Jackson Financial Inc. (NYSE: JXN) (Jackson®) today announced
financial results for the first quarter ended March 31, 2023.
Key Highlights
- Net income (loss) attributable to Jackson Financial Inc. of
$(1,497) million, or $(18.11) per diluted share, including the net
impact of market risk benefits and hedging results
- Adjusted operating earnings1 of $271 million, or $3.15 per
diluted share, down 28% from the first quarter of 2022 reflecting
the decline in annuity account values and higher interest crediting
rates on variable annuity fixed rate options in the first quarter
of 2023
- Returned $124 million to common shareholders in the first
quarter through $70 million of share repurchases and $54 million in
dividends; on pace to achieve 2023 capital return target of
$450-550 million
- First quarter 2023 registered index-linked annuity (RILA) sales
of $533 million, up from $199 million in the first quarter of
2022
- Total annuity account value of $219 billion decreased 10% from
the first quarter of 2022, driven largely by lower equity markets
over the 12-month period. Compared to fourth quarter 2022, total
annuity account value increased 4% due primarily to higher equity
markets in the current quarter.
- Estimated Risk Based Capital (RBC) ratio at Jackson National
Life Insurance Company was within our target range of 425-500% as
of the end of the first quarter of 2023, including the impact of
first quarter distributions from Jackson National Life of $600
million
- Successful issuance of preferred stock in the first quarter,
raising $533 million of net proceeds
- Cash and highly liquid securities at the holding company
remained robust at more than $1.5 billion at the end of the first
quarter, significantly above Jackson’s 2023 targeted minimum
liquidity buffer of 2x annual holding company expenses
Laura Prieskorn, President and Chief Executive Officer of
Jackson, stated, “We are pleased with the performance of Jackson’s
business throughout the first quarter of 2023, which keeps us on
track with our strategic and operational goals amid ongoing market
volatility. In line with our commitments, we returned $124 million
to common shareholders through dividends and share buybacks over
the first three months of the year, giving us a strong start toward
our 2023 capital return target of $450-550 million. We also
retained significant financial flexibility with an estimated
operating company RBC ratio within our target range and over $1.5
billion of liquidity at the holding company. We continue to be
confident in our ability to achieve our 2023 key financial targets
and to create value for shareholders over the long-term.”
Consolidated First Quarter 2023
Results
The company reported net income (loss) attributable to Jackson
Financial Inc. of $(1,497) million, or $(18.11) per diluted share
for the three months ended March 31, 2023, compared to $2,194
million, or $24.39 per diluted share for the three months ended
March 31, 2022. The current quarter net loss primarily reflects a
larger net hedging loss compared to the prior year’s first quarter,
driven by higher freestanding derivative losses resulting from
comparatively stronger equity market returns in the current
quarter, as well as smaller gains on market risk benefits resulting
from comparatively unfavorable interest rate movements in the
current quarter. The change in the reported fair value of
derivatives is not expected to match the change in hedged
liabilities on a U.S. GAAP basis period-to-period, which can result
in net income volatility. We believe adjusted operating earnings
better represent the underlying performance of our business as the
figure excludes, among other things, changes in fair value of
derivative instruments and market risk benefits tied to market
volatility. Additionally, net income in the first quarter reflects
a $366 million loss from business reinsured to third parties, while
the prior year’s first quarter included a gain of $1,288 million.
These figures include the gain/loss on a funds withheld reinsurance
treaty and the related net investment income, which do not impact
our statutory capital or free cash flow and can be volatile quarter
to quarter.
Adjusted operating earnings for the three months ended March 31,
2023 were $271 million, or $3.15 per diluted share, compared to
$377 million or $4.19 per diluted share for the three months ended
March 31, 2022. The decline in adjusted operating earnings was
primarily the result of lower annuity account values driven by
lower equity markets over the twelve month period, lower spread
income from resetting interest crediting rates on variable annuity
fixed rate options in the first quarter of 2023, and a loss on
operating derivatives compared to a gain in the prior quarter due
to higher short-term interest rates. These were partially offset by
improved mortality in closed block life, lower asset based
expenses, and higher net investment income.
First quarter adjusted operating earnings included a negative
impact of $20 million from underperformance of private equity and
other limited partnership returns relative to a 10% annualized
return assumption. This same item resulted in a benefit of $36
million in the first quarter of 2022.
Total common shareholders’ equity was $8.1 billion or $95.70 per
diluted share as of March 31, 2023, down from $8.6 billion or
$100.56 per diluted share as of year-end 2022. Adjusted book value
attributed to common shareholders2 was $8.6 billion or $101.32 per
diluted share as of March 31, 2023, down from $9.9 billion or
$115.36 per diluted share as of year-end 2022. The decrease was
primarily the result of non-operating hedging losses partially
offset by adjusted operating earnings of $271 million during the
first quarter of 2023.
Segment Results – Pretax Adjusted
Operating Earnings2
Three Months Ended
(in
millions)
March 31, 2023
March 31, 2022
Retail Annuities
$356
$425
Institutional Products
9
23
Closed Life and Annuity Blocks
(20)
(9)
Corporate and Other
(43)
6
Total3
$302
$445
Retail Annuities
Retail Annuities reported pretax adjusted operating earnings of
$356 million in the first quarter of 2023 compared to $425 million
in the first quarter of 2022. The current quarter was impacted by
lower annuity account values driven by lower equity markets over
the twelve month period, lower spread income from resetting
interest crediting rates on variable annuity fixed rate options in
the first quarter of 2023, and a loss on operating derivatives
compared to a gain in the prior quarter. These were partially
offset by lower asset based expenses, lower policy benefits, and
higher net investment income.
Total annuity sales of $3.1 billion in the current quarter were
down 35% from the first quarter of 2022. Variable annuity sales
were down 46% compared to the first quarter of 2022, primarily due
to the decline and volatility in equity markets and shifting
consumer preferences in a higher interest rate environment. The
current quarter also included $533 million of sales of RILA
products, up from $199 million in the first quarter of 2022. Fixed
and fixed indexed annuity sales in the current quarter totaled $133
million, up from $23 million in the first quarter of 2022. In
total, annuity sales without lifetime benefit guarantees
represented 43% of total annuity sales, up from 33% in the first
quarter of 2022.
Institutional Products
Institutional Products reported pretax adjusted operating
earnings of $9 million in the first quarter of 2023 compared to $23
million in the first quarter of 2022. The current quarter was down
from the prior year quarter due to higher interest credited and a
higher loss on operating derivatives, which were partially offset
by higher net investment income. Total sales for the current
quarter were $649 million. Net flows totaled $(391) million in the
current quarter, and total account value of $8.7 billion was down
from $9.2 billion in the first quarter of 2022.
Closed Life and Annuity Blocks
Closed Life and Annuity Blocks reported a pretax adjusted
operating loss of $(20) million in the first quarter of 2023
compared to $(9) million in the first quarter of 2022. The current
quarter was impacted by lower income on operating derivatives and
lower net investment income, partially offset by improved
mortality.
Corporate and Other
Corporate and Other reported a pretax adjusted operating loss of
$(43) million in the first quarter of 2023 compared to income of $6
million in the first quarter of 2022. The change was due to higher
interest and operating expenses, lower income on operating
derivatives, and lower net investment income.
Capitalization and
Liquidity
(Unaudited,
in billions)
March 31, 2023
December 31, 2022
Statutory Total Adjusted Capital (TAC)
Jackson National Life Insurance Company
$4.7
$7.0
Statutory TAC at Jackson National Life Insurance Company (JNLIC)
was $4.7 billion as of the current quarter, down from $7.0 billion
as of year-end 2022. TAC decreased primarily due to hedging losses
as reserve releases were limited by the cash surrender value floor,
the impact of the distribution from the operating company of $600
million, and additional tax impacts including DTA admissibility
limits.
The negative impact from the reduction in TAC was partially
offset by a decline in company action level (CAL) required capital,
due primarily to higher equity markets and the update to the mean
reversion parameter effective in the first quarter of 2023. The
estimated RBC ratio as of first quarter 2023 was within our
425-500% target range.
Cash and liquid assets at the holding company totaled over $1.5
billion as of March 31, 2023, which was above our targeted minimum
liquidity buffer of 2x annual holding company expenses. The holding
company liquidity includes proceeds from our preferred equity
issuance in the first quarter of 2023, which helped to effectively
prefund our $600 million senior debt maturity in November of 2023
that we expect to pay off at that time.
Earnings Conference Call
Jackson will host a conference call Wednesday, May 10, 2023, at
9 a.m. ET to review the first quarter results. The live webcast is
open to the public and can be accessed at
https://investors.jackson.com. A replay will be available following
the call.
To register for the webcast, click here.
FORWARD-LOOKING STATEMENTS
The information in this press release contains forward-looking
statements about future events and circumstances and their effects
upon revenues, expenses and business opportunities. Generally
speaking, any statement in this release not based upon historical
fact is a forward-looking statement. Forward-looking statements can
also be identified by the use of forward-looking or conditional
words, such as “could,” “should,” “can,” “continue,” “estimate,”
“forecast,” “intend,” “look,” “may,” “will,” “expect,” “believe,”
“anticipate,” “plan,” “remain,” “confident” and “commit” or similar
expressions. In particular, statements regarding plans, strategies,
prospects, targets and expectations regarding the business and
industry are forward-looking statements. They reflect expectations,
are not guarantees of performance and speak only as of the dates
the statements are made. We caution investors that these
forward-looking statements are subject to known and unknown risks
and uncertainties that may cause actual results to differ
materially from those projected, expressed or implied. Factors that
could cause actual results to differ materially from those in the
forward-looking statements include those reflected in Part I, Item
1A. Risk Factors and Part II, Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations in our
Annual Report on Form 10-K for the year ended December 31, 2022, as
filed with the SEC on March 1, 2023, (the "2022 Annual Report") and
elsewhere in the Company’s reports filed with the U.S. Securities
and Exchange Commission. Except as required by law, Jackson
Financial Inc. does not undertake to update such forward-looking
statements. You should not rely unduly on forward-looking
statements.
Certain financial data included in this release consists of
non-GAAP (Generally Accepted Accounting Principles) financial
measures. These non-GAAP financial measures may not be comparable
to similarly titled measures presented by other entities, nor
should they be construed as an alternative to other financial
measures determined in accordance with U.S. GAAP. Although the
Company believes these non-GAAP financial measures provide useful
information to investors in measuring the financial performance and
condition of its business, investors are cautioned not to place
undue reliance on any non-GAAP financial measures and ratios
included in this release. A reconciliation of the non-GAAP
financial measures to the most directly comparable U.S. GAAP
financial measure can be found in the “Non-GAAP Financial Measures”
Appendix of this release.
Certain financial data included in this release consists of
statutory accounting principles (“statutory”) financial measures,
including “total adjusted capital.” These statutory financial
measures are included in or derived from the Jackson National Life
Insurance Company annual and/or quarterly statements filed with the
Michigan Department of Insurance and Financial Services and
available in the investor relations section of the Company’s
website at investors.jackson.com/financials/statutory-filings.
ABOUT JACKSON
Jackson® (NYSE: JXN) is committed to helping clarify the
complexity of retirement planning—for financial professionals and
their clients. Through our range of annuity products, financial
know-how, history of award-winning service* and streamlined
experiences, we strive to reduce the confusion that complicates
retirement planning. We take a balanced, long-term approach to
responsibly serving all our stakeholders, including customers,
shareholders, distribution partners, employees, regulators and
community partners. We believe by providing clarity for all today,
we can help drive better outcomes for tomorrow. For more
information, visit www.jackson.com.
Visit investors.jackson.com to view information regarding
Jackson Financial Inc., including a supplement regarding the First
Quarter 2023 results. We use this website as a primary channel for
disclosing key information to our investors, some of which may
contain material and previously non-public information.
*SQM (Service Quality Measurement Group) Contact Center Awards
Program for 2004 and 2006-2022, for the financial services industry
(To achieve world-class certification, 80% or more of call-center
customers surveyed must have rated their experience as very
satisfied, the highest rating possible).
Jackson® is the marketing name for Jackson Financial Inc.,
Jackson National Life Insurance Company® (Home Office: Lansing,
Michigan) and Jackson National Life Insurance Company of New York®
(Home Office: Purchase, New York).
APPENDIX
Non-GAAP Financial Measures
In addition to presenting our results of operations and
financial condition in accordance with GAAP, we use and report
selected non-GAAP financial measures. Management believes the use
of these non-GAAP financial measures, together with relevant GAAP
financial measures, provides a better understanding of our results
of operations, financial condition and the underlying performance
drivers of our business. These non-GAAP financial measures should
be considered supplementary to our results of operations and
financial condition that are presented in accordance with GAAP and
should not be viewed as a substitute for the GAAP financial
measures. Other companies may use similarly titled non-GAAP
financial measures that are calculated differently from the way we
calculate such measures. Consequently, our non-GAAP financial
measures may not be comparable to similar measures used by other
companies.
Adjusted Operating Earnings
Adjusted Operating Earnings is an after-tax non-GAAP financial
measure, which we believe should be used to evaluate our financial
performance on a consolidated basis by excluding certain items that
may be highly variable from period to period due to accounting
treatment under GAAP or that are non-recurring in nature, as well
as certain other revenues and expenses that we do not view as
driving our underlying performance. Adjusted Operating Earnings
should not be used as a substitute for net income as calculated in
accordance with GAAP. However, we believe the adjustments to net
income are useful for gaining an understanding of our overall
results of operations.
For additional detail on the excluded items, please refer to the
supplement regarding the first quarter ended March 31, 2023, posted
on our website, https://investors.jackson.com.
The following is a reconciliation of Adjusted Operating Earnings
to net income (loss) attributable to Jackson Financial Inc.
(Jackson), the most comparable GAAP measure.
GAAP Net Income (Loss) to Adjusted
Operating Earnings
Three Months Ended
(in
millions)
March 31, 2023
March 31, 2022
Net income (loss) attributable to
Jackson Financial Inc.
$
(1,497
)
$
2,194
Income tax expense (benefit)
(558
)
388
Pretax income (loss) attributable to
Jackson Financial Inc.
(2,055
)
2,582
Non-operating adjustments – (income)
loss:
Guaranteed benefits and hedging
results:
Fees attributed to guaranteed benefit
reserves
(780
)
(764
)
Net movement in freestanding
derivatives
2,512
1,476
Market risk benefits gains (losses),
net
(174
)
(1,907
)
Net reserve and embedded derivative
movements
189
40
Amortization of DAC associated with
non-operating items at date of transition to LDTI
153
173
Total guaranteed benefits and hedging
results
1,900
(982
)
Net realized investment (gains) losses
68
130
Net realized investment (gains) losses on
funds withheld assets
673
(1,028
)
Net investment income on funds withheld
assets
(307
)
(260
)
Other items
23
3
Total non-operating adjustments
2,357
(2,137
)
Pretax Adjusted Operating
Earnings
302
445
Operating income taxes
31
68
Adjusted Operating Earnings
$
271
$
377
Weighted Average diluted shares
outstanding
86,082,970
89,959,862
Net income (loss) per diluted
share
$
(18.11
)
$
24.39
Adjusted Operating Earnings per diluted
share
$
3.15
$
4.19
Adjusted Book Value Attributable to Common
Shareholders
Adjusted Book Value Attributable to Common Shareholders excludes
Preferred Stock and Accumulated Other Comprehensive Income (Loss)
("AOCI") attributable to Jackson Financial Inc ("JFI"). AOCI
attributable to JFI excludes AOCI arising from investments held
within the funds withheld account related to the Athene Reinsurance
Transaction. We exclude AOCI attributable to JFI from Adjusted Book
Value Attributable to Common Shareholders because our invested
assets are generally invested to closely match the duration of our
liabilities, which are longer duration in nature, and therefore we
believe period-to-period fair market value fluctuations in AOCI to
be inconsistent with this objective. We believe excluding AOCI
attributable to JFI is more useful to investors in analyzing trends
in our business.
(in
millions)
March 31, 2023
December 31, 2022
Total shareholders’ equity
$
8,638
$
8,646
Less: Preferred equity
533
—
Total common shareholders’
equity
8,105
8,646
Adjustments to total common
shareholders’ equity:
Exclude Accumulated Other Comprehensive
(Income) Loss attributable to Jackson Financial Inc.
476
1,272
Adjusted Book Value Attributable to
Common Shareholders
$
8,581
$
9,918
Condensed Consolidated Balance
Sheets
March 31,
December 31,
2023
2022
(in millions,
except per share data)
Assets
Investments:
Debt Securities, available-for-sale, net
of allowance for credit losses of $29 and $23 at March 31, 2023 and
December 31, 2022, respectively (amortized cost: 2023 $49,026; 2022
$48,798)
$
43,774
$
42,489
Debt Securities, at fair value under fair
value option
2,255
2,173
Debt Securities, trading, at fair
value
101
100
Equity securities, at fair value
225
393
Mortgage loans, net of allowance for
credit losses of $146 and $95 at March 31, 2023 and December 31,
2022, respectively
10,911
10,967
Mortgage loans, at fair value under fair
value option
480
582
Policy loans (including $3,427 and $3,419
at fair value under the fair value option at March 31, 2023 and
December 31, 2022, respectively)
4,377
4,377
Freestanding derivative instruments
1,051
1,270
Other invested assets
3,711
3,595
Total investments
66,885
65,946
Cash and cash equivalents
1,779
4,298
Accrued investment income
497
514
Deferred acquisition costs
12,760
12,923
Reinsurance recoverable, net of allowance
for credit losses of $15 and $15 at March 31, 2023 and December 31,
2022, respectively
28,078
29,046
Reinsurance recoverable on market risk
benefits, at fair value
238
221
Market risk benefit assets, at fair
value
5,204
4,865
Deferred income taxes, net
755
320
Other assets
902
944
Separate account assets
204,366
195,906
Total assets
$
321,464
$
314,983
Condensed Consolidated Balance
Sheets
March 31,
December 31,
2023
2022
(in millions,
except share and per share data)
Liabilities and Equity
Liabilities
Reserves for future policy benefits and
claims payable
$
12,369
$
12,318
Other contract holder funds
57,094
58,190
Market risk benefit liabilities, at fair
value
5,560
5,662
Funds withheld payable under reinsurance
treaties (including $3,591 and $3,582 at fair value under the fair
value option at March 31, 2023 and December 31, 2022,
respectively)
22,254
22,957
Long-term debt
2,632
2,635
Repurchase agreements and securities
lending payable
1,124
1,048
Collateral payable for derivative
instruments
545
689
Freestanding derivative instruments
1,510
2,065
Notes issued by consolidated variable
interest entities, at fair value under fair value option
2,016
1,732
Other liabilities
2,527
2,403
Separate account liabilities
204,366
195,906
Total liabilities
311,997
305,605
Equity
Series A non-cumulative preferred stock
and additional paid in capital, $1 par value per share: 24,000
shares authorized; shares issued: 2023 - 22,000; liquidation
preference $25,000 per share
533
—
Common stock; 1,000,000,000 shares
authorized, $0.01 par value per share and 81,044,318 and 82,690,098
shares issued and outstanding at March 31, 2023 and December 31,
2022, respectively
1
1
Additional paid-in capital
6,070
6,063
Treasury stock, at cost; 13,431,514 and
11,784,813 shares at March 31, 2023 and December 31, 2022,
respectively
(510
)
(443
)
Accumulated other comprehensive income
(loss), net of tax expense (benefit) of $52 and $(66) at March 31,
2023 and December 31, 2022, respectively
(2,308
)
(3,378
)
Retained earnings
4,852
6,403
Total shareholders' equity
8,638
8,646
Noncontrolling interests
829
732
Total equity
9,467
9,378
Total liabilities and equity
321,464
314,983
Condensed Consolidated Income
Statements
Three Months Ended March 31,
(in millions,
except per share data)
2023
2022
Revenues
Fee income
$
1,888
$
2,012
Premiums
25
37
Net investment income:
Net investment income excluding funds
withheld assets
415
430
Net investment income on funds withheld
assets
307
260
Total net investment income
722
690
Net gains (losses) on derivatives and
investments:
Net gains (losses) on derivatives and
investments
(2,726
)
(1,566
)
Net gains (losses) on funds withheld
reinsurance treaties
(673
)
1,028
Total net gains (losses) on derivatives
and investments
(3,399
)
(538
)
Other income
15
20
Total revenues
(749
)
2,221
Benefits and Expenses
Death, other policy benefits and change in
policy reserves, net of deferrals
228
300
(Gain) loss from updating future policy
benefits cash flow assumptions, net
14
15
Market risk benefits (gains) losses,
net
(174
)
(1,907
)
Interest credited on other contract holder
funds, net of deferrals and amortization
285
197
Interest expense
43
20
Operating costs and other expenses, net of
deferrals
616
666
Amortization of deferred acquisition
costs
293
317
Total benefits and expenses
1,305
(392
)
Pretax income (loss)
(2,054
)
2,613
Income tax expense (benefit)
(558
)
388
Net income (loss)
(1,496
)
2,225
Less: Net income (loss) attributable to
noncontrolling interests
1
31
Net income (loss) attributable to Jackson
Financial Inc.
$
(1,497
)
$
2,194
Earnings per share
Basic
$
(18.11
)
$
25.41
Diluted
$
(18.11
)
$
24.39
____________________________
1 For the reconciliation of
non-GAAP measures to the most comparable GAAP measure, please see
the explanation of Non-GAAP Financial Measures in the Appendix to
this release.
2 For the reconciliation of
non-GAAP measures to the most comparable GAAP measure, please see
the explanation of Non-GAAP Financial Measures in the Appendix to
this release.
3 See reconciliation of Net
Income to Total pretax adjusted operating earnings in the Appendix
to this release
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230509006152/en/
Investor Relations Contacts: Liz Werner
elizabeth.werner@jackson.com
Andrew Campbell andrew.campbell@jackson.com
Media Contact: Patrick Rich patrick.rich@jackson.com
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