Future Policy Benefits and Claims

6 Months Ended

Jun. 30, 2025

9. Future Policy Benefits and Claims

Future policy benefits and claims include reserves for short-duration contracts and long-duration contracts as well as certain reinsurance balances, when in a liability position.

The following tables summarize disaggregated amounts included in future policy benefit and claims and reconcile the totals to those reported in the consolidated statements of financial position.


	June 30, 2025		December 31, 2024

	(in millions)
Liability for future policy benefits by segment (1):
Retirement and Income Solutions:
Pension risk transfer	$	25,999.1	$	24,958.1
Individual fixed income annuities		4,447.3		4,504.6
Total Retirement and Income Solutions		30,446.4		29,462.7
Principal Asset Management – International Pension:
Latin America:
Individual fixed income annuities		4,407.9		4,126.9
Benefits and Protection:
Specialty Benefits:
Individual disability		1,915.0		1,829.0
Life Insurance:
Term life		1,349.0		1,248.0
Total Benefits and Protection		3,264.0		3,077.0
Corporate:
Long-term care insurance		166.7		164.8
Total liability for future policy benefits		38,285.0		36,831.4

Additional liability for certain benefit features by segment (2):
Benefits and Protection – Life Insurance:
Universal life		6,303.1		6,037.2
Total additional liability for certain benefit features		6,303.1		6,037.2

Reconciling items:
Participating contracts		2,851.7		2,924.2
Short-duration contracts		1,226.9		1,267.4
Cost of reinsurance liability		962.9		958.1
Reinsurance recoverable liability		68.0		60.3
Other (3)		248.3		100.8
Future policy benefits and claims per consolidated statements of financial position	$	49,945.9	$	48,179.4

(1)	Amounts include the deferred profit liability.

(2)	Includes reserves on certain long-duration contracts where benefit features result in gains in early years followed by losses in later years.

(3)	Includes other miscellaneous reserves and the impact of unrealized gains (losses) on the additional liability for certain benefit features.

Liability for Unpaid Claims

The liability for unpaid claims is reported in future policy benefits and claims within our consolidated statements of financial position. Activity associated with unpaid claims was as follows:


	For the six months ended June 30,
	2025		2024

	(in millions)
Balance at beginning of period	$	1,379.9	$	1,405.9
Less: reinsurance recoverable		61.2		67.8
Net balance at beginning of period		1,318.7		1,338.1
Incurred:
Current year		926.1		899.7
Prior years		(71.1)		(68.3)
Total incurred		855.0		831.4
Payments:
Current year		615.5		578.6
Prior years		254.1		250.4
Total payments		869.6		829.0
Net balance at end of period		1,304.1		1,340.5
Plus: reinsurance recoverable		59.7		63.7
Balance at end of period	$	1,363.8	$	1,404.2

Incurred liability adjustments relating to prior years, which affected current operations during 2025 and 2024, resulted in part from developed claims for prior years being different than were anticipated when the liabilities for unpaid claims were originally estimated. These trends have been considered in establishing the current year liability for unpaid claims.

Long-Duration Contracts

Gross Premiums or Assessments and Interest Accretion

The amount of gross premiums or assessments and interest accretion recognized by segment in the consolidated statements of operations was as follows:

Gross premiums or assessments (1)

For the three months ended

For the six months ended

June 30,

2025

2024

2025

2024

(in millions)

Retirement and Income Solutions:

Pension risk transfer

444.0

991.1

1,250.1

1,744.1

Individual fixed income annuities

5.9

11.2

14.1

28.2

Total Retirement and Income Solutions

449.9

1,002.3

1,264.2

1,772.3

Principal Asset Management – International Pension:

Latin America:

Individual fixed income annuities

4.1

10.9

5.9

13.0

Benefits and Protection:

Specialty Benefits:

Individual disability

161.8

159.6

320.4

314.5

Life Insurance:

Universal life

177.2

180.7

354.2

356.9

Term life

173.7

169.6

344.0

333.7

Total Benefits and Protection

512.7

509.9

1,018.6

1,005.1

Corporate:

Long-term care insurance

1.2

1.2

2.9

2.7

Total per consolidated statements of operations

967.9

1,524.3

2,291.6

2,793.1

(1)

Gross premiums are included within premiums and other considerations on the consolidated statements of operations. Assessments, which are only applicable to the Life Insurance – Universal life level of aggregation, are included within fees and other revenues on the consolidated statements of operations.

Interest accretion (1)

For the three months ended

For the six months ended

June 30,

2025

2024

2025

2024

(in millions)

Retirement and Income Solutions:

Pension risk transfer

308.1

279.7

608.6

552.6

Individual fixed income annuities

49.6

52.6

99.9

105.8

Total Retirement and Income Solutions

357.7

332.3

708.5

658.4

Principal Asset Management – International Pension:

Latin America:

Individual fixed income annuities (2)

78.4

91.7

167.2

162.8

Benefits and Protection:

Specialty Benefits:

Individual disability

26.2

24.6

52.0

49.0

Life Insurance:

Universal life

69.8

61.6

138.3

122.0

Term life

16.1

13.6

31.6

26.8

Total Benefits and Protection

112.1

99.8

221.9

197.8

Corporate:

Long-term care insurance

2.3

2.3

4.7

4.5

Total per consolidated statements of operations

550.5

526.1

1,102.3

1,023.5

(1)	Interest accretion is included within benefits, claims and settlement expenses on the consolidated statements of operations.

(2)	Includes inflation adjustments included within the liability for future policy benefits rollforward for interest accretion.

Liability for Future Policy Benefits

The liability for future policy benefits (“LFPB”) for individual and group annuities is generally equal to the present value of expected future policy benefit payments. The reserves are computed using assumptions for mortality and interest. The LFPB for non-participating term life insurance, individual disability income contracts and individual and group long-term care contracts is generally equal to the present value of expected future policy benefit payments less the present value of expected net premiums. The reserves are computed using assumptions for mortality, interest, morbidity and lapse. Cohorts are used as the unit of account for liability measurement. Actual cash flows are grouped into issue-year cohorts for the liability calculation and updated quarterly. We review and update, if necessary, assumptions used to measure cash flows for the LFPB during the third quarter of each year, or more frequently if evidence suggests assumptions should be revised. The change in our liability estimate as a result of updating cash flow assumptions is recognized in net income.

An interest accretion rate is determined for an identified cohort and remains unchanged after the issue year. For policies issued on or prior to December 31, 2020, the interest accretion rate is based on the assumed investment yield when the business was issued. For policies issued after December 31, 2020, the interest accretion rate is based on the upper-medium grade fixed-income instrument yields, which is generally equivalent to a single-A rated bond yield matched to the duration of our insurance liabilities, when the business was issued.

The LFPB is remeasured to reflect current upper-medium grade fixed-income instrument yields as of each reporting date. The liability is calculated by discounting cash flows using rate curves reflecting the currency and duration of the insurance liabilities. For discount rate tenors, or points on the curves, where the upper-medium grade fixed-income instrument yields are not liquid or limited observable market data is available, we use various estimation techniques consistent with fair value measurement guidance.

For our individual fixed income annuities in Latin America, the discount rate methodology is designed to prioritize observable inputs based on market data available in the local debt markets where the respective policies are issued in the currency in which the policies are denominated. For discount rate tenors where upper-medium grade fixed-income instrument yields based on international rating standards are not liquid or limited observable market data is available, estimation techniques are used to determine a curve in the appropriate currency.

Further details regarding reference rates used are included under “Interest Accretion and Current Discount Rates.”

Retirement and Income Solutions

The balances and the changes in the present value for expected future policy benefits were as follows:


	For the six months ended				For the year ended
	June 30, 2025				December 31, 2024
	Pension		Individual		Pension		Individual
	risk		fixed income		risk		fixed income
	transfer		annuities		transfer		annuities

	($ in millions)
Present value of expected future policy benefit payments
Balance at beginning of period	$	24,958.1	$	4,504.6	$	23,855.8	$	4,914.1
Effect of changes in discount rate assumptions at beginning of period		1,938.8		420.4		1,036.1		296.7
Balance at beginning of period at original discount rate		26,896.9		4,925.0		24,891.9		5,210.8
Effect of changes in cash flow assumptions		—		—		(3.4)		(38.4)
Effect of actual variances from expected experience		(8.5)		0.2		(1.5)		(1.7)
Adjusted beginning of period balance at original discount rate		26,888.4		4,925.2		24,887.0		5,170.7
Interest accrual		608.6		99.9		1,135.1		208.4
Benefit payments		(1,212.8)		(248.0)		(2,238.1)		(500.2)
Issuances		1,257.4		13.9		3,112.9		46.1
Balance at end of period at original discount rate		27,541.6		4,791.0		26,896.9		4,925.0
Effect of changes in discount rate assumptions at end of period		(1,542.5)		(343.7)		(1,938.8)		(420.4)
Future policy benefits		25,999.1		4,447.3		24,958.1		4,504.6
Reinsurance impact		—		(4,403.6)		—		(4,469.4)
Future policy benefits after reinsurance	$	25,999.1	$	43.7	$	24,958.1	$	35.2

Weighted-average duration for future policy benefits (years) (1)		8.0		7.1		8.0		7.2

(1)	Represents the average of the cohort-level duration of the benefit cash flows weighted by the reserve balance for each cohort.

Principal Asset Management – International Pension

The balances and the changes in the present value for expected future policy benefits for Latin America – Individual fixed income annuities were as follows:


	For the six months ended		For the year ended
	June 30, 2025		December 31, 2024

	($ in millions)
Present value of expected future policy benefit payments
Balance at beginning of period	$	4,126.9	$	4,593.7
Effect of changes in discount rate assumptions at beginning of period		(368.4)		(351.8)
Balance at beginning of period at original discount rate		3,758.5		4,241.9
Effect of actual variances from expected experience		(0.1)		1.1
Adjusted beginning of period balance at original discount rate		3,758.4		4,243.0
Interest accrual (1)		167.2		330.2
Benefit payments		(166.4)		(326.7)
Issuances		5.8		29.4
Foreign currency translation adjustment		245.3		(517.4)
Balance at end of period at original discount rate		4,010.3		3,758.5
Effect of changes in discount rate assumptions at end of period		397.6		368.4
Future policy benefits	$	4,407.9	$	4,126.9

Weighted-average duration for future policy benefits (years) (2)		9.6		9.8

(1)	Includes inflation adjustments.

(2)	Represents the average of the cohort-level duration of the benefit cash flows weighted by the reserve balance for each cohort.

Benefits and Protection

The balances and the changes in the present value for expected net premiums and expected future policy benefits were as follows:


	For the six months ended				For the year ended
	June 30, 2025				December 31, 2024
	Specialty		Life		Specialty		Life
	Benefits		Insurance		Benefits		Insurance
	Individual				Individual
	disability		Term life		disability		Term life

	($ in millions)
Present value of expected net premiums
Balance at beginning of period	$	2,680.6	$	4,107.2	$	2,552.3	$	3,793.7
Effect of changes in discount rate assumptions at beginning of period		436.4		290.1		313.7		100.1
Balance at beginning of period at original discount rate		3,117.0		4,397.3		2,866.0		3,893.8
Effect of changes in cash flow assumptions		—		—		183.9		419.9
Effect of actual variances from expected experience		57.0		2.3		168.3		42.5
Adjusted beginning of period balance at original discount rate		3,174.0		4,399.6		3,218.2		4,356.2
Interest accrual		54.3		101.9		103.5		190.9
Net premiums collected		(147.5)		(206.1)		(289.1)		(390.8)
Issuances		35.3		110.3		84.4		241.0
Balance at end of period at original discount rate		3,116.1		4,405.7		3,117.0		4,397.3
Effect of changes in discount rate assumptions at end of period		(386.5)		(222.4)		(436.4)		(290.1)
Balance at end of period	$	2,729.6	$	4,183.3	$	2,680.6	$	4,107.2

Present value of expected future policy benefit payments
Balance at beginning of period	$	4,509.6	$	5,355.2	$	4,450.7	$	4,879.6
Effect of changes in discount rate assumptions at beginning of period		1,302.8		366.0		903.5		124.5
Balance at beginning of period at original discount rate		5,812.4		5,721.2		5,354.2		5,004.1
Effect of changes in cash flow assumptions		—		—		216.2		488.1
Effect of actual variances from expected experience		57.1		(4.9)		173.2		45.1
Adjusted beginning of period balance at original discount rate		5,869.5		5,716.3		5,743.6		5,537.3
Interest accrual		106.3		133.5		203.3		247.9
Benefit payments		(112.4)		(168.7)		(219.0)		(321.6)
Issuances		34.6		116.8		84.5		257.6
Balance at end of period at original discount rate		5,898.0		5,797.9		5,812.4		5,721.2
Effect of changes in discount rate assumptions at end of period		(1,253.4)		(265.6)		(1,302.8)		(366.0)
Balance at end of period	$	4,644.6	$	5,532.3	$	4,509.6	$	5,355.2

Future policy benefits (1)	$	1,915.0	$	1,349.0	$	1,829.0	$	1,248.0
Reinsurance impact		(426.0)		23.2		(412.1)		19.5
Future policy benefits after reinsurance	$	1,489.0	$	1,372.2	$	1,416.9	$	1,267.5

Weighted-average duration for future policy benefits (years) (2)		17.7		8.1		18.3		8.4

(1)	Represents the present value of expected future policy benefit payments less the present value of expected net premiums.

(2)	Represents the average of the cohort-level duration of the benefits less the net premium cash flows weighted by the reserve balance for each cohort.

We updated our actuarial assumptions during the third quarter of 2024, resulting in a $32.3 million increase in the LFPB and an $18.2 million decrease to income before taxes, net of reinsurance, for Individual disability. This was primarily due to unfavorable updates to termination and lapse assumptions. The updates also resulted in a $68.2 million increase in the LFPB and a $52.9 million decrease to income before taxes, net of reinsurance, for Term life. This was primarily due to unfavorable updates to mortality and lapse assumptions.

Additional Liability for Certain Benefit Features

The LFPB also includes an additional reserve on certain universal life contracts where benefit features result in gains in early years followed by losses in later years. The liability for these future losses is accrued in relation to estimated contract assessments. A premium deficiency exists if the net liabilities together with future premiums are determined to be insufficient to provide for expected future policy benefits. Premium deficiency testing considers, among other factors, anticipated investment income and does not include a provision for adverse deviation. We did not have a premium deficiency reserve as of June 30, 2025 or December 31, 2024.

The balances and the changes in the additional liability for certain benefit features for Life Insurance - Universal life contracts, excluding the impact of unrealized gains (losses), were as follows:


	For the six months ended		For the year ended
	June 30, 2025		December 31, 2024

	($ in millions)
Balance at beginning of period	$	6,037.2	$	5,326.5
Effect of changes in cash flow assumptions		—		151.9
Effect of actual variances from expected experience		9.0		28.0
Interest accrual		138.3		253.3
Net assessments collected		213.5		425.2
Benefit payments		(94.9)		(147.7)
Balance at end of period		6,303.1		6,037.2
Reinsurance impact		(6,287.5)		(6,011.3)
Balance at end of period after reinsurance	$	15.6	$	25.9

Weighted-average duration for additional liability (years) (1)		22.4		23.3

(1)	Represents the average of the cohort-level duration of the benefits less the net assessment cash flows weighted by the reserve balance for each cohort.

We updated our actuarial assumptions during the third quarter of 2024, resulting in a $151.9 million increase in the additional liability for certain benefit features primarily due to mortality assumptions related to ULSG products, resulting in a $0.3 million decrease to income before taxes, net of reinsurance.

Corporate

The balances and the changes in the present value for expected net premiums and expected future policy benefits for long-term care insurance were as follows:


	For the six months ended		For the year ended
	June 30, 2025		December 31, 2024

	($ in millions)
Present value of expected net premiums
Balance at beginning of period	$	30.8	$	42.8
Effect of changes in discount rate assumptions at beginning of period		(1.3)		(3.0)
Balance at beginning of period at original discount rate		29.5		39.8
Effect of changes in cash flow assumptions		—		(5.3)
Effect of actual variances from expected experience		0.4		(2.2)
Adjusted beginning of period balance at original discount rate		29.9		32.3
Interest accrual		0.9		1.9
Net premiums collected		(2.5)		(4.7)
Balance at end of period at original discount rate		28.3		29.5
Effect of changes in discount rate assumptions at end of period		1.7		1.3
Balance at end of period	$	30.0	$	30.8

Present value of expected future policy benefit payments
Balance at beginning of period	$	195.6	$	209.5
Effect of changes in discount rate assumptions at beginning of period		(8.8)		(20.0)
Balance at beginning of period at original discount rate		186.8		189.5
Effect of changes in cash flow assumptions		—		(1.2)
Effect of actual variances from expected experience		1.2		2.5
Adjusted beginning of period balance at original discount rate		188.0		190.8
Interest accrual		5.6		11.2
Benefit payments		(7.9)		(15.2)
Balance at end of period at original discount rate		185.7		186.8
Effect of changes in discount rate assumptions at end of period		11.0		8.8
Balance at end of period	$	196.7	$	195.6

Future policy benefits (1)	$	166.7	$	164.8
Reinsurance impact		(166.7)		(164.8)
Future policy benefits after reinsurance	$	—	$	—

Weighted-average duration for future policy benefits (years) (2)		9.1		9.3

(1)	Represents the present value of expected future policy benefit payments less the present value of expected net premiums.

(2)	Represents the average of cohort-level duration of the benefits less the net premium cash flows weighted by the reserve balance for each cohort.

Expected Future Gross Premiums and Benefit Payments

The amounts of expected undiscounted future benefit payments, expected undiscounted future gross premiums and expected discounted future gross premiums, utilizing the current upper-medium fixed-income instrument yield, were as follows:


	June 30, 2025		December 31, 2024

	(in millions)
Retirement and Income Solutions:
Pension risk transfer
Expected undiscounted future benefit payments	$	40,756.9	$	39,532.3

Individual fixed income annuities
Expected undiscounted future benefit payments	$	6,413.9	$	6,622.6

Principal Asset Management – International Pension:
Latin America:
Individual fixed income annuities
Expected undiscounted future benefit payments	$	5,841.6	$	5,509.1

Benefits and Protection – Specialty Benefits:
Individual disability
Expected discounted future gross premiums	$	5,588.0	$	5,484.0
Expected undiscounted future gross premiums	$	8,693.9	$	8,680.0
Expected undiscounted future benefit payments	$	9,925.1	$	9,808.8

Benefits and Protection – Life Insurance:
Term life
Expected discounted future gross premiums	$	6,821.1	$	6,651.2
Expected undiscounted future gross premiums	$	11,533.7	$	11,391.4
Expected undiscounted future benefit payments	$	9,066.8	$	8,970.7

Corporate:
Long-term care insurance
Expected discounted future gross premiums	$	36.7	$	38.4
Expected undiscounted future gross premiums	$	52.3	$	55.7
Expected undiscounted future benefit payments	$	351.4	$	357.3

Interest Accretion and Current Discount Rates

The interest accretion rate shown for each level of aggregation is an average of the cohort-level accretion rates weighted by the reserve balance for each cohort within that level of aggregation. The current discount rate is calculated at a cohort-level based on current upper-medium fixed-income instrument yields and weighted by the reserve balance for each cohort within each level of aggregation. The weighted-average rates were as follows:


	Interest accretion rate				Current discount rate
	June 30, 2025		December 31, 2024		June 30, 2025		December 31, 2024
Retirement and Income Solutions:
Pension risk transfer	4.66	%	4.61	%	5.38	%	5.55	%
Individual fixed income annuities	4.22	%	4.22	%	5.28	%	5.50	%
Principal Asset Management – International Pension (1):
Latin America:
Individual fixed income annuities	4.20	%	4.21	%	3.01	%	3.04	%
Benefits and Protection:
Specialty Benefits:
Individual disability	3.86	%	3.89	%	5.51	%	5.64	%
Life Insurance:
Universal life	4.74	%	4.75	%	See note (2)		See note (2)
Term life	4.81	%	4.82	%	4.99	%	5.35	%
Corporate:
Long-term care insurance	6.16	%	6.16	%	5.41	%	5.58	%

(1)	The interest accretion rate and current discount rate are Chilean real rates, excluding inflation, in the local currency.

(2)	The additional liability for certain benefit features for Life Insurance – Universal life is measured using the discount rate at contract inception. Therefore, the current discount rate is not applicable for this product.