Principal Financial Group’s Q3 2023: A Dividend Hike, Exited-Business Gains, and the Durable Core

Ticker: PFG • Des Moines, Iowa • October 26, 2023

Executive snapshot

Principal Financial Group (PFG) delivered third-quarter 2023 results that balance a GAAP drumbeat with a non-GAAP narrative that leans on an exit from a business line. The headline numbers are cheered by a modest dividend increase and a sizable capital return, but the more instructive tale lies in what is considered “repeatable” earnings versus one-offs.

GAAP net income attributable to PFG, Inc.: $1,246 million, or $5.10 per diluted share, including $702 million of income from exited business.
Non-GAAP operating earnings: $420 million, or $1.72 per diluted share.
Non-GAAP net income excluding income from exited business: $544.4 million, or $2.23 per diluted share.
Capital action: fourth-quarter 2023 common stock dividend raised by $0.02 to $0.67 per share; cash return to shareholders of $356 million.
AUM/AUA scale: assets under management $651 billion, included in assets under administration of $1.5 trillion.

What the numbers imply beyond the headline

The press release makes a clear distinction between GAAP results and non-GAAP measures, a distinction that has become routine in earnings reporting. The GAAP EPS of $5.10 is inflated by $702 million of income tied to exited business—an item that, frankly, looks less like a forecast for ongoing profitability and more like a post-mini-restructure tailwind. The non-GAAP numbers tell a different story: operating earnings of $420 million or $1.72 per diluted share, and a clean non-GAAP net income excluding exited business of $2.23 per diluted share. In other words, the “earnings surprise” potential, if any, depends on whether you anchor on GAAP or non-GAAP and how much you trust exits to repeat.

For investors and analysts who watch the EPS consensus with the seriousness of a math exam, this quarter highlights a familiar tension: is the business generating durable earnings power, or is the narrative buoyed by a one-off exit income? The answer, at least for now, is nuanced. The non-GAAP narrative suggests a steadier earnings base, while the GAAP figure captures the corporate reconfiguration that can’t be dismissed, especially when it materially shifts per-share results.

On strategy, the dividend increase signals management’s comfort with cash generation and capital returns. It’s a small, deliberate signal in a sector where capital discipline, not just top-line growth, often drives equity value. The $356 million returned to shareholders this quarter pairs with a large asset base—AUM at $651 billion and AUA at $1.5 trillion—indicating a business model that leans on scale and fee-based growth to support earnings power over time.

Implications for PFG’s peers and the sector

In the current rate environment, a durable earnings base and disciplined capital allocation are a competitive advantage. Principal’s results imply that exits can temporarily lift reported profitability, but peers will be evaluating whether they can translate non-GAAP operating earnings into sustainable growth drivers—fees, spreads, and risk-adjusted returns—without relying on one-off items.

For asset managers and retirement-focused financials, the combination of solid AUM growth, disciplined capital deployment, and steady cash generation may become the yardstick by which market participants measure resilience. If others in the sector pursue similar exits or portfolio reductions, you could see a broader re-rating of earnings power that prioritizes cash flow quality over headline GAAP numbers. In short, the market may reward clarity on repeatable earnings—and punish the over-reliance on outsized one-offs when the next quarter rolls around.

What to watch next

Details on the exited business and the lasting impact on segment profitability.
Progress on margins, expense discipline, and the durability of non-GAAP earnings streams.
Updates on revenue drivers within wealth management, retirement services, and insurance operations.
Outlook and revenue forecast for 2024 and beyond, and how dividend policy evolves in response to earnings quality.

Bottom line

This quarter reinforces a familiar finance truth: the math of earnings presentation matters as much as the math of earnings growth. Principal’s GAAP EPS benefited from exit-related income, but the durability story rests with non-GAAP earnings power and the ability to translate AUM scale into sustainable revenue and margin expansion. The dividend uplift and sizable capital return underscore a confidence in cash flow, while the path forward will test whether the core earnings trajectory can stand on its own—an important factor for the EPS consensus that often drives investor sentiment in the weeks and quarters ahead.