Jackson Financial Inc. · NYSE:JXN
Jackson Financial — Investor Day (August 2021)
55 slides from Jackson Financial's investor day presentation, Aug 17, 2021
Slide 1: Analyst Day Presentation
Analyst Day Presentation August 17, 2021 1
Slide 2: Disclaimer
Disclaimer This presentation (the “Presentation”) has been prepared by Jackson Financial Inc. (the “Company”), solely for informational purposes. This presentation contains forward-looking statements which can be identified by the use of terms such as “believes,” “expects,” “may,” “will,” “shall,” “
Slide 3: Today's Presenters
Today’s Presenters LAURA PRIESKORN MARCIA WADSTEN CHAD MYERS Chief Executive Officer Chief Financial Officer Vice Chairman, Jackson Holdings 33+ Years of Experience 30+ Years of Experience 32+ Years of Experience 3
Slide 4: A Leading Retirement Solutions Provider
A Leading Retirement Solutions Provider An Established Market Presence Account Value (Q1 2021) • Broad capabilities across retail and institutional products 4%3% 4% 4% – Offering clients a diversified mix of variable, fixed and fixed index <1% 1% annuities and institutional products $257b • A recogn
Slide 5: A Long History of Consistent Execution Success
A Long History of Consistent Execution Success • Steady growth through product development and expanding distribution • A consistent approach to underwriting and product design • An ownership culture that balances multiple stakeholders and focuses on providing exceptional value to advisors, policyho
Slide 6: Resilient Capitalization and Cash Generation
Resilient Capitalization and Cash Generation Capital and Cash Return History RBC Ratio History (1) (%) • Jackson prioritizes balance sheet strength 485 500+ 481 470 450 456 458 • Sustainable cash distributions supported by 429 423 profitable in-force block while maintaining 409 new business growth 3
Slide 7: Strong Financial Profile
Strong Financial Profile • Strong statutory capital generation and cash flows across a range of equity and interest rate scenarios Distributable • Targeting annual return to stockholders of approximately 40-60% of the annual change in excess capital, adjusted for capital contributions and Cash Flows
Slide 8: Jackson Key Success Factors
Jackson Key Success Factors Experienced Management Team Compelling Retirement Value Proposition Industry-Leading, Broad Distribution Capabilities Efficient and Scalable Operations Prudent Pricing and Product Design Proven Risk Management Attractive Financial Profile with Strong Balance Sheet 8
Slide 9: Experienced Management Team
Experienced Management Team Highly experienced management team combining product, distribution and risk management expertise and an average tenure at Jackson of over 15 years Laura Prieskorn Marcia Wadsten Chad Myers Chief Executive Officer Chief Financial Officer Vice Chairman, Jackson Holdings 33+
Slide 10: Addressing Retirement Needs of Americans
Addressing Retirement Needs of Americans Our annuities enable Americans to pursue financial freedom for life Provide Retirement Benefit from Rising Markets with Mitigate Longevity Risk and Income Downside Protection Provide Family Protection • Need for guaranteed retirement • Capture benefit of risi
Slide 11: Differentiated Product Approach and Strong Reputation
Differentiated Product Approach and Strong Reputation Consistent Value Proposition Highly Valued Advisor Brand (1) • Unique ‘menu based’ product platform – all features individually priced High Net Promoter Highest Advisor • Standalone benefits provide transparent pricing and best serve customer nee
Slide 12: Industry-Leading, Broad Distribution Capabilities
Industry-Leading, Broad Distribution Capabilities #1 Retail Annuity and Variable Annuity writer in 2020 and 1Q’21 with 8% Retail Annuity and 16% Variable Annuity market share in 1Q’21 #1 Retail Annuity writer for 8 of past 9 years 2020 Industry Variable Annuity Sales by Channel (2) Q1 2021 Jackson A
Slide 13: Industry Leading Service at Low Cost
Industry Leading Service at Low Cost Best-in-Class Operational Efficiency (1) 1 Single, in-house policy administration platform 2 Scalable TPA agreements with leading BPOs 58 bps 57 bps 3 Industry leading cloud platforms 4 Track record of successful M&A integration 5 Flexible workforce in low-cost l
Slide 14: Opportunities for Future Profitable Growth
Opportunities 2 for Future Profitable Growth Broaden our portfolio of retail Leverage and expand our leading Expand market for retirement annuities distribution network products • Developing Registered Index Linked Annuity • Continue to establish new retail broker- • Working with distribution partne
Slide 15: Market Link Pro Presents Compelling Opportunity
Market Link Pro Presents Compelling Opportunity Overview Industry RILA Sales ($ billion) • We intend to offer Market Link Pro, our RILA product, in 2021 ‒ Offers investors exposure to market returns subject to a cap with protection from losses through buffers or floors 24.1 ‒ Will have commission an
Slide 16: Embedded Risk Management Approach
Embedded Risk Management Approach • Lead on product differentiation rather than price • Rigorous evaluation process • Have not offered buybacks due to healthy in- force book • Focus on funds where we believe we can transact in highly correlated hedge assets • Less than 5% of in-force sold prior to 2
Slide 17: Prudent Pricing and Product Design Process
Prudent Pricing and Product Design Process Pricing and Product Design Outcome • Consistent, disciplined approach to product pricing • Long term organic cash flow generation ‒ Regular experience reviews to validate pricing ‒ Based on economic rather than market share targets • Consistently high retur
Slide 18: Highly Disciplined Variable Annuity Fund Management
Highly Disciplined Variable Annuity Fund Management Investment freedom is well managed through rigorous fund selection process, aligning interest for Jackson and policyholders • Jackson believes in investment freedom for variable annuity products and has been consistent in approach – Policyholders d
Slide 19: Hedging Philosophy
Hedging Philosophy Healthy, well designed variable annuity book drives a differentiated approach to hedging Highlights • Balanced approach that protects against adverse market events while stabilizing statutory distributable earnings throughout market cycles • Our hedging philosophy has primarily fo
Slide 20: Resilient Capitalization with Effective Hedging Program
Resilient Capitalization with Effective Hedging Program Proven variable annuity hedge performance during financial stresses RBC Ratio Before and After Stress (1) Overview (%) Global Financial Crisis 2018 Equity Shock COVID-19 Pandemic 1• Decline due to investment losses and asset Excluding investmen
Slide 21: GMWB Focused Profile
GMWB Focused Profile Variable Annuity Account Value by Guarantee (Q1 2021) Key Takeaways • Jackson has immaterial exposure (1% of account value) to difficult to manage GMDB and guarantees (GMIB/GMAB) and this small amount is substantially reinsured GMWB for Life 73% • 11% of the block has no guarant
Slide 22: Key Drivers of Hedging Costs
Key Drivers of Hedging Costs Hedging costs vary over time based on both market inputs and Jackson’s financial condition Key Drivers VIX 55.0 85.0 Level of 45.0 • Lower capital levels put us closer to risk limits, requiring more hedging Capital 35.0 25.0 15.0 18.0 12.4 5.0 Interest • Lower interest r
Slide 23: Scenarios For Evaluation of Health of In-force Book
Scenarios For Evaluation of Health of In-force Book Capital market scenarios reflect a more normalized, long term view while stresses evaluate strength of in-force book • Base case reflects a more normalized, long-term view of equity market returns and a conservative view on interest rates • Stresse
Slide 24: Key Features of Guarantee Minimum Withdrawal Benefit
Key Features of Guarantee Minimum Withdrawal Benefit GMWB can only be monetized through annual withdrawals, providing a superior policyholder behavior profile Key Features Simplified Illustration of Benefit Mechanics (1) • Typical customer: Looking to manage retirement income needs $100 Gray shading
Slide 25: Well Designed Products with Resilient Economics (Before Hedging)
Well Designed Products with Resilient Economics (Before Hedging) Base Case Highlights ($ million) • Very strong pattern of guarantee fee emergence supports hedging program 2021 2028 2035 2042 2049 2056 2063 2070 • In shock scenarios guarantee fees remain strong due Equity Downside to fees being calc
Slide 26: Comprehensive Variable Annuity Cash Flows Are Resilient
Comprehensive Variable Annuity Cash Flows Are Resilient PV of block remains materially positive in all scenarios including hedging costs and excluding resources backing the book Asset & Cash Flow Scenarios Highlights ($ billion) 8.5 • PV of cash flows remains positive in all scenarios 7.1 6.7 Key •
Slide 27: 5-Year Statutory Capital Generation
5-Year Statutory Capital Generation Strong cumulative statutory capital generation and cash flows across a wide range of capital markets scenarios (1) (Five Year Statutory Capital Generation, $ billion) • Analysis includes statutory reserve and required capital movements • Distributable cash generat
Slide 28: Recent Financial Performance
Recent Financial Performance Sales (1) Adj. Operating Earnings & ROE (2) Adj. Book Value(2) ($b) ($b) 28.0% ($b) 22.2 29.1% 8.8 20.6 27.6% 2.5 19.2 7.8 3.1 1.2 1.3 20.9% 2.0 0.5 0.3 1.9 6.8 6.8 0.3 3.8 1.0 1.7 16.7 16.6 14.7 0.0 0.6 0.0 4.7 0.0 4.7 2018 2019 2020 2021 Q1 2018 2019 2020 2021 Q1 2018
Slide 29: Conservative Adjusted Operating Earnings Definition
Conservative Adjusted Operating Earnings Definition Approach aligns both revenue and expenses associated with guarantee benefits and places below the line Variable Annuity Peer Approach to Guarantee 2021 Q1 Adj. Operating Earnings Reconciliation Benefit Fees in Operating Earnings ($m) Approach acros
Slide 30: Objectives and Approaches of Accounting Regimes
Objectives and Approaches of Accounting Regimes US GAAP US Statutory • Designed with protection of policyholder interests and long-term solvency • Designed to provide a long-term view of earnings of company as priority Main Purpose • Aims to improve clarity, consistency and comparability of • Used b
Slide 31: Target Payout Ratio Calibrates Total Adjusted Capital to Required Capital Level
Target Payout Ratio Calibrates Total Adjusted Capital to Required Capital Level RBC ratio impacted by leverage in the calculation Overview Illustration • RBC ratio is built off of 2 components: Beginning of End of - Total adjusted capital (TAC) = numerator in calculation ($ million) Period Period -
Slide 32: Conservatism in Statutory Variable Annuity Reserving
Conservatism in Statutory Variable Annuity Reserving Statutory reserving dynamics illustrated through two similar sized, hypothetical variable annuity blocks Impact of Cash Surrender Value on Variable Annuity Reserves (1) Dynamics of Variable Annuity Reserving for a Healthy Block • The dynamics belo
Slide 33: Non-Admitted DTAs Represent Unrecognized Economic Value
Non-Admitted DTAs Represent Unrecognized Economic Value Non-Admitted Deferred Tax Asset (1) Overview ($m) 1,679 • Hedge gains / losses recognized over three years for tax purposes – DTA and current tax benefit generated in up markets from hedging losses 1,077 • Under statutory accounting, DTAs are i
Slide 34: Impact of Latent Capital in Different Market Scenarios
Impact of Latent Capital in Different Market Scenarios When required reserves from PV of cash flows < CSV, latent capital builds in up markets and provides benefit in down markets Equity Market Gain Equity Market Decline • Required reserves using PV of cash flows increase and, if they now exceed • R
Slide 35: Committed to Strong Balance Sheet and Financial Strength Ratings
Committed to Strong Balance Sheet and Financial Strength Ratings Financially Flexible With Multiple Liquidity Sources Financial Strength Ratings Profile (1) Optimized Pro Forma financial leverage at Q1 within our long-term target A A2 A A Leverage ratio of 20-25% (2) S&P Moody’s Fitch AM Best Pro Fo
Slide 36: Capital Management Strategy
Capital Management Strategy Balanced Use of Capital Resources Target Capitalization and Distributable Cash Supporting our financial strength • Target adjusted RBC ratio of 500-525% under normal market conditions (1) Targets Optimizing our total financial leverage • Target return of capital to stockh
Slide 37: Q2 2021 Update – Statutory
Q2 2021 Update – Statutory Pro Forma RBC (1) Key Highlights (%) • Q2 2021 Pro Forma RBC up from Q4 2020 and Q1 2021 470+ 500+ 470 • Decline in TAC from Q4 2020 to Q2 2021 primarily driven by: – Hedging losses from higher equity markets and interest rates – Offset from reserve releases constrained by
Slide 38: Jackson – Positioned to Deliver
Jackson – Positioned to Deliver A history of execution and proven management team position Jackson to deliver value to stockholders • Jackson has been a top 5 retail annuity writer for the past 13 years Recognized Franchise Providing Value and Service to Advisors • Strong ties to broad distribution
Slide 39: Appendix
Appendix 39
Slide 40: Jackson Legal Structure Pro Forma for Demerger
Jackson Legal Structure Pro Forma for Demerger (1) 1 2 3 Highlights Prudential plc Existing Prudential Shareholders Athene ~19.7% economic interest ~11.1% economic interest 1 Prudential plc ~69.2% economic interest ~19.9% total combined voting ~70.1% total combined voting power ~9.9% total combined
Slide 41: Distribution Capabilities across a Variety of Channels
Distribution 2 Capabilities across a Variety of Channels Focused on banks, credit unions and other insurance Focused on registered representatives who are typically carriers that specialize in P&C insurance but are running their own practices and includes branch offices looking to offer annuity
Slide 42: Overview of Operating Segments
Overview of Operating Segments Jackson manages its business in three operating segments with a focus on retail annuity products Retail Annuities Institutional Products Closed Blocks Variable Annuities Fixed & Fixed Index Annuities • Includes GICs, • Primarily composed funding agreements of blocks ac
Slide 43: Riders Priced to Support Hedging Program
Riders 3 Priced to Support Hedging Program Benefit riders priced to support hedging program Variable Annuity Account Value Rider Option (1) ($ million) Description Jackson Highlights and Benefits Easier to manage risk given guarantee is tied to policyholder mortality, • Guarantees annuity benefici
Slide 44: Conservatively Positioned Fixed Maturity Portfolio
Conservatively Positioned Fixed Maturity Portfolio Investment Portfolio Classification (1) (2) Key Highlights (1) (2) Equity Securities 1% • Market / book ratio of the fixed maturity portfolio is 1.05 Other Government Securities 2% Other Invested Assets Derivatives 2% 1% Policy Loans 2% Residential
Slide 45: Commercial Mortgage Loan Book Has Performed Well
Commercial Mortgage Loan Book Has Performed Well By Property Type (1) (2) Key Highlights (1) (2) Hotels 10% • Highly diversified with an average loan size of $18m • 99% are senior / first mortgage loans Office 13% Apartment 35% • 99% of the portfolio has the highest ratings, CM1-2 $7.6b • Overall av
Slide 46: High Quality CMBS Portfolio
High Quality CMBS Portfolio CMBS by Seniority of Tranche (1) (2) Key Highlights (1) (2) Mezz AAA 7% Agency-Guaranteed 2% • 88% is rated AAA (3) and virtually all are rated NAIC 1 Subordinated 10% • 83% of CMBS portfolio are diversified pools of commercial $1.4b mortgages Senior AAA 82% • Single Asse
Slide 47: Diverse ABS Portfolio with High Credit Quality
Diverse ABS Portfolio with High Credit Quality ABS Sector Distribution (1) (2) (3) NAIC Rating Distribution (1) (3) Auto Subprime 2% Servicer Advance 2% Auto Prime <1% NAIC 2 (BBB) 7% NAIC 3 (BB) <1% Other ABS 3% Credit Cards, <1% Stranded Utility 3% Rooftop Solar 9% CLOs 43% Timeshare 9% $1.4b $1.4
Slide 48: Historical Consolidated Balance Sheet
Historical Consolidated Balance Sheet Years Ended December 31, Three Months Ended March 31, ($ million) 2018 2019 2020 2021 2021 Pro Forma (1) Balance Sheet Data (at period end) Assets Total Investments $70,255.9 $76,974.3 $80,488.0 $75,880.9 $75,880.9 Cash and Cash Equivalents 3,968.3 1,934.5 2,018
Slide 49: Historical Consolidated Income Statement
Historical Consolidated Income Statement Years Ended December 31, Three Months Ended March 31, ($ million) 2018 2019 2020 2020 Pro Forma (1) 2020 2021 2021 Pro Forma (1) Statement of Income (Loss) Data Revenues Fee Income $6,259.9 $6,412.9 $6,604.0 $6,560.0 $1,618.2 $1,816.0 $1,816.0 Advisory and We
Slide 50: Non-GAAP Reconciliation: Adjusted Operating Earnings
Non-GAAP Reconciliation: Adjusted Operating Earnings Years Ended December 31, Three Months Ended March 31, ($ million) 2018 2019 2020 2020 2021 Net Income (loss) Attributable to Jackson Financial Inc. $1,985.6 $(497.1) $(1,633.5) $1,796.9 $2,931.5 Income Tax Expense (Benefit) 338.3 (368.9) (853.9) 3
Slide 51: Non-GAAP Reconciliation: Pretax Adjusted Operating Earnings by Segment – 2020
Non-GAAP Reconciliation: Pretax Adjusted Operating Earnings by Segment – 2020 Year Ended December 31, 2020 Retail Closed Life and Institutional Corporate Intersegment Total ($ million) Annuities Annuity Blocks Products and Other Eliminations Consolidated Operating Revenues Fee Income $3,470.2 $512.5
Slide 52: Non-GAAP Reconciliation: Pretax Adjusted Operating Earnings by Segment – 2020 Q1
Non-GAAP Reconciliation: Pretax Adjusted Operating Earnings by Segment – 2020 Q1 (1) Three Months Ended March 31, 2020 Retail Closed Life and Institutional Corporate Intersegment Total ($ million) Annuities Annuity Blocks Products and Other Eliminations Consolidated Operating Revenues Fee Income $85
Slide 53: Non-GAAP Reconciliation: Pretax Adjusted Operating Earnings by Segment – 2021 Q1
Non-GAAP Reconciliation: Pretax Adjusted Operating Earnings by Segment – 2021 Q1 (1) Three Months Ended March 31, 2021 Retail Closed Life and Institutional Corporate Intersegment Total ($ million) Annuities Annuity Blocks Products and Other Eliminations Consolidated Operating Revenues Fee Income $99
Slide 54: Non-GAAP Reconciliation: Adjusted Book Value and Adjusted Operating ROE
Non-GAAP Reconciliation: Adjusted Book Value and Adjusted Operating ROE Years Ended December 31, Three Months Ended March 31, ($ million, except percentages) 2018 2019 2020 2020 2021 Net Income (loss) Attributable to Jackson Financial Inc. $1,985.6 $(497.1) $(1,633.5) $1,796.7 $2,931.5 Adjusted Oper
Slide 55: Glossary of Terms
Glossary of Terms • ABS: Asset-Backed Securities • GMDB: Guaranteed Minimum Death Benefits • ALM: Asset and Liability Management • GMIB: Guaranteed Minimum Income Benefits • AOCI: Accumulated Other Comprehensive Income • GMWB: Guaranteed Minimum Withdrawal Benefits • AUM: Assets Under Management (in