Press release·11/07/2024 01:52:31

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 mixed financial results for the three and nine months ended September 30, 2024.

Consolidated Results

For the three months ended September 30, 2024, JFI’s pretax income decreased by $4,081 million to a loss of $579 million, compared to a profit of $3,502 million in the prior year period. This was primarily due to:

• $3,548 million in unfavorable movements in market risk benefits, driven by unfavorable interest rate changes.
• $506 million decrease in net gains on derivatives and investments.
• $116 million increase in operating expenses, mainly from higher incentive compensation and commissions.

These were partially offset by an $82 million increase in fee income from higher separate account values.

For the nine months ended September 30, 2024, pretax income decreased by $2,271 million to $642 million, compared to $2,913 million in the prior year period. The main drivers were:

• $3,058 million in unfavorable movements in market risk benefits.
• $243 million increase in operating expenses.

These were partially offset by a $490 million increase in net gains on derivatives and investments, a $287 million increase in fee income, and a $98 million increase in net investment income.

Segment Performance

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

Retail Annuities

• Pretax adjusted operating earnings increased $104 million to $458 million for the three months ended September 30, 2024, driven by higher fee income and investment spread.
• For the nine months ended September 30, 2024, pretax adjusted operating earnings increased $304 million to $1,342 million, also due to higher fee income and investment spread.
• Retail annuities account value increased $38.2 billion over the prior year period, reflecting positive variable annuity separate account returns and net inflows in RILA and fixed annuities.

Institutional Products

• Pretax adjusted operating earnings decreased $4 million to $17 million for the three months ended September 30, 2024, due to lower investment income.
• For the nine months ended September 30, 2024, pretax adjusted operating earnings increased $30 million to $77 million, driven by higher investment income.
• Institutional product account value decreased from $8,712 million to $7,929 million, due to continued maturities of existing contracts.

Closed Life and Annuity Blocks

• Pretax adjusted operating earnings increased $1 million to $7 million for the three months ended September 30, 2024, primarily from lower policyholder benefits.
• For the nine months ended September 30, 2024, pretax adjusted operating earnings increased $68 million to $61 million, also due to lower policyholder benefits and interest credited.

Corporate and Other

• Pretax adjusted operating earnings decreased $45 million to a loss of $71 million for the three months ended September 30, 2024, driven by higher expenses and lower investment income.
• For the nine months ended September 30, 2024, pretax adjusted operating earnings decreased $91 million to a loss of $207 million, also from higher expenses and lower investment and other income.

Investments and Liquidity

JFI’s investment portfolio primarily consists of fixed-income securities, loans, and other structured products. The company’s investment strategy focuses on maintaining a diversified, largely investment-grade fixed income portfolio to support its insurance obligations.

As of September 30, 2024:

• $42.3 billion in available-for-sale debt securities, with net unrealized losses of $3.2 billion.
• $10.0 billion in mortgage loans, net of a $148 million allowance for credit losses.
• $63.0 billion in total investments.

JFI experienced positive operating cash flows of $4.3 billion for the nine months ended September 30, 2024, an increase of $592 million over the prior year period. Investing cash flows were negative $4.3 billion, as the company increased purchases of debt securities. Financing cash flows were positive $423 million, driven by higher deposits and repurchase agreement proceeds.

The company’s insurance subsidiaries maintain statutory surplus well above regulatory requirements. JFI, as the holding company, expects to have sufficient liquidity to fund two years of fixed expenses from cash, short-term investments, and access to credit facilities.

Outlook and Key Trends

JFI believes it is well-positioned to benefit from several macroeconomic and industry trends:

Macroeconomic Conditions

• Volatility in interest rates, equity markets, and credit conditions can impact JFI’s financial performance through changes in investment income, hedging costs, and liability valuations.
• The company’s exposure to these market movements is partially mitigated by its dynamic hedging program, but some volatility in GAAP earnings is expected to continue.

Demographic Trends

• The aging U.S. population transitioning into retirement is expected to drive increased demand for JFI’s annuity and retirement planning products.

Regulatory Environment

• Recent legislation like the SECURE Act has expanded access to annuities in retirement plans, which could benefit JFI.
• However, new regulations like the Department of Labor’s Fiduciary Advice Rule could increase compliance costs and impact annuity sales through certain distribution channels.

Conclusion

Overall, JFI reported mixed financial results for the first nine months of 2024. While the company experienced significant volatility in market-related earnings, its core Retail Annuities segment continued to deliver strong operating performance driven by higher fee income and investment spreads. The company’s liquidity and capital position remain strong, supporting its ability to navigate the evolving macroeconomic and regulatory landscape. Looking ahead, JFI believes it is well-positioned to capitalize on favorable demographic trends in the U.S. retirement market.