Jackson Financial Inc. Q4 FY2024 earnings call

• 2024 was pivotal with significant operational and financial accomplishments, including completing a full year of economic hedging and realizing capital stability. • Jackson National Life Distributors had strong results with $875 million distributions to holding company, highest in history. • Net income exceeded $900 million, adjusted operating earnings $1.4 billion, largely due to retail annuity segment growth. • Retail annuity sales $18 billion, up 39% YoY. • RBC ratio ended 2024 at 572%, comfortably above target. • Capital return to common shareholders was $631 million in 2024, with 2025 target increased to $700-$800 million. • Announced 4th dividend increase to $0.80 per share, 14% increase. • Product innovation like RILA product in NY, partnership with JPMorgan Chase, and adding guaranteed minimum accumulation benefit to Elite Access. • Distribution expansion with new and diverse relationships, reaching $1 billion in advisory sales in 2024.

Retail annuities: Retail annuity sales of $18 billion in 2024 increased 39% year over year. RILA contributed more than 30% of total retail annuity sales. Adjusted operating earnings for retail annuities segment were up 57% compared to Q4 2023 and 12% from Q3 2024. Retail annuity AUM was $252 billion, up 7% from end-2023. Institutional segment: Pretax adjusted operating earnings were broadly in line with Q4 2023. Closed block segment: Pretax adjusted operating earnings improved from Q4 2023 due to higher net investment income but were down sequentially due to assumptions review impacts.

• 2025 capital return target increased to $700 to $800 million compared to 2024's $631 million. • Expect to hold a buffer of $250 million at the holding company and maintain an RBC ratio above 425%. • Capital management approach will balance investment in business, financial strength, and returning capital to shareholders.

• Non-operating results from business reinsurance to third parties can be volatile. • Actuarial assumptions review can have unfavorable impacts on earnings, like the $419 million unfavorable impact in Q4 2024 related to withdrawal behavior projections. • Market risk: Net loss on hedging assets in Q4 due to interest rate and equity market movements, though MRB provided positive offset. • Reserve and embedded derivative loss in Q4 due to increases in RILA reserves from higher equity markets.

Q: Could you provide more color on the moving pieces within Brook Re in 2024 that produced the $200 million increase in capital?

A: Don Cummings explained that consolidated hedging results differ from Brook Re's due to scope of business and modifications like fixed long-term volatility assumption, fixed nonperformance risk spread, haircut on guarantee fee stream, and expense provision for administrative costs.

Q: On the assumption review, did you consider changing the long-term lapse assumption and why keep existing?

A: Don Cummings said the main impact was on withdrawal behavior, not utilization. The 7% surrender rate in 2022 was the last down market experience, and they didn't change the lapse assumption as surrenders vary with market conditions but landed on a rate based on past experience.

Q: How to get comfort Brook Re is well capitalized and regular disclosure?

A: Don Cummings said they disclose on Brook Re every quarter, with disclosures in 2023 earnings materials, and will continue to manage it on a long-term self-sustaining basis, sharing capital needs or withdrawals as needed.

Q: Thoughts on PPM's long-term strategy?

A: Laura Prieskorn said PPM is a core part of the business, supporting general account management, and they'll look for opportunities to expand its role if they arise. Craig Smith added PPM has various verticals and recently hired an emerging market debt team.

Q: Actuarial review charge and lapse rate assumption?

A: Don Cummings said the charge was related to refining withdrawal behavior projections, not utilization. The 7% surrender rate was from 2022, and terminal lapse rate assumption is closer to 8%-9% range.

Q: Guardrails around RBC on statutory basis with Brook Re?

A: Don Cummings said GOES impact is largely not applicable to reinsured book, and primary guardrail is minimum operating capital well above required level.