Last Update 03 Dec 25

PFG: Normalizing Investment Income And Calmer Claims Will Support Steady Future Performance

Analysts modestly raised their price target on Principal Financial Group to a range of approximately $87 to $94 per share, reflecting updated insurance sector models, calmer than expected catastrophe activity, as well as improving visibility into earnings and downside risks.

Analyst Commentary

Analysts are broadly constructive on Principal Financial Group, but remain divided on how much upside is left after the recent rerating in the sector and the stock's multiple compression over the past year.

Bullish Takeaways

Bullish analysts highlight that a relatively calm catastrophe season and limited macro spillover into earnings support more confidence in the sustainability of current margins and cash generation.
Several price target increases point to improved earnings visibility across both spread and fee based businesses, reinforcing the view that downside risks to the core operations are now more contained.
Favorable claims experience is viewed as an indicator that actuarial reviews should be supportive of capital deployment plans and future earnings growth, which underpins higher valuation ranges.
Ongoing strength in distribution and incremental tailwinds from additional fee and trading days, alongside equity market gains, are seen as drivers of steady top line and fee income expansion.

Bearish Takeaways

Bearish analysts caution that, despite higher targets, the stock still faces structural flow headwinds in certain fee businesses, which could cap long term growth and justify only modest multiple expansion.
Concerns persist around a softening property and casualty cycle heading into 2026, which could pressure pricing power and returns if claims trends normalize less favorably.
Some see the recent compression in valuation multiples as only partly offset by improved fundamentals, arguing that execution missteps or renewed macro volatility could quickly erode the perceived earnings cushion.
There is skepticism that benefits from variable investment income normalization and equity market tailwinds are already well understood by investors, limiting additional upside from these known catalysts.

What's in the News

Piper Sandler raised its price target on Principal Financial Group to $94 from $92 and reiterated an Overweight rating, citing continued tailwinds from variable investment income normalization, favorable claims experience, and strong distribution trends (Periodical).
The company completed a major share repurchase program announced in February 2024, buying back approximately 14.8 million shares, or 6.46% of shares outstanding, for about $1.32 billion between July 1 and September 30, 2025 (Key Development).
Principal Financial Group declared a fourth quarter cash dividend of $0.79 per share, payable on December 19, 2025 to shareholders of record as of December 3, 2025, marking an increase in capital returned to shareholders (Key Development).
A separate buyback authorization announced in February 2025 remained unused through September 30, 2025, with no shares repurchased under that program during the latest tranche period (Key Development).

Valuation Changes

Fair Value Estimate, unchanged at approximately $89.08 per share, indicating no revision to the intrinsic value assessment in this update cycle.
Discount Rate, edged down slightly from about 6.96% to 6.96%, reflecting a marginally lower required return but no meaningful shift in the risk profile.
Revenue Growth, effectively unchanged at around 6.09% annually, suggesting stable long term top line expectations.
Net Profit Margin, remained essentially flat at roughly 11.63%, indicating no material change in projected profitability levels.
Future P/E, held steady at about 10.03x, implying that valuation multiples embedded in the model were not adjusted despite the updated inputs.

Strategic focus on SMBs and global asset management aims to capitalize on retirement growth, enhancing future revenue potential.
Cost management aligns expenses with revenue, improving net margins and resilience amid market volatility.
Market volatility and competitive pressures could reduce revenue and compress net margins across various business segments due to changes in client behavior and pricing adjustments.

Catalysts

About Principal Financial Group

Provides retirement, asset management, and insurance products and services to businesses, individuals, and institutional clients worldwide.What are the underlying business or industry changes driving this perspective?

Principal Financial Group is positioning itself to capitalize on growth opportunities in the retirement ecosystem, focusing on SMBs and Global Asset Management. This strategy could drive future revenue growth as these markets expand.
The company has been aligning expenses with revenue through disciplined cost management, which is likely to positively impact net margins and earnings even during volatile market conditions.
Principal is leveraging its diversified and resilient business model, which includes high-growth areas like high-yield, preferred securities, real estate, and international equities. Positive developments in these asset classes could enhance future AUM and revenue streams.
The company's strategic expansion in international markets, particularly seen in strong local investment management flows in Mexico and Southeast Asia, points to potential future revenue growth from increased global reach.
By focusing on higher-quality and higher-fee mandates, particularly in asset management, Principal stands to improve its revenue rate and margins across its portfolio, thereby contributing to future earnings growth.

Principal Financial Group Earnings and Revenue Growth

Principal Financial Group Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Principal Financial Group's revenue will grow by 7.5% annually over the next 3 years.
Analysts assume that profit margins will increase from 7.5% today to 11.6% in 3 years time.
Analysts expect earnings to reach $2.2 billion (and earnings per share of $10.37) by about September 2028, up from $1.1 billion today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.9x on those 2028 earnings, down from 15.7x today. This future PE is lower than the current PE for the US Insurance industry at 14.3x.
Analysts expect the number of shares outstanding to decline by 2.6% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 6.79%, as per the Simply Wall St company report.

Principal Financial Group Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The market environment is highly dynamic and unpredictable, with policy shifts and uncertainties contributing to heightened volatility, impacting fee revenue in retirement and asset management. This could affect revenue and earnings in the future.
Despite positive quarterly earnings, there was a net cash outflow of $4 billion, largely due to low-fee institutional fixed income withdrawals. Continued challenges with inflows versus outflows could pressure run rate revenue and net margins.
The recent market volatility may weaken client behavior in asset management, leading to more risk-off allocations, which could decrease revenue and impact net margins if persistent.
While mortality in the life insurance business remains within expectations over longer periods, there was a noted increase in single, severe claims this quarter, which may indicate potential variability in future earnings and could impact net margins.
Persistent competitive pressures and pricing adjustments in the dental insurance segment of Specialty Benefits could constrain growth in premium and fees, impacting revenue and potentially compressing net margins over time.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $86.0 for Principal Financial Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $101.0, and the most bearish reporting a price target of just $72.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $18.8 billion, earnings will come to $2.2 billion, and it would be trading on a PE ratio of 9.9x, assuming you use a discount rate of 6.8%.
Given the current share price of $80.07, the analyst price target of $86.0 is 6.9% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Analyst Commentary Drives Modest Price Target Increases for Principal Financial Group Amid Stable Outlook