PRINCIPAL FINANCIAL GROUP INC (PFG) stock intrinsic value fair value estimate & owner earnings analysis

Principal Financial Group is a diversified retirement, insurance and asset-management company built around three connected businesses: a large-scale U.S. retirement-plan recordkeeping and administration business serving small and mid-sized employers, a life and disability insurance and benefits business, and Principal Asset Management, a global investment manager whose retirement and institutional operations extend into Latin America (Brazil, Chile, Mexico) and Asia (China, through a joint venture with China Construction Bank, plus Hong Kong, Malaysia and Thailand). A large piece of the company's balance sheet sits behind long-duration life and annuity contracts, so its reported cash flow each year is heavily affected by growth in policy reserves, by mark-to-market swings tied to a large block of business reinsured to a third party starting in 2022, and by the amortization of the loss recognized on that transaction. We treated the year-to-year growth in policy reserves as capital that has to stay invested against future claims rather than cash available to owners, and we let the reinsurance and derivative accounting entries flow through as reported rather than adjusting the earnings level for them, since their swings are better smoothed by looking across several years than by picking apart any single one. On that basis, cash owner earnings have run at roughly $7-$8 per share in 2023-2025, versus roughly $4.50-$5.50 per share in 2017-2021, before the reinsurance transaction reshaped the balance sheet. We treated 2023-2025 as describing the business as it exists now and anchored the valuation there (median of about $7.90 per share), rather than blending in the earlier, structurally different period. 2025 came in a bit below 2024 (about $7.03 versus $7.97 per share), mostly reflecting ordinary year-to-year swings in reserve and tax timing rather than any specific setback. We did not assume a rebound above that dip without a specific reason to expect one, so all three cases start the forecast from a reduced 2026 base rather than resuming from the 2024 level. From there: the base case assumes owner earnings per share grow at roughly 3-4% a year, in line with the low-single-digit revenue growth and the roughly 3% a year reduction in shares outstanding the company has produced over the past eight years through consistent buybacks (a $1.5 billion program completed in December 2025, with a further $1.5 billion program authorized in February 2025 and no expiration date), moderating in later years as buyback capacity slows and as fee competition in asset management, an industry-wide trend, limits margin growth. The bear case assumes owner earnings per share grow only slightly for a decade: the investment portfolio includes commercial mortgage loans on office properties, a segment under valuation and credit pressure industry-wide since 2020, and if that pressure or the reinsurance-related amortization runs longer than currently visible, less capital would be available for buybacks and growth would largely stall. The bull case assumes the reinsurance-related amortization (which fell from $632 million in 2024 to $97 million in 2025) keeps fading, buybacks continue at the demonstrated pace, and asset-management flows and investment spreads improve, producing mid-single-digit annual growth (roughly 5-6%) for several years before settling into a slower, durable pace supported by the company's long-standing scale in U.S. retirement-plan recordkeeping and its diversified international retirement franchise. Discounting these three paths at a flat 6% (applied the same way to every company we look at, with risk expressed only in how the cases differ from one another, not in the rate) gives a bear-case value near $116 per share, a base-case value near $179 per share, and a bull-case value near $268 per share. Given the real credit and spread risk in the investment portfolio and the fact that a meaningful part of recent earnings still depends on a large reinsurance transaction working itself out over time, the margin-of-safety price sits at a substantial discount to our base-case estimate. Our judgment is a margin-of-safety price around $70 per share, below even the bear case, to leave room for the mortgage book or the reinsurance run-off to go worse than expected. One item we could not fully reconcile from the filings: the "net income" figure at the top of the cash-flow statement runs modestly higher each year than "net income attributable to Principal Financial Group" on the income statement (for example, $1,255.5 million versus $1,185.1 million in 2025). This did not affect the cash-flow-based figures used here, but we note it for transparency.