FULLTEXT DEL 5 AV 8
10-K – 2026-02-18 – pfg-20251231x10k.htm
Commercial Mortgage Loan Valuation Allowance. We establish the commercial mortgage loan valuation allowance at levels considered adequate to absorb estimated expected credit losses within the portfolio. For further details on the commercial mortgage loan valuation allowance, see Item 8. “Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements, Note 4, Investments” under the caption, “Financing Receivables Valuation Allowance.” Real Estate Real estate consists primarily of commercial equity real estate. As of December 31, 2025 and December 31, 2024, the carrying amount of our equity real estate investment was $2,408.4 million and $2,463.7 million, respectively. Our commercial equity real estate is held in the form of wholly owned real estate, real estate acquired upon foreclosure of commercial mortgage loans and majority owned interests in real estate joint ventures. Equity real estate is categorized as either “real estate held for investment” or “real estate held for sale.” The carrying value of real estate held for investment is generally adjusted for impairments whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Such impairment adjustments are recorded as net realized capital losses in our consolidated results of operations. No such impairment adjustments were recorded for the year ended December 31, 2025 or for the year ended December 31, 2024. Once we identify a real estate property to be sold and it is probable that it will be sold, we classify the property as held for sale. We establish a valuation allowance subject to periodic revisions, if necessary, to adjust the carrying value of the property to reflect the lower of its current carrying value or the fair value, less associated selling costs. The valuation allowance did not change for the year ended December 31, 2025 or for the year ended December 31, 2024. We use research, both internal and external, to recommend appropriate product and geographic allocations and changes to the equity real estate portfolio. We monitor product, geographic and industry diversification separately and together to determine the most appropriate mix. Equity real estate is distributed across geographic regions of the country. As of December 31, 2025, our largest equity real estate portfolio concentration was in the Pacific (45%) region of the United States. By property type, our largest concentrations were in Office (35%) and Apartments (28%) as of December 31, 2025. 67 Table of Contents Other Investments Our other investments totaled $5,885.3 million as of December 31, 2025, compared to $4,844.7 million as of December 31, 2024. Other investments include interests in unconsolidated entities, which include real estate properties owned jointly with venture partners and operated by the partners; sponsored investment funds; the cash surrender value of company owned and trust owned life insurance; derivative assets and other investments. International Investment Operations Of our invested assets, $6,682.9 million were held by our international operations as of December 31, 2025. Due to the regulatory constraints in each location, each company maintains its own investment policies. As shown in the following table, the major category of international invested assets is fixed maturities. The following table excludes invested assets of the separate accounts. December 31, 2025 December 31, 2024 Carrying Percent Carrying Percent amount of total amount of total ($ in millions) Fixed maturities $ 2,646.0 40 % $ 2,495.0 41 % Equity securities 887.4 13 747.1 12 Mortgage loans 951.0 14 867.2 14 Real estate 1.3 — 0.8 — Policy loans 16.2 — 15.0 — Other investments: Direct financing leases 567.6 8 560.0 9 Investment in unconsolidated operating entities 1,133.2 18 1,048.6 17 Derivative assets and other investments 480.2 7 394.2 7 Total invested assets 6,682.9 100 % 6,127.9 100 % Cash and cash equivalents 306.7 248.9 Total invested assets and cash $ 6,989.6 $ 6,376.8 Regulations in certain locations require investment in the funds we manage. These required regulatory investments are classified as equity securities within our consolidated statements of financial position, with all mark-to-market changes reflected in net investment income. Our investment is primarily dictated by client activity and all investment performance is retained by us. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Market Risk Exposures and Risk Management Market risk is the risk we will incur losses due to adverse fluctuations in market rates and prices. Our primary market risk exposures are to interest rates, equity markets and foreign currency exchange rates. The active management of market risk is an integral part of our operations. We manage our overall market risk exposure within established risk tolerance ranges using several approaches, including: ● rebalancing our existing asset or liability portfolios; ● controlling the risk structure of newly acquired assets and liabilities and ● using derivative instruments to modify the market risk characteristics of existing assets or liabilities or assets expected to be purchased. 68 Table of Contents Interest Rate Risk Interest rate risk is the risk of economic losses due to adverse changes in interest rates. Interest rate risk arises primarily from our holdings in interest sensitive assets and liabilities. Changes in interest rates impact numerous aspects of our operations, including but not limited to: ● yield on our invested assets; ● rate of interest we credit to contractholder account balances; ● timing of cash flows on assets and liabilities containing embedded prepayment options; ● cost of hedging our GMWB rider; ● discount rate used in valuing our liability for future policy benefits for long-duration insurance and annuity contracts; ● discount rate used in valuing our pension and OPEB obligations; ● statutory reserve and capital requirements; ● asset-based fees earned on the fixed income assets we manage; ● interest expense on our long-term borrowings; ● fair value of intangible assets in our reporting units and ● fair value of financial assets and liabilities held at fair value on our consolidated statements of financial position. Lower interest rates generally result in lower profitability in the long-term. Conversely, higher interest rates generally result in higher profitability in the long-term. However, an increase in market interest rates may cause a decline in the value of financial assets held at fair value on our consolidated statements of financial position. Impact of Changes in Long-Term Interest Rate Assumptions We use long-term interest rate assumptions to calculate MRBs, certain reserves and benefit plan obligations in accordance with U.S. GAAP. In setting these assumptions, we consider a variety of factors, including historical experience, emerging trends and future expectations. We evaluate our assumptions on at least an annual basis. Due to the long-term nature of our assumptions, we generally do not revise our assumptions in response to short-term fluctuations in market interest rates. However, we will consider revising our assumptions if a significant change occurs in the factors noted above. A reduction in our long-term interest rate assumptions may result in increases in MRB liabilities and certain reserves. 69 Table of Contents Impact of Changes in Interest Rates Changes in interest rates or a sustained low interest rate environment may result in the following impacts, which would impact our financial position and results of operations: Impact of Falling Interest Rates or Sustained Low Interest Rates Impact of Rising Interest Rates Adverse Impacts: Positive Impacts: A reduction in investment income, which may be partially offset by a reduction in the interest we credit on contractholder account balances; however, our ability to lower crediting rates may be constrained by guaranteed minimum interest rates and competitive pressures An increase in investment income, which may be partially or fully offset by an increase in the interest we credit on contractholder account balances An increase in the cost of hedging our GMWB rider A decrease in the cost of hedging our GMWB rider An increase in MRB liabilities and certain reserves A decrease in MRB liabilities and certain reserves A reduction in the discount rate used to measure reserves for long-duration insurance and annuity contracts, leading to an increase in our reserves An increase in the discount rate used to measure reserves for long-duration insurance and annuity contracts, leading to a decrease in our reserves A reduction in the discount rate used in valuing our pension and OPEB obligations, leading to an increase in our Projected Benefit Obligation, Net Periodic Pension Cost, Accumulated Postretirement Benefit Obligation and Net Periodic Benefit Cost An increase in the discount rate used in valuing our pension and OPEB obligations, leading to a decrease in our Projected Benefit Obligation, Net Periodic Pension Cost, Accumulated Postretirement Benefit Obligation and Net Periodic Benefit Cost An increase in statutory capital we are required to hold as well as the amount of assets we must maintain to support statutory reserves A decrease in statutory capital we are required to hold as well as the amount of assets we must maintain to support statutory reserves An increase in prepayments or redemptions on mortgages and bonds we own, which would force us to reinvest the proceeds at lower interest rates A decrease in prepayments or redemptions on mortgages and bonds we own, which would reduce our opportunity to reinvest the proceeds at higher interest rates Positive Impacts: Adverse Impacts: An increase in the value of the fixed income assets we manage, resulting in an increase in our fee revenue in the short-term A decrease in the value of the fixed income assets we manage, resulting in a decrease in our fee revenue in the short-term A decrease in the interest expense on our long-term borrowings, to the extent the borrowings have adjustable rates or we are able to refinance our obligations at lower interest rates An increase in the interest expense on our long-term borrowings, to the extent the borrowings have adjustable rates or we refinance our obligations at higher interest rates An increase in the fair value of certain financial assets held at fair value on our consolidated statements of financial position A decrease in the fair value of certain financial assets held at fair value on our consolidated statements of financial position, as discussed below A reduction in the fair value of intangible assets in our reporting units, potentially leading to an impairment of goodwill or other intangible assets We estimate a hypothetical 100 basis point immediate, parallel decrease in U.S. interest rates would impact segment pre-tax operating earnings between (1)% and 1% over the next twelve months. This estimate reflects the impact of routine management actions in response to changes in interest rates, such as reducing the interest rates we credit on contractholder account balances, but does not reflect the impact of other actions management may consider, such as curtailing sales of certain products. The selection of a 100 basis point immediate, parallel decrease in U.S. interest rates should not be construed as a prediction by us of future market events, but rather as an illustration of the impact of such an event. Our exposure will change as a result of ongoing portfolio transactions in response to new business, management’s assessment of changing market conditions and changes in our mix of business. If market rates increase rapidly, policy surrenders, withdrawals and requests for policy loans may increase as customers seek to achieve higher returns. Excess lapses may result in an acceleration of amortization for our DAC and other actuarial balances. We may be required to sell assets to raise the cash necessary to respond to such surrenders, withdrawals and loans, thereby realizing capital losses on the assets sold. 70 Table of Contents Guaranteed Minimum Interest Rate Exposure . The following table provides detail on the differences between the interest rates being credited to contractholders as of December 31, 2025, and the respective guaranteed minimum interest rates (“GMIRs”). Amounts for contracts without significant fee revenues such as GICs, funding agreements, retail fixed income annuities and guaranteed pension contracts are excluded. Additionally, amounts for contracts that are reinsured are also excluded. Account values are broken down by GMIR level within the Retirement and Income Solutions and Benefits and Protection segments. Account values (1) Excess of crediting rates over GMIR: Up to 0.50% 0.51% to 1.00% 1.01% to 2.00% 2.01% or more At GMIR above GMIR above GMIR above GMIR above GMIR Total ($ in millions) Guaranteed minimum interest rate Retirement and Income Solutions Up to 1.00% $ 14.8 $ — $ — $ — $ — $ 14.8 1.01% ‑ 2.00% 3.9 2,700.0 — 741.4 — 3,445.3 2.01% ‑ 3.00% 392.2 189.1 673.2 3,935.8 4,471.3 9,661.6 3.01% ‑ 4.00% 7.6 — — — — 7.6 4.01% and above 11.9 — — — — 11.9 Subtotal 430.4 2,889.1 673.2 4,677.2 4,471.3 13,141.2 Benefits and Protection Up to 1.00% — — — 14.8 31.2 46.0 1.01% ‑ 2.00% — — — 3.7 458.0 461.7 2.01% ‑ 3.00% 2.6 10.6 108.7 391.8 4.9 518.6 3.01% ‑ 4.00% 1,512.2 53.3 28.4 104.9 2.7 1,701.5 4.01% and above 17.0 9.6 16.1 7.7 — 50.4 Subtotal 1,531.8 73.5 153.2 522.9 496.8 2,778.2 Total $ 1,962.2 $ 2,962.6 $ 826.4 $ 5,200.1 $ 4,968.1 $ 15,919.4 Percentage of total 12.3 % 18.6 % 5.2 % 32.7 % 31.2 % 100.0 % (1) Includes only the account values, net of the account values with associated policy loans, for products with GMIRs and discretionary crediting rates, excluding amounts for contracts that are reinsured. Impact of Rising Interest Rates on the Fair Value of Financial Assets. An increase in market interest rates may cause a decline in the value of financial assets held at fair value on our consolidated statements of financial position. Although changes in the fair value of our financial assets due to changes in interest rates may impact the amount of equity reported in our consolidated statements of financial position, these changes will not cause an economic gain or loss unless we sell investments, terminate derivative positions, record an allowance for credit loss, or determine a derivative instrument is no longer an effective hedge. We estimate a hypothetical 100 basis point immediate, parallel increase in interest rates would reduce the net reported fair value of our financial assets and derivatives by $2,730.6 million as of December 31, 2025, compared to $2,670.8 million as of December 31, 2024. This estimate only reflects the change in fair value for financial assets and derivatives reported at fair value on our consolidated statements of financial position. Assets and liabilities not reported at fair value on our consolidated statements of financial position – including mortgage loans, liabilities relating to insurance contracts, investment contracts, debt and bank deposits – are excluded from this sensitivity analysis. We believe the excluded liability items would economically serve as a partial offset to the net interest rate risk of the financial instruments included in the sensitivity analysis. Separate account assets and liabilities are also excluded from this estimate, as any interest rate risk is borne by the holder of the separate account. Assets backing reserves as part of a coinsurance with funds withheld agreement are excluded from this estimate, as any interest rate risk is passed to the reinsurer. For more information on fair value measurements, see Item 8. “Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements, Note 18, Fair Value Measurements.” Our selection of a 100 basis point immediate, parallel increase in interest rates is a hypothetical rate scenario we use to demonstrate potential risk. While a 100 basis point immediate, parallel increase does not represent our view of future market changes, it is a near term reasonably possible hypothetical change that illustrates the potential impact of such events. While this sensitivity analysis provides a representation of interest rate sensitivity, it is based on our portfolio exposures at a point in time and may not be representative of future market results. These exposures will change as a result of ongoing portfolio transactions in response to new business, management’s assessment of changing market conditions and available investment opportunities. 71 Table of Contents Interest Rate Risk Management We manage interest rate risk through the use of an integrated risk management framework. This helps us identify, assess, monitor, report and manage our risks within established limits and risk tolerances. Our internal risk committees monitor and discuss our risk profile and identify necessary actions to mitigate impacts from interest rate risk. The product designs within our business units result in a variety of different interest rate risk profiles. Therefore, our business units use a variety of different approaches for managing their asset and liability interest rate risks. ● Retirement Business Stable Cash Flows – For stable and predictable cash flow liabilities, such as pension risk transfer, WSRS, and investment only, we use investment strategy and hedges to tightly align the cash flow run off of these asset and liability cash flows. Immunization analysis is also utilized in the management of interest rate risk. ● U.S. Insurance Stable Cash Flows – Our insurance businesses in many instances contain long-term guarantees with stable and predictable liability cash flows and recurring premiums. We manage the interest rate risk through investment strategy, product crediting rates and analyzing duration and embedded value sensitivity. ● Principal Asset Management – Our international businesses operate within local regulations and financial market conditions (e.g., derivative markets, assets available) to achieve similar asset and liability cash flow management objectives. In locations with a limited availability of long-dated assets and derivative markets, the duration gap is managed to risk tolerances specific to each location. We also limit our exposure to interest rate risk through our business mix and strategy. We have intentionally limited our exposure to specific products where investment margins are critical to the product’s profitability, and we continue to emphasize the sale of products that generate revenues in the form of fees for service or premiums for insurance coverage and expose us to minimal interest rate risk. Prepayment risk is controlled by limiting our exposure to investments that are prepayable without penalty prior to maturity at the option of the issuer. We also require additional yield on these investments to compensate for the risk the issuer will exercise such option. Prepayment risk is also controlled by limiting the sales of liabilities with features such as puts or other options that can be exercised at inopportune times. We manage the interest rate risk associated with our long-term borrowings by monitoring the interest rate environment and evaluating refinancing opportunities as maturity dates approach. The plan fiduciaries use a Dynamic Asset Allocation strategy for our qualified defined benefit pension plan, which strategically allocates an increasing portion of the assets of the pension plan to fixed income securities as the funding status improves. The intended purpose of using the Dynamic Asset Allocation strategy is that the expected change in the value of the plan assets and the change in pension benefit obligation due to market movements are more likely to have more correlation versus a static allocation of assets between categories. For more information see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates — Benefit Plans” and Item 8. “Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements, Note 15, Employee and Agent Benefits.” Use of Derivatives to Manage Interest Rate Risk. We use or have used various derivative financial instruments to manage our exposure to fluctuations in interest rates, including interest rate swaps, interest rate options, bond forwards, treasury forwards and futures. We use interest rate swaps, treasury forwards and futures contracts to hedge against changes in the value of the GMWB MRB. We use interest rate swaps and treasury forwards primarily to more closely match the interest rate characteristics of assets and liabilities. They can be used to change the sensitivity to the interest rate of specific assets and liabilities as well as an entire portfolio. We use interest rate swaps to manage our exposure to cash flow variability on recognized assets due to fluctuations in market interest rates. We use bond forwards to fix the purchase price of a bond at a specified date in the future. We use interest rate options to manage prepayment risks in our assets and minimum guaranteed interest rates and lapse risks in our liabilities. Foreign Currency Risk Foreign currency risk is the risk we will incur economic losses due to adverse fluctuations in foreign currency exchange rates. This risk arises from foreign currency-denominated funding agreements issued to nonqualified institutional investors in the international market, foreign currency-denominated fixed maturity and equity securities, and our international operations, including expected cash flows and potential acquisition and divestiture activity. 72 Table of Contents We estimate as of December 31, 2025, a 10% immediate unfavorable change in each of the foreign currency exchange rates to which we are exposed would result in no material change to the net fair value of our foreign currency-denominated instruments identified above because we effectively hedge foreign currency-denominated instruments to minimize exchange rate impacts, which is consistent with our estimate as of December 31, 2024. However, fluctuations in foreign currency exchange rates do affect the translation of segment pre-tax operating earnings and equity of our international operations into our consolidated financial statements. For our international operations, we estimate a 10% immediate unfavorable change in each of the foreign currency exchange rates to which we were exposed would have resulted in a $275.1 million, or 7%, reduction in the total equity excluding noncontrolling interests of our international operations as of December 31, 2025, as compared to an estimated $277.0 million, or 7%, reduction as of December 31, 2024. We estimate a 10% unfavorable change in the average foreign currency exchange rates to which we were exposed through our international operations would have resulted in a $46.9 million, or 5%, reduction in segment pre-tax operating earnings of our international operations for the year ended December 31, 2025, as compared to an estimated $43.7 million, or 5%, reduction for the year ended December 31, 2024. The selection of a 10% immediate unfavorable change in all currency exchange rates should not be construed as a prediction by us of future market events, but rather as an illustration of the potential impact of such an event. These exposures will change as a result of a change in the size and mix of our foreign operations. Use of Derivatives to Manage Foreign Currency Risk. The foreign currency risk on funding agreements and fixed maturities in our U.S. operations is mitigated by using currency swaps that swap the foreign currency interest and principal payments to our functional currency. We did not have currency swap agreements associated with foreign-denominated liabilities as of December 31, 2025 and December 31, 2024. The notional amount of our currency swap agreements associated with foreign-denominated fixed maturities was $3,319.6 million and $2,669.3 million as of December 31, 2025 and December 31, 2024, respectively. With regard to our international operations, in order to enhance the diversification of our investment portfolios we may invest in bonds denominated in a currency that is different than the currency of our liabilities. We use foreign exchange derivatives to economically hedge the currency mismatch. Our international operations had currency swaps with a notional amount of $219.1 million and $214.5 million as of December 31, 2025 and December 31, 2024, respectively. Our international operations also utilized currency forwards with a notional amount of $642.9 million and $694.8 million as of December 31, 2025 and December 31, 2024, respectively. We use currency forwards to hedge currency risk associated with expected cash flows in our foreign operations. We held currency forwards with a notional of $156.5 million and $179.7 million as of December 31, 2025 and December 31, 2024, respectively. Additionally, we use currency forwards to hedge net equity investments in our foreign operations, including certain sponsored investment funds. We held currency forwards with a notional amount of $55.6 million and $50.8 million as of December 31, 2025 and December 31, 2024, respectively. We also use currency forwards to hedge certain foreign-denominated investments in our domestic operations. We held currency forwards with a notional amount of $59.6 million and $55.9 million as of December 31, 2025 and December 31, 2024, respectively. 73 Table of Contents Equity Risk Equity risk is the risk we will incur economic losses due to adverse fluctuations in equity markets. As of December 31, 2025 and December 31, 2024, the fair value of our equity securities was $2,237.3 million and $2,295.0 million, respectively. We estimate a 10% decline in the prices of the equity securities would result in a decline in fair value of our equity securities of $223.7 million as of December 31, 2025, as compared to a decline in fair value of our equity securities of $229.5 million as of December 31, 2024. We are also exposed to the risk that asset-based fees decrease as a result of declines in assets under management due to changes in investment prices and the risk that asset management fees calculated by reference to performance could be lower. We also have equity risk associated with (1) universal life contracts that credit interest to customers based on changes in an external equity index; (2) variable annuity contracts that have a GMWB rider that allows the customer to make withdrawals of a specified annual amount, either for a fixed number of years or for the lifetime of the customer, even if the account value is reduced to zero; (3) variable annuity contracts that have a GMDB that allows the death benefit to be paid, even if the account value has fallen below the GMDB amount; (4) SEC-registered annuity contracts with returns linked to an external equity index and (5) investment contracts in which the return is subject to minimum contractual guarantees. We are also subject to equity risk based upon the assets that support our employee benefit plans. For further discussion of equity risk associated with these plans, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates — Benefit Plans.” We estimate an immediate 10% downward equity shock, followed by a 2% per quarter increase would reduce our annual segment pre-tax operating earnings by approximately 5% to 8% over the next twelve months. The selection of a 10% unfavorable equity shock should not be construed as a prediction by us of future market events, but rather as an illustration of the potential impact of such an event. Our exposure will change as a result of changes in our mix of business. Separate and distinct from our equity risk associated with a decline in the equity indices, we also have equity risk associated with certain domestic alternative investments. These investments are comprised of several asset categories (including hedge funds, private equity, infrastructure and direct lending) that provide an attractive asset match to our long-dated liabilities and create diversification benefits to our fixed income investments. The risk profile of these investments is actively monitored by our Investment Committee and our corporate risk management function. Changes in the value of these investments will impact earnings. We estimate an immediate 10% decline in the value of those assets, followed by a 2% per quarter increase would reduce our annual segment pre-tax operating earnings by less than 9%. The selection of a 10% unfavorable change in the value of those assets should not be construed as a prediction of future market events, but rather as an illustration of the potential impact of such a decline in value of those assets. Use of Derivatives to Manage Equity Risk. We economically hedge the universal life products, where the interest credited is linked to an external equity index, by purchasing options that match the product’s profile or selling options to offset existing exposures. We have economically hedged certain investments using total return swaps to swap the equity risk for income enhancement. We economically hedge RILA index credit exposure using options and futures. We economically hedge the GMWB rider MRB exposure, which includes interest rate risk and equity risk, using futures, options, treasury forwards and interest rate swaps with notional amounts of $7,088.9 million and $7,678.0 million as of December 31, 2025, and December 31, 2024, respectively. The fair value of both MRBs and associated hedging instruments are sensitive to financial market conditions and the variance related to the change in fair value of these items for a given period is largely dependent on market conditions at the end of the period. 74 Table of Contents Item 8. Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting 76 Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 77 Audited Consolidated Financial Statements Consolidated Statements of Financial Position 79 Consolidated Statements of Operations 80 Consolidated Statements of Comprehensive Income 81 Consolidated Statements of Stockholders’ Equity 82 Consolidated Statements of Cash Flows 83 Notes to Consolidated Financial Statements 1. Nature of Operations and Significant Accounting Policies 84 2. Goodwill and Other Intangible Assets 98 3. Variable Interest Entities 100 4. Investments 103 5. Derivative Financial Instruments 122 6. Closed Block 134 7. Deferred Acquisition Costs and Other Actuarial Balances 136 8. Separate Account Balances 139 9. Contractholder Funds 143 10. Future Policy Benefits and Claims 148 11. Market Risk Benefits 162 12. Reinsurance 165 13. Debt 168 14. Income Taxes 172 15. Employee and Agent Benefits 178 16. Contingencies, Guarantees, Indemnifications and Leases 189 17. Stockholders’ Equity 193 18. Fair Value Measurements 198 19. Statutory Insurance Financial Information 214 20. Segment Information 215 21. Revenues from Contracts with Customers 225 22. Stock-Based Compensation Plans 230 23. Earnings Per Common Share 234 24. Subsequent Event 234 75 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Principal Financial Group, Inc. Opinion on Internal Control Over Financial Reporting We have audited Principal Financial Group, Inc.’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Principal Financial Group, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of financial position of the Company as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and financial statement schedules listed in the Index at Item 15(a) and our report dated February 18, 2026 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Des Moines, Iowa February 18, 2026 76 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Principal Financial Group, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated statements of financial position of Principal Financial Group, Inc.(the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and financial statement schedules listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 18, 2026 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 77 Table of Contents Liability for future policy benefits and claims Description of the Matter At December 31, 2025, future policy benefits and claims related to traditional and limited payment long-duration contracts totaled $51.7 billion. The future policy benefits liability related to these products is based on estimates of how much the Company will need to pay for future benefits and the amount of fees to be collected from policyholders for these policy features. As described in Note 10, there is uncertainty inherent in estimating this liability because there is a significant amount of management judgment involved in developing certain assumptions that impact the liability balance, which include mortality rates, and lapse termination rates. Auditing the valuation of future policy benefits liabilities related to these products was complex and required the involvement of our actuarial specialist due to the high degree of judgment used by management in setting the assumptions used in the estimate of the future policy benefits liability related to these products. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the future policy benefits liability estimation processes, including among others, controls related to the review and approval processes that management has in place for the assumptions used in the valuation of the future policy benefits liability. This included testing controls related to management’s evaluation of the need to update assumptions based on the comparison of actual company experience to previous assumptions. We involved actuarial specialists to assist with our audit procedures which included, among others, an evaluation of the methodology applied by management with those methods used in prior periods. To assess the significant assumptions used by management, we compared the significant assumptions noted above to historical experience, industry data or management’s estimates of prospective changes in these assumptions. In addition, we performed an independent recalculation of cash flows related to the future policy benefit reserves for a sample of cohorts or contracts which we compared to the actuarial model used by management. /s/ Ernst & Young LLP We have served as the Company’s auditor since 1967. Des Moines, Iowa February 18, 2026 78 Table of Contents Principal Financial Group, Inc. Consolidated Statements of Financial Position December 31, December 31, 2025 2024 (in millions, except share amounts) Assets Fixed maturities, available-for-sale (1) $ 73,360.7 $ 68,251.0 Fixed maturities, trading (2025 and 2024 include $ 185.0 million and $ 205.9 million related to consolidated variable interest entities) 1,243.8 1,023.3 Equity securities (2025 and 2024 include $ 428.6 million and $ 367.9 million related to consolidated variable interest entities) 2,237.3 2,295.0 Mortgage loans (2025 and 2024 include $ 726.5 million and $ 944.5 million related to consolidated variable interest entities and $ 0.0 million and $ 140.6 million measured at fair value under the fair value option) 21,008.3 20,484.2 Real estate (2025 and 2024 include $ 819.4 million and $ 781.8 million related to consolidated variable interest entities) 2,409.7 2,464.5 Policy loans 866.7 867.5 Other investments (2025 and 2024 include $ 838.4 million and $ 625.6 million related to consolidated variable interest entities and $ 167.1 million and $ 129.0 million measured at fair value under the fair value option) 9,775.0 7,990.3 Total investments 110,901.5 103,375.8 Cash and cash equivalents (2025 and 2024 include $ 89.1 million and $ 86.1 million related to consolidated variable interest entities) 4,431.0 4,211.9 Accrued investment income (2025 and 2024 include $ 43.8 million and $ 19.1 million related to consolidated variable interest entities) 870.9 828.6 Reinsurance recoverable and deposit receivable 19,000.1 19,490.1 Premiums due and other receivables 3,894.5 3,771.5 Deferred acquisition costs 4,071.6 4,006.9 Market risk benefit asset 197.1 199.5 Property and equipment 701.4 769.4 Goodwill 1,600.5 1,549.7 Other intangibles 1,267.0 1,389.9 Separate account assets (2025 and 2024 include $ 41,450.5 million and $ 32,802.2 million related to consolidated variable interest entities) 193,622.6 173,327.1 Other assets 818.3 743.2 Total assets $ 341,376.5 $ 313,663.6 Liabilities Contractholder funds $ 45,380.3 $ 43,099.6 Future policy benefits and claims 51,749.7 48,179.4 Market risk benefit liability 66.9 62.1 Other policyholder funds 940.8 966.4 Short-term debt (2025 and 2024 include $ 0.0 million and $ 119.0 million related to consolidated variable interest entities) 27.7 152.7 Long-term debt 3,926.3 3,955.3 Income taxes currently payable 29.5 8.6 Deferred income taxes 1,856.4 1,706.0 Separate account liabilities (2025 and 2024 include $ 41,450.5 million and $ 32,802.2 million related to consolidated variable interest entities) 193,622.6 173,327.1 Funds withheld payable 17,783.4 18,103.7 Other liabilities (2025 and 2024 include $ 69.4 million and $ 108.8 million related to consolidated variable interest entities) 13,601.6 12,633.7 Total liabilities 328,985.2 302,194.6 Redeemable noncontrolling interest (2025 and 2024 include $ 440.9 million and $ 309.9 million related to consolidated variable interest entities) 474.3 337.7 Stockholders’ equity Common stock, par value $ 0.01 per share; 2,500,000,000 shares authorized; 496,884,232 and 494,734,908 shares issued as of 2025 and 2024; 217,380,912 and 226,225,161 shares outstanding as of 2025 and 2024 5.0 4.9 Additional paid-in capital 11,275.4 11,100.9 Retained earnings 18,071.3 17,583.5 Accumulated other comprehensive loss ( 4,188.4 ) ( 5,224.8 ) Treasury stock, at cost; 279,503,320 and 268,509,747 shares as of 2025 and 2024 ( 13,279.4 ) ( 12,378.1 ) Total stockholders’ equity attributable to Principal Financial Group, Inc. 11,883.9 11,086.4 Noncontrolling interest 33.1 44.9 Total stockholders’ equity 11,917.0 11,131.3 Total liabilities and stockholders’ equity $ 341,376.5 $ 313,663.6 (1) See Note 4, Investments, for further details relating to the amortized cost of fixed maturities, available-for-sale. See accompanying notes. 79 Table of Contents Principal Financial Group, Inc. Consolidated Statements of Operations For the year ended December 31, 2025 2024 2023 (in millions, except per share data) Revenues Premiums and other considerations $ 6,780.4 $ 6,850.2 $ 6,470.9 Fees and other revenues 4,424.8 4,320.5 4,095.9 Net investment income 4,730.5 4,449.2 4,091.9 Net realized capital gains (losses) (1) 27.7 ( 27.3 ) ( 72.2 ) Net realized capital gains on funds withheld assets (1) 43.2 87.7 165.0 Change in fair value of funds withheld embedded derivative ( 381.1 ) 447.4 ( 1,085.7 ) Total revenues 15,625.5 16,127.7 13,665.8 Expenses Benefits, claims and settlement expenses 8,564.5 8,072.6 7,788.2 Liability for future policy benefits remeasurement (gain) loss 56.4 671.4 ( 51.6 ) Market risk benefit remeasurement loss 63.1 30.3 29.1 Dividends to policyholders 91.7 99.9 89.2 Operating expenses 5,433.8 5,363.9 5,072.1 Total expenses 14,209.5 14,238.1 12,927.0 Income before income taxes 1,416.0 1,889.6 738.8 Income taxes 160.5 291.7 68.7 Net income 1,255.5 1,597.9 670.1 Net income attributable to noncontrolling interest 70.4 26.9 46.9 Net income attributable to Principal Financial Group, Inc. $ 1,185.1 $ 1,571.0 $ 623.2 Earnings per common share Basic earnings per common share $ 5.32 $ 6.77 $ 2.58 Diluted earnings per common share $ 5.25 $ 6.68 $ 2.55 (1) Includes realized and unrealized gains (losses). See Note 4, Investments, for further details. See accompanying notes. 80 Table of Contents Principal Financial Group, Inc. Consolidated Statements of Comprehensive Income For the year ended December 31, 2025 2024 2023 (in millions) Net income $ 1,255.5 $ 1,597.9 $ 670.1 Other comprehensive income, net: Net unrealized gains (losses) on available-for-sale securities 1,463.8 ( 678.0 ) 1,843.1 Net unrealized gains (losses) on derivative instruments ( 83.7 ) 53.9 ( 41.8 ) Liability for future policy benefits discount rate remeasurement gain (loss) ( 625.7 ) 1,010.0 ( 312.7 ) Market risk benefit nonperformance risk remeasurement gain (loss) 1.6 ( 8.1 ) ( 30.9 ) Foreign currency translation adjustment 231.1 ( 296.6 ) 73.7 Net unrecognized postretirement benefit obligation 41.1 30.7 2.4 Other comprehensive income 1,028.2 111.9 1,533.8 Comprehensive income 2,283.7 1,709.8 2,203.9 Comprehensive income attributable to noncontrolling interest 62.2 18.3 47.0 Comprehensive income attributable to Principal Financial Group, Inc. $ 2,221.5 $ 1,691.5 $ 2,156.9 See accompanying notes. 81 Table of Contents Principal Financial Group, Inc. Consolidated Statements of Stockholders’ Equity Accumulated Additional other Total Common paid-in Retained comprehensive Treasury Noncontrolling stockholders’ stock capital earnings loss stock interest equity (in millions) Balances as of January 1, 2023 $ 4.9 $ 10,740.4 $ 16,697.3 $ ( 6,879.0 ) $ ( 10,586.9 ) $ 41.1 $ 10,017.8 Common stock issued — 57.8 — — — — 57.8 Stock-based compensation — 110.7 ( 11.5 ) — — 0.5 99.7 Treasury stock acquired, common — — — — ( 748.8 ) — ( 748.8 ) Dividends to common stockholders — — ( 625.5 ) — — — ( 625.5 ) Distributions to noncontrolling interest — — — — — ( 26.5 ) ( 26.5 ) Contributions from noncontrolling interest — — — — — 7.6 7.6 Purchase of subsidiary shares from noncontrolling interest (1) — ( 1.2 ) — — — — ( 1.2 ) Adjustments to redemption amount of redeemable noncontrolling interest — 0.9 — — — 0.2 1.1 Net income (1) — — 623.2 — — 23.2 646.4 Other comprehensive income (1) — — — 1,533.7 — ( 0.4 ) 1,533.3 Balances as of December 31, 2023 4.9 10,908.6 16,683.5 ( 5,345.3 ) ( 11,335.7 ) 45.7 10,961.7 Common stock issued — 67.7 — — — — 67.7 Stock-based compensation — 121.4 ( 12.6 ) — — 0.5 109.3 Treasury stock acquired, common — — — — ( 1,042.4 ) — ( 1,042.4 ) Dividends to common stockholders — — ( 658.4 ) — — — ( 658.4 ) Distributions to noncontrolling interest — — — — — ( 22.8 ) ( 22.8 ) Contributions from noncontrolling interest — — — — — 7.3 7.3 Purchase of subsidiary shares from noncontrolling interest (1) — ( 0.3 ) — — — — ( 0.3 ) Adjustments to redemption amount of redeemable noncontrolling interest — 3.5 — — — 0.9 4.4 Net income (1) — — 1,571.0 — — 15.1 1,586.1 Other comprehensive income (1) — — — 120.5 — ( 1.8 ) 118.7 Balances as of December 31, 2024 4.9 11,100.9 17,583.5 ( 5,224.8 ) ( 12,378.1 ) 44.9 11,131.3 Common stock issued 0.1 43.6 — — — — 43.7 Stock-based compensation — 123.1 ( 13.3 ) — — 0.5 110.3 Treasury stock acquired, common — — — — ( 901.3 ) — ( 901.3 ) Dividends to common stockholders — — ( 684.0 ) — — — ( 684.0 ) Distributions to noncontrolling interest — — — — — ( 6.0 ) ( 6.0 ) Contributions from noncontrolling interest — — — — — 8.4 8.4 Impacts from deconsolidation of noncontrolling interest — 7.8 — — — ( 23.4 ) ( 15.6 ) Net income (1) — — 1,185.1 — — 7.2 1,192.3 Other comprehensive income (1) — — — 1,036.4 — 1.5 1,037.9 Balances as of December 31, 2025 $ 5.0 $ 11,275.4 $ 18,071.3 $ ( 4,188.4 ) $ ( 13,279.4 ) $ 33.1 $ 11,917.0 (1) Excludes amounts attributable to redeemable noncontrolling interest. See Note 17, Stockholders’ Equity, for further details. See accompanying notes. 82 Table of Contents Principal Financial Group, Inc. Consolidated Statements of Cash Flows For the year ended December 31, 2025 2024 2023 (in millions) Operating activities Net income $ 1,255.5 $ 1,597.9 $ 670.1 Adjustments to reconcile net income to net cash provided by operating activities: Net realized capital (gains) losses ( 27.7 ) 27.3 72.2 Net realized capital gains on funds withheld assets ( 43.2 ) ( 87.7 ) ( 165.0 ) Change in fair value of funds withheld embedded derivative 381.1 ( 447.4 ) 1,085.7 Depreciation and amortization expense 251.4 256.2 272.7 Amortization of deferred acquisition costs and contract costs 480.5 431.0 428.1 Additions to deferred acquisition costs and contract costs ( 512.8 ) ( 490.6 ) ( 429.3 ) Amortization of reinsurance loss 96.9 631.6 17.7 Market risk benefit remeasurement loss 63.1 30.3 29.1 Stock-based compensation 109.9 108.7 99.4 (Income) loss from equity method investments, net of dividends received ( 127.7 ) 10.9 ( 110.2 ) Changes in: Accrued investment income ( 43.3 ) ( 42.4 ) ( 44.1 ) Net cash flows for trading securities and equity securities with operating intent 79.3 ( 97.5 ) ( 56.0 ) Premiums due and other receivables ( 181.0 ) 53.1 ( 36.7 ) Contractholder and policyholder liabilities and dividends 2,530.0 2,704.8 2,562.0 Current and deferred income taxes (benefits) ( 96.4 ) 106.1 ( 40.5 ) Real estate acquired through operating activities ( 4.2 ) ( 82.4 ) ( 130.8 ) Real estate sold through operating activities — 131.9 164.8 Funds withheld, net of reinsurance recoverable and deposit receivable 59.4 ( 33.4 ) ( 665.2 ) Other assets and liabilities 254.1 1.7 214.9 Other 11.8 ( 207.2 ) ( 146.5 ) Net adjustments 3,281.2 3,005.0 3,122.3 Net cash provided by operating activities 4,536.7 4,602.9 3,792.4 Investing activities Fixed maturities available-for-sale and equity securities with intent to hold: Purchases ( 15,663.4 ) ( 14,969.4 ) ( 11,417.0 ) Sales 4,627.8 3,542.7 5,888.3 Maturities 8,188.6 7,412.1 5,190.8 Mortgage loans acquired or originated ( 3,863.5 ) ( 2,449.4 ) ( 2,044.2 ) Mortgage loans sold or repaid 3,284.8 1,895.6 2,112.0 Real estate acquired ( 135.5 ) ( 167.8 ) ( 187.5 ) Real estate sold 201.0 125.8 132.0 Net purchases of property and equipment ( 98.0 ) ( 68.8 ) ( 102.0 ) Purchase of business or interests in subsidiaries, net of cash acquired — ( 27.1 ) — Sale of interests in subsidiaries, net of cash divested ( 5.6 ) — — Net change in other investments ( 672.0 ) ( 692.7 ) ( 919.3 ) Net cash used in investing activities ( 4,135.8 ) ( 5,399.0 ) ( 1,346.9 ) Financing activities Issuance of common stock 43.7 67.7 57.8 Acquisition of treasury stock ( 902.7 ) ( 1,042.4 ) ( 740.4 ) Payments for financing element derivatives ( 41.9 ) ( 43.1 ) ( 42.1 ) Purchase of subsidiary shares from noncontrolling interest ( 7.6 ) ( 0.9 ) ( 2.8 ) Dividends to common stockholders ( 684.0 ) ( 658.4 ) ( 625.5 ) Issuance of long-term debt — 21.8 691.5 Principal repayments of long-term debt ( 400.1 ) ( 0.1 ) ( 764.0 ) Net proceeds from (repayments of) short-term borrowings ( 9.0 ) 97.9 ( 18.5 ) Investment contract deposits 12,016.2 12,248.9 8,618.9 Investment contract withdrawals ( 10,637.9 ) ( 10,962.7 ) ( 9,422.4 ) Net increase (decrease) in banking operation deposits 442.8 571.2 ( 338.6 ) Other ( 1.3 ) 0.4 0.3 Net cash provided by (used in) financing activities ( 181.8 ) 300.3 ( 2,585.8 ) Net increase (decrease) in cash and cash equivalents 219.1 ( 495.8 ) ( 140.3 ) Cash and cash equivalents at beginning of period 4,211.9 4,707.7 4,848.0 Cash and cash equivalents at end of period $ 4,431.0 $ 4,211.9 $ 4,707.7 Supplemental information: Cash paid for interest $ 172.6 $ 170.3 $ 170.7 Cash paid for income taxes (1) 220.7 117.7 68.1 Supplemental disclosure of non-cash activities: Assets received in kind from pension risk transfer transactions 152.7 405.0 — Pre-capitalized contingent funding agreement exercise: Increase in fixed maturities, trading 388.3 — — Increase in long-term debt, net of discount ( 388.3 ) — — Changes resulting from deconsolidation of an investment: Decrease in mortgage loans ( 140.6 ) — — Decrease in short-term debt 54.0 — — Decrease in long-term debt 86.7 — — Asset changes resulting from deconsolidation of residential whole loan securitizations: Decrease in mortgage loans — — ( 389.7 ) Increase in fixed maturities, available-for-sale — — 286.2 Increase in fixed maturities, trading — — 10.8 (1) See Note 14, Income Taxes, for further details. See accompanying notes. 83 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements December 31, 2025 1. Nature of Operations and Significant Accounting Policies Description of Business Principal Financial Group, Inc. (“PFG”) is a leader in global investment management offering businesses, individuals and institutional clients a wide range of financial products and services, including retirement, asset management and insurance through our diverse family of financial services companies. Basis of Presentation The accompanying consolidated financial statements include the accounts of PFG and all other entities in which we directly or indirectly have a controlling financial interest as well as those variable interest entities (“VIEs”) in which we are the primary beneficiary. The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). All significant intercompany accounts and transactions have been eliminated. Uncertainties may impact our business, results of operations, financial condition and liquidity. See “Use of Estimates in the Preparation of Financial Statements” for additional details. Our estimates and assumptions could change in the future. Our results of operations and financial condition may also be impacted by other uncertainties including evolving regulatory, legislative and standard-setter accounting interpretations and guidance. Certain reclassifications have been made to prior periods to conform to the current presentation of our policyholder account balance disclosures, which have been revised to enhance transparency regarding indexed crediting impacts and their relationship to embedded derivative and host contract adjustments. See Note 9, Contractholder Funds. Consolidation We have relationships with various special purpose entities and other legal entities that must be evaluated to determine if the entities meet the criteria of a VIE or a voting interest entity (“VOE”). This assessment is performed by reviewing contractual, ownership and other rights, including involvement of related parties, and requires use of judgment. First, we determine if we hold a variable interest in an entity by assessing if we have the right to receive expected losses and expected residual returns of the entity. If we hold a variable interest, then the entity is assessed to determine if it is a VIE. An entity is a VIE if the equity at risk is not sufficient to support its activities, if the equity holders lack a controlling financial interest or if the entity is structured with non-substantive voting rights. In addition to the previous criteria, if the entity is a limited partnership or similar entity, it is a VIE if the limited partners do not have the power to direct the entity’s most significant activities through substantive kick-out rights or participating rights. A VIE is evaluated to determine the primary beneficiary. The primary beneficiary of a VIE is the enterprise with (1) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (2) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. When we are the primary beneficiary, we are required to consolidate the entity in our financial statements. We reassess our involvement with VIEs on a quarterly basis. For further information about VIEs, refer to Note 3, Variable Interest Entities. If an entity is not a VIE, it is considered a VOE. VOEs are generally consolidated if we own a greater than 50% voting interest. If we determine our involvement in an entity no longer meets the requirements for consolidation under either the VIE or VOE models, the entity is deconsolidated. Entities in which we have management influence over the operating and financing decisions but are not required to consolidate, other than investments accounted for at fair value under the fair value option, are reported using the equity method. 84 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 1. Nature of Operations and Significant Accounting Policies – (continued) Recent Accounting Pronouncements Description Date of adoption Effect on our consolidated financial statements or other significant matters Standards not yet adopted: Accounting for government grants received by a business entity This authoritative guidance provides specific guidance related to the recognition, measurement and presentation of government grants. January 1, 2029 We are currently evaluating the impact this guidance will have on our consolidated financial statements. Accounting for internal-use software This authoritative guidance aligns the accounting for internal-use software with the method used to develop the software, which will lead to consistency in determining when software capitalization should begin. January 1, 2028 We are currently evaluating the impact this guidance will have on our consolidated financial statements. Disaggregation of income statement expenses This authoritative guidance expands the disclosures about a public entity’s expenses and addresses requests for more granular information about the types of expenses in commonly presented expense categories. December 31, 2027 We are currently evaluating the impact this guidance will have on our notes to the consolidated financial statements . Credit losses on purchased loans This authoritative guidance expands application of the gross up method for credit losses from purchased financial assets with credit deterioration to certain acquired loans categorized as purchased seasoned loans. January 1, 2027 We are currently evaluating the impact this guidance will have on our consolidated financial statements. Hedge accounting improvements This authoritative guidance aims to more closely align financial reporting with the economics of an entity’s risk management activities by expanding and refining the hedge accounting guidance in five key areas: 1. Similar risk assessment for cash flow hedges 2. Hedging forecasted interest payments on choose-your-rate debt 3. Cash flow hedges of non-financial forecasted transactions 4. Net written options as hedging instruments 5. Dual hedges January 1, 2027 We are currently evaluating the impact this guidance will have on our consolidated financial statements. Standards adopted: Improvements to income tax disclosures This authoritative guidance provides improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. December 31, 2025 The enhanced disclosures can be found in Note 14, Income Taxes. 85 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 1. Nature of Operations and Significant Accounting Policies – (continued) Description Date of adoption Effect on our consolidated financial statements or other significant matters Improvements to reportable segments disclosures This authoritative guidance enhances the disclosures about a public entity’s reportable segments and addresses requests from investors for additional, more detailed information about a reportable segment’s expenses. December 31, 2024 The enhanced disclosures can be found in Note 20, Segment Information. Targeted improvements to the accounting for long-duration insurance contracts This authoritative guidance updated certain requirements in the accounting for long-duration insurance and annuity contracts. 1. The assumptions used to calculate the liability for future policy benefits on traditional and limited-payment contracts are reviewed and updated periodically. Cash flow assumptions are reviewed at least annually and updated when necessary with the impact recognized in net income. Discount rate assumptions are prescribed as the current upper-medium grade (low credit risk) fixed income instrument yield and are updated quarterly with the impact recognized in other comprehensive income (“OCI”). 2. Market risk benefits (“MRBs”), which are contracts or contract features that provide protection to the policyholder from capital market risk and expose us to other-than-nominal capital market risk, are measured at fair value. The periodic change in fair value is recognized in net income with the exception of the periodic change in fair value related to our own nonperformance risk, which is recognized in OCI. 3. Deferred acquisition costs (“DAC”) and other actuarial balances for all insurance and annuity contracts are amortized on a constant basis over the expected term of the related contracts. 4. Additional disclosures are required, including disaggregated rollforwards of significant insurance liabilities and other account balances as well as disclosures about significant inputs, judgments, assumptions and methods used in measurement. The guidance for the liability for future policy benefits for traditional and limited-payment contracts and DAC was applied on a modified retrospective basis; that is, to contracts in force as of the beginning of the earliest period presented (January 1, 2021, also referred to as the transition date) based on their existing carrying amounts. An entity could elect to apply the changes retrospectively. The guidance for MRBs was applied retrospectively. January 1, 2023 This guidance changed how we account for many of our insurance and annuity products. The additional disclosure requirements can be found in the following notes: ● Note 7, Deferred Acquisition Costs and Other Actuarial Balances ● Note 8, Separate Account Balances ● Note 9, Contractholder Funds ● Note 10, Future Policy Benefits and Claims ● Note 11, Market Risk Benefits 86 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 1. Nature of Operations and Significant Accounting Policies – (continued) Description Date of adoption Effect on our consolidated financial statements or other significant matters Troubled debt restructurings and vintage disclosures This authoritative guidance eliminated the accounting requirements for troubled debt restructurings (“TDRs”) by creditors and enhanced the disclosure requirements for certain loan refinancing and restructuring by creditors when a borrower is experiencing financial difficulty. The update required entities to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases. The amendments in this update were applied prospectively, except for the transition method related to the recognition and measurement of TDRs, for which an entity had the option to apply a modified retrospective transition method. Early adoption was permitted. January 1, 2023 This guidance did not have a material impact on our consolidated financial statements. Targeted improvements to accounting for hedging activities – portfolio layer method This authoritative guidance is intended to further align the economics of a company’s risk management activities in its financial statements with hedge accounting requirements. The guidance expanded the current single-layer method to allow multiple hedge layers of a single closed portfolio. Non-prepayable assets can also be included in the same portfolio. This guidance also clarified the current guidance on accounting for fair value basis adjustments applicable to both a single hedged layer and multiple hedged layers. Upon adoption, the application of these hedge strategies was applied prospectively. Early adoption was permitted. January 1, 2023 This guidance did not have a material impact on our consolidated financial statements. Facilitation of the effects of reference rate reform on financial reporting This authoritative guidance provided optional expedients and exceptions for contracts and hedging relationships affected by reference rate reform. An entity could elect not to apply certain modification accounting requirements to contracts affected by reference rate reform and instead account for the modified contract as a continuation of the existing contract. Also, an entity could apply optional expedients to continue hedge accounting for hedging relationships in which the critical terms changed due to reference rate reform. This guidance eased the financial reporting impacts of reference rate reform on contracts and hedging relationships and was effective until December 31, 2022. A subsequent amendment issued in December 2022 extended the relief date from December 31, 2022, to December 31, 2024, and was effective upon issuance. March 12, 2020 We adopted the guidance upon issuance prospectively and elected the applicable optional expedients and exceptions for contracts and hedging relationships impacted by reference rate reform through December 31, 2024. The guidance did not have an impact on our consolidated financial statements upon adoption. 87 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 1. Nature of Operations and Significant Accounting Policies – (continued) When we adopt new accounting standards, we have a process in place to perform a thorough review of the pronouncement, identify the financial statement and system impacts and create an implementation plan among our impacted business units to ensure we are compliant with the pronouncement on the date of adoption. This includes having effective processes and controls in place to support the reported amounts. Each of the standards listed above is in varying stages in our implementation process based on its issuance and adoption dates. We are on track to implement guidance by the respective effective dates. Long-Duration Insurance Contracts Disclosures We include disaggregated rollforwards for DAC, the unearned revenue liability, separate account liabilities, policyholder account balances, the liability for future policy benefits, the additional liability for certain benefit features and MRBs. Further, for certain actuarial balances, disclosures are required for the significant inputs, judgments, assumptions and methods used in measurement, including changes in those inputs, judgments and assumptions, and the effect of those changes on measurement. Amounts from different reportable segments cannot be aggregated for disclosures. Factors to consider in determining the level of aggregation for disclosures include the type of coverage, geography and market or type of customer. We have identified the following levels of aggregation for long-duration insurance contract disclosures. ● Retirement and Income Solutions: o Workplace savings and retirement solutions – Group annuity contracts offered to the plan sponsors of defined contribution plans or defined benefit plans o Individual variable annuities – Variable deferred annuities and registered index-linked annuities (“RILAs”) offered to individuals for both qualified and nonqualified retirement savings o Pension risk transfer – Single premium group annuities offered to pension plan sponsors and other institutions o Individual fixed deferred annuities – An exited business that offered single premium deferred annuity contracts and flexible premium deferred annuities (“FPDAs”) to individuals for both qualified and nonqualified retirement savings o Individual fixed income annuities – An exited business that offered single premium immediate annuities (“SPIAs”) and deferred income annuities (“DIAs”) to individuals for both qualified and nonqualified retirement savings; also includes supplementary contracts generated by annuitizations from other individual product lines o Investment only – Primarily guaranteed investment contracts (“GICs”) and funding agreements offered to retirement plan sponsors and other institutions ● Principal Asset Management – International Pension o Latin America: ◾ Individual fixed income annuities – SPIAs offered to individuals ◾ Pension – Certain retirement accumulation products where the segregated funds and associated obligation to the client are consolidated within our financial statements as separate account assets and liabilities and are only in the scope of long-duration insurance contracts disclosures for separate accounts ● Benefits and Protection – Specialty Benefits: o Individual disability – Disability insurance providing protection to individuals and/or business owners 88 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 1. Nature of Operations and Significant Accounting Policies – (continued) ● Benefits and Protection – Life Insurance: o Universal life – Universal life, variable universal life and indexed universal life insurance products offered to individuals and/or business owners, which will be collectively referred to hereafter as “universal life” contracts; includes our exited universal life insurance with secondary guarantee (“ULSG”) business o Term life – Term life insurance products offered to individuals and/or business owners o Participating life – Participating life insurance contracts offered to individuals, some of which are part of a closed block of business and are only in the scope of long-duration insurance contracts disclosures for DAC ● Corporate: o Long-term care insurance – A closed block of long-term care insurance that is fully reinsured, which was offered on both a group and individual basis. For the separate account liability disclosures, our Retirement and Income Solutions segment uses a Group retirement contracts level of aggregation. This consists primarily of separate account liabilities for the workplace savings and retirement solutions business as well as amounts for the investment only and pension risk transfer businesses. Use of Estimates in the Preparation of Financial Statements The preparation of our consolidated financial statements and accompanying notes requires management to make estimates and assumptions that affect the amounts reported and disclosed. These estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed in the consolidated financial statements and accompanying notes. The most critical estimates include those used in determining: ● the fair value of investments in the absence of quoted market values; ● investment impairments and valuation allowances; ● the fair value of derivatives; ● the fair value of MRBs; ● the measurement of goodwill, indefinite lived intangible assets, finite lived intangible assets and related impairments or amortization, if any; ● the liability for future policy benefits and claims, including the deferred profit liability; ● the value of our pension and other postretirement benefit obligations and ● accounting for income taxes and the valuation of deferred tax assets. A description of such critical estimates is incorporated within the discussion of the related accounting policies that follow. In applying these policies, management makes subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Actual results could differ from these estimates. Closed Block Principal Life Insurance Company (“Principal Life”) operates a closed block (“Closed Block”) for the benefit of individual participating dividend-paying policies in force at the time of the 1998 mutual insurance holding company (“MIHC”) formation. See Note 6, Closed Block, for further details. 89 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 1. Nature of Operations and Significant Accounting Policies – (continued) Cash and Cash Equivalents Cash and cash equivalents include cash on hand, money market instruments and other debt issues with a maturity date of three months or less when purchased. Investments Fixed maturities include bonds, asset-backed securities (“ABS”), redeemable preferred stock and certain non-redeemable preferred securities. Equity securities include mutual funds, common stock, non-redeemable preferred stock and required regulatory investments. We classify fixed maturities as either available-for-sale or trading at the time of the purchase and, accordingly, carry them at fair value. Equity securities are also carried at fair value. See Note 18, Fair Value Measurements, for methodologies related to the determination of fair value. Unrealized gains and losses related to fixed maturities, available-for-sale, excluding those in fair value hedging relationships, are reflected in stockholders’ equity, net of adjustments associated with related actuarial balances, derivatives in cash flow hedge relationships and applicable income taxes. Mark-to-market adjustments on certain equity securities and mark-to-market adjustments on certain fixed maturities, trading are reflected in net realized capital gains (losses). Mark-to-market adjustments on certain fixed maturities, trading are reflected in market risk benefit remeasurement (gain) loss. Unrealized gains and losses related to hedged portions of fixed maturities, available-for-sale in fair value hedging relationships are reflected in net investment income. Mark-to-market adjustments related to certain securities carried at fair value with an investment objective to realize economic value through mark-to-market changes are reflected in net investment income. The amortized cost of fixed maturities includes cost adjusted for amortization of premiums and discounts, computed using the interest method. The amortized cost of fixed maturities, available-for-sale is adjusted for changes in fair value of the hedged portions of securities in fair value hedging relationships and excludes accrued interest receivable. Accrued interest receivable is reported in accrued investment income on the consolidated statements of financial position. Fixed maturities, available-for-sale are subject to an allowance for credit loss and changes in the allowance are reported in net income as a component of net realized capital gains (losses). Interest income, as well as prepayment fees and the amortization of the related premium or discount, is reported in net investment income. For loan-backed and structured securities, we recognize income using a constant effective yield based on currently anticipated cash flows. Commercial and residential mortgage loans are generally reported at cost adjusted for amortization of premiums and accrual of discounts, computed using the interest method and net of valuation allowances. Amortized cost excludes accrued interest receivable. Interest income is accrued on the principal amount of the loan based on the loan’s contractual interest rate. Interest income, as well as prepayment of fees and the amortization of the related premium or discount, is reported in net investment income on the consolidated statements of operations. Accrued interest receivable is reported in accrued investment income on the consolidated statements of financial position. Any changes in the loan valuation allowances are reported in net realized capital gains (losses) on the consolidated statements of operations. See Note 4, Investments, for further details of our valuation allowance. Our commercial and residential mortgage loan portfolios can include loans that have been modified. We assess loan modifications on a case-by-case basis to evaluate whether a change to the valuation allowance and/or write-off is needed. See Note 4, Investments, under the caption “Mortgage Loan Modifications” for further details. Real estate investments are reported at cost less accumulated depreciation. The initial cost bases of properties acquired through loan foreclosures are the lower of the fair market values of the properties at the time of foreclosure or the outstanding loan balance. Buildings and land improvements are generally depreciated on the straight-line method over the estimated useful life of improvements and tenant improvement costs are depreciated on the straight-line method over the term of the related lease. We recognize impairment losses for properties when indicators of impairment are present and a property’s expected undiscounted cash flows are not sufficient to recover the property’s carrying value. In such cases, the cost basis of the property is reduced to fair value. Real estate expected to be disposed is carried at the lower of cost or fair value, less cost to sell, with valuation allowances established accordingly and depreciation no longer recognized. The carrying amount of real estate held for sale was $ 224.0 million and $ 219.3 million as of December 31, 2025 and 2024, respectively. Any impairment losses and any changes in valuation allowances are reported in net income. 90 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 1. Nature of Operations and Significant Accounting Policies – (continued) Net realized capital gains and losses on sales of investments are determined on the basis of specific identification. In general, in addition to realized capital gains and losses on investment sales and periodic settlements on derivatives not designated as hedges, we report gains and losses related to the following in net realized capital gains (losses) on the consolidated statements of operations: mark-to-market adjustments on certain equity securities, mark-to-market adjustments on certain fixed maturities, trading, mark-to-market adjustments on sponsored investment funds, mark-to-market adjustments on derivatives not designated as hedges, cash flow hedge gains (losses) when the hedged item impacts realized capital gains (losses), changes in the valuation allowance for fixed maturities, available-for-sale and certain financing receivables, impairments of real estate held for investment and impairments of equity method investments. Investment gains and losses on sales of certain real estate held for sale due to investment strategy and mark-to-market adjustments on certain securities carried at fair value with an investment objective to realize economic value through mark-to-market changes are reported as net investment income and are excluded from net realized capital gains (losses). Policy loans and certain other investments are reported at cost. Interests in unconsolidated entities, joint ventures and partnerships are generally accounted for using the equity method. We had certain real estate ventures for which the fair value option had been elected in prior periods. See Note 18, Fair Value Measurements, for detail on these investments. Derivatives Overview Derivatives are financial instruments whose values are derived from interest rates, foreign exchange rates, financial indices or the values of securities. Derivatives generally used by us include swaps, options, futures and forwards. Derivative positions are either assets or liabilities in the consolidated statements of financial position and are measured at fair value, generally by obtaining quoted market prices or through the use of pricing models. See Note 18, Fair Value Measurements, for policies related to the determination of fair value. Fair values can be affected by changes in interest rates, foreign exchange rates, financial indices, values of securities, credit spreads, and market volatility and liquidity. Accounting and Financial Statement Presentation We designate derivatives as either: (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, including those denominated in a foreign currency (“fair value hedge”); (b) a hedge of a forecasted transaction or the exposure to variability of cash flows to be received or paid related to a recognized asset or liability, including those denominated in a foreign currency (“cash flow hedge”); (c) a hedge of a net investment in a foreign operation or (d) a derivative not designated as a hedging instrument. Our accounting for the ongoing changes in fair value of a derivative depends on the intended use of the derivative and the designation, as described above, and is determined when the derivative contract is entered into or at the time of redesignation. Hedge accounting is used for derivatives that are specifically designated in advance as hedges and that reduce our exposure to an indicated risk by having a high correlation between changes in the value of the derivatives and the items being hedged at both the inception of the hedge and throughout the hedge period. Cash flows associated with derivatives are included within operating activities in the consolidated statements of cash flows, with the exception of cash paid for certain options with deferred premiums. Those derivatives are included in payments for financing element derivatives within financing activities in the consolidated statements of cash flows. 91 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 1. Nature of Operations and Significant Accounting Policies – (continued) Fair Value Hedges. When a derivative is designated as a fair value hedge and is determined to be highly effective, changes in its fair value, along with changes in the fair value of the hedged asset, liability or firm commitment attributable to the hedged risk, are reported in the same consolidated statements of operations line item that is used to report the earnings effect of the hedged item. For fair value hedges of fixed maturities, available-for-sale and mortgage loans, these changes in fair value are reported in net investment income or net realized capital gains (losses). For fair value hedges of liabilities, changes in fair value are reported in cost of interest credited. The change in the fair value of excluded components is recorded in OCI and is recognized in net income through periodic settlements. A fair value hedge determined to be highly effective may still result in a mismatch between the change in the fair value of the hedging instrument and the change in the fair value of the hedged item attributable to the hedged risk. Certain fair value hedges use the portfolio layer method to hedge a designated layer amount within a closed portfolio of prepayable assets that is expected to remain outstanding for the length of the hedging relationship and is not expected to be impacted by prepayments, defaults or other factors that affect the timing and amount of cash flows. Prepayment risk is excluded when measuring the change in fair value attributable to the hedged risk under the portfolio layer method. Cash Flow Hedges. When a derivative is designated as a cash flow hedge and is determined to be highly effective, changes in its fair value are recorded as a component of OCI. At the time the variability of cash flows being hedged impacts net income, the related portion of deferred gains or losses on the derivative instrument is reclassified and reported in net income. Net Investment in a Foreign Operation Hedge. When a derivative is used as a hedge of a net investment in a foreign operation, its change in fair value, to the extent effective as a hedge, is recorded as a component of OCI. If the foreign operation is sold or upon complete or substantially complete liquidation, the deferred gains or losses on the derivative instrument are reclassified into net income. Non-Hedge Derivatives. If a derivative does not qualify or is not designated for hedge accounting, all changes in fair value are reported in net income without considering the changes in the fair value of the economically associated assets or liabilities. Hedge Documentation and Effectiveness Testing. At inception, we formally document all relationships between hedging instruments and hedged items, as well as our risk management objective and strategy for undertaking various hedge transactions. This process includes associating all derivatives designated as fair value or cash flow hedges with specific assets or liabilities on the consolidated statements of financial position or with specific firm commitments or forecasted transactions. Documentation of fair value hedges that use the portfolio layer method supports the expectation that the hedged layer amount is anticipated to be outstanding at the end of the hedging relationship and includes expectations of prepayments, defaults or other factors that affect the timing and amount of cash flows. Effectiveness of the hedge is formally assessed at inception and throughout the life of the hedging relationship. Even if a hedge is determined to be highly effective, the hedge may still result in a mismatch between the change in the fair value of the hedging instrument and the change in the fair value of the hedged item attributable to the hedged risk. We use qualitative and quantitative methods to assess hedge effectiveness. Qualitative methods may include monitoring changes to terms and conditions and counterparty credit ratings. Quantitative methods may include statistical tests including regression analysis and minimum variance and dollar offset techniques. For portfolio layer method hedges, the assessment of hedge effectiveness includes confirming we expect the hedged layer amount to be outstanding at the end of the hedging relationship. Termination of Hedge Accounting. We prospectively discontinue hedge accounting when (1) the criteria to qualify for hedge accounting is no longer met, e.g., a derivative is determined to no longer be highly effective in offsetting the change in fair value or cash flows of a hedged item; (2) the derivative expires, is sold, terminated or exercised or (3) we remove the designation of the derivative being the hedging instrument for a fair value or cash flow hedge. 92 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 1. Nature of Operations and Significant Accounting Policies – (continued) If it is determined that a derivative no longer qualifies as an effective hedge, the derivative will continue to be carried on the consolidated statements of financial position at its fair value, with changes in fair value recognized prospectively in net realized capital gains (losses). The asset or liability under a fair value hedge will no longer be adjusted for changes in fair value pursuant to hedging rules and the existing basis adjustment is amortized to the consolidated statements of operations line associated with the asset or liability. If a portfolio layer method hedging relationship is discontinued, the outstanding basis adjustment is allocated to the individual assets in the closed portfolio and those amounts are amortized consistent with the amortization of other discounts or premiums associated with those assets. The component of accumulated other comprehensive income (“AOCI”) related to discontinued cash flow hedges that are no longer highly effective is amortized to the consolidated statements of operations consistent with the net income impacts of the original hedged cash flows. If a cash flow hedge is discontinued because it is probable the hedged forecasted transaction will not occur, the deferred gain or loss is immediately reclassified from AOCI into net income. Embedded Derivatives. We purchase and issue certain financial instruments and products that contain a derivative that is embedded in the financial instrument or product. We assess whether this embedded derivative is clearly and closely related to the asset or liability that serves as its host contract. If we deem that the embedded derivative’s terms are not clearly and closely related to the host contract, and a separate instrument with the same terms would qualify as a derivative instrument, the derivative is bifurcated from that contract and held at fair value on the consolidated statements of financial position, with changes in fair value reported in net income. Contractholder and Policyholder Liabilities Contractholder and policyholder liabilities (contractholder funds, future policy benefits and claims, MRBs and other policyholder funds) include reserves for investment contracts, individual and group annuities that provide periodic income payments, universal life insurance, variable universal life insurance, indexed universal life insurance, term life insurance, participating traditional individual life insurance, group dental and vision insurance, group critical illness, group accident, group hospital indemnity, paid family and medical leave (“PFML”), group short-term and long-term disability insurance, group life insurance, individual disability insurance and long-term care insurance. It also includes a provision for dividends on participating policies. Investment contracts are contractholders’ funds on deposit with us and generally include reserves for pension and annuity contracts. Reserves on investment contracts are equal to the cumulative deposits less any applicable charges and withdrawals plus credited interest. Reserves for universal life, variable universal life and indexed universal life insurance contracts are equal to cumulative deposits less charges plus credited interest, which represents the account balances that accrue to the benefit of the policyholders. See Note 9, Contractholder Funds, for additional details. We hold additional reserves on certain long-duration contracts where benefit features result in gains in early years followed by losses in later years and universal life, variable universal life and indexed universal life insurance contracts that contain no lapse guarantee features. Refer to Note 10, Future Policy Benefits and Claims, under the caption “Long-Duration Contracts” for information about the calculation of reserves for long-duration insurance and annuity contracts. Contracts or contract features that provide protection to the policyholder from capital market risk and expose us to other than nominal capital market risk are classified as MRBs and reported at fair value. See Note 11, Market Risk Benefits, for additional details. Reserves for participating life insurance contracts are based on the net level premium reserve for death and endowment policy benefits. This net level premium reserve is calculated based on dividend fund interest rates and mortality rates guaranteed in calculating the cash surrender values described in the contract. 93 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 1. Nature of Operations and Significant Accounting Policies – (continued) Participating business represented approximately 2 %, 2 % and 3 % of our life insurance in force and 14 %, 15 % and 16 % of the number of life insurance policies in force as of December 31, 2025, 2024 and 2023, respectively. Participating business represented approximately 15 %, 15 % and 16 % of life insurance premiums for the years ended December 31, 2025, 2024 and 2023, respectively. The amount of dividends to policyholders is declared annually by Principal Life’s Board of Directors. The amount of dividends to be paid to policyholders is determined after consideration of several factors including interest, mortality, morbidity and other expense experience for the year and judgment as to the appropriate level of statutory surplus to be retained by Principal Life. At the end of the reporting period, Principal Life establishes a dividend liability for the pro rata portion of the dividends expected to be paid on or before the next policy anniversary date. Some of our policies and contracts require payment of fees or other policyholder assessments in advance for services that will be rendered over the estimated lives of the policies and contracts. See Note 7, Deferred Acquisition Costs and Other Actuarial Balances, under the caption “Unearned Revenue Liability” for additional details. Short-Duration Contracts We include the following group products in our short-duration insurance contracts disclosures: long-term disability (“LTD”), group life waiver, dental, vision, short-term disability (“STD”), critical illness, accident, PFML, hospital indemnity and group life. Refer to Note 10, Future Policy Benefits and Claims, under the caption “Short-Duration Contracts” for additional details. Liability for Unpaid Claims The liability for unpaid claims for both long-duration and short-duration contracts is an estimate of the ultimate net cost of reported and unreported losses not yet settled. This liability is estimated using actuarial analyses and case basis evaluations. Although considerable variability is inherent in such estimates, we believe the liability for unpaid claims is adequate. These estimates are continually reviewed and, as adjustments to this liability become necessary, such adjustments are reflected in net income. We incur claim adjustment expenses for both long-duration and short-duration contracts that cannot be allocated to a specific claim. Our claim adjustment expense liability is estimated using actuarial analyses based on historical trends of expenses and expected claim runout patterns. See Note 10, Future Policy Benefits and Claims, under the caption “Liability for Unpaid Claims” for further details. Recognition of Premiums and Other Considerations, Fees and Other Revenues and Benefits Products with fixed and guaranteed premiums and benefits consist principally of whole life and term life insurance policies and individual disability income. Premiums from these products are recognized as premium revenue when due. Related policy benefits and expenses for individual life products are associated with earned premiums and result in the recognition of profits over the expected term of the policies and contracts. Immediate annuities with life contingencies include products with fixed and guaranteed annuity considerations and benefits and consist principally of group and individual single premium annuities with life contingencies. Annuity considerations from these products are recognized as premium revenue. However, the collection of these annuity considerations does not represent the completion of the earnings process, as we establish annuity reserves using estimates for mortality and interest assumptions. We anticipate profits to emerge over the life of the annuity products as we earn investment income, pay benefits and release reserves. Any gross premium received in excess of the net premium is recognized as a deferred profit liability and amortized in relation to the expected future benefit payments. See Note 10, Future Policy Benefits and Claims, for additional details. Group life, dental, vision, critical illness, accident, PFML, hospital indemnity and disability premiums are generally recorded as premium revenue over the term of the coverage. Certain group contracts contain experience premium refund provisions based on a pre-defined formula that reflects their claim experience. Experience premium refunds reduce revenue over the term of the coverage and are adjusted to reflect current experience. Related policy benefits and expenses are associated with earned premiums and result in the recognition of profits over the term of the policies and contracts. Fees for contracts providing claim processing or other administrative services are recorded as revenue over the period the service is provided. 94 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 1. Nature of Operations and Significant Accounting Policies – (continued) Universal life-type policies are insurance contracts with terms that are not fixed. Amounts received as payments for such contracts are not reported as premium revenues. Revenues for universal life-type insurance contracts consist of policy charges for the cost of insurance, policy initiation and administration, surrender charges and other fees that have been assessed against policy account values and investment income. Policy benefits and claims that are charged to expense include interest credited to contracts and benefit claims incurred in the period in excess of related policy account balances. Investment contracts do not subject us to significant risks arising from policyholder mortality or morbidity and consist primarily of guaranteed investment contracts (“GICs”), funding agreements and certain deferred annuities. Amounts received as payments for investment contracts are established as investment contract liability balances and are not reported as premium revenues. Revenues for investment contracts consist of investment income and policy administration charges. Investment contract benefits that are charged to expense include benefit claims incurred in the period in excess of related investment contract liability balances and interest credited to investment contract liability balances. Fees and other revenues are earned for asset management, investment advisory and distribution services provided to retail and institutional clients based largely upon contractual rates applied to the specified amounts in the clients’ portfolios, which include various platforms such as mutual funds, collective investment trusts and business trusts. Additionally, fees and other revenues are earned for administrative services performed including recordkeeping, trust and custody and reporting services for retirement savings plans, insurance companies, endowments and other financial institutions and other products. Fees and other revenues received for performance of asset management and administrative services are recognized as revenue when earned, typically when the service is performed. Fees for managing customers’ mandatory retirement savings accounts in Chile are collected with each monthly deposit made by our customers. If a customer stops contributing before retirement age, we collect no fees but services are still provided. We recognize revenue from these long-term service contracts as services are performed over the life of the contract. Deferred Acquisition Costs Refer to Note 7, Deferred Acquisition Costs and Other Actuarial Balances, for information related to DAC on insurance policies and investment contracts. Commissions and other incremental direct costs for the acquisition of long-term service contracts are also capitalized to the extent recoverable. Internal Replacement Transactions All insurance and investment contract modifications and replacements are reviewed to determine if the internal replacement results in a substantially changed contract. If so, the acquisition costs, sales inducements and unearned revenue associated with the new contract are deferred and amortized over the lifetime of the new contract. In addition, the existing DAC, sales inducement costs and unearned revenue balances associated with the replaced contract are written off. If an internal replacement results in a substantially unchanged contract, the acquisition costs, sales inducements and unearned revenue associated with the new contract are immediately recognized in the period incurred. In addition, the existing DAC, sales inducement costs or unearned revenue balance associated with the replaced contract is not written off, but instead is carried over to the new contract. Long-Term Debt Long-term debt includes notes payable, nonrecourse mortgages and other debt with a maturity date greater than one year at the date of issuance. Current maturities of long-term debt are classified as long-term debt in our consolidated statements of financial position. Long-term debt is primarily recorded at the unpaid principal balance, net of unamortized discount, premium and issuance costs. 95 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 1. Nature of Operations and Significant Accounting Policies – (continued) Reinsurance We enter into reinsurance agreements with other companies in the normal course of business in order to limit losses and minimize exposure to significant risks. We evaluate each insurance agreement to determine whether the agreement provides indemnification against loss or liability related to insurance risk. For agreements that expose the reinsurer to reasonable possibility of significant loss from insurance risk, the reinsurance method of accounting is used for the agreement. Assets and liabilities related to reinsurance ceded are reported on a gross basis on the consolidated statements of financial position. Insurance liabilities are reported before the effects of reinsurance and we record an offsetting reinsurance recoverable, net of valuation allowance. Premiums and expenses are reported net of reinsurance ceded on the consolidated statements of operations. If an agreement does not expose the reinsurer to reasonable possibility of significant loss from insurance risk, the deposit method of accounting is used for the agreement. We record a deposit receivable, net of valuation allowance, if necessary. The deposit receivable is adjusted as amounts are paid or received on the underlying contracts. Accretion on the deposit receivable is calculated using an effective interest method and is reported in fees and other revenues and operating expense on the consolidated statements of operations. The cost of reinsurance related to long-duration contracts is amortized over the life of the underlying reinsured policies using assumptions consistent with those used to account for the underlying policies. We have entered into coinsurance with funds withheld reinsurance agreements in which we record a funds withheld payable that contains an embedded derivative for which the fair value is estimated based on the change in fair value of the assets supporting the funds withheld payable. The change in fair value of the funds withheld embedded derivative is separately reported on the consolidated statements of operations. Gains and losses that do not flow to the reinsurer are reported in net realized capital gains (losses) on funds withheld assets on the consolidated statements of operations. For further information about reinsurance, refer to Note 12, Reinsurance. For further information about the financing receivables valuation allowance on the reinsurance recoverable and deposit receivable, refer to Note 4, Investments. Separate Accounts Refer to Note 8, Separate Account Balances, for information on our separate account assets and liabilities. Income Taxes We file a U.S. consolidated income tax return that includes all of our qualifying subsidiaries. In addition, we file income tax returns in all states and foreign jurisdictions in which we conduct business. Our policy of allocating income tax expenses and benefits to companies in the group is generally based upon pro rata contribution of taxable income or operating losses. We are taxed at corporate rates on taxable income based on existing tax laws. Current income taxes are charged or credited to net income based upon amounts estimated to be payable or recoverable as a result of taxable operations for the current year. Deferred income taxes are provided for the tax effect of temporary differences in the financial reporting and income tax bases of assets and liabilities, net operating loss carryforwards and tax credit carryforwards using enacted income tax rates and laws. The effect on deferred income tax assets and deferred income tax liabilities of a change in tax rates is recognized in net income in the period in which the change is enacted. Subsequent to a change in tax rates and laws, any stranded tax effects remaining in AOCI will be released only if an entire portfolio is liquidated, sold or extinguished. Foreign Exchange Assets and liabilities of our foreign subsidiaries and affiliates denominated in non-U.S. dollars, where the U.S. dollar is not the functional currency, are translated into U.S. dollar equivalents at the year-end spot foreign exchange rates. Resulting translation adjustments are reported as a component of stockholders’ equity, along with any related hedge and tax effects. Revenues and expenses for these entities are translated at the average exchange rates. Revenue, expense and other foreign currency transaction and translation adjustments that affect cash flows are reported in net income, along with related hedge and tax effects. 96 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 1. Nature of Operations and Significant Accounting Policies – (continued) Goodwill and Other Intangibles Goodwill and other intangible assets include the cost of acquired subsidiaries in excess of the fair value of the net tangible assets recorded in connection with acquisitions. Goodwill and indefinite lived intangible assets are not amortized. Rather, they are tested for impairment during the third quarter each year, or more frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill is tested at the reporting unit level, which is one level below the operating segment, if financial information is prepared and regularly reviewed by management at that level. Once goodwill has been assigned to a reporting unit, it is no longer associated with a particular acquisition; therefore, all of the activities within a reporting unit, whether acquired or organically grown, are available to support the goodwill value. Intangible assets with a finite useful life are amortized as related benefits emerge and are reviewed periodically for indicators of impairment in value. If facts and circumstances suggest possible impairment, the sum of the estimated undiscounted future cash flows expected to result from the use of the asset is compared to the current carrying value of the asset. If the undiscounted future cash flows are less than the carrying value, an impairment loss is recognized for the excess of the carrying amount of assets over their fair value. Earnings Per Common Share Basic earnings per common share is calculated by dividing net income available to common stockholders by the weighted-average number of common shares outstanding for the period and excludes the dilutive effect of equity awards. Diluted earnings per common share reflects the potential dilution that could occur if dilutive securities, such as options and non-vested stock grants, were exercised or resulted in the issuance of common stock. For any time period in which we have a net loss available to common stockholders, we use the weighted-average number of common shares used in our basic earnings per share calculation to calculate the diluted earnings per share, as dilutive shares would have an antidilutive effect and result in a lower loss per share. 97 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 2. Goodwill and Other Intangible Assets Goodwill The changes in the carrying amount of goodwill reported in our segments were as follows: Retirement Principal and Income Asset Benefits and Solutions Management Protection Corporate Consolidated (in millions) Balance as of January 1, 2024 $ 675.9 $ 903.1 $ 29.5 $ — $ 1,608.5 Goodwill from acquisitions (1) 11.3 — — — 11.3 Foreign currency — ( 70.1 ) — — ( 70.1 ) Balance as of December 31, 2024 687.2 833.0 29.5 — 1,549.7 Foreign currency — 50.8 — — 50.8 Balance as of December 31, 2025 $ 687.2 $ 883.8 $ 29.5 $ — $ 1,600.5 (1) Relates to the acquisition of employee stock ownership plan business from Ascensus within our Retirement and Income Solutions segment. Finite Lived Intangible Assets Amortized intangible assets primarily relate to customer relationship intangibles associated with our acquisition of the Institutional Retirement & Trust business of Wells Fargo Bank, N.A. and previous acquisitions in Chile, Mexico and Hong Kong. The finite lived intangible assets that continue to be subject to amortization over a weighted average remaining expected life of 14 years were as follows: December 31, 2025 2024 (in millions) Gross carrying value $ 1,018.4 $ 1,157.9 Accumulated amortization 515.7 523.1 Net carrying value $ 502.7 $ 634.8 On January 16, 2025, we announced the signing of an agreement with Bank Consortium Trust Company (“BCT”) to expand our investment management capabilities and exit our sponsor and trustee (pension) roles in Hong Kong for Mandatory Provident Fund Schemes (“MPF Schemes”) within the Principal Asset Management segment. BCT will be assuming the role as sponsor and trustee for the Principal MPF Schemes. The transaction is expected to close in 2026, subject to regulatory approval; however, certain transaction impacts were recognized in first quarter 2025. We impaired our distribution agreement intangible asset that will cease to exist, resulting in a $ 20.0 million loss reported in operating expenses on our consolidated statements of operations. Additionally, our customer relationship intangible asset was written down to the expected value that will be received from this transaction, resulting in a $ 77.0 million loss reported in net realized capital gains (losses) on our consolidated statements of operations. We also recorded an impairment for contract costs from pension contracts. See Note 21, Revenues from Contracts with Customers, for further details. 98 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 2. Goodwill and Other Intangible Assets – (continued) During 2025 and 2024, we fully amortized other finite lived intangible assets of $ 56.6 million and $ 18.4 million, respectively. The amortization expense for intangible assets with finite useful lives was $ 72.9 million, $ 66.1 million and $ 68.6 million for 2025, 2024 and 2023, respectively. As of December 31, 2025, the estimated amortization expense for the next five years is as follows (in millions): Year ending December 31: 2026 $ 50.3 2027 50.0 2028 33.9 2029 32.5 2030 32.5 Indefinite Lived Intangible Assets The net carrying amount of unamortized indefinite lived intangible assets was $ 764.3 million and $ 755.1 million as of December 31, 2025 and 2024, respectively. As of both December 31, 2025 and 2024, $ 608.0 million relates to investment management contracts associated with our acquisition of WM Advisors, Inc. in 2006. The remaining balance primarily relates to the trade name intangible associated with our acquisition of Administradora de Fondos de Pensiones Cuprum S.A. (“Cuprum”) in 2013. 99 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 3. Variable Interest Entities We have relationships with various types of entities that may be VIEs. Certain VIEs are consolidated in our financial results. See Note 1, Nature of Operations and Significant Accounting Policies, under the caption “Consolidation” for further details of our consolidation accounting policies. We did not provide financial or other support to investees designated as VIEs for the periods ended December 31, 2025 and December 31, 2024. Consolidated Variable Interest Entities Mandatory Retirement Savings Funds We hold an equity interest in Chilean mandatory privatized social security funds in which we provide asset management services. We determined the mandatory privatized social security funds, which also include contributions for voluntary pension savings, voluntary non-pension savings and compensation savings accounts, are VIEs. This is because the equity holders as a group lack the power, due to voting rights or similar rights, to direct the activities of the entity that most significantly impact the entity’s economic performance and also because equity investors are protected from below-average market investment returns relative to the industry’s return, due to a regulatory guarantee that we provide. Further, we concluded we are the primary beneficiary through our power to make decisions and our significant variable interest in the funds. The purpose of the funds, which reside in legally segregated entities, is to provide long-term retirement savings. The obligation to the customer is directly related to the assets held in the funds and, as such, we present the assets as separate account assets and the obligation as separate account liabilities within our consolidated statements of financial position. Real Estate We invest in several real estate limited partnerships and limited liability companies. The entities invest in real estate properties. Certain of these entities are VIEs based on the combination of our significant economic interest and related voting rights. We determined we are the primary beneficiary as a result of our power to control the entities through our significant ownership. Due to the nature of these real estate investments, the investment balance will fluctuate as we purchase and sell interests in the entities and as capital expenditures are made to improve the underlying real estate. Sponsored Investment Funds We sponsor and invest in certain investment funds for which we provide asset management services. Although our asset management fee is commensurate with the services provided and consistent with fees for similar services negotiated at arms-length, we have a variable interest for funds where our other interests are more than insignificant. The funds are VIEs as the equity holders lack power through voting rights to direct the activities of the entity that most significantly impact its economic performance. We determined we are the primary beneficiary of the VIEs where our interest in the entity is more than insignificant and we are the asset manager. We deconsolidated certain sponsored investment funds in 2025 and 2024 due to the acquisition of substantial voting rights through investment in the funds by external investors. Residential Mortgage Loans We invest in ABS trusts. The trusts issue various collateralized mortgage obligation certificates and purchase residential mortgage loans. The trusts are considered VIEs due to insufficient equity to sustain themselves. We concluded we are the primary beneficiary as we purchase substantially all of the certificates and have the obligation to absorb losses that could potentially be significant to the VIEs. Asset-Backed Limited Partnership We invest in an ABS limited partnership. The limited partnership issues multiple notes and purchases consumer loans, auto loans, other loans and credit facilities. The limited partnership is considered a VIE due to insufficient equity to sustain itself. We concluded we are the primary beneficiary as we have purchased all of the notes and have the obligation to absorb losses and residual returns that could potentially be significant to the VIE. 100 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 3. Variable Interest Entities – (continued) Assets and Liabilities of Consolidated Variable Interest Entities The carrying amounts of our consolidated VIE assets, which can only be used to settle obligations of consolidated VIEs, and liabilities of consolidated VIEs for which creditors do not have recourse were as follows: December 31, 2025 December 31, 2024 Total Total Total Total assets liabilities assets liabilities (in millions) Mandatory retirement savings funds (1) $ 41,865.2 $ 41,450.5 $ 33,130.4 $ 32,802.2 Real estate (2) 883.4 34.2 814.3 69.4 Sponsored investment funds (3) 851.4 16.3 833.7 160.3 Residential mortgage loans (4) 728.9 18.8 806.5 19.9 Asset-backed limited partnership (5) 256.3 — 250.0 — Total $ 44,585.2 $ 41,519.8 $ 35,834.9 $ 33,051.8 (1) The assets of the mandatory retirement savings funds primarily include separate account assets and equity securities. The liabilities primarily include separate account liabilities. (2) The assets of the real estate VIEs primarily include real estate, other investments and cash. Liabilities primarily include other liabilities. (3) The assets of sponsored investment funds are primarily fixed maturities and equity securities, certain of which are reported with other investments, and cash. The liabilities primarily include other liabilities. The consolidated statements of financial position included a $ 440.9 million and $ 309.9 million redeemable noncontrolling interest for sponsored investment funds as of December 31, 2025 and December 31, 2024, respectively. (4) The assets of the residential mortgage loans VIEs primarily include residential mortgage loans. The liabilities primarily include other liabilities. (5) The assets of the asset-backed limited partnership VIE primarily include consumer loans, auto loans, other loans and credit facilities. These assets are reported with cash and cash equivalents,other investments and fixed maturities, trading on the consolidated statements of financial position. Unconsolidated Variable Interest Entities We hold a variable interest in a number of VIEs where we are not the primary beneficiary. Our investments in these VIEs are reported in fixed maturities, available-for-sale; fixed maturities, trading; equity securities and other investments in the consolidated statements of financial position and are described below. Unconsolidated VIEs include certain commercial mortgage-backed securities (“CMBS”), residential mortgage-backed pass-through securities (“RMBS”) and other ABS. All of these entities were deemed VIEs because the equity within these entities is insufficient to sustain them. We determined we are not the primary beneficiary in the entities within these categories of investments. This determination was based primarily on the fact we do not own the class of security that controls the unilateral right to replace the special servicer or equivalent function. We invest in cash collateralized debt obligations, collateralized bond obligations, collateralized loan obligations and other collateralized structures, which are VIEs due to insufficient equity to sustain the entities. We have determined we are not the primary beneficiary of these entities primarily because we do not control the economic performance of the entities and were not involved with the design of the entities or because we do not have a potentially significant variable interest in the entities for which we are the asset manager. We have invested in various VIE trusts and similar entities as a debt holder. Most of these entities are classified as VIEs due to insufficient equity to sustain them. In addition, we have an entity classified as a VIE based on the combination of our significant economic interest and lack of voting rights. We have determined we are not the primary beneficiary primarily because we do not control the economic performance of the entities and were not involved with the design of the entities. We have invested in partnerships and other funds, which are classified as VIEs. The entities are VIEs as equity holders lack the power to control the most significant activities of the entities because the equity holders do not have either the ability by a simple majority to exercise substantive kick-out rights or substantive participating rights. We have determined we are not the primary beneficiary because we do not have the power to direct the most significant activities of the entities. As previously discussed, we sponsor and invest in certain investment funds that are VIEs. We determined we are not the primary beneficiary of the VIEs for which we are the asset manager but do not have a potentially significant variable interest in the funds. 101 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 3. Variable Interest Entities – (continued) We hold an equity interest in Mexican mandatory privatized social security funds in which we provide asset management services. Our equity interest in the funds is considered a variable interest. We concluded the funds are VIEs because the equity holders as a group lack decision-making ability through their voting rights. We are not the primary beneficiary of the VIEs because although we, as the asset manager, have the power to direct the activities of the VIEs, we do not have a potentially significant variable interest in the funds. The carrying value and maximum loss exposure for our unconsolidated VIEs were as follows: Maximum exposure to Asset carrying value loss (1) (in millions) December 31, 2025 Fixed maturities, available-for-sale: Corporate $ 289.4 $ 361.7 Residential mortgage-backed pass-through securities 3,805.1 3,868.4 Commercial mortgage-backed securities 5,371.6 5,659.6 Collateralized debt obligations (2) 6,422.3 6,417.4 Other debt obligations 10,681.3 12,167.2 Fixed maturities, trading: Residential mortgage-backed pass-through securities 8.4 8.4 Commercial mortgage-backed securities 70.7 70.7 Collateralized debt obligations (2) 211.0 211.0 Other debt obligations 338.8 338.8 Equity securities 109.5 109.5 Other investments: Other limited partnership and fund interests (3) 3,498.4 5,500.7 December 31, 2024 Fixed maturities, available-for-sale: Corporate $ 308.2 $ 359.7 Residential mortgage-backed pass-through securities 3,674.2 3,881.3 Commercial mortgage-backed securities 5,188.0 5,634.3 Collateralized debt obligations (2) 6,560.4 6,518.7 Other debt obligations 8,904.0 10,580.8 Fixed maturities, trading: Residential mortgage-backed pass-through securities 9.0 9.0 Commercial mortgage-backed securities 44.2 44.2 Collateralized debt obligations (2) 135.3 135.3 Other debt obligations 210.0 210.0 Equity securities 85.1 85.1 Other investments: Other limited partnership and fund interests (3) 2,766.4 4,804.6 (1) Our risk of loss is limited to our initial investment measured at amortized cost excluding portfolio layer method basis adjustments for fixed maturities, available-for-sale, plus any unfunded commitments and/or guarantees and similar provisions for collateralized debt obligations and other debt obligations. Our risk of loss is limited to our investment measured at fair value for our fixed maturities, trading and equity securities. Our risk of loss is limited to our carrying value plus any unfunded commitments and/or guarantees and similar provisions for our other investments. A carrying value of zero is used if distributions have been received in excess of our investment, resulting in a negative carrying value for the investment. Unfunded commitments are not liabilities on our consolidated statements of financial position because we are only required to fund additional equity when called upon to do so by the general partner or investment manager . (2) Primarily consists of collateralized loan obligations backed by secured corporate loans. (3) As of December 31, 2025 and December 31, 2024, the maximum exposure to loss for other limited partnership and fund interests includes $ 256.1 million and $ 236.1 million, respectively, of debt within certain of our managed international real estate funds that is fully secured by assets whose value exceeds the amount of the debt, but also includes recourse to the investment manager. Money Market Funds We are the investment manager for certain money market mutual funds. These types of funds are exempt from assessment under any consolidation model due to a scope exception for money market funds registered under Rule 2a-7 of the Investment Company Act of 1940 or similar funds. As of December 31, 2025 and December 31, 2024, money market mutual funds we manage held $ 5.9 billion and $ 4.5 billion in total assets, respectively. We have no contractual obligation to contribute to these funds; however, we provide support through the waiver of fees and through expense reimbursements. The amount of fees waived and expenses reimbursed was insignificant. 102 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 4. Investments Our investments include assets backing reserves as part of a coinsurance with funds withheld agreement. The funds withheld invested assets are reported within their respective line items, primarily consisting of fixed maturities available-for-sale, mortgage loans and other investments. See Note 12, Reinsurance, for more information on the funds withheld invested assets. Fixed Maturities The amortized cost, gross unrealized gains and losses, allowance for credit loss and fair value of fixed maturities, available-for-sale were as follows: Gross Gross Allowance Amortized unrealized unrealized for credit cost (1) gains losses loss Fair value (in millions) December 31, 2025 Fixed maturities, available-for-sale: U.S. government and agencies $ 2,126.2 $ 9.6 $ 268.1 $ 0.1 $ 1,867.6 Non-U.S. governments 554.7 17.6 54.6 — 517.7 States and political subdivisions 8,107.8 42.8 1,011.9 — 7,138.7 Corporate 39,867.6 777.7 3,072.8 25.0 37,547.5 Residential mortgage-backed pass-through securities 3,868.4 54.7 118.0 — 3,805.1 Commercial mortgage-backed securities 5,659.6 19.4 306.0 1.4 5,371.6 Collateralized debt obligations (2) 6,417.4 14.6 9.7 — 6,422.3 Other debt obligations 10,981.2 99.3 389.9 0.4 10,690.2 Total excluding portfolio layer method basis adjustment 77,582.9 1,035.7 5,231.0 26.9 73,360.7 Unallocated portfolio layer method basis adjustment (3) ( 16.9 ) 16.9 — — — Total fixed maturities, available-for-sale $ 77,566.0 $ 1,052.6 $ 5,231.0 $ 26.9 $ 73,360.7 Gross Gross Allowance Amortized unrealized unrealized for credit cost (1) gains losses loss Fair value (in millions) December 31, 2024 Fixed maturities, available-for-sale: U.S. government and agencies $ 1,937.4 $ 0.2 $ 299.7 $ — $ 1,637.9 Non-U.S. governments 567.3 12.9 84.5 — 495.7 States and political subdivisions 7,207.8 10.4 1,141.7 — 6,076.5 Corporate 38,911.1 509.9 3,699.9 18.5 35,702.6 Residential mortgage-backed pass-through securities 3,881.3 8.7 215.8 — 3,674.2 Commercial mortgage-backed securities 5,634.3 4.6 450.9 — 5,188.0 Collateralized debt obligations (2) 6,518.7 48.0 6.3 — 6,560.4 Other debt obligations 9,446.2 49.9 580.2 0.2 8,915.7 Total excluding portfolio layer method basis adjustment 74,104.1 644.6 6,479.0 18.7 68,251.0 Unallocated portfolio layer method basis adjustment (3) ( 55.7 ) 55.7 — — — Total fixed maturities, available-for-sale $ 74,048.4 $ 700.3 $ 6,479.0 $ 18.7 $ 68,251.0 (1) Amortized cost excludes accrued interest receivable of $ 473.8 million and $ 647.3 million as of December 31, 2025 and December 31, 2024, respectively. (2) Primarily consists of collateralized loan obligations backed by secured corporate loans. (3) Represents unallocated basis adjustments related to fair value hedges utilizing the portfolio layer method. See Note 5, Derivative Financial Instruments, for further details. 103 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 4. Investments – (continued) The amortized cost and fair value of fixed maturities, available-for-sale as of December 31, 2025, by expected maturity, were as follows: Amortized cost (1) Fair value (in millions) Due in one year or less $ 1,537.4 $ 1,527.3 Due after one year through five years 9,895.3 9,877.9 Due after five years through ten years 9,683.6 9,657.4 Due after ten years 29,540.0 26,008.9 Subtotal 50,656.3 47,071.5 Mortgage-backed and other asset-backed securities 26,926.6 26,289.2 Total $ 77,582.9 $ 73,360.7 (1) Excludes unallocated basis adjustments related to fair value hedges utilizing the portfolio layer method. Actual maturities may differ because borrowers may have the right to call or prepay obligations. Our portfolio is diversified by industry, issuer and asset class. Credit concentrations are managed to established limits. Net Investment Income The major components of net investment income are shown below and are net of amounts on funds withheld invested assets that are passed directly to the reinsurer. See Note 12, Reinsurance, for further details. For the year ended December 31, 2025 2024 2023 (in millions) Fixed maturities, available-for-sale $ 2,980.2 $ 2,728.5 $ 2,508.9 Fixed maturities, trading 73.4 49.1 43.3 Equity securities 119.2 68.2 66.3 Mortgage loans 883.5 802.4 761.7 Real estate 130.3 175.1 177.2 Policy loans 45.9 44.1 41.3 Cash and cash equivalents 198.8 267.1 196.6 Derivatives 21.1 94.3 38.6 Other 537.8 491.6 496.1 Total 4,990.2 4,720.4 4,330.0 Investment expenses ( 259.7 ) ( 271.2 ) ( 238.1 ) Net investment income $ 4,730.5 $ 4,449.2 $ 4,091.9 104 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 4. Investments – (continued) Net Realized Capital Gains and Losses The major components of net realized capital gains (losses) on investments are shown below and are net of amounts on funds withheld invested assets that are passed directly to the reinsurer. See Note 12, Reinsurance, for further details. The amounts below do not include net realized capital gains (losses) on funds withheld assets that are not passed to the reinsurer, which are separately reported on the consolidated statements of operations. Net realized capital gains (losses) on funds withheld assets includes gains (losses) realized upon sale of assets put into the funds withheld at the start of a reinsurance transaction for the unrealized gain (losses) on the date of transfer into the funds withheld, the change in the valuation allowance on funds withheld commercial mortgage loans and unrealized gains and losses related to the change in fair value of funds withheld fixed maturities, trading, equity securities and derivatives. For the year ended December 31, 2025 2024 2023 (in millions) Fixed maturities, available-for-sale: Gross gains $ 11.4 $ 13.1 $ 51.4 Gross losses ( 58.6 ) ( 61.0 ) ( 141.7 ) Net credit losses (1) ( 41.6 ) ( 21.7 ) ( 26.2 ) Hedging, net (2) 23.6 ( 11.5 ) 2.2 Fixed maturities, trading (3) 0.8 1.6 ( 8.6 ) Equity securities (4) 119.3 128.4 64.0 Mortgage loans (5) ( 53.9 ) ( 101.3 ) ( 134.5 ) Derivatives (2) ( 46.6 ) 14.9 ( 34.1 ) Other 73.3 10.2 155.3 Net realized capital gains (losses) $ 27.7 $ ( 27.3 ) $ ( 72.2 ) (1) Includes credit sales, adjustments to the credit loss valuation allowance, write-offs and recoveries on available-for-sale securities. (2) The change in fair value of fixed maturities, available-for-sale and the change in fair value of derivative hedging instruments in fair value hedging relationships are reported in net investment income with the earnings effect of fixed maturities, available-for-sale. Gains (losses) for fixed maturities, available-for-sale related to terminated cash flow hedges continue to be reflected in net realized capital gains (losses). (3) Unrealized gains (losses) on fixed maturities, trading still held at the reporting date were $ 1.7 million, $ 0.7 million and $( 9.6 ) million for the years ended December 31, 2025, 2024 and 2023, respectively. This excludes $ 8.2 million, $ 1.7 million and $ 2.9 million in unrealized gains (losses) for the years ended December 31, 2025, 2024 and 2023, respectively, that were reported in market risk benefit remeasurement (gain) loss and $( 5.4 ) million, $ 2.0 million and $ 6.8 million of unrealized gains (losses) for the years ended December 31, 2025, 2024 and 2023, respectively, that were reported in net realized capital gains (losses) on funds withheld assets. (4) Unrealized gains (losses) on equity securities still held at the reporting date were $ 45.7 million, $ 106.9 million and $ 73.4 million for the years ended December 31, 2025, 2024 and 2023, respectively. This excludes $ 67.2 million, $ 37.9 million and $ 34.7 million of unrealized gains (losses) for the years ended December 31, 2025, 2024 and 2023, respectively, that were reported in net investment income and $ 0.0 million, $ 0.0 million and $ 1.7 million of unrealized gains (losses) for the years ended December 31, 2025, 2024 and 2023, respectively, that were reported in net realized capital gains (losses) on funds withheld assets. (5) Net realized capital gains (losses) on mortgage loans include losses related to the deconsolidation of residential mortgage loan trusts in 2023. Proceeds from sales of investments (excluding call and maturity proceeds) in fixed maturities, available-for-sale were $ 2,777.4 million, $ 3,346.4 million and $ 5,392.7 million in 2025, 2024 and 2023, respectively. 105 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 4. Investments – (continued) Allowance for Credit Loss We have a process in place to identify fixed maturity securities that could potentially require an allowance for credit loss. This process involves monitoring market events that could impact issuers’ credit ratings, business climate, management changes, litigation and government actions and other similar factors. This process also involves monitoring late payments, pricing levels, downgrades by rating agencies, key financial ratios, financial statements, revenue forecasts and cash flow projections as indicators of credit issues. Each reporting period, all securities in an unrealized loss position are reviewed to determine whether a decline in value is due to credit. Relevant facts and circumstances considered include: (1) the extent the fair value is below cost; (2) the reasons for the decline in value; (3) the financial position and access to capital of the issuer, including the current and future impact of any specific events and (4) for structured securities, the adequacy of the expected cash flows. To the extent we determine an unrealized loss is due to credit, an allowance for credit loss is recognized through a reduction to net income. We estimate the amount of the allowance for credit loss as the difference between amortized cost and the present value of the expected cash flows of the security. The present value is determined using the best estimate cash flows discounted at the effective interest rate implicit to the security at the date of purchase or the current yield to accrete an asset-backed or floating rate security. The methodology and assumptions for establishing the best estimate cash flows vary depending on the type of security. The ABS cash flow estimates are based on security specific facts and circumstances that may include collateral characteristics, expectations of delinquency and default rates, loss severity and prepayment speeds and structural support, including subordination and guarantees. The corporate security cash flow estimates are derived from scenario-based outcomes of expected corporate restructurings or liquidations using bond specific facts and circumstances including timing, security interests and loss severity. We do not measure a credit loss allowance on accrued interest receivable because we write off the accrued interest receivable balance to net investment income in a timely manner when we have concern regarding collectability. Amounts on fixed maturities, available-for-sale deemed to be uncollectible are written off and removed from the allowance for credit loss. A write-off may also occur if we intend to sell a security or whether it is more likely than not we will be required to sell the security before the recovery of its amortized cost which, in some cases, may extend to maturity. 106 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 4. Investments – (continued) A rollforward of the allowance for credit loss by major security type was as follows. For the year ended December 31, 2025 Residential mortgage- backed Commercial U.S. States and pass- mortgage- Collateralized Other government Non-U.S. political through backed debt debt and agencies governments subdivisions Corporate securities securities obligations (1) obligations Total (in millions) Beginning balance $ — $ — $ — $ 18.5 $ — $ — $ — $ 0.2 $ 18.7 Additions for credit losses not previously recorded 0.1 — — 22.4 — 1.5 0.1 0.1 24.2 Additional increases (decreases) for credit losses on securities with an allowance recorded in the previous period — — — 0.1 — ( 0.1 ) ( 0.1 ) 0.1 — Write-offs charged against allowance — — — ( 16.2 ) — — — — ( 16.2 ) Foreign currency translation adjustment — — — 0.2 — — — — 0.2 Ending balance $ 0.1 $ — $ — $ 25.0 $ — $ 1.4 $ — $ 0.4 $ 26.9 Accrued interest written off to net investment income $ — $ — $ — $ 0.4 $ — $ — $ — $ — $ 0.4 For the year ended December 31, 2024 Residential mortgage- backed Commercial U.S. States and pass- mortgage- Collateralized Other government Non-U.S. political through backed debt debt and agencies governments subdivisions Corporate securities securities obligations (1) obligations Total (in millions) Beginning balance $ — $ — $ — $ 4.6 $ — $ — $ — $ 0.1 $ 4.7 Additions for credit losses not previously recorded — — — 16.1 — — — 0.1 16.2 Reductions for securities sold during the period — — — ( 0.3 ) — — — — ( 0.3 ) Write-offs charged against allowance — — — ( 1.6 ) — — — — ( 1.6 ) Foreign currency translation adjustment — — — ( 0.3 ) — — — — ( 0.3 ) Ending balance $ — $ — $ — $ 18.5 $ — $ — $ — $ 0.2 $ 18.7 Accrued interest written off to net investment income $ — $ — $ — $ 1.0 $ — $ — $ — $ — $ 1.0 For the year ended December 31, 2023 Residential mortgage- backed Commercial U.S. States and pass- mortgage- Collateralized Other government Non-U.S. political through backed debt debt and agencies governments subdivisions Corporate securities securities obligations (1) obligations Total (in millions) Beginning balance $ — $ — $ — $ 7.7 $ — $ — $ — $ 0.1 $ 7.8 Additions for credit losses not previously recorded — — — 8.2 — — — — 8.2 Additional increases (decreases) for credit losses on securities with an allowance recorded in the previous period — — — ( 7.5 ) — — — — ( 7.5 ) Write-offs charged against allowance — — — ( 3.8 ) — — — — ( 3.8 ) Ending balance $ — $ — $ — $ 4.6 $ — $ — $ — $ 0.1 $ 4.7 Accrued interest written off to net investment income $ — $ — $ — $ 0.1 $ — $ — $ — $ — $ 0.1 (1) Primarily consists of collateralized loan obligations backed by secured corporate loans. 107 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 4. Investments – (continued) Available-For-Sale Securities in Unrealized Loss Positions Without an Allowance for Credit Loss For available-for-sale securities with unrealized losses for which an allowance for credit loss has not been recorded, the gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position were as follows: December 31, 2025 Less than Greater than or twelve months equal to twelve months Total Gross Gross Gross Fair unrealized Fair unrealized Fair unrealized value losses value losses value losses (in millions) Fixed maturities, available-for-sale (1): U.S. government and agencies $ 484.1 $ 11.0 $ 734.1 $ 257.1 $ 1,218.2 $ 268.1 Non-U.S. governments 12.8 0.3 310.9 54.3 323.7 54.6 States and political subdivisions 639.4 8.9 4,903.5 1,003.0 5,542.9 1,011.9 Corporate 1,889.9 95.7 19,474.6 2,970.8 21,364.5 3,066.5 Residential mortgage-backed pass- through securities 201.2 0.7 1,147.6 117.3 1,348.8 118.0 Commercial mortgage-backed securities 342.0 2.5 3,465.9 301.6 3,807.9 304.1 Collateralized debt obligations (2) 1,919.9 4.7 20.2 5.0 1,940.1 9.7 Other debt obligations 567.0 1.9 3,514.2 387.2 4,081.2 389.1 Total fixed maturities, available-for-sale $ 6,056.3 $ 125.7 $ 33,571.0 $ 5,096.3 $ 39,627.3 $ 5,222.0 (1) Fair value and gross unrealized losses are excluded for available-for-sale securities for which an allowance for credit loss has been recorded. Gross unrealized losses exclude unallocated basis adjustments related to fair value hedges utilizing the portfolio layer method. (2) Primarily consists of collateralized loan obligations backed by secured corporate loans. Of the total amounts, Principal Life Insurance Company’s (“Principal Life’s”) consolidated portfolio represented $ 38,748.0 million in available-for-sale fixed maturities with gross unrealized losses of $ 5,149.9 million. Of the available-for-sale fixed maturities within Principal Life’s consolidated portfolio in a gross unrealized loss position, 97 % were investment grade (rated AAA through BBB-) with an average price of 88 (carrying value/amortized cost) as of December 31, 2025. Gross unrealized losses in our fixed maturities portfolio decreased during the year ended December 31, 2025, primarily due to a decrease in interest rates, which was partially offset by a widening of credit spreads. For those securities that had been in a continuous unrealized loss position for less than twelve months, Principal Life’s consolidated portfolio held 870 securities with a carrying value of $ 5,888.1 million and unrealized losses of $ 117.8 million reflecting an average price of 98 as of December 31, 2025. Of this portfolio, 93 % was investment grade (rated AAA through BBB-) as of December 31, 2025, with associated unrealized losses of $ 96.7 million. The unrealized losses on these securities can primarily be attributed to changes in market interest rates and changes in credit spreads since the securities were acquired. 108 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 4. Investments – (continued) For those securities that had been in a continuous unrealized loss position greater than or equal to twelve months, Principal Life’s consolidated portfolio held 5,758 securities with a carrying value of $ 32,859.9 million and unrealized losses of $ 5,032.1 million as of December 31, 2025. The average credit rating of this portfolio was A with an average price of 87 as of December 31, 2025. Of the $ 5,032.1 million in unrealized losses, the corporate sector accounts for $ 2,919.0 million in unrealized losses with an average price of 87 and an average credit rating of A-. Furthermore, unrealized losses include $ 996.0 million within the states and political subdivisions sector with an average price of 83 and an average credit rating of AA-; $ 356.7 million within the collateralized mortgage obligation security sector with an average price of 87 and an average credit rating of AA+; and $ 301.0 million within the CMBS sector with an average price of 92 and an average credit rating of AA. The unrealized losses on these securities can primarily be attributed to changes in market interest rates and changes in credit spreads since the securities were acquired. Because we expected to recover our amortized cost, we did not record an allowance for credit loss on these securities as of December 31, 2025. Because it was not our intent to sell the fixed maturity available-for-sale securities with unrealized losses and it was not more likely than not that we would be required to sell these securities before recovery of the amortized cost, which may be at maturity, we did not write down these investments to fair value. December 31, 2024 Less than Greater than or twelve months equal to twelve months Total Gross Gross Gross Fair unrealized Fair unrealized Fair unrealized value losses value losses value losses (in millions) Fixed maturities, available-for-sale (1): U.S. government and agencies $ 909.1 $ 17.4 $ 810.6 $ 283.1 $ 1,719.7 $ 300.5 Non-U.S. governments 32.9 1.3 308.8 83.2 341.7 84.5 States and political subdivisions 743.2 26.0 4,745.7 1,115.8 5,488.9 1,141.8 Corporate 4,970.7 164.2 20,099.1 3,532.3 25,069.8 3,696.5 Residential mortgage-backed pass-through securities 1,938.4 33.2 1,214.0 182.6 3,152.4 215.8 Commercial mortgage-backed securities 691.7 8.2 3,860.1 442.6 4,551.8 450.8 Collateralized debt obligations (2) 582.2 1.3 29.8 5.0 612.0 6.3 Other debt obligations 1,732.5 21.8 3,698.5 557.2 5,431.0 579.0 Total fixed maturities, available-for-sale $ 11,600.7 $ 273.4 $ 34,766.6 $ 6,201.8 $ 46,367.3 $ 6,475.2 (1) Fair value and gross unrealized losses are excluded for available-for-sale securities for which an allowance for credit loss has been recorded. Gross unrealized losses exclude unallocated basis adjustments related to fair value hedges utilizing the portfolio layer method. (2) Primarily consists of collateralized loan obligations backed by secured corporate loans. Of the total amounts, Principal Life’s consolidated portfolio represented $ 44,950.7 million in available-for-sale fixed maturities with gross unrealized losses of $ 6,373.8 million. Of the available-for-sale fixed maturities within Principal Life’s consolidated portfolio in a gross unrealized loss position, 97 % were investment grade (rated AAA through BBB-) with an average price of 88 (carrying value/amortized cost) as of December 31, 2024. Gross unrealized losses in our fixed maturities portfolio increased during the year ended December 31, 2024, primarily due to an increase in interest rates, which was partially offset by a tightening of credit spreads. 109 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 4. Investments – (continued) For those securities that had been in a continuous unrealized loss position for less than twelve months, Principal Life’s consolidated portfolio held 1,747 securities with a carrying value of $ 10,805.4 million and unrealized losses of $ 252.3 million reflecting an average price of 98 as of December 31, 2024. Of this portfolio, 96 % was investment grade (rated AAA through BBB-) as of December 31, 2024, with associated unrealized losses of $ 245.4 million. The unrealized losses on these securities can primarily be attributed to changes in market interest rates and changes in credit spreads since the securities were acquired. For those securities that had been in a continuous unrealized loss position greater than or equal to twelve months, Principal Life’s consolidated portfolio held 6,219 securities with a carrying value of $ 34,145.3 million and unrealized losses of $ 6,121.5 million as of December 31, 2024. The average credit rating of this portfolio was A with an average price of 85 as of December 31, 2024. Of the $ 6,121.5 million in unrealized losses, the corporate sector accounts for $ 3,470.0 million in unrealized losses with an average price of 85 and an average credit rating of BBB+. Furthermore, unrealized losses include $ 1,108.0 million within the states and political subdivisions sector with an average price of 81 and an average credit rating of AA-; $ 490.8 million within the collateralized mortgage obligation security sector with an average price of 83 and an average credit rating of AAA; and $ 441.5 million within the CMBS sector with an average price of 90 and an average credit rating of AA. The unrealized losses on these securities can primarily be attributed to changes in market interest rates and changes in credit spreads since the securities were acquired. Because we expected to recover our amortized cost, we did not record an allowance for credit loss on these securities as of December 31, 2024. Because it was not our intent to sell the fixed maturity available-for-sale securities with unrealized losses and it was not more likely than not that we would be required to sell these securities before recovery of the amortized cost, which may be at maturity, we did not write down these investments to fair value. Net Unrealized Gains and Losses on Available-For-Sale Securities and Derivative Instruments The net unrealized gains and losses on investments in available-for-sale securities and the net unrealized gains and losses on derivative instruments in cash flow hedge relationships are reported as separate components of stockholders’ equity. The cumulative amount of net unrealized gains and losses on available-for-sale securities and derivative instruments in cash flow hedge relationships net of adjustments related to actuarial balances, policyholder liabilities, noncontrolling interest and applicable income taxes was as follows: December 31, 2025 December 31, 2024 (in millions) Net unrealized losses on fixed maturities, available-for-sale (1) $ ( 4,081.8 ) $ ( 5,942.5 ) Net unrealized gains (losses) on derivative instruments ( 40.0 ) 66.1 Adjustments for assumed changes in amortization patterns 4.2 5.1 Adjustments for assumed changes in policyholder liabilities 21.2 12.2 Net unrealized losses on other investments and noncontrolling interest adjustments ( 58.3 ) ( 52.5 ) Provision for deferred income tax benefits 893.7 1,270.5 Net unrealized losses on available-for-sale securities and derivative instruments $ ( 3,261.0 ) $ ( 4,641.1 ) (1) Excludes net unrealized gains (losses) on fixed maturities, available-for-sale included in fair value hedging relationships. 110 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 4. Investments – (continued) Financing Receivables Mortgage Loans Mortgage loans consist of commercial and residential mortgage loans. Our commercial mortgage loan portfolio consists primarily of non-recourse, fixed rate mortgages on stabilized properties. Our residential mortgage loan portfolio is composed of first lien mortgages concentrated in Chile and the United States. Commercial and residential mortgage loans are generally reported at cost adjusted for amortization of premiums and accrual of discounts, computed using the interest method and net of valuation allowances. Amortized cost excludes accrued interest receivable. The amortized cost of our residential mortgage loans also includes basis adjustments related to fair value hedges in a closed portfolio. See Note 5, Derivative Financial Instruments, for further information. Interest income is accrued on the principal amount of the loan based on the loan’s contractual interest rate. Interest income, as well as prepayment of fees and the amortization of the related premium or discount, is reported in net investment income on the consolidated statements of operations. Accrued interest receivable is reported in accrued investment income on the consolidated statements of financial position. Any changes in the loan valuation allowances are reported in net realized capital gains (losses) on the consolidated statements of operations. Further details relating to our valuation allowance are included under the caption “Financing Receivables Valuation Allowance.” Direct Financing Leases Our direct financing leases are concentrated in Chile. Our Chilean operations enter into private placement contracts for commercial, industrial and office space properties whereby our Chilean operations purchase the real estate and/or building from the seller-lessee but then lease the property back to the seller-lessee. Ownership of the property is transferred to the lessee by the end of the lease term. Direct financing leases are reported as a component of other investments in the consolidated statements of financial position. Reinsurance Recoverable and Deposit Receivable Our reinsurance recoverables include amounts due from reinsurers for paid or unpaid claims, claims incurred but not reported or policy benefits. We cede life, disability, medical and long-term care insurance as well as fixed annuity contracts with significant life insurance risk to other insurance companies through reinsurance. Deposit receivables include amounts due from the reinsurer for fixed annuity contracts without significant life insurance risk recorded using the deposit method of accounting. Other Loans Our other loans include consumer, auto and other loans (“other loans”) of a consolidated VIE for which the fair value option was elected as well as consumer loans for which the fair value option was not elected. Other loans are generally subject to amortized cost accounting and a valuation allowance if the fair value option is not elected. Other loans are reported as a component of other investments in the consolidated statements of financial position. 111 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 4. Investments – (continued) Credit Quality Information for Financing Receivables The amortized cost of our financing receivables by credit risk and vintage was as follows: December 31, 2025 2025 2024 2023 2022 2021 Prior Total (in millions) Commercial mortgage loans: A- and above $ 1,568.5 $ 1,315.6 $ 900.9 $ 1,079.7 $ 1,738.8 $ 6,878.7 $ 13,482.2 BBB+ thru BBB- 200.9 189.7 151.6 172.1 116.2 1,187.9 2,018.4 BB+ thru BB- 111.0 64.2 109.5 215.8 11.1 120.7 632.3 B+ and below — — 32.4 — — 352.8 385.2 Total $ 1,880.4 $ 1,569.5 $ 1,194.4 $ 1,467.6 $ 1,866.1 $ 8,540.1 $ 16,518.1 Direct financing leases: A- and above $ — $ — $ — $ 32.7 $ 11.7 $ 213.1 $ 257.5 BBB+ thru BBB- — 10.6 — 94.5 22.0 97.5 224.6 BB+ thru BB- — — 2.1 0.5 5.6 32.2 40.4 B+ and below 44.6 — — — 9.4 — 54.0 Total $ 44.6 $ 10.6 $ 2.1 $ 127.7 $ 48.7 $ 342.8 $ 576.5 Residential mortgage loans: Performing $ 1,304.3 $ 366.3 $ 381.3 $ 919.1 $ 1,137.6 $ 564.3 $ 4,672.9 Non-performing — 1.3 5.3 8.1 6.9 3.4 25.0 Total excluding portfolio layer method basis adjustments $ 1,304.3 $ 367.6 $ 386.6 $ 927.2 $ 1,144.5 $ 567.7 4,697.9 Unallocated portfolio layer method basis adjustment (1) ( 3.7 ) Total $ 4,694.2 Other loans: Performing $ 123.1 $ 28.4 $ 27.9 $ — $ — $ — $ 179.4 Non-performing 1.4 3.6 1.5 — — — 6.5 Total $ 124.5 $ 32.0 $ 29.4 $ — $ — $ — $ 185.9 Reinsurance recoverable and deposit receivable $ 19,003.3 112 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 4. Investments – (continued) December 31, 2024 2024 2023 2022 2021 2020 Prior Total (in millions) Commercial mortgage loans: A- and above $ 1,182.1 $ 793.1 $ 1,234.3 $ 2,101.3 $ 1,463.4 $ 6,594.0 $ 13,368.2 BBB+ thru BBB- 210.0 393.6 231.6 269.1 180.6 1,217.5 2,502.4 BB+ thru BB- 215.7 143.4 154.3 47.9 40.1 271.7 873.1 B+ and below — — — — 2.5 326.5 329.0 Total $ 1,607.8 $ 1,330.1 $ 1,620.2 $ 2,418.3 $ 1,686.6 $ 8,409.7 $ 17,072.7 Direct financing leases: A- and above $ 1.0 $ — $ 38.5 $ 11.0 $ 33.8 $ 177.4 $ 261.7 BBB+ thru BBB- 4.9 1.8 87.3 19.0 52.8 67.0 232.8 BB+ thru BB- 38.8 — 0.5 6.8 3.4 8.5 58.0 B+ and below 3.6 — — 6.9 — — 10.5 Total $ 48.3 $ 1.8 $ 126.3 $ 43.7 $ 90.0 $ 252.9 $ 563.0 Residential mortgage loans: Performing $ 350.4 $ 411.5 $ 970.3 $ 1,234.9 $ 196.0 $ 427.6 $ 3,590.7 Non-performing 0.5 5.5 6.1 4.8 2.5 5.7 25.1 Total excluding portfolio layer method basis adjustments $ 350.9 $ 417.0 $ 976.4 $ 1,239.7 $ 198.5 $ 433.3 3,615.8 Unallocated portfolio layer method basis adjustment (1) ( 8.4 ) Total $ 3,607.4 Other loans: Performing $ 84.2 $ 61.9 $ — $ — $ — $ — $ 146.1 Non-performing 0.1 — — — — 0.1 0.2 Total $ 84.3 $ 61.9 $ — $ — $ — $ 0.1 $ 146.3 Reinsurance recoverable and deposit receivable $ 19,493.4 (1) Represents unallocated basis adjustments related to fair value hedges utilizing the portfolio layer method. See Note 5, Derivative Financial Instruments, for further details. The amortized cost of commercial mortgage loans, direct financing leases, residential mortgage loans and other loans excluded accrued interest receivable of $ 65.2 million, $ 1.5 million, $ 20.0 million and $ 1.4 million, respectively, as of December 31, 2025, and $ 69.2 million, $ 1.2 million, $ 12.0 million and $ 1.3 million, respectively, as of December 31, 2024. Financing Receivables Credit Monitoring Commercial Mortgage Loan Credit Risk Profile Based on Internal Rating We actively monitor and manage our commercial mortgage loan and direct financing lease portfolios. All commercial mortgage loans and direct financing leases are analyzed regularly and substantially all are internally rated, based on a proprietary risk rating cash flow model, in order to monitor the financial quality of these assets. The models stress expected cash flows at various levels and at different points in time depending on the durability of the income stream, which includes our assessment of factors such as location (macro and micro markets), tenant quality and lease expirations. Our internal rating analysis presents expected losses in terms of an S&P Global (“S&P”) bond equivalent rating for domestic commercial mortgage loans and Feller rate equivalent for Chilean commercial mortgage loans and direct financing leases. As the credit risk for commercial mortgage loans and direct financing leases increases, we adjust our internal ratings downward with loans in the category “B+ and below” having the highest risk for credit loss. Internal ratings on commercial mortgage loans and direct financing leases are updated at least annually and potentially more often for certain investments with material changes in collateral value or occupancy and for investments on an internal “watch list”. Commercial mortgage loans and direct financing leases that require more frequent and detailed attention are identified and placed on an internal “watch list”. Among the criteria that may indicate a potential problem are significant negative changes in ratios of loan to value or contract rents to debt service, major tenant vacancies or bankruptcies, borrower sponsorship problems, late payments, delinquent taxes and loan relief/restructuring requests. 113 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 4. Investments – (continued) Residential Mortgage Loan Credit Risk Profile Based on Performance Status Our residential mortgage loan portfolio is monitored based on performance of the loans. Monitoring on a residential mortgage loan increases when the loan is delinquent or earlier if there is an indication of potential impairment. We define non-performing domestic residential mortgage loans as loans 90 days or greater delinquent or on non-accrual status. We define non-performing residential first lien mortgages in the Chilean market as loans that have missed a specified number of coupon payments based on the nature of the loans and collection practices in that market. Other Loans Credit Risk Profile Based on Performance Status Our other loans are monitored based on performance of the loans. Monitoring on other loans increases when the loan is delinquent or earlier if there is an indication of potential impairment. Non-Accrual Financing Receivables Financing receivables are placed on non-accrual status if we have concern regarding the collectability of future payments or if a financing receivable has matured without being paid off or extended. Factors considered may include conversations with the borrower, loss of major tenant, bankruptcy of borrower or major tenant, decreased property cash flow for commercial mortgage loans and direct financing leases or number of days past due and other circumstances for residential mortgage loans. Based on an assessment as to the collectability of the principal, a determination is made to apply any payments received either against the principal, against the valuation allowance or according to the contractual terms. When a financing receivable is placed on non-accrual status, the accrued unpaid interest receivable is reversed against interest income. Accrual of interest resumes after factors resulting in doubts about collectability have improved. Financing receivables in the Chilean market are carried on accrual for a longer period of delinquency than domestic financing receivables, as assessment of collectability is based on the nature of the financing receivables and collection practices in that market. The amortized cost of financing receivables on non-accrual status was as follows: December 31, 2025 Amortized cost Beginning Ending of nonaccrual amortized cost amortized cost assets without on nonaccrual on nonaccrual a valuation status status allowance (in millions) Commercial mortgage loans $ 70.5 $ 58.4 $ — Residential mortgage loans 15.6 19.9 7.0 Other loans — 6.4 6.4 Total $ 86.1 $ 84.7 $ 13.4 December 31, 2024 Amortized cost Beginning Ending of nonaccrual amortized cost amortized cost assets without on nonaccrual on nonaccrual a valuation status status allowance (in millions) Commercial mortgage loans $ 58.4 $ 70.5 $ — Residential mortgage loans 10.2 15.6 — Total $ 68.6 $ 86.1 $ — 114 Table of Contents Principal Financial Group, Inc. Notes to Consolidated Financial Statements – (continued) December 31, 2025 4. Investments – (continued) Interest income recognized on non-accrual financing receivables was as follows: For the year ended December 31, 2025 2024 2023 (in millions) Commercial mortgage loans $ 0.2 $ 0.8 $ 1.2 Residential mortgage loans 0.6 0.1 — Total $ 0.8 $ 0.9 $ 1.2 The aging of our financing receivables, based on amortized cost, was as follows: December 31, 2025 Amortized cost 90 days or 90 days or 30-59 days 60-89 days more past Total past more and past due past due due due Current Total (1) accruing (in millions) Commercial mortgage loans $ 5.9 $ 1.4 $ 101.0 $ 108.3 $ 16,409.8 $ 16,518.1 $ 42.6 Direct financing leases 3.9 0.9 — 4.8 571.7 576.5 — Residential mortgage loans (2) 64.8 20.3 26.3 111.4 4,586.5 4,697.9 12.1 Other loans 2.3 1.5 8.4 12.2 173.7 185.9 2.0 Total $ 76.9 $ 24.1 $ 135.7 $ 236.7 $ 21,741.7 $ 21,978.4 $ 56.7 December 31, 2024 Amortized cost 90 days or 90 days or 30-59 days 60-89 days more past Total past more and past due past due due due Current Total (1) accruing (in millions) Commercial mortgage loans $ 70.3 $ 2.2 $ 26.3 $ 98.8 $ 16,973.9 $ 17,072.7 $ — Direct financing leases 3.6 — — 3.6 559.4 563.0 — Residential mortgage loans (2) 54.4 14.9 23.5 92.8 3,523.0 3,615.8 9.5 Other loans 2.1 1.8 1.6 5.5 140.8 146.3 1.4 Total $ 130.4 $ 18.9 $ 51.4 $ 200.7 $ 21,197.1 $ 21,397.8 $ 10.9 (1) As of both December 31, 2025 and December 31, 2024, no reinsurance recoverables or deposit receivables were considered past due. (2) Excludes unallocated basis adjustments related to fair value hedges utilizing the portfolio layer method.