Can Principal Financial Balance Growth With Margin Pressures?

Principal Financial Group, Inc. PFG has built its growth strategy around businesses that generate stable, recurring revenue. Its leadership in retirement and long-term savings is a key driver, supported by strong demand in both U.S. and international markets.

The company also benefits from a solid presence in group benefits and protection, as well as a growing global asset management franchise. By emphasizing fee-based income and expanding assets under management, Principal Financial reduces its dependence on interest rate movements and creates a more resilient earnings profile.

Building on this foundation, Principal Financial is seeing steady growth in retirement and benefits, particularly within the U.S. small to midsize business segment. Strong employment trends and rising wages continue to support demand, while global asset management and international retirement platforms add further momentum. With fee, spread, and risk businesses contributing to performance, the company is well-positioned to drive revenue growth and expand margins over time.

Alongside its organic momentum, Principal Financial has also used select acquisitions to strengthen its core businesses. Purchases in retirement and asset management, including the Wells Fargo Institutional Retirement and Trust business, have expanded its scale and enhanced service capabilities. These moves not only added to fee-based revenue streams but also reinforced the company’s position in the global retirement market, creating a broader platform for sustained growth.

Principal Financial has complemented its growth strategy with steady capital returns to shareholders. Over the past five years, the company has raised its dividend 12 times, with payouts climbing nearly 6% during the period. The current payout ratio stands at about 40% of earnings, leaving room for continued distributions.

Looking ahead, management expects capital deployment to remain elevated in the second half of 2025, targeting $1.4 billion to $1.7 billion, including $700 million to $1 billion in share repurchases. In February 2025, the board authorized a new buyback program of up to $1.5 billion.

Headwinds Faced by PFG

Despite its strong growth, Principal Financial faces certain headwinds that could affect margins. Rising operating expenses, along with higher benefits, claims, and settlement costs, put pressure on profitability. In addition, elevated leverage has contributed to increased interest expenses, further challenging margin expansion.

Also, return on invested capital (ROIC) for the trailing 12 months was 0.5% comparing unfavorably with the industry’s 2%. This reflects its inefficiency in utilizing shareholders’ funds. 

Earnings Surprise History

PFG’s earnings history is disappointing. It lagged estimates in three of the last four quarters, the average negative earnings surprise being 1.5%.

Other Industry Players

Other players in the Insurance - Multi line include Radian Group Inc. RDN, Everest Group, Ltd. EG and EverQuote, Inc. EVER.

Radian Group’s earnings surpassed estimates in each of the last four quarters, the average surprise being 11.5%

Radian Group is strengthening its mortgage insurance portfolio to support sustainable growth, driven by a steady market and improved credit quality in newly insured loans. Rising policy renewals and growing demand for new insurance have expanded its total coverage, while proprietary tools, such as the RADAR Rates platform, help capture value across the portfolio. With overall claim activity declining and defaults remaining low, the company is well-positioned to maintain a stable and reliable earnings stream.

EG’searnings surpassed estimates in two of the last four quarters and missed in the other two, with an average surprise of 3.4%.

Everest Group’s growth is supported by strong organic drivers, including product diversification, healthy premium volumes, and a balanced insurance mix. Expansion in Asia, Latin America, and Europe reduces reliance on North America, while local autonomy improves underwriting agility. Combined with conservative investments and a solid balance sheet, these factors support stable, risk-adjusted earnings and long-term financial resilience.

EverQuote’s earnings surpassed estimates in each of the last four quarters, the average surprise being 44.2%.

EverQuote is positioned for long-term growth, supported by its proprietary data platform, focus on property and casualty markets, and leaner operations. Rising digital adoption, lower advertising costs, and strong auto insurance demand underpin revenue growth, with 2025 projected to reach nearly $1 billion. Investments in AI, technology, and data initiatives, along with a $50 million share repurchase program, further strengthen efficiency, monetization, and competitive advantage.

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