Jackson Financial Inc.

Jackson Financial Inc. (NYSE: JXN) provides retirement annuities through its insurance subsidiaries. Variable annuities generate fees tied to customer assets and related services. Fixed and index-linked products also generate income from the difference between investment returns and amounts credited to customers. PPM America manages investments for Jackson and third-party clients.

Sales count customer deposits into annuity contracts. They are different from GAAP revenue, which includes fees, premiums, investment income and market-related gains or losses.

The latest results

The GAAP earnings increase included more favorable hedging results and a $337 million gain on reinsured business, compared with a $176 million loss. Jackson says the reinsured-business movements do not affect statutory capital or free cash flow.

Adjusted operating earnings remove selected guarantee and hedging effects, transition-related acquisition-cost amortization, investment and funds-withheld items, and other adjustments, with separate taxes and preferred dividends. The measure retains costs such as corporate interest. Retail Annuities supplied $638 million of pretax adjusted earnings, while the other segments and corporate expenses reduced the total.

Retail annuity sales reached $6.527 billion, versus $5.362 billion. Registered index-linked annuity sales were $2.967 billion. Retail net flows after reinsurance remained negative at $1.849 billion, improving from a $2.538 billion outflow as newer products partly offset withdrawals from variable annuities.

What the capital figures mean

Free capital generation adjusts Jackson National Life's statutory capital generation for changes in required capital using a 425% risk-based capital calibration. That is the company's calibration, distinct from the legal regulatory minimum. The insurer's estimated September RBC ratio was 524%, compared with 538% in June.

Our comparison finds that the requirement adjustment rose to $210 million from $120 million a year earlier, while capital generation before it fell to $491 million from $579 million. Against Q2, the adjustment eased from $352 million, consistent with the moderation August anticipated.

February, August and November all targeted at least $1.2 billion of annual free capital generation and $900 million–$1.1 billion of common shareholder returns. The free-capital target assumes a 5% equity-market total return and the year-end 2025 forward interest-rate curve.

Parent funding and shareholder returns

Quarterly parent-only GAAP operating cash was $6 million. Adding $280 million of subsidiary capital distributions and deducting $11 million of preferred dividends gives $275 million of non-GAAP free cash flow. Consolidated operating cash covers the insurance group and is a different measure.

Nearly $1.4 billion of parent cash and highly liquid securities includes $650 million shown as debt prefunding. The internal minimum liquidity target is $325 million. June's $750 million senior-note issue added funding ahead of $400 million of parent notes and $250 million of insurer surplus notes due in 2027.

Program common repurchases were $649 million through September. February's $500 million equity investment from TPG reissued 4.7 million treasury shares, helping fund Hickory Re and growth in fixed and indexed annuities. That older issuance offsets much of the share-count reduction from repurchases. September common shares were 66.45 million, versus 66.83 million at year-end.

The October 30 board decision added $1 billion of discretionary buyback authority. The report on Jackson's expanded buyback capacity explains the latest capital comparison.