One example of trends we’re seeing comes to Life in The Global Financial Inclusion Index, a global study sponsored by Principal, assessing the state of financial inclusion worldwide. We released our second year finding earlier this month, identifying a continued and persistent need for financial service companies, employers and governments to continue to work together to help more people feel prepared to fully participate in building long-term financial security. Before turning it over to Deanna, I’d like to highlight some recognition we recently received. Forbes recently recognized Principal on its list of Best Employers for Women in the US and one of America’s most cybersecured companies. We also achieved the top score on the 2023 Disability Equality Index from Disability:IN.
And in Chile, most innovative companies, a local innovation consulting group recently awarded Cuprum and Principal as the most innovative company in both the AFP and asset management categories. Recognition like this helps us benchmark progress, attract and retain talent and stand out in the marketplace. Deanna?
Deanna Strable: Thanks, Dan. Good morning to everyone on the call. This morning, I will share the key contributors to financial performance for the quarter. Details of our current financial and capital position and an update on our commercial mortgage loan portfolio. We reported net income of $1.2 billion in the third quarter, reflecting more than $700 million of income from exited businesses. This benefit was primarily due to a change in the fair value of the funds withheld embedded derivative, which doesn’t impact our capital or free cash flow and can be extremely volatile quarter-to-quarter. Excluding the income from exited businesses, net income was $544 million with minimal credit losses of $6 million. We also had minimal impacts from credit drift in the third quarter.
Year-to-date, total credit drift and losses were a manageable $41 million, which is better than our expectation at the beginning of the year. Excluding significant variances, third quarter non-GAAP operating earnings were $446 million or $1.83 per diluted share. EPS increased 14% over the third quarter of 2022, demonstrating the strength and resiliency of our diversified business model. On a year-to-date basis, EPS excluding significant variances, has increased 5% over 2022 compared to our 3% to 6% guided range. As detailed on Slide 11, significant variances impacted our third quarter non-GAAP operating earnings by a net positive $40 million pre-tax, a net negative $27 million after-tax and $0.11 per diluted share. The significant variances included impacts from the actuarial assumption review, lower-than-expected variable investment income in RIS, Life and Corporate as well as impacts in Principal International, including lower-than-expected encaje performance and better-than-expected impacts of inflation.
The assumption review had a net positive $63 million impact on pre-tax operating earnings. This was primarily driven by experience adjustments in RIS and Specialty Benefits, including updates to PRT mortality assumptions, group and individual disability morbidity assumptions as well as model refinements in Life. The after-tax impact was a negative $6 million as the pre-tax benefit was more than offset by a one-time tax impact resulting from a PRT tax reserve methodology change. RIS and Life’s third quarter pre-tax operating earnings, excluding significant variances, reflect the run rate impacts from the assumption review. There are no material run rate impacts in Specialty Benefits. In total, variable investment income was positive for the quarter and improved from the first half of the year, but it was lower than our run rate expectation.
While VII benefited from improvement in real estate sales and alternative investment returns, prepayment fees remain immaterial. Looking at macroeconomics in the third quarter, the S&P 500 daily average increased 6% from the second quarter and 12% from the third quarter of 2022, benefiting third quarter results in our fee-based businesses. While the daily average increased markets retreated in the second half of the quarter, the S&P 500 closed nearly 4% lower than the second quarter and fixed income returns were negative as well. This impacts revenue, earnings and margins for our fee-based businesses. Foreign exchange rates were a slight headwind on a quarterly basis relative to the second quarter, a slight tailwind compared to the third quarter of 2022 and immaterial on a trailing 12-month basis.
In RIS, benefits from strong expense management as well as favorable equity market performance and higher interest rates were partially offset by fee compression. Excluding significant variances, net revenue increased 4% compared to a year ago and margin was strong at 39%. PGI benefited from real estate performance fees in the quarter, driving a 6% increase in revenue over the third quarter of 2022 and improved the margin to 39%. Specialty Benefits pre-tax operating earnings, excluding significant variances, increased 32% over the year ago quarter. This was fueled by growth in the business, strong long-term disability underwriting experience and lower group life mortality. The third quarter adjusted margin was strong at over 17%, which was more than 300 basis points higher than the third quarter of 2022.
