Jackson Financial Inc. (NYSE: JXN) (Jackson®) today announced
financial results for the second quarter ended June 30, 2023.
Key Highlights
- Net income attributable to Jackson Financial Inc. common
shareholders of $1,204 million, or $14.21 per diluted share,
including the net impact of market risk benefits and hedging
results
- Adjusted operating earnings1 of $283 million, or $3.34 per
diluted share, compared to $407 million, or $4.56 per diluted share
in second quarter of 2022
- Returned $100 million to common shareholders in the second
quarter through $47 million of share repurchases and $53 million in
dividends; remain committed to achieving 2023 capital return target
of $450-$550 million
- Second quarter 2023 registered index-linked annuity (RILA)
sales of $541 million, up from $490 million in the second quarter
of 2022
- Total annuity account value of $227 billion increased 9% from
the second quarter of 2022, driven largely by higher equity markets
over the 12-month period
- Estimated Risk Based Capital (RBC) ratio at Jackson National
Life Insurance Company as of the second quarter of 2023 was up from
the first quarter of 2023 and within our target range of
425-500%
- Holding company assets (excluding equity in subsidiaries) of
nearly $1.5 billion at the end of the second quarter, including
cash and highly liquid securities of nearly $1 billion,
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, “Jackson’s second quarter 2023 results highlight
our continued progress toward our strategic and operational goals.
We successfully launched our enhanced RILA offering in June,
positioning ourselves well in this attractive market. In line with
our commitments, we returned $100 million to common shareholders
through dividends and share buybacks over the second quarter and
remain committed to achieving our 2023 capital return target of
$450-$550 million. We retained significant financial flexibility
with an estimated operating company RBC ratio within our target
range and above our first quarter 2023 level. We also maintained
healthy levels of excess liquidity at the holding company, which
supports our continued confidence to achieve our 2023 key financial
targets and create long-term value for shareholders.”
Consolidated Second Quarter 2023
Results
The company reported net income attributable to Jackson
Financial Inc. common shareholders of $1,204 million, or $14.21 per
diluted share for the three months ended June 30, 2023, compared to
$3,263 million, or $36.59 per diluted share for the three months
ended June 30, 2022. The current quarter net income primarily
reflects a smaller net hedging gain compared to the prior year’s
second quarter. The net hedging results were driven by freestanding
derivative losses in the current quarter due to comparatively
stronger equity market returns, partially offset by improved market
risk benefits results from comparatively favorable equity market
returns and 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 second quarter reflects a $118 million gain from business
reinsured to third parties, while the prior year’s second quarter
included a gain of $1,441 million. These figures consist of 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 June 30,
2023 were $283 million, or $3.34 per diluted share, compared to
$407 million or $4.56 per diluted share for the three months ended
June 30, 2022. The decline in adjusted operating earnings was
primarily the result of higher operating and interest expenses,
lower spread income from resetting minimum interest crediting rates
on variable annuity fixed rate options in 2023, a loss on operating
derivatives compared to a gain in the prior year’s second quarter
due to higher short-term interest rates, and lower fee income as a
result of lower average variable annuity AUM. These were partially
offset by higher net investment income and improved mortality in
the closed block life business.
The current quarter adjusted operating earnings included a
greater degree of underperformance of private equity and other
limited partnership returns relative to a 10% annualized return
assumption than in the second quarter of 2022, resulting in a
negative $12 million pretax comparative variance. The current
quarter also included a $25 million pretax allowance for
reinsurance credit losses, with no similar item in the second
quarter of 2022.
Total common shareholders’ equity was $8.1 billion or $98.27 per
diluted share as of June 30, 2023, compared to $8.6 billion or
$100.56 per diluted share as of year-end 2022. Adjusted book value
attributed to common shareholders2 was $9.6 billion or $115.63 per
diluted share as of June 30, 2023, compared to $9.9 billion or
$115.36 per diluted share as of year-end 2022. The decrease over
the first half of 2023 was primarily the result of non-operating
hedging losses partially offset by adjusted operating earnings of
$554 million.
Segment Results – Pretax Adjusted
Operating Earnings2
Three Months Ended
(in millions)
June 30, 2023
June 30, 2022
Retail Annuities
$328
$425
Institutional Products
17
19
Closed Life and Annuity Blocks
7
12
Corporate and Other
(47)
8
Total3
$305
$464
Retail Annuities
Retail Annuities reported pretax adjusted operating earnings of
$328 million in the second quarter of 2023 compared to $425 million
in the second quarter of 2022. The current quarter was impacted by
lower spread income due to resetting minimum interest crediting
rates on variable annuity fixed rate options in 2023, lower fee
income resulting from lower average variable annuity AUM, higher
operating and interest expenses, and a loss on operating
derivatives compared to a gain in the prior year’s second quarter.
These were partially offset by higher net investment income.
Current quarter total annuity sales of $3.1 billion were in line
with the first quarter of 2023 and down 25% from the second quarter
of 2022. Traditional variable annuity sales have stabilized over
recent quarters and were down 33% compared to the second quarter of
2022, primarily due to consumer preferences for asset protection.
The current quarter also included $541 million of sales of RILA
products, up from $490 million in the second quarter of 2022. Fixed
and fixed indexed annuity sales in the current quarter totaled $115
million, up from $19 million in the second quarter of 2022.
Institutional Products
Institutional Products reported pretax adjusted operating
earnings of $17 million in the second quarter of 2023, broadly in
line with $19 million in the second quarter of 2022. Total sales
for the current quarter were $304 million. Net flows totaled $100
million in the current quarter, and total account value of $8.9
billion was up from $8.5 billion in the second quarter of 2022.
Closed Life and Annuity Blocks
Closed Life and Annuity Blocks reported pretax adjusted
operating earnings of $7 million in the second quarter of 2023
compared to $12 million in the second quarter of 2022. The current
quarter was negatively impacted by lower income on operating
derivatives, an allowance for reinsurance losses, and higher
operating expenses, partially offset by improved mortality.
Corporate and Other
Corporate and Other reported a pretax adjusted operating loss of
$(47) million in the second quarter of 2023 compared to income of
$8 million in the second quarter of 2022. The change was primarily
due to higher incentive compensation in the current quarter and
lower deferred compensation expenses in the prior year’s second
quarter, as well as lower income on operating derivatives in the
current quarter.
Capitalization and
Liquidity
(Unaudited, in billions)
June 30, 2023
March 31, 2023
Statutory Total Adjusted Capital (TAC)
Jackson National Life Insurance Company
$3.8
$4.7
Jackson National Life Insurance Company’s (JNLIC) estimated RBC
ratio as of second quarter 2023 was up from the first quarter of
2023 and within our 425-500% target range.
Statutory TAC at JNLIC was $3.8 billion as of the current
quarter, down from $4.7 billion as of the first quarter of 2023.
TAC decreased primarily due to hedging losses as reserve releases
were limited by the cash surrender value minimum reserve, and
related tax impacts including deferred tax asset admissibility
limits.
The reduction in TAC from the first quarter was more than offset
by the benefit of a decline in estimated company action level (CAL)
required capital. The required capital benefit was largely due to
the impact of second quarter equity market appreciation and rising
interest rates, as well as periodic rebalancing of the portfolio
mix resulting in the sale of certain limited partnership
investments from JNLIC to Jackson Financial Inc. with the
expectation that JFI will sell these investments in future
quarters.
Holding company assets (excluding equity in subsidiaries)
totaled nearly $1.5 billion, including cash and liquid assets of
nearly $1 billion as of June 30, 2023, which was above our targeted
minimum liquidity buffer of 2x annual holding company expenses. The
holding company assets include 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 2023.
Earnings Conference Call
Jackson will host a conference call Wednesday, August 9, 2023,
at 9 a.m. ET to review the second 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"), as
Part II, Item 7 was recast to reflect the adoption of the Long
Duration Targeted Improvements accounting principle in our Current
Report on Form 8-K filed May 10, 2023, 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 Second
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 second quarter ended June 30, 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. common
shareholders, the most comparable GAAP measure.
GAAP Net Income (Loss) to Adjusted
Operating Earnings
Three Months Ended
(in millions, except per share
data)
June 30, 2023
June 30, 2022
Net income (loss) attributable to
Jackson Financial Inc. common shareholders
$
1,204
$
3,263
Add: dividends on preferred stock
13
—
Add: income tax expense (benefit)
245
845
Pretax income (loss) attributable to
Jackson Financial Inc.
1,462
4,108
Non-operating adjustments – (income)
loss:
Guaranteed benefits and hedging
results:
Fees attributed to guaranteed benefit
reserves
(781
)
(765
)
Net movement in freestanding
derivatives
1,911
(2,847
)
Market risk benefits (gains) losses,
net
(2,570
)
1,184
Net reserve and embedded derivative
movements
194
—
Amortization of DAC associated with
non-operating items at date of transition to LDTI
149
166
Total guaranteed benefits and hedging
results
(1,097
)
(2,262
)
Net realized investment (gains) losses
40
(5
)
Net realized investment (gains) losses on
funds withheld assets
134
(1,077
)
Net investment income on funds withheld
assets
(252
)
(364
)
Other items
18
64
Total non-operating adjustments
(1,157
)
(3,644
)
Pretax adjusted operating
earnings
305
464
Less: operating income tax expense
(benefit)
9
57
Adjusted operating earnings before
dividends on preferred stock
296
407
Less: dividends on preferred stock
13
—
Adjusted operating earnings
$
283
$
407
Weighted Average diluted shares
outstanding
84,754,611
89,168,775
Net income (loss) per diluted
share
$
14.21
$
36.59
Adjusted Operating Earnings per diluted
share
$
3.34
$
4.56
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)
June 30, 2023
December 31, 2022
Total shareholders’ equity
$
8,652
$
8,646
Less: Preferred equity
533
—
Total common shareholders’
equity
8,119
8,646
Adjustments to total common
shareholders’ equity:
Exclude Accumulated Other Comprehensive
(Income) Loss attributable to Jackson Financial Inc.
1,435
1,272
Adjusted Book Value Attributable to
Common Shareholders
$
9,554
$
9,918
Condensed Consolidated Balance
Sheets
June 30,
December 31,
2023
2022
(in millions, except share and per
share data)
Assets
Investments:
Debt Securities, available-for-sale, net
of allowance for credit losses of $16 and $23 at June 30, 2023 and
December 31, 2022, respectively (amortized cost: 2023 $47,871; 2022
$48,798)
$
42,063
$
42,489
Debt Securities, at fair value under fair
value option
2,210
2,173
Debt Securities, trading, at fair
value
101
100
Equity securities, at fair value
267
393
Mortgage loans, net of allowance for
credit losses of $162 and $95 at June 30, 2023 and December 31,
2022, respectively
10,303
10,967
Mortgage loans, at fair value under fair
value option
509
582
Policy loans (including $3,438 and $3,419
at fair value under the fair value option at June 30, 2023 and
December 31, 2022, respectively)
4,381
4,377
Freestanding derivative instruments
946
1,270
Other invested assets
3,503
3,595
Total investments
64,283
65,946
Cash and cash equivalents
2,100
4,298
Accrued investment income
528
514
Deferred acquisition costs
12,599
12,923
Reinsurance recoverable, net of allowance
for credit losses of $39 and $15 at June 30, 2023 and December 31,
2022, respectively
27,069
29,046
Reinsurance recoverable on market risk
benefits, at fair value
194
221
Market risk benefit assets, at fair
value
5,957
4,865
Deferred income taxes, net
681
320
Other assets
850
944
Separate account assets
212,719
195,906
Total assets
$
326,980
$
314,983
Condensed Consolidated Balance
Sheets
June 30,
December 31,
2023
2022
(in millions, except share and per
share data)
Liabilities and Equity
Liabilities
Reserves for future policy benefits and
claims payable
$
12,003
$
12,318
Other contract holder funds
56,477
58,190
Market risk benefit liabilities, at fair
value
4,463
5,662
Funds withheld payable under reinsurance
treaties (including $3,602 and $3,582 at fair value under the fair
value option at June 30, 2023 and December 31, 2022,
respectively)
21,170
22,957
Long-term debt
2,633
2,635
Repurchase agreements and securities
lending payable
1,678
1,048
Collateral payable for derivative
instruments
498
689
Freestanding derivative instruments
1,816
2,065
Notes issued by consolidated variable
interest entities, at fair value under fair value option
1,996
1,732
Other liabilities
2,104
2,403
Separate account liabilities
212,719
195,906
Total liabilities
317,557
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 81,910,831 and 82,690,098
shares issued and outstanding at June 30, 2023 and December 31,
2022, respectively
1
1
Additional paid-in capital
5,997
6,063
Treasury stock, at cost; 12,570,175 and
11,784,813 shares at June 30, 2023 and December 31, 2022,
respectively
(466
)
(443
)
Accumulated other comprehensive income
(loss), net of tax expense (benefit) of $(127) and $(66) at June
30, 2023 and December 31, 2022, respectively
(3,365
)
(3,378
)
Retained earnings
5,952
6,403
Total shareholders' equity
8,652
8,646
Noncontrolling interests
771
732
Total equity
9,423
9,378
Total liabilities and equity
326,980
314,983
Condensed Consolidated Income
Statements
Three Months Ended June
30,
Six Months Ended June
30,
(in millions, except per share
data)
2023
2022
2023
2022
Revenues
Fee income
$
1,913
$
1,934
$
3,801
$
3,946
Premiums
52
32
77
69
Net investment income:
Net investment income excluding funds
withheld assets
420
328
835
758
Net investment income on funds withheld
assets
252
364
559
624
Total net investment income
672
692
1,394
1,382
Net gains (losses) on derivatives and
investments:
Net gains (losses) on derivatives and
investments
(2,112
)
2,938
(4,838
)
1,372
Net gains (losses) on funds withheld
reinsurance treaties
(134
)
1,077
(807
)
2,105
Total net gains (losses) on derivatives
and investments
(2,246
)
4,015
(5,645
)
3,477
Other income
19
21
34
41
Total revenues
410
6,694
(339
)
8,915
Benefits and Expenses
Death, other policy benefits and change in
policy reserves, net of deferrals
241
274
469
574
(Gain) loss from updating future policy
benefits cash flow assumptions, net
10
14
24
29
Market risk benefits (gains) losses,
net
(2,570
)
1,184
(2,744
)
(723
)
Interest credited on other contract holder
funds, net of deferrals and amortization
295
209
580
406
Interest expense
58
24
101
44
Operating costs and other expenses, net of
deferrals
620
543
1,236
1,209
Amortization of deferred acquisition
costs
291
307
584
624
Total benefits and expenses
(1,055
)
2,555
250
2,163
Pretax income (loss)
1,465
4,139
(589
)
6,752
Income tax expense (benefit)
245
845
(313
)
1,233
Net income (loss)
1,220
3,294
(276
)
5,519
Less: Net income (loss) attributable to
noncontrolling interests
3
31
4
62
Net income (loss) attributable to Jackson
Financial Inc.
1,217
3,263
(280
)
5,457
Less: Dividends on preferred stock
13
—
13
—
Net income (loss) attributable to Jackson
Financial Inc. common shareholders
$
1,204
$
3,263
$
(293
)
$
5,457
Earnings per share
Basic
$
14.58
$
37.96
$
(3.55
)
$
62.98
Diluted4
$
14.21
$
36.59
$
(3.55
)
$
60.60
______________________________
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.
4
In a quarter in which we reported a net
loss attributable to Jackson Financial Inc., all common stock
equivalents are anti-dilutive and are therefore excluded from the
calculation of diluted shares and diluted per share amounts. The
shares excluded from the diluted EPS calculation were 2,794,562
shares for the six months ended June 30, 2023.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230808857707/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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