Jackson Financial Inc. Q2 FY2026 earnings call

Overall Financial Performance

• Record adjusted operating earnings of $7.30 per diluted share in Q2 2026. Excluding notable items and adjusting for tax guidance, adjusted operating EPS was $7.68, a 55% increase year-over-year.
• Pre-tax adjusted operating earnings were $618 million, or $648 million excluding notable items, with ex-notables earnings up 50% year-over-year.
• Trailing 12-month adjusted operating return on equity through June 2026 was 16.3%, up from 12.7% for the same period ending June 2025.
• First half 2026 adjusted operating earnings grew more than 20% year-over-year; first half free cash flow was $575 million, a 14% increase year-over-year.

Capital and Liquidity Position

• Total adjusted capital at quarter-end was $5.8 billion, up nearly 9% year-over-year, with an estimated RBC ratio of 538%, comfortably above minimum targets.
• After-tax statutory capital generation was $656 million in Q2 2026; Q2 free capital generation was $304 million.
• Holding company free cash flow was $287 million in Q2, in line with prior year and first quarter 2026 levels. Total available liquidity at Jackson Financial Inc. was ~$4 billion at quarter-end, with Jackson National Life holding more than $32 billion in available operating liquidity.
• The company returned $290 million to shareholders in Q2, with $547 million returned in the first half of 2026. Since its IPO, Jackson has returned nearly $3.3 billion to common shareholders, exceeding its initial IPO market capitalization.
• Total leverage ratio is approximately 23.4% (excluding AOCI), or ~19.7% after adjusting for planned 2027 debt maturity retirement, positioning Jackson among the strongest leverage profiles in its peer group.

Product and Distribution Strategy

• Jackson launched the new RILA products MarketLink Pro 4 and MarketLink Pro Advisory 4, the first industry offerings with a Dow Jones Industrial Average Index option, to expand RILA value for advisors and clients.
• Product diversification has shifted the in-force business mix: nearly 40% of the current in-force book is now comprised of spread-based and investment-only variable annuities.
• The company holds a leading number 2 position in the advisory annuity market, with nearly 50% of Q2 2026 advisory sales coming from non-variable annuity products, consistent with its diversification strategy. 80% of first half 2026 advisory sales came from RILA, FIA, and Elite Access investment-only variable annuities.
• Since 2025, Jackson has added nearly 1,500 new advisors and reactivated 2,300 inactive advisors; 60% of producers selling the new FIA product are new or reactivated Jackson producers.
• Jackson was named Investment News 2026 Annuity Provider of the Year, recognizing its product strength, distribution partnerships, and service quality.

Investment Portfolio and Strategic Partnership

• The fixed maturity investment portfolio is conservatively positioned, with 6% allocated to highly liquid U.S. Treasuries, a market-to-book ratio of 96%, and just 1% exposure to below investment grade securities.
• The strategic partnership with TPG continues to progress in line with previously outlined AUM targets, broadening investment opportunities and delivering higher new money yields, with consistent capital deployment momentum in Q2.
• Jackson remains underweight direct lending relative to peers, and is selectively building exposure at current attractive valuations, leveraging TPG's lower middle market credit expertise. The private investment portfolio remains conservatively positioned with substantial remaining capacity for deployment.

Hedging Program

• After transitioning to a more economic hedging framework, Jackson has achieved improved consistency in hedging outcomes, supporting stable capital generation. After isolating volatility-related impacts, overall Q2 2026 net hedge result was a modest $2 million gain, a favorable outcome given the size and complexity of the liability profile.
• Brook Re's capitalization remains well above internal risk targets and regulatory minimums, with no capital contributions or distributions in Q2, and is managed on a self-sustaining basis.

Leadership Transition

• CEO Laura Prieskorn will retire at the end of 2026; CFO Don Cummings will succeed her as President and CEO, and Brian Walta, Head of Planning and Asset Liability Management, will become CFO, with both transitions effective October 1, 2026. The transition is the result of deliberate succession planning to ensure continuity and long-term stability.

1. Retail Annuities: Total Q2 2026 sales reached ~$6 billion, representing 34% year-over-year growth and 12% sequential growth. Spread-based products accounted for 54% of total retail segment sales in the quarter. RILA (Registered Index-Linked Annuity) sales hit a new quarterly record of $2.3 billion, up 69% year-over-year, with total RILA AUM growing to over $26 billion. Fixed and fixed index annuity (FIA) sales totaled $812 million in Q2, up 73% year-over-year, bringing first half 2026 FIA sales to $1.3 billion. Non-variable annuity net inflows were $2.9 billion, up 65% year-over-year and 16% sequentially. The segment holds the number 1 market position in traditional variable annuities and a top 4 position in RILA. Total combined account value for retail annuities and institutional products exceeded $295 billion, a 10% increase from the prior quarter.
2. Institutional: Institutional product sales were $1.4 billion in Q2 2026, increasing both year-over-year and sequentially, driven by strong demand for spread lending products.
3. PPM America (Wholly Owned Investment Management Subsidiary): PPM America's total AUM exceeded $100 billion in Q2 2026, supported by growth in Jackson's spread-based businesses and third-party AUM growth.

• Management reaffirmed its full year 2026 guidance, maintaining the target of at least $1.2 billion in full year free capital generation, and a capital return to common shareholders target of $900 million to $1.1 billion.
• Holding company liquidity remains well above the required minimum buffer even before accounting for recent senior debt issuance proceeds.
• Management expects continued growth in spread-based assets and continued strong earnings results, assuming equity markets trade near current levels; significant equity market declines would create a headwind for results.

• Forward-looking statements are inherently uncertain, and actual results may differ materially from projections due to various risk factors, as detailed in Jackson's SEC filings.
• Limited partnership investment valuations can vary quarter to quarter; Q2 2026 limited partnership returns fell short of the company's long-term 10% return assumption, creating an unfavorable $0.36 per share impact on adjusted operating earnings.
• Surrender activity in the variable annuity block is sensitive to equity market performance; strong Q2 2026 equity markets drove modestly higher variable annuity surrenders relative to the prior year.
• Quarterly GAAP hedging results can differ from underlying economic outcomes for RILA and FIA products, due to the company's focus on hedging economic rather than accounting impacts, creating periodic volatility in reported GAAP hedge results.
• Significant large single-quarter equity market movements can create temporary noise in GAAP hedging results, even when underlying economic hedging performance remains on target.

Q: The quarter's normalized earnings saw a 30% sequential increase that exceeded expectations. Is this earnings level sustainable, and what drove the sequential growth? / A: Strong Q2 equity markets (S&P 500 up 15%) created a tailwind for fee-based earnings, but a large portion of the growth came from spread-based business. Spread AUM grew 14% sequentially and nearly 50% year-over-year, with higher average invested assets and improved portfolio yields from new investments at higher rates driving spread earnings growth. Management expects continued strong results going forward, assuming equities stay near current levels, as the shift to spread products continues to deliver growth. Significant equity declines would create a headwind. (297 chars)

Q: How do higher equity markets impact statutory capital generation, free cash flow, and holding company flexibility, and is there upside to full year guidance from first half market performance? / A: The benefits of higher equities and spread business growth for earnings generally flow through to capital generation, though there are minor offsetting nuances in the statutory required capital framework. Overall, higher equity markets and continued spread growth are expected to be beneficial for full year capital generation. (179 chars)

Q: Can you unpack Q2 hedging results where RILA/FIA had a large GAAP gain and VA had an offsetting GAAP loss? Is the offset intentional or coincidental? / A: Jackson hedges to an economic/statutory framework, not GAAP accounting. The large 15% equity market movement created outsized GAAP noise for the quarter, but economic hedging results were near breakeven overall, with VA hedging results flat at Brook Re after accounting for scope differences. The offset between RILA/FIA and VA GAAP results was mostly coincidental; each business is hedged independently, with no diversification credit taken in internal risk management. (281 chars)

Q: What is your outlook for inorganic growth opportunities like block transactions or strategic M&A? / A: Management did not share new specific comments on potential inorganic activity in the available call exchange.