Executive Summary / Key Takeaways

• Jackson Financial has successfully transformed its capital structure and hedging strategy via the Brooke Re captive reinsurer, significantly stabilizing statutory capital generation and enabling more predictable financial results.
• The company is executing a diversified growth strategy in retail annuities, with strong sales momentum across Variable Annuities (VA), Registered Index-Linked Annuities (RILA), and Fixed/Fixed Index Annuities (FIA), supported by digital innovation and expanding distribution.
• Robust capital generation and a strong balance sheet are underpinning a commitment to significant shareholder returns, with a 2025 target of $700-$800 million and free capital generation expected to exceed $1 billion under normal market conditions.
• Jackson's investment portfolio remains conservatively positioned, primarily in investment-grade fixed income, managed by its subsidiary PPM, providing a stable earnings base for spread products.
• While facing competition from larger, more technologically advanced peers and indirect alternatives, Jackson leverages its service excellence, distribution network, and targeted digital tools as key differentiators in the U.S. retirement market.

Jackson Financial Inc. ($JXN) operates at the heart of the U.S. retirement market, a landscape shaped by an aging population seeking financial security and income solutions. As a financial services company specializing in annuities and life insurance, Jackson's core mission is to help Americans navigate the complexities of funding their later years. The company's strategy centers on offering a diverse suite of retirement products, maintaining disciplined risk management, leveraging an efficient operating platform, and capitalizing on its extensive distribution network. This approach positions Jackson to capture demand driven by the ongoing shift of retirement responsibility from institutions to individuals.

Jackson's history, marked by its spin-off into an independent public company in September 2021 and a strategic pivot away from new life insurance sales towards opportunistic block acquisitions since 2012, informs its current focus. The company has actively diversified its product offerings beyond traditional variable annuities, notably expanding its presence in the Registered Index-Linked Annuity (RILA) and Fixed/Fixed Index Annuity (FIA) markets. This evolution reflects a dynamic response to changing market conditions and consumer preferences.

A pivotal development in Jackson's strategic evolution is the establishment of Brooke Life Reinsurance Company (Brooke Re), a Michigan-based captive reinsurer, effective January 1, 2024. This transaction involved ceding liabilities associated with certain variable annuity guaranteed benefit riders (MRBs) for both in-force and future business to Brooke Re via a 100% coinsurance with funds withheld arrangement. While Jackson retains administrative and asset management responsibilities for the underlying funds withheld assets, the core economic risk of these riders is transferred. The primary objective of the Brooke Re structure is to significantly moderate the impact of the cash surrender value floor on Jackson's statutory capital, enabling more efficient economic hedging and leading to more stable capital generation and predictable financial results. Brooke Re operates under a modified U.S. GAAP approach for regulatory reporting, incorporating fixed long-term volatility assumptions and adjustments to discount rates, guarantee fees, and administrative expenses to promote balance sheet stability.

Jackson's operational capabilities are bolstered by its investment management subsidiary, PPM America, Inc. (PPM), which manages the majority of the company's general account investment portfolio and also serves third-party clients. PPM's expertise spans public and private fixed income, CLO management, commercial mortgage debt, and private equity. This internal asset management capability supports Jackson's investment strategy, which prioritizes a diversified, largely investment-grade fixed income portfolio designed for capital efficiency, competitive product pricing, and robust liquidity.

Technological innovation plays a crucial role in Jackson's strategy, particularly in enhancing its distribution and service capabilities. The company has invested in digital connectivity, including data exchanges and integrations within the annuity industry ecosystem, aiming to simplify interactions for financial professionals and clients. A key operational differentiator is the RILA digital ecosystem, a platform enabling advisors to model how RILA products fit into client portfolios based on customized market scenarios. This platform has seen substantial growth in activity, with visits up nearly 75% year-over-year in Q2 2024, contributing to sales momentum and advisor relationships; approximately one-third of Q2 2024 RILA sales originated from producers using this ecosystem. Jackson is also a leader in industry-wide digital initiatives, being one of the first insurers to implement paperless annuity replacement in collaboration with the Insured Retirement Institute (IRI) and the Depository Trust and Clearing Corporation (DTCC), streamlining processing. Product innovation is also linked to technology, such as the Principal Guard Guaranteed Minimum Accumulation Benefit (GMAB) feature for the Elite Access investment-only VA, which offers principal protection and investment flexibility supported by digital analysis tools. The recent launch of JMLPIII/JMLPAIII RILA products includes a Nasdaq 100 Index option and a full principal protection option, demonstrating ongoing product enhancement. These technological advancements aim to improve efficiency, enhance the value proposition for advisors and clients, and contribute to sales growth and competitive positioning.

In the competitive U.S. annuities and life insurance market, Jackson faces established rivals such as MetLife (MET), Principal Financial Group (PFG), Prudential Financial (PRU), and Lincoln National Corporation (LNC), as well as indirect competitors like robo-advisors and fintech firms. While larger peers like MET and PFG may possess greater scale and more extensive technological infrastructure (e.g., MET's potential for faster processing via AI), Jackson differentiates itself through its focused U.S. distribution network and a history of award-winning service excellence. This service focus can translate into higher customer retention rates, potentially supporting better margins in its core retail segments. However, Jackson's more limited technological innovation compared to some rivals and its U.S.-only focus represent vulnerabilities, potentially leading to higher operating costs per unit or limiting its ability to capture market share in global or highly automated segments. The competitive landscape for fixed and fixed index annuities is particularly active, with alternative asset managers also participating, requiring Jackson to maintain pricing discipline while leveraging its distribution strength to attract new advisors.

Jackson's recent financial performance reflects the impact of its strategic initiatives and market conditions. For the three months ended March 31, 2025, the company reported a net loss attributable to common shareholders of $35 million, compared to net income of $784 million in the prior-year period. This change was primarily driven by unfavorable movements in market risk benefits (MRB) gains/losses, largely due to unfavorable interest rate and fund performance movements, partially offset by increased net gains/losses on derivatives and investments. Adjusted operating earnings, which exclude these market-driven items, were $376 million in Q1 2025, up 13% from $334 million in Q1 2024. This growth was primarily fueled by higher earnings on spread products, benefiting from increased net investment income due to RILA and fixed annuity block growth and higher bond yields, as well as higher fee income from variable annuity assets under management (AUM).

The Retail Annuities segment saw pretax adjusted operating earnings increase slightly to $420 million in Q1 2025 from $419 million in Q1 2024. This was driven by higher fee income from increased average separate account values and higher spread income from increased investment income, partially offset by higher expenses and policy benefits. Sales in this segment were strong, exceeding $4 billion in Q1 2025, up over 9% year-over-year. VA sales increased 9% to $2.7 billion, with VA without living benefits up 40%. RILA sales were $1.2 billion, up 3%. Fixed and fixed index annuity sales also saw meaningful growth, though at a more moderated pace than in late 2024. Advisory sales, a key growth channel, increased 28% year-over-year in Q1 2025, with a trailing 12-month run rate exceeding $1 billion.

The Institutional Products segment's pretax adjusted operating earnings decreased to $18 million in Q1 2025 from $31 million in Q1 2024, reflecting lower spread income despite higher sales volumes ($1.6 billion in Q1 2025). The Closed Life and Annuity Blocks segment saw pretax adjusted operating earnings increase to $28 million from $19 million, primarily due to higher net investment income. The Corporate and Other segment's pretax adjusted operating earnings increased significantly to $24 million from $80 million, benefiting from decreased general and administrative expenses and increased other income.

Jackson's capital position remains robust. The estimated Risk-Based Capital (RBC) ratio was 585% as of March 31, 2025, up from 572% at year-end 2024 and well above the company's minimum target of 425%. After-tax statutory capital generation was $441 million in Q1 2025, contributing to total adjusted capital (TAC) of $5.2 billion. Free capital generation exceeded $400 million in Q1 2025. Management expects free capital generation to exceed $1 billion in 2025 under normal market conditions, building on over $1.3 billion generated in 2024. This strong capital base supports significant shareholder returns. Jackson returned $231 million to common shareholders in Q1 2025 ($59 million in dividends, $172 million in buybacks), representing a 44% year-over-year increase on a per diluted share basis.

The company's 2025 capital return target for common shareholders is $700-$800 million, an increase of over 10% from the $631 million returned in 2024. Holding company liquid assets were over $600 million at the end of Q1 2025, comfortably above the $250 million minimum buffer.

Key risks for Jackson include market volatility (equity and interest rates) impacting hedging effectiveness and costs, investment performance, and policyholder behavior (lapses, withdrawals). Regulatory changes, such as the potential impact of the DOL Fiduciary Advice Rule, could affect distribution and compliance costs. The ability of insurance subsidiaries to pay dividends is subject to state regulations and capital levels. While Brooke Re is designed to stabilize capital, extreme market events could still pose challenges.

Conclusion

Jackson Financial has successfully implemented strategic initiatives, most notably the Brooke Re reinsurance transaction, to enhance capital stability and enable a more predictable financial profile. This stability, combined with a diversified growth strategy across its retail annuity products and opportunistic institutional sales, is driving robust capital generation. The company's commitment to returning capital to shareholders is clearly demonstrated by its increasing targets and consistent execution. While facing competitive pressures and market risks inherent in the annuity business, Jackson's focus on service excellence, targeted digital innovation, and disciplined risk management provides a solid foundation. The outlook for exceeding $1 billion in free capital generation in 2025 underpins the increased capital return target, positioning Jackson favorably for investors seeking exposure to a well-capitalized player in the growing retirement market.