Overview of Jackson Financial’s Performance

Jackson Financial Inc. (JFI) is a financial services company that provides annuity and life insurance products primarily in the United States. The company reported strong financial results for the first half of 2024, with net income attributable to common shareholders of $1,048 million, up significantly from a loss of $293 million in the same period last year.

Adjusted Operating Earnings, a non-GAAP measure that excludes market volatility and other one-time items, also increased to $744 million from $554 million in the prior year period. This improvement was driven by higher fee income, investment returns, and favorable claims experience, partially offset by increased operating expenses.

Revenue and Profit Trends

JFI generates revenue predominantly from fee income, investment spreads, and margins on insurance products. Fee income increased 5.4% in the first half of 2024 compared to the prior year, reflecting higher average separate account values. Net investment income also grew 9.9% due to higher yields on the company’s bond portfolio and increased income from limited partnership investments.

On the expense side, death and other policy benefits declined, while operating costs and expenses increased due to higher asset-based commissions and incentive compensation. Overall, the company’s pretax adjusted operating earnings margin improved to 18.1% in the first half of 2024, up from 14.5% in the prior year period.

Segment Performance

JFI manages its business through three main segments: Retail Annuities, Institutional Products, and Closed Life and Annuity Blocks.

The Retail Annuities segment, which accounts for 90% of the company’s policy and contract liabilities, saw pretax adjusted operating earnings increase 29.2% to $884 million. This was driven by higher fee income and investment spreads, partially offset by increased operating expenses. Retail annuity sales, including variable annuities and registered index-linked annuities (RILAs), grew 27.0% year-over-year.

The Institutional Products segment reported a 130.8% increase in pretax adjusted operating earnings to $60 million, primarily due to higher net investment income. Institutional product sales decreased 25.3% compared to the prior year period as the company took a more opportunistic approach to this business.

The Closed Life and Annuity Blocks segment, which contains the company’s legacy insurance products, saw pretax adjusted operating earnings improve to $54 million from a loss of $13 million in the prior year, driven by favorable mortality experience and lower interest credited on contract holder funds.

Strengths and Weaknesses

Key strengths of JFI’s business model include its differentiated product portfolio, well-known brand, and disciplined risk management. The company’s efficient and scalable operating platform and industry-leading distribution network also support its market position. These factors have enabled JFI to grow profitably as the U.S. population transitions into retirement.

However, the company’s financial performance can be adversely affected by market volatility, as it does not directly hedge the movement in its U.S. GAAP market risk benefit liabilities. This results in earnings volatility from period to period. Additionally, changes in interest rates, credit conditions, and consumer behavior can impact JFI’s results.

Outlook and Future Prospects

Looking ahead, JFI believes it is well-positioned to capture increased demand for its products driven by favorable demographic trends, such as the growing number of retirement-age individuals in the U.S. The company’s recent execution of the Brooke Re transaction is also expected to help stabilize its capital generation and produce more predictable financial results going forward.

Regulatory changes, such as the Department of Labor’s Fiduciary Advice Rule, could potentially impact the distribution of annuities and increase compliance costs, though the company believes it has limited exposure given its primarily intermediary-based distribution model.

Overall, JFI’s strong performance in the first half of 2024, combined with its differentiated product offerings, efficient operations, and favorable industry trends, suggest the company is poised for continued growth and profitability. However, the company will need to navigate various economic, industry, and regulatory challenges to sustain its success.