Future Policy Benefits and Claims

6 Months Ended

Jun. 30, 2026

8. 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, 2026			December 31, 2025

		(in millions)
Liability for future policy benefits by segment (1):
Retirement and Income Solutions:
Pension risk transfer		$	26,999.0		$	27,349.3
Individual fixed income annuities			4,180.4			4,367.4
Total Retirement and Income Solutions			31,179.4			31,716.7
Principal Asset Management – International Pension:
Latin America:
Individual fixed income annuities			4,382.4			4,600.5
Benefits and Protection:
Specialty Benefits:
Individual disability			2,039.4			1,994.2
Life Insurance:
Term life			1,555.7			1,515.7
Total Benefits and Protection			3,595.1			3,509.9
Corporate:
Long-term care insurance			163.7			166.7
Total liability for future policy benefits			39,320.6			39,993.8

Additional liability for certain benefit features by segment (2):
Benefits and Protection – Life Insurance:
Universal life			6,876.4			6,604.8
Total additional liability for certain benefit features			6,876.4			6,604.8

Reconciling items:
Participating contracts			2,723.9			2,784.3
Short-duration contracts			1,180.4			1,205.2
Cost of reinsurance liability			953.9			971.4
Reinsurance recoverable liability			27.8			23.5
Other (3)			165.1			166.7
Future policy benefits and claims per consolidated statements of financial position		$	51,248.1		$	51,749.7

(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,
		2026		2025

		(in millions)
Balance at beginning of period		$	1,342.4	$	1,379.9
Less: reinsurance recoverable			62.6		61.2
Net balance at beginning of period			1,279.8		1,318.7
Incurred:
Current year			932.0		926.1
Prior years			(83.3)		(71.1)
Total incurred			848.7		855.0
Payments:
Current year			625.4		615.5
Prior years			241.1		254.1
Total payments			866.5		869.6
Net balance at end of period			1,262.0		1,304.1
Plus: reinsurance recoverable			61.7		59.7
Balance at end of period		$	1,323.7	$	1,363.8

Incurred liability adjustments relating to prior years, which affected current operations during 2026 and 2025, 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,

 

2026

 

2025

 

2026

 

2025

(in millions)

Retirement and Income Solutions:

Pension risk transfer (2)

485.0

444.0

653.4

1,250.1

Individual fixed income annuities

6.5

5.9

12.0

14.1

Total Retirement and Income Solutions

491.5

449.9

665.4

1,264.2

Principal Asset Management – International Pension:

Latin America:

Individual fixed income annuities

—

4.1

—

5.9

Benefits and Protection:

Specialty Benefits:

Individual disability

165.4

161.8

325.9

320.4

Life Insurance:

Universal life

179.2

177.2

360.6

354.2

Term life

178.1

173.7

352.4

344.0

Total Benefits and Protection

522.7

512.7

1,038.9

1,018.6

Corporate:

Long-term care insurance

1.1

1.2

2.8

2.9

Total per consolidated statements of operations

1,015.3

967.9

1,707.1

2,291.6

(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.

(2)	Since premium received from pension risk transfer products is generally in the form of single payments, the level of premiums can fluctuate depending on the number of large-scale annuity sales in a particular quarter.

Interest accretion (1)

For the three months ended

For the six months ended

June 30,

2026

2025

2026

2025

(in millions)

Retirement and Income Solutions:

Pension risk transfer

324.6

308.1

650.6

608.6

Individual fixed income annuities

47.0

49.6

94.6

99.9

Total Retirement and Income Solutions

371.6

357.7

745.2

708.5

Principal Asset Management – International Pension:

Latin America:

Individual fixed income annuities (2)

141.9

78.4

196.3

167.2

Benefits and Protection:

Specialty Benefits:

Individual disability

27.1

26.2

54.0

52.0

Life Insurance:

Universal life

75.9

69.8

150.3

138.3

Term life

18.4

16.1

36.4

31.6

Total Benefits and Protection

121.4

112.1

240.7

221.9

Corporate:

Long-term care insurance

2.3

2.3

4.7

4.7

Total per consolidated statements of operations

637.2

550.5

1,186.9

1,102.3

(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, 2026

December 31, 2025

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

27,349.3

4,367.4

24,958.1

4,504.6

Effect of changes in discount rate assumptions at beginning of period

1,294.3

297.6

1,938.8

420.4

Balance at beginning of period at original discount rate

28,643.6

4,665.0

26,896.9

4,925.0

Effect of actual variances from expected experience

(1.0)

1.9

(17.9)

2.3

Adjusted beginning of period balance at original discount rate

28,642.6

4,666.9

26,879.0

4,927.3

Interest accrual

650.6

94.6

1,234.2

197.2

Benefit payments

(1,282.4)

(242.2)

(2,442.8)

(490.0)

Issuances

654.2

11.8

2,973.2

30.5

Balance at end of period at original discount rate

28,665.0

4,531.1

28,643.6

4,665.0

Effect of changes in discount rate assumptions at end of period

(1,666.0)

(350.7)

(1,294.3)

(297.6)

Future policy benefits

26,999.0

4,180.4

27,349.3

4,367.4

Reinsurance impact

—

(4,118.1)

—

(4,310.3)

Future policy benefits after reinsurance

26,999.0

62.3

27,349.3

57.1

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

7.9

7.0

7.9

7.1

(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, 2026			December 31, 2025

		($ in millions)
Present value of expected future policy benefit payments
Balance at beginning of period		$	4,600.5		$	4,126.9
Effect of changes in discount rate assumptions at beginning of period			(493.5)			(368.4)
Balance at beginning of period at original discount rate			4,107.0			3,758.5
Effect of actual variances from expected experience			0.4			(0.4)
Adjusted beginning of period balance at original discount rate			4,107.4			3,758.1
Interest accrual (1)			196.3			293.1
Benefit payments			(181.9)			(335.6)
Issuances			—			6.4
Foreign currency translation adjustment			(91.3)			385.0
Balance at end of period at original discount rate			4,030.5			4,107.0
Effect of changes in discount rate assumptions at end of period			351.9			493.5
Future policy benefits		$	4,382.4		$	4,600.5

Weighted-average duration for future policy benefits (years) (2)			9.3			9.6

(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, 2026						December 31, 2025
		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		$	2,740.8		$	4,392.2		$	2,680.6		$	4,107.2
Effect of changes in discount rate assumptions at beginning of period			349.8			198.4			436.4			290.1
Balance at beginning of period at original discount rate			3,090.6			4,590.6			3,117.0			4,397.3
Effect of changes in cash flow assumptions			—			—			(22.5)			163.2
Effect of actual variances from expected experience			50.8			(16.4)			114.8			11.7
Adjusted beginning of period balance at original discount rate			3,141.4			4,574.2			3,209.3			4,572.2
Interest accrual			54.7			107.3			108.8			208.7
Net premiums collected			(148.7)			(213.2)			(298.0)			(418.8)
Issuances			31.7			109.6			70.5			228.5
Balance at end of period at original discount rate			3,079.1			4,577.9			3,090.6			4,590.6
Effect of changes in discount rate assumptions at end of period			(384.7)			(260.1)			(349.8)			(198.4)
Balance at end of period		$	2,694.4		$	4,317.8		$	2,740.8		$	4,392.2

Present value of expected future policy benefit payments
Balance at beginning of period		$	4,735.0		$	5,907.9		$	4,509.6		$	5,355.2
Effect of changes in discount rate assumptions at beginning of period			1,191.3			215.7			1,302.8			366.0
Balance at beginning of period at original discount rate			5,926.3			6,123.6			5,812.4			5,721.2
Effect of changes in cash flow assumptions			—			—			(42.6)			240.4
Effect of actual variances from expected experience			48.1			(26.8)			107.9			4.1
Adjusted beginning of period balance at original discount rate			5,974.4			6,096.8			5,877.7			5,965.7
Interest accrual			108.7			143.7			213.8			275.3
Benefit payments			(122.9)			(177.2)			(234.1)			(359.7)
Issuances			30.6			116.1			68.9			242.3
Balance at end of period at original discount rate			5,990.8			6,179.4			5,926.3			6,123.6
Effect of changes in discount rate assumptions at end of period			(1,257.0)			(305.9)			(1,191.3)			(215.7)
Balance at end of period		$	4,733.8		$	5,873.5		$	4,735.0		$	5,907.9

Future policy benefits (1)		$	2,039.4		$	1,555.7		$	1,994.2		$	1,515.7
Reinsurance impact			(432.1)			9.6			(430.0)			9.8
Future policy benefits after reinsurance		$	1,607.3		$	1,565.3		$	1,564.2		$	1,525.5

Weighted-average duration for future policy benefits (years) (2)			16.9			7.1			17.2			7.4

(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 2025, resulting in a $20.1 million decrease in the LFPB and a $16.2 million increase to income before taxes, net of reinsurance, for Individual disability. This was primarily due to favorable updates to morbidity assumptions. The updates also resulted in a $77.2 million increase in the LFPB and a $63.0 million decrease to income before taxes, net of reinsurance, for Term life. This was primarily due to unfavorable updates to lapse and mortality 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, 2026 or December 31, 2025.

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, 2026			December 31, 2025

		($ in millions)
Balance at beginning of period		$	6,604.8		$	6,037.2
Effect of changes in cash flow assumptions			—			6.8
Effect of actual variances from expected experience			35.2			18.5
Interest accrual			150.3			282.4
Net assessments collected			214.2			430.6
Benefit payments			(128.1)			(170.7)
Balance at end of period			6,876.4			6,604.8
Reinsurance impact			(6,865.4)			(6,593.6)
Balance at end of period after reinsurance		$	11.0		$	11.2

Weighted-average duration for additional liability (years) (1)			20.8			21.6

(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.

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, 2026			December 31, 2025

		($ in millions)
Present value of expected net premiums	* *			* *
Balance at beginning of period		$	32.4		$	30.8
Effect of changes in discount rate assumptions at beginning of period			(2.0)			(1.3)
Balance at beginning of period at original discount rate			30.4			29.5
Effect of changes in cash flow assumptions			—			3.3
Effect of actual variances from expected experience			(0.5)			0.3
Adjusted beginning of period balance at original discount rate			29.9			33.1
Interest accrual			0.8			1.8
Net premiums collected			(2.5)			(4.5)
Balance at end of period at original discount rate			28.2			30.4
Effect of changes in discount rate assumptions at end of period			1.4			2.0
Balance at end of period		$	29.6		$	32.4

Present value of expected future policy benefit payments
Balance at beginning of period		$	199.1		$	195.6
Effect of changes in discount rate assumptions at beginning of period			(12.7)			(8.8)
Balance at beginning of period at original discount rate			186.4			186.8
Effect of changes in cash flow assumptions			—			1.3
Effect of actual variances from expected experience			0.3			3.4
Adjusted beginning of period balance at original discount rate			186.7			191.5
Interest accrual			5.5			11.2
Benefit payments			(8.1)			(16.3)
Balance at end of period at original discount rate			184.1			186.4
Effect of changes in discount rate assumptions at end of period			9.2			12.7
Balance at end of period		$	193.3		$	199.1

Future policy benefits (1)		$	163.7		$	166.7
Reinsurance impact			(163.7)			(166.7)
Future policy benefits after reinsurance		$	—		$	—

Weighted-average duration for future policy benefits (years) (2)			9.5			9.7

(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.

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, 2026			December 31, 2025

		(in millions)
Retirement and Income Solutions:
Pension risk transfer
Expected undiscounted future benefit payments		$	42,577.0		$	42,601.7

Individual fixed income annuities
Expected undiscounted future benefit payments		$	6,018.6		$	6,221.3

Principal Asset Management – International Pension:
Latin America:
Individual fixed income annuities
Expected undiscounted future benefit payments		$	5,800.8		$	5,945.8

Benefits and Protection – Specialty Benefits:
Individual disability
Expected discounted future gross premiums		$	5,602.3		$	5,683.8
Expected undiscounted future gross premiums		$	8,759.6		$	8,763.7
Expected undiscounted future benefit payments		$	10,032.2		$	9,951.7

Benefits and Protection – Life Insurance:
Term life
Expected discounted future gross premiums		$	6,873.4		$	6,929.2
Expected undiscounted future gross premiums		$	12,060.4		$	11,960.4
Expected undiscounted future benefit payments		$	9,710.9		$	9,653.9

Corporate:
Long-term care insurance
Expected discounted future gross premiums		$	33.8		$	37.4
Expected undiscounted future gross premiums		$	48.3		$	52.7
Expected undiscounted future benefit payments		$	355.9		$	363.1

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, 2026		December 31, 2025		June 30, 2026		December 31, 2025
Retirement and Income Solutions:
Pension risk transfer		4.72	%	4.70	%	5.49	%	5.28	%
Individual fixed income annuities		4.22	%	4.22	%	5.41	%	5.16	%
Principal Asset Management – International Pension (1):
Latin America:
Individual fixed income annuities		4.19	%	4.19	%	3.10	%	2.78	%
Benefits and Protection:
Specialty Benefits:
Individual disability		3.82	%	3.84	%	5.62	%	5.43	%
Life Insurance:
Universal life		4.74	%	4.74	%	See note	(2)	See note	(2)
Term life		4.67	%	4.81	%	5.21	%	4.91	%
Corporate:
Long-term care insurance		6.16	%	6.16	%	5.56	%	5.36	%

(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.