Jackson Financial Inc. · NYSE:JXN
Jackson Financial — Q2 2022 Earnings Presentation
30 slides from Jackson Financial's earnings presentation, Aug 9, 2022
Slide 1: Jackson Financial Inc. Second Quarter 2022 Financial Results
August 10, 2022 Jackson Financial Inc. Second 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: Second Quarter 2022 Highlights
Second 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 $250 million minimum cash and highly liquid securities at the holding company 20 - 25% total financial leverage 2 Slightly below the target range as expected under market stress condition
Slide 5: Adjusted Operating Earnings and Adjusted Book Value
8,633 8,694 8,937 9,827 11,608 2Q21 3Q21 4Q21 1Q22 2Q22 636 487 707 354 225 2Q21 3Q21 4Q21 1Q22 2Q22 5 Adjusted Operating Earnings 1 ($ millions) Adjusted Book Value 1 ($ millions) Adjusted Operating Earnings • Adjusted Operating Earnings of $225 million, down from 2Q21, primarily due to higher leve
Slide 6: Notable Items
Notable Items 6 2Q21 2Q22 ($ millions, except per share amounts) Pretax After - tax 1 EPS - Diluted Pretax After - tax 1 EPS - Diluted (Loss) / Income Attributable to Jackson Financial Inc. (594) (540) (5.72) 3,620 2,903 32.56 Non - Operating Loss / (Income) 1,355 1,176 12.46 (3,377) (2,678) (30.04)
Slide 7: Key Impacts of Rising Interest Rates for VA
Key Impacts of Rising Interest Rates for VA 7 Topic Immediate Go - Forward 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 Statutory (TAC) Negativ
Slide 8: Non-Operating Items
Non - Operating Items 8 • YTD 2022 net hedge gain 1 of $2,777 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 int
Slide 9: Segment Results – Retail Annuities
4.9 4.8 5.0 4.8 4.1 2Q21 3Q21 4Q21 1Q22 2Q22 Segment Results – Retail Annuities • Variable annuity sales down 25% in 2Q22 compared to 2Q21 reflecting lower industry sales and the result of declining equity markets • RILA sales of $490 million in 2Q22, up 146% compared to $199 million in 1Q22 • Annui
Slide 10: Segment Results – Retail Annuities
735 2Q21 2Q22 0 249 206 2Q21 2Q22 683 218 2Q21 2Q22 Segment Results – Retail Annuities • Pretax adjusted operating earnings decreased in 2Q22, reflecting lower fee income due to reduced AUM, lower limited partnersh ip income, as well as higher (accelerated) DAC amortization expense resulting from a
Slide 11: Segment Results – Institutional & Closed Blocks
8.9 8.5 ( 2.2 ) ( 0.1 ) 1.7 0.2 2Q21 Premiums and Deposits Surrenders, Withdrawals, and Benefits Interest Credited Policy Charges and Other 2Q22 36% 38% 20% 6% Segment Results – Institutional & Closed Blocks • Pretax adjusted operating earnings 1 of $19 million in 2Q22 increased from $6 million in t
Slide 12: Capital Management
Capital Management 12 • On track to reach 2022 capital return guidance of $425 - $525 million, with $308 million returned in the first half of 2022 ‒ Returned $116 million to shareholders in 2Q through $66 million of share repurchases and $50 million in dividends ‒ $183 million remaining on share re
Slide 13: Cumulative Capital Return to Shareholders
Oct 2021 Nov 2021 Dec 2021 Jan 2022 Feb 2022 Mar 2022 Apr 2022 May 2022 Jun 2022 Cumulative Capital Return to Shareholders 13 JXN updates capital return target to $425 - $525m for calendar year 2022 JXN announces increased share repurchase authorization by $300m and increased per share dividend 10%
Slide 14: Summary
― Resilient 2Q22 results amid volatile financial market conditions ― Maintained strong balance sheet and robust levels of liquidity ― Consistent capital return: On track to meet the 2022 capital return target of $425 - $525 million ― Well - positioned for continued value creation for shareholders Su
Slide 15: Appendix
Appendix OO oem,
Slide 16: DAC / Mean Reversion Overview
DAC / Mean Reversion Overview 16 ▪ 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 17: 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 18: Drivers of GAAP Guaranteed Benefits and Hedging Results
Drivers of GAAP Guaranteed Benefits and Hedging Results 18 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 19: LDTI – Impact from Equity and Rate Movements
LDTI – Impact from Equity and Rate Movements 19 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 20: GAAP – Investment Portfolio June 30, 2022
U.S government securities 6.8% Other government securities 2.2% Corporate securities 55.3% Residential mortgage - backed 0.5% Commercial mortgage - backed 2.8% Other asset - backed securities 3.9% Equity securities 0.4% Mortgage loans 16.5% Policy loans 2.3% Derivatives 2.7% Limited Partnerships 5.7
Slide 21: Statutory – Investment Portfolio June 30, 2022
U.S government securities 8.4% Other government securities 2.2% Corporate securities 54.5% Residential mortgage - backed 0.5% Commercial mortgage - backed 3.0% Other asset - backed securities 4.4% Equity securities 0.7% Mortgage loans 16.9% Policy loans 2.3% Derivatives 2.3% Limited Partnerships 4.0
Slide 22: Statutory – Fixed Maturity Rating Distribution
US Treasuries 11.5% NAIC 1A - 1D (AAA - AA - ) 15.4% NAIC 1E - 1G (A) 30.3% NAIC 2A - 2C (BBB) 40.7% NAIC 3A - 3C (BB) 1.6% NAIC 4A - 4C (B) 0.5% Statutory – Fixed Maturity Rating Distribution June 30, 2022 22 Notes: Excludes Funds Withheld. Statutory statement value based on NAIC ratings. Includes
Slide 23: Statutory – Corporate Portfolio
AAA 0.9% AA 5.8% A 36.7% BBB 53.8% BB 2.2% B 0.6% CCC and below 0.0% Statutory – Corporate Portfolio June 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 Distribu
Slide 24: Statutory – ABS Portfolio
NAIC 1A - 1D 53% NAIC 1E - 1G 38% NAIC 2A - 2C 8% NAIC 3A - 3C < 1% Statutory – ABS Portfolio June 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.
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 Six Months Ended 6/30/21 9/30/21 12/31/21 3/31/22 6/30/22 6/30/21 6/30/22 Adjusted Operating Earnings Net income (loss) attributable to Jackson Financial Inc. (540) 206 585 2,025 2,
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 Six Months Ended 6/30/21 9/30/21 12/31/21 3/31/22 6/30/22 6/30/21 6/30/22 Net Income (Loss) (484) 268 661 2,056 2,934 2,516 4,990 Income attributable to non - contr
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 , offers 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 loss