Principal Financial Group (PFG) Risk Factor Changes

Pandemics, natural disasters, terrorist attacks or military actions may disrupt operations, reduce economic activity and adversely affect our financial condition.

Catastrophic events could adversely affect our operations, net income or financial condition.

Climate change may impact asset prices, as well as general economic conditions.

Atmospheric concentrations of carbon dioxide and other greenhouse gases have increased noticeably since the industrial revolution, resulting in a gradual increase in global average temperatures and an increase in the…

Disruptions in information technology systems or cybersecurity breaches may impair operations and damage our reputation.

We have coinsurance with funds withheld reinsurance agreements with Talcott Life & Annuity Re, Ltd., a limited liability company organized under the laws of the Cayman Islands and an affiliate of Talcott Resolution Li…

We have acquired businesses in the past and expect to continue to do so in the future.

The premium rates we charge are based, in part, on the assumption that reinsurance will be available at a certain cost.

We cede life, annuity, disability, medical and long-term care insurance to other insurance companies through reinsurance.

We participate in joint ventures, primarily in our international businesses and real estate investment operations.

Some jurisdictions mandate in-country data storage, increasing compliance costs.

Our international operations face distinct political, legal and operational risks.

Certain of our variable annuity products include guaranteed minimum death benefits and/or guaranteed minimum withdrawal benefits.

Revenues from our asset management and accumulation products are primarily fee-based.

Technological and societal shifts may require changes to our distribution, customer service and product offerings.

Our Benefits and Protection segment primarily competes with other insurance companies.

Our governance structure may hinder stockholders from replacing management.

State laws and our charter documents may deter a takeover that some stockholders might favor.

Many of the insurance, annuity and investment products we issue receive favorable tax treatment under current U.S.

We are subject to numerous federal, state, and international regulations regarding the privacy and security of personal information.

We collect, process, store, share, disclose and use personal information from and about our customers, employees and plan participants as well as our website, mobile and application users.

The U.S.

Our businesses are subject to comprehensive regulation and supervision throughout the U.S.

Amortization of our DAC asset and other actuarial balances depends on several assumptions, including but not limited to, mortality and policy lapse.

Our results of operations may also be adversely impacted if our actual investment earnings differ from our pricing and reserve assumptions.

Tax provisions involve estimates on deductibility, timing and realization of losses and tax credits.

Market disruptions may impair valuation of certain securities.

Fixed maturities, equity securities and derivatives represent most assets and liabilities reported at fair value on our consolidated statements of financial position, excluding separate account assets and market risk…

We face foreign currency risk from international operations and local currency investments.

Fixed maturities that are classified as available-for-sale (“AFS”) are reported on the consolidated statements of financial position at fair value.

Our California commercial mortgage loan concentration exposes us to regional economic and catastrophe risks, including but not limited to earthquakes, fires, drought, extreme heat, flooding and tsunamis.

Environmental liabilities from mortgage loan and real estate investments may impact our financial strength and profitability.

Derivative agreements may require collateral posting under certain conditions.

We use derivatives to hedge business risks.

We hold less liquid investments, including privately placed fixed maturities, mortgage loans, and real estate.

Our investment portfolio includes equity securities, trading securities and derivative instruments that are reported at fair value on the consolidated statements of financial position with changes in fair value report…

As of December 31, 2025, the international investment operations of our fully consolidated subsidiaries held $2.6 billion of fixed maturities, or 40%, of total international invested assets, of which 7% are government…

Credit spread changes affect market prices and reinvestment risk.

Rising interest rates may also negatively affect our results of operations, financial condition and liquidity.

Prolonged low interest rates may reduce asset yields below pricing assumptions, lowering profitability.

Because the revenues of our asset accumulation and management businesses are largely based on the value of AUM and AUA, a decline in domestic and global equity, bond or real estate markets will decrease our revenues.

Our results of operations are materially affected by global market and economic conditions.

In addition, we maintain credit facilities with various financial institutions as a potential source of excess liquidity.

We maintain a level of cash and securities which, combined with expected cash inflows from investments and operations, is believed adequate to meet anticipated short-term and long-term benefit and expense payment obli…

In the discussion below, we exclude investments held under coinsurance with funds withheld reinsurance agreements when providing details related to our investment portfolio, as these assets support related obligations…

Our enterprise risk management framework may not be fully effective in identifying or mitigating all the risks to which we are exposed.

We increasingly rely on services and products provided by many vendors in the United States and abroad.

Loss of or disruption in key vendor relationships and services or failure of a vendor to protect information of our customers or employees could adversely affect our business or result in losses.

Our continued success is largely dependent on our ability to attract, develop and retain qualified employees.

Advances in medical technology may also adversely impact our profitability.

Technological and societal changes may disrupt our business model and impair our ability to retain existing customers, attract new customers and maintain our profitability.

Potential impacts may include the following:

Our policyholders may submit fraudulent requests for claim payments.

We compete with many financial services companies, many of which may have advantages over us in one or more of the competitive factors described in Item 1.

require the approval of at least 75% of the voting power of our outstanding common stock for the amendment of our by-laws and provisions of our certificate of incorporation governing:

The following provisions, included in our certificate of incorporation and by-laws, may also have anti-takeover effects and may delay, defer or prevent a takeover attempt that some stockholders might consider in their…

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA 2022”) was enacted by the U.S.

Risks relating to laws, regulations and taxation

The profitability of our insurance and annuity products depends significantly upon the extent to which our actual experience is consistent with the assumptions used in setting prices for our products and establishing…

Deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates expected to be in effect during the years in w…

The determination of the amount of allowances and impairments varies by investment type and is based upon our periodic evaluation and assessment of known and inherent risks associated with the respective asset class.

Risks relating to estimates, assumptions and valuations

If we require significant amounts of cash on short notice, we may have difficulty selling these investments in a timely manner, be forced to sell them for less than we otherwise would have been able to realize or both.

As of December 31, 2024, approximately $12.3 billion, or 85%, of our U.S.

Our commercial mortgage loan portfolio faces both delinquency and default risk.

We are subject to the risk that the issuers of the fixed maturities we own will default on principal and interest payments.

Our investment portfolio is subject to several risks that may diminish the value of our invested assets and the investment returns credited to customers, which could reduce our sales, revenues, AUM and net income.

An economic downturn may also lead to weakening of foreign currencies against the U.S.

Factors such as consumer spending, business investment, government spending, the volatility and strength of the capital markets, investor and consumer confidence, foreign currency exchange rates, inflation levels and…

Disruptions, uncertainty or volatility in the capital and credit markets may limit our access to capital required to operate our business, most significantly our insurance operations.

Our results of operations, financial condition, cash flows and capital position could be materially adversely affected by volatility, uncertainty and disruption in the capital and credit markets.

Risks relating to economic conditions, market conditions and investments

These risks are of a general nature and include the risk of catastrophic event; the risk of global climate change; the risk of technological and societal changes; reputational risk; intellectual property risk; risks a…

Business risks include risks associated with competition, products, fraud, external business partner relationships and acquisitions.

Many different regulatory bodies govern our company.

We use financial models to price our products, calculate reserves and other actuarial balances, value our investments and determine the amount of allowances or impairments taken on our investments.

In general, economic and market conditions can cause variability in the following factors: demand for our products and services, short-term and long-term interest rates, inflation and deflation, equity returns, credit…

Our risk factors are organized into the following categories: 1) Risks relating to economic conditions, market conditions and investments, 2) Risks relating to estimates, assumptions and valuations, 3) Risks relating…

This section provides a summary of the risks that may impact our performance in the future.

Policy uncertainty regarding geoeconomic issues and geopolitical uncertainty more broadly are increasing factor considerations for market participants.

Sustainability considerations are an important element of our portfolio construction process.

Risks relating to computer cyber-terrorism, crisis on a national or global scale, climate change or other catastrophic events

Our operations increasingly depend on a network of third party vendors, many of whom rely on additional subcontractors or fourth party providers.

We face risks arising from vendor failures or data breaches.

Fraudulent claims may increase both claims and operational expenses.

We face competition from financial services firms with potential advantages in key areas described in Item 1.

Our risk management framework may not identify or mitigate all risks, potentially leading to unexpected losses.

require 75% shareholder approval to amend key governance provisions:

The following charter provisions may delay or prevent takeovers.

Legal liability or adverse publicity with respect to current or future legal or regulatory actions, whether or not involving us, may affect our financial strength or reduce our profitability.

Reputational harm from litigation, compliance failures, or third party misconduct may reduce revenues and profitability.

Additional legislative or regulatory action in the United States and globally could further regulate our collection, use, sharing and other processing of personal data.

We provide products and services to certain employee benefit plans that are subject to ERISA or the Internal Revenue Code of 1986, as amended and regulated by various federal agencies, including the DOL.

Profitability depends on actual experience aligning with pricing and reserving assumptions.

Deferred tax assets and liabilities reflect differences between financial and tax bases, using enacted future tax rates.

Allowance and impairment levels are based on periodic risk assessments by asset class.

In a time of market illiquidity, we may be forced to sell assets at unfavorable prices as reported asset values may not reflect potential sale prices in stressed markets.

A portion of our commercial mortgage loans have balloon maturities.

Our commercial mortgage loans are subject to delinquency and default risk.

An increase in the default rate of fixed maturity issuers could harm our financial strength and decrease our profitability.