Jackson Financial Inc. · NYSE:JXN
Jackson Financial — Q3 2022 Earnings Presentation
30 slides from Jackson Financial's earnings presentation, Nov 9, 2022
Slide 1: Third Quarter 2022 Financial Results
November 10, 2022 Jackson Financial Inc. Third Quarter 2022 Financial Results
Slide 2: Forward-Looking Statements and Non-GAAP Measures
Forward - Looking Statements and Non - GAAP Measures This document may contain certain statements that constitute “forward - looking statements.” Forward - looking statements can genera lly be identified by their use of terms such as “anticipate,” “estimate,” “believe,” “expect,” “could,” “forecast,
Slide 3: Third Quarter 2022 Highlights
Third Quarter 2022 Highlights 1) See the Appendix for the non - GAAP financial measures, definitions and reconciliations to most comparable GAAP measure. 2) Se e slide #6 for details of notable items. 3) Excludes net flows attributable to business ceded to Athene. 3 Resilient Earnings Results • Net
Slide 4: 2022 Key Financial Targets
2022 Key Financial Targets 4 500 - 525% adjusted Risk Based Capital (RBC) ratio 1 under normal market conditions $250 million minimum cash and highly liquid securities at the holding company 20 - 25% total financial leverage 2 Above the targeted range for normal market conditions Holding company cas
Slide 5: Adjusted Operating Earnings and Adjusted Book Value
8,694 8,937 9,827 11,608 12,376 3Q21 4Q21 1Q22 2Q22 3Q22 487 707 354 225 373 3Q21 4Q21 1Q22 2Q22 3Q22 5 Adjusted Operating Earnings 1 ($ millions) Adjusted Book Value 1 ($ millions) Adjusted Operating Earnings • Adjusted Operating Earnings of $373 million were down from 3Q21, primarily due to lower
Slide 6: Notable Items
Notable Items 6 3Q21 3Q22 ($ millions, except per share amounts) Pretax After - tax 1 EPS - Diluted Pretax After - tax 1 EPS - Diluted Income Attributable to Jackson Financial Inc. 190 206 2.18 2,038 1,479 16.83 Non - Operating Loss / (Income) 381 281 2.98 (1,634) (1,106) (12.59) Adjusted Operating
Slide 7: Non-Operating Items
Non - Operating Items 7 • YTD net hedge gain 1 of $3,551 million • Accounting mismatch on equity market impact as equity derivatives are marked - to - market while non - economic reserves are only partially fair valued • Mismatch from interest rate movements: ― SOP - 03 - 1 not sensitive to interest
Slide 8: Segment Results – Retail Annuities
4.8 5.0 4.8 4.1 3.6 3Q21 4Q21 1Q22 2Q22 3Q22 Segment Results – Retail Annuities • Variable annuity sales down 39% in 3Q22 compared to 3Q21, primarily due to the decline in equity markets and shifting consumer preferences in a rising interest rate environment • RILA sales of $562 million in 3Q22, up
Slide 9: Segment Results – Retail Annuities
1,235 3Q21 3Q22 0 246 195 3Q21 3Q22 527 364 3Q21 3Q22 Segment Results – Retail Annuities • Pretax adjusted operating earnings decreased year over year as a result of lower fee income due to reduced AUM and lower limi ted partnership income relative to the prior year period, partially offset by lower
Slide 10: Segment Results – Institutional & Closed Blocks
36% 38% 19% 6% Segment Results – Institutional & Closed Blocks • Pretax adjusted operating earnings 1 of $20 million in 3Q22 down slightly from $21 million in the year - ago quarter • Institutional sales of $314 million during 3Q22 and $1.5 billion during the first nine months of 2022 10 • Pretax ad
Slide 11: Capital Management
Capital Management 11 • Expect to be at or above the midpoint of the 2022 targeted capital return range of $425 - $525 million at year end, with $396 mill ion returned in the first nine months ‒ Returned $88 million to shareholders in 3Q through $39 million of share repurchases and $49 million in di
Slide 12: Cumulative Capital Return to Shareholders
Oct 2021 Nov 2021 Dec 2021 Jan 2022 Feb 2022 Mar 2022 Apr 2022 May 2022 Jun 2022 Jul 2022 Aug 2022 Sep 2022 Cumulative Capital Return to Shareholders 12 JXN updates capital return target to $425 - $525m for calendar year 2022 JXN announces increased share repurchase authorization by $300m and increa
Slide 13: Summary
― Resilient 3Q22 results amid volatile financial market conditions ― Maintained strong balance sheet and robust levels of liquidity ― Consistent capital return: Expect to be at or above the midpoint of the targeted capital return range of $425 - $525 million ― Well - positioned for continued value c
Slide 14: Appendix
Appendix
Slide 15: DAC / Mean Reversion Overview
DAC / Mean Reversion Overview 15 ▪ For annuity products, the key driver that determines DAC amortization is historical and projected spread or fee income. For fixed annuities, this is typically stable through time, with account balances growing steadily by a modestly varying growth rate. ▪ However,
Slide 16: DAC Acceleration/Deceleration Estimation
▪ DAC (acceleration)/deceleration is determined by separate account returns as detailed in the prior slide, and has both a drop - off of the 3 - year return component and a current period return component ▪ Estimating the impact from the drop - off of the return 3 years ago is simple, as it remains
Slide 17: Drivers of GAAP Guaranteed Benefits and Hedging Results
Drivers of GAAP Guaranteed Benefits and Hedging Results 17 Macroeconomic Factor Impact to Total Guaranteed Benefit Reserves and Hedging Results Reason Equity Markets Up Negative Hedges fully mark to fair value, while not all liabilities are fully fair valued (SOP 03 - 1). This is true under current
Slide 18: LDTI – Impact from Equity and Rate Movements
LDTI – Impact from Equity and Rate Movements 18 Key Increase Equity Decrease Equity Minor Impact Moderate Impact Significant Impact Increases to: Shareholders’ Equity Impact Interest Rates Equity Returns Equity Volatility Credit Spreads Market Risk Benefits Liability for Future Policyholder Benefits
Slide 19: Key Impacts of Rising Interest Rates for VA
Key Impacts of Rising Interest Rates for VA 19 Topic Immediate Impact Go - Forward Impact Notes Hedging Cash Flows Negative Positive • Higher rates drive hedging losses in the current period • Reduced amount of hedging required going forward • Lower cost of hedging instruments going forward Statutor
Slide 20: GAAP – Investment Portfolio
U.S government securities 9% Other government securities 2% Corporate securities 52% Residential mortgage - backed <1% Commercial mortgage - backed 3% Other asset - backed securities 4% Equity securities <1% Mortgage loans 16% Policy loans 2% Derivatives 4% Limited Partnerships 6% Other invested ass
Slide 21: Statutory – Investment Portfolio
U.S government securities 10% Other government securities 2% Corporate securities 53% Residential mortgage - backed <1% Commercial mortgage - backed 3% Other asset - backed securities 5% Equity securities <1% Mortgage loans 16% Policy loans 2% Derivatives 3% Limited Partnerships 4% Other invested as
Slide 22: Statutory – Fixed Maturity Rating Distribution
US Treasuries 14% NAIC 1A - 1D (AAA - AA - ) 16% NAIC 1E - 1G (A) 31% NAIC 2A - 2C (BBB) 38% NAIC 3A - 3C (BB) 2% NAIC 4A - 4C (B) <1% Statutory – Fixed Maturity Rating Distribution September 30, 2022 22 Notes: Excludes Funds Withheld. Statutory statement value based on NAIC ratings. Includes Brooke
Slide 23: Statutory – Corporate Portfolio
Statutory – Corporate Portfolio September 30, 2022 23 1) Excludes Funds Withheld. Based on NAIC expanded ratings and Statement value. Includes Brooke, Squire, Squire II, Jackson, and Jackson New York. Corporate Portfolio Rating Distribution 1 Key Highlights • Market/book ratio of the corporate portf
Slide 24: Statutory – ABS Portfolio
Statutory – ABS Portfolio September 30, 2022 24 1) Excludes Funds Withheld. 2) ABS exposure excludes subprime which is included with the RMBS exposure. 3) Statement value. Includes Brooke, Squire, Squire II, Jackson and Jackson New York. $1.9b ABS Sector Distribution 1, 2, 3 NAIC Rating Distribution
Slide 25: Non-GAAP Financial Measures
Non - GAAP Financial Measures In addition to presenting our results of operations and financial condition in accordance with U.S. GAAP, we use and report, sel ected non - GAAP financial measures. Management believes that the use of these non - GAAP financial measures, together with relevant U.S. GAA
Slide 26: Non-GAAP Financial Measures Adjusted Operating Earnings (Continued)
Non - GAAP Financial Measures Adjusted Operating Earnings (Continued) Adjusted Operating Earnings equals our net income adjusted to eliminate the impact of the items listed on the previous slide plu s the following items: 2) Net Realized Investment Gains and Losses including change in fair value of
Slide 27: Adjusted Operating Earnings Reconciliation
Adjusted Operating Earnings Reconciliation 27 $ millions, except effective tax rate For the Three Months Ended For the Nine Months Ended 9/30/21 12/31/21 03/31/22 6/30/22 9/30/22 9/30/21 9/30/22 Adjusted Operating Earnings Net income (loss) attributable to Jackson Financial Inc. 206 585 2,025 2,903
Slide 28: Select GAAP to Non-GAAP Reconciliation
Select GAAP to Non - GAAP Reconciliation 28 $ millions, except per share and shares outstanding data For the Three Months Ended For the Nine Months Ended 9/30/21 12/31/21 3/31/22 6/30/22 9/30/22 9/30/21 9/30/22 Net Income (Loss) 268 661 2,056 2,934 1,468 2,784 6,458 Income attributable to non - cont
Slide 29: Glossary
Glossary Assets Under Management (AUM) – Investment assets that are managed by one of our subsidiaries and includes: ( i ) the assets in our investment portfolio managed by PPM, which excludes assets held in funds withheld accounts for reinsurance transactions, (ii) third - party assets managed by P
Slide 30: Glossary
Glossary Registered Index - Linked Annuity (RILA) – Jackson Market Link Pro SM and Jackson Market Link Pro Advisory SM , offer investors exposure to market returns through market index - linked investment options, subject to a cap, and offers a variety of guarantees designed to modify or limit losse