablehigher actuarialyields assumptionson andinvested model refinements in 2024 compared to favorable in 2023.assets. Pre-tax operating earnings in our Life Insurance business decreased $68.4$18.6 million due to more unfavorable actuarial assumption updates, model refinements and other updates in 20242025 compared to 20232024, andpartially $11.0offset by $3.5 million due to anlower increasenet commissions and $3.2 million due to a one-time expense accrual release in the policyholder dividend obligation.2025.

NetPremiums investmentand incomefees in our Specialty Benefits business increased $13.4$105.5 million due to growth in investedthe assetsbusiness. Premiums and $3.8 million due to higher yields on invested assets. Net investment incomefees in our Life Insurance business increased $10.4$17.8 million due to highergrowth yieldsin onthe investedbusiness assets.and $11.4 million due to the one-time impact of the YRT Reinsurance Transactions in 2024.

Benefits, claims and settlement expenses in our Specialty Benefits business increased $122.0$63.5 million due to growth in the business,business offsetand by $8.7$16.1 million due to more favorableunfavorable actuarial assumption updates and model refinements in 20242025 compared to 2023.favorable in 2024, offset by $40.0 million from improved claims experience. Benefits, claims and settlement expenses in our Life Insurance business decreasedincreased $65.0 million due to the one-time impactsimpact of the YRT Reinsurance Transactions in 2024,2024 offsetand by $12.1$49.7 million due to growth in business and $4.0 million due tofrom unfavorable actuarialclaims assumption updates, model refinements and other updates in 2024 compared to favorable in 2023.experience.

Liability for future policy benefits remeasurement (gain) loss in our Specialty Benefits business increasedchanged $18.5$31.7 million due to unfavorablefavorable actuarial assumption updates and model refinements in 20242025 compared to favorableunfavorable in 2023.2024. Liability for future policy benefits remeasurement loss in our Life Insurance business increaseddecreased $55.9$44.8 million due to the one-time impact of the YRT Reinsurance Transactions in 2024 and $26.5 million due to changes in underlying claims experience, partially offset by $22.4 million due to more unfavorable actuarial assumption updates, model refinements and other updates in 20242025 compared to 2023 and $44.8 million due to the one-time impacts of the YRT Reinsurance Transactions in 2024.

Operating expenses in our Specialty Benefits business increased $62.4$33.1 million due to growth in the business.business and $28.1 million due to higher net commissions, partially offset by a $7.1 million decrease due to a one-time expense accrual release in 2025. Operating expenses in our Life Insurance business increaseddecreased $11.7$3.5 million due to higherlower net commissions and $6.8$3.2 million due to growtha one-time expense accrual release in the business.2025.

Liquidity and capital resources represent the overall strength of a company and its ability to generate strong cash flows, borrow funds at a competitive rate and raise new capital to meet operating and growth needs. We are monitoring our liquidity closely and feel confident in our ability to meet all long-term obligations to customers, policyholders and debt holders. Our sources of strength include our laddered long-term debt maturities with the next maturity occurring in MayNovember 2025,2026, access to revolving credit facility and contingent funding arrangements, a strong risk-based capital position and our available cash and liquid assets. Our legal entity structure has an impact on our ability to meet cash flow needs as an organization. Following is a simplified organizational structure.

Net cash provided by operating activities was $4,602.9$4,536.7 million and $3,792.4$4,602.9 million for the years ended December 31, 20242025 and 2023,2024, 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 increasedecrease in cash provided by operating activities in 20242025 compared to 20232024 was primarily due to fluctuations in receivables and payables associated with the timing of settlements, and due to a one-time impact of the YRT Reinsurance Transactions in 2024.

Net cash used in investing activities was $5,399.0$4,135.8 million and $1,346.9$5,399.0 million for the years ended December 31, 20242025 and 2023,2024, respectively. The increasedecrease in cash used in investing activities was primarily due to higherlower net purchases of available-for-sale securities in 20242025 as compared to 2023.2024.

In February 2024, our Board authorized a share repurchase program of up to $1.5 billion of our outstanding common stock, which haswas nocompleted expirationin date.December 2025. In February 2025, our Board authorized a share repurchase program of up to $1.5 billion of our outstanding common stock, which has no expiration date. See Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities,” for information about our share repurchase authorizations. For additional stockholders’ equity information, see Item 8. “Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements, Note 17, Stockholders’ Equity.”

Net assets (liabilities) measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of December 31, 2024,2025, were $8,046.3$7,042.6 million as compared to $7,447.8$8,046.3 million as of December 31, 2023.2024. The increasedecrease was primarily related to anissuances increaseof investment and universal life contracts, a decrease in the funds withheld payable embedded derivative net asset.asset and settlements of mortgage loans.

Net investment income increased primarily due to higher yields and average invested assets and yields in fixed maturities, commercial mortgagesmaturities and cashmortgage inloans for our U.S. operations and higher income on derivatives associated with fair value hedges.operations. These increases were partially offset by foreignlower currencyincome headwindsassociated impactingwith derivatives in fair value hedges for our LatinU.S. Americanoperations business.and decreases in federal fund rates tied to our short-term investments.

Net realized capital lossesgains decreasedincreased primarily due to reducedgains non-creditversus losses on available-for-saleGMWB/RILA fixedactivities, maturities, increased gains on currency derivatives and reduced losses on non-hedged interest rate derivatives due to changes in interest rates. These decreases were partially offset increaseddecreased losses on commercial mortgage loans reserve changes, increased losses on GMWB/RILA activitieschanges and reducedincreased gains on equity securities and sponsored investment funds due to equity market movement. These increases were partially offset by increased losses on non-hedged interest rate derivatives due to changes in rates and reduced gains on currency derivatives.

Fixed maturities include bonds, ABS, redeemable preferred stock and certain non-redeemable preferred securities that were diversified by category of issuer, as shown in the following table for the years indicated.

Of the $4,246.2$3,281.5 million in gross unrealized losses as of December 31, 2024,2025, $5.3$7.0 million in losses were attributed to securities scheduled to mature in one year or less, $222.4$173.4 million attributed to securities scheduled to mature between one to five years, $572.5$298.8 million attributed to securities scheduled to mature between five to ten years, $2,384.7$2,104.9 million attributed to securities scheduled to mature after ten years and $1,061.3$697.4 million related to mortgage-backed and other ABS that are not classified by maturity year. As of December 31, 2024,2025, we were in a $3,769.9$2,448.0 million net unrealized loss position as compared to a $3,542.9$3,769.9 million net unrealized loss position as of December 31, 2023.2024. The $227.0$1,321.9 million increasedecrease in net unrealized losses for the year ended December 31, 2024,2025, can be attributed to ana increasedecrease in interest ratesrates, which was partially offset by tighteninga widening of credit spreads.

The typical borrower in our commercial mortgage loan portfolio is a single purpose entity or single asset entity. As of December 31, 20242025 and December 31, 2023,2024, the total number of commercial mortgage loans outstanding were 620602 and 596,620, of which 35%32% and 38%35% were for loans with principal balances less than $10.0 million as of December 31, 20242025 and December 31, 2023,2024, respectively. The average loan size of our commercial mortgage portfolio was $23.2 million as of both December 31, 2025 and $22.9December million31, as2024. As of December 31, 20242025, andapproximately December$12.1 31,billion, 2023,or respectively.86%, of our U.S. investment operations commercial mortgage loans before valuation allowance had balloon payment maturities.

We had five delinquent problem commercial mortgage loans with a carrying amount of $123.7 million for which we had a valuation allowance of $62.1 million as of December 31, 2025. We also had one potential problem commercial mortgage loan with a carrying amount of $140.1 million for which we had a valuation allowance of $25.1 million as of December 31, 2025. We did not have any restructured problem commercial mortgage loans as of December 31, 2025. We had three delinquent problem commercial mortgage loans with a carrying amount of $20.6 million for which we had a valuation allowance of $18.9 million as of December 31, 2024. We also had two potential problem commercial mortgage loans with a carrying amount of $140.5 million for which we had a valuation allowance of $33.0 million and one restructured problem commercial mortgage loan with a carrying amount of $34.1 million for which we had a valuation allowance of $34.1 million as of December 31, 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.

Equity real estate is distributed across geographic regions of the country. As of December 31, 2024,2025, our largest equity real estate portfolio concentration was in the Pacific (47%45%) region of the United States. By property type, our largest concentrations were in IndustrialOffice (33%35%) and OfficeApartments (32%28%) as of December 31, 2024.2025.

The following analysis discusses our financial condition as of MarchJune 31,30, 2026, compared with December 31, 2025, and our consolidated results of operations for the three and six months ended MarchJune 31,30, 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.

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 financial resources, broader arrays of products, higher ratings and stronger financial performance, may impair our ability to retain existing customers, attract new customers and maintain our profitability; (19) a downgrade in our financial strength or credit ratings may increase policy surrenders and withdrawals, reduce new sales, terminate relationships with distributors, impact existing liabilities and increase our cost of capital, any of which could adversely affect our profitability and financial condition; (20) client terminations or withdrawals or changes in investor preferences may lead to a reduction in revenues for our asset management and accumulation businesses; (21) guarantees within certain of our products that protect policyholders may decrease our net income or increase the volatility of our results of operations or financial position under U.S. GAAP if our hedging or risk management strategies prove ineffective or insufficient; (22) our international businesses face political, legal, operational and other risks that could reduce our profitability in those businesses; (23) we face risks arising from fraudulent activities; (24) we face risks arising from vendor failures or data breaches; (25) we face risks arising from our participation in joint ventures; (26) we may need to fund deficiencies in our Closed Block assets; (27) our reinsurers could default on their obligations or increase their rates, which could adversely impact our net income and financial condition; (28) we face risks arising from future acquisitions of businesses; (29) we face risks in administering coinsurance with funds withheld reinsurance agreements; (30) if we are unable to attract, develop and retain qualified employees and sales representatives and develop new distribution sources, our results of operations, financial condition, strategic growth commitments and sales of our products may be adversely impacted; (31) interruptions in information technology, infrastructure or other internal or external systems used for our business operations, or a failure to maintain the confidentiality, integrity or availability of data residing on such systems, could disrupt our business, damage our reputation and adversely impact our profitability; (32) our financial results may be adversely impacted by global climate changes and (33) catastrophic events could adversely affect our operations, net income or financial condition.

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 closeclosed in 2026,the subjectthird toquarter regulatoryof approval2026; 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,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-saleheld 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.

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$7.9 million and $15.9 million for the three and six months ended MarchJune 31,30, 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.”

Premiums and other considerations decreasedincreased $638.4$40.7 million for the Retirement and Income Solutions segment primarily due to lowerhigher sales of single premium group annuities with life contingencies. Premiums and other considerations increased $37.1$27.7 million for the Benefits and Protection segment primarily due to growth in theour Specialty Benefits business.

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$37.5 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 $24.1 million for the Corporate segment primarily due to an increase in commission income related to the affiliated distribution realignment in 2026.

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

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

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

The effective income tax rate ofincreased to 14% for the threesix months ended MarchJune 31,30, 2026 changed2026, from (118)%7% for the threesix months ended MarchJune 31,30, 2025, primarily due to a 6% impact from an increase in pre-tax income with no proportionate changeincrease in permanent tax differences.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.

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 creditperformance marketof performance.financial markets.

Pre-Tax Operating EarningsExpenses

Net revenue increased primarily due to a $14.0 million increase resulting from growth in the business, a $9.3$46.0 million increase in fee revenue primarily due to an increase in average monthly account values, which largely resulted from more favorable financial marketsmarkets, and ana $8.0$35.6 million increase in variable investment income.

Pre-tax operating earnings increased in our Investment Management operations primarily due to $9.5$18.2 million higher management fee revenue as a result of increased average AUM.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 $12.8$16.4 million higher earnings from our equity method investments in Brazil and $6.8$14.0 million of foreign currency tailwinds. These improvements were partially offset by $8.8 million of unfavorable relative market performance on our required regulatory investments.

OperatingPremiums expensesand decreasedfees primarilyin our Specialty Benefits business increased $33.1 million due to lowergrowth netin commissionthe expensebusiness. Premium and fees decreased $13.9 million in our Life Insurance business largelyprimarily due to lower commission income resulting from the affiliated distribution realignment in 2026.