Jackson Financial Q1 2025 Earnings Call Transcript

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May 8, 2025
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Operator

for attending the Jackson Financial 1Q twenty twenty five Earnings Call. My name is Matt, and I'll be the moderator for today's call. I'd now like to pass the conference over to our host, Liz Werner, Head of Investor Relations. Liz, please go ahead.

Liz Werner
Liz Werner
SVP - Head of IR at Jackson Financial

Good morning, everyone, and welcome to Jackson's first quarter twenty twenty five earnings call. Today's remarks may contain forward looking statements, which are subject to risks and uncertainties. These statements are not guarantees of future performance or events and are based upon management's current expectations. Jackson's filings with the SEC provide details on important factors that may cause actual results or events to differ materially. Except as required by law, Jackson is under no obligation to update any forward looking statements if circumstances or management's estimates or opinions should change.

Liz Werner
Liz Werner
SVP - Head of IR at Jackson Financial

Today's remarks also refer to certain non GAAP financial measures. The reconciliation of those measures to the most comparable U. S. GAAP figures is included in our earnings release, our financial supplement and earnings presentation, all of which are available on the Investor Relations page of our website at investors.jackson.com. Presenting on today's call are our CEO, Laura Prescorn our CFO, Don Cummings and joining us in the room are our President of Jackson National Life Distributors, Scott Romine our President and Chief Investment Officer of PPM, Craig Smith and Head of Asset Liability Management, Brian Walta.

Liz Werner
Liz Werner
SVP - Head of IR at Jackson Financial

At this time, I'll turn the call over to our CEO, Laura Prescorn. Thank you, Liz.

Laura Prieskorn
Laura Prieskorn
CEO, President & Director at Jackson Financial

Good morning, everyone, and welcome to our first quarter twenty twenty five earnings call. I'll begin by reviewing the quarter's results including our progress toward achieving our 2025 financial targets, our strong capital position and our ability to manage risk and navigate through periods of market uncertainty. Following my remarks, I'll then turn it over to our CFO, Don Cummings to discuss our financial performance in further detail. Beginning with Slide three, Jackson's strong performance during the first quarter reinforces the resilience of our business and value of Jackson's products. We delivered solid results across our business with adjusted operating earnings of $376,000,000 a growth of 13% over the previous year.

Laura Prieskorn
Laura Prieskorn
CEO, President & Director at Jackson Financial

Given our consistent approach to share repurchase and overall return to shareholders our adjusted operating earnings on a per share basis increased over 20% from a year ago. Since becoming an independent public company Jackson has returned over $2,000,000,000 in capital to shareholders while expanding our business and maintaining our financial strength. Our net loss this quarter reflects the impact of third party reinsurance and our modest net hedging results, which Don will discuss shortly. As a reminder, the results of reinsured business do not impact our statutory capital or free cash flow and have a minimal net impact on shareholders' equity. Our leading retail annuities business benefited from strong spread income and sales growth across all products compared to the first quarter of twenty twenty four.

Laura Prieskorn
Laura Prieskorn
CEO, President & Director at Jackson Financial

First quarter retail annuity sales were over $4,000,000,000 up more than 9% from a year ago. Jackson's multi product portfolio positions us well to serve a range of market environments and client needs which was evident again this quarter. Sales of our variable annuities increased nine percent from a year ago to $2,700,000,000 Notably we saw increasing demand for Elite Access our investment only variable annuity. Elite Access growth benefited from the success of our recently introduced Principal Guard feature a guaranteed minimum accumulation benefit. Sales of variable annuities without living benefits were up 40% from the prior year and accounted for nearly 40% of total variable annuity sales.

Laura Prieskorn
Laura Prieskorn
CEO, President & Director at Jackson Financial

We continue to believe there is a long term demand for variable annuity products from the millions of Americans who retire each year seeking both asset growth and guaranteed income. Jackson's successful diversification

Laura Prieskorn
Laura Prieskorn
CEO, President & Director at Jackson Financial

guaranteed resulted in 30% of total first quarter sales coming from traditional variable annuities with lifetime benefits compared to 64% at separation. Jackson's RILEH product suite is a consistent source of new sales at $1,200,000,000 for the quarter up 3% from a year ago. We expect future growth in our RILE business to be supported by the 2024 launch of our plus income optional benefit, the availability of a Jackson RILE product in New York and our expanded distribution opportunities through financial professionals at JPMorgan Wealth Management. Ryla has also led to new and reengaged producer relationships as the product provides advisors and their clients with upside growth potential and downside protection. LIMRA estimates industry RILE sales to be $65,000,000,000 this year and as a top five provider Jackson is well positioned to meet market demand through our product innovation, strong distribution, and industry leading service.

Laura Prieskorn
Laura Prieskorn
CEO, President & Director at Jackson Financial

Turning to fixed and fixed indexed annuity sales, we saw meaningful growth compared to a year ago though at a more moderated level than in the second half of last year. We continue to maintain a disciplined approach to this market and closely monitor market conditions for profitable growth opportunities providing even greater diversification to our retail annuity sales mix. Jackson's innovative approach to product our industry leading service and prudent risk management allow us to provide a broad range of annuity solutions to our distribution partners. Focusing on emerging distribution channels, we believe fee based advisory business is expanding the overall market for annuity products. We continue to see sales momentum within this channel driven by our strong value proposition and beneficial digital experience which help advisors to include annuities in their clients comprehensive financial plans.

Laura Prieskorn
Laura Prieskorn
CEO, President & Director at Jackson Financial

In the first quarter Jackson's advisory sales increased 28% over the first quarter of twenty twenty four. Over the twelve months ending in March 2025, advisory sales are at an annual run rate of more than 1,000,000,000 During the first quarter of twenty twenty five, our healthy and profitable book of business generated excess capital and resulted in an estimated 585% RBC. Distribution from our operating company Jackson National Life provided $240,000,000 in cash to the holding company. Our steady approach to periodic distributions combined with excess holding company liquidity highlights our capital strength and reinforces our confidence in achieving our 2025 financial targets. Turning to Slide four, you can see we are off to a strong start having returned over $230,000,000 to common shareholders while maintaining more than $600,000,000 in holding company liquid assets.

Laura Prieskorn
Laura Prieskorn
CEO, President & Director at Jackson Financial

We look forward to completing our fifth consecutive year of delivering on our financial targets while positioning the company for long term profitability. Additionally, we continue to view a cash dividend as a valuable stream of sustainable capital return and yesterday announced our Board's approval of a second quarter cash dividend of $0.80 per common share. Importantly, Jackson's resilient capital, hedging strategy and risk management discipline have allowed us to manage through the recent period of market volatility with confidence. We also believe that the current environment reinforces the importance of providing security to Americans planning for their retirement. Advisors are increasingly seeing annuities as a valuable tool in delivering this security for their clients, a powerful illustration of this dynamic.

Laura Prieskorn
Laura Prieskorn
CEO, President & Director at Jackson Financial

Jackson's focus on the annuity industry and delivering flexible protection and income oriented solutions is highly valued during times of market uncertainty, and we remain committed to serving our distribution partners and their clients. With that I'll turn the call over to Don.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

Thank you, Laura. I'll begin on Slide five with our first quarter twenty twenty five consolidated financial results. Adjusted operating earnings of $376,000,000 were up 13% over the first quarter of last year. This significant increase was primarily due to higher earnings on spread products, which benefited from gains in net investment income, primarily driven by the growth of our RILA and fixed annuity blocks, as well as higher yields on our bond portfolio. Our high quality conservative investment portfolio supporting the spread product business is well positioned with diversification and strong credit quality, a theme throughout the portfolio.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

The exposure of our portfolio to commercial office loans and below investment grade securities is less than 21% respectively. The appendix of our earnings presentation provides additional information on our investment portfolio. Before turning to notable items in the quarter, I want to highlight the strong and growing return on our per common share book value. The $231,000,000 of capital return during the quarter led to a decrease of $132,000,000 in adjusted book value attributable to common shareholders from year end 2024. However, the corresponding reduction in our diluted share count from buyback activity drove a 2% increase in book value on a diluted share basis to $152.84 Adjusted operating return on common equity for the quarter increased 160 basis points to 13.6% from 12% in the first quarter of twenty twenty four.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

Slide six outlines the notable items included in adjusted operating earnings. Reported adjusted operating earnings per share were $5.1 for the current quarter. Adjusting for $0.10 of notable items and the difference in tax rates from our 15% guidance, earnings per share were $5.2 for the current quarter, up 25% from $4.16 in the prior year's first quarter. This strong improvement was primarily due to the growth in spread income noted earlier, as well as a reduction in diluted share count from common share repurchase activity. The only notable item for the quarter was an $0.11 negative from limited partnership results coming in modestly below our 10% long term assumption.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

On Slide seven, we focus on the diverse profile of our retail annuity segment illustrated by growth of 9% from the first quarter of twenty twenty four. Our RILA product delivered first quarter sales of $1,200,000,000 supporting further diversification in our top line growth. As Laura mentioned, sales of variable annuities remained strong, growing 9% from the first quarter of last year. During the first quarter, we also remain committed to producing spread product sales and delivered $174,000,000 of fixed and fixed index annuity sales in the quarter. Our overall sales mix remained capital efficient during the quarter and this stability provides the opportunity to continue allocating some capital towards spread products as we further diversify our business going forward.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

We are pleased with the diversity of our new business mix since becoming an independent public company. Turning to net flows, the sales we generated in RILA and other spread products translated to 1,300,000,000 of non variable annuity net flows in the first quarter. These net flows provide valuable economic diversification and hedging efficiency benefits. As we discussed last quarter, variable annuity net flows have been elevated in recent quarters, reflecting the healthy money in this profile of our book, the aging of policyholders and large past sales years coming out of the surrender period. In the current quarter, the all in surrender and benefit rate, including partial withdrawals and death benefits, declined 60 basis points from the fourth quarter of twenty twenty four.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

Our experience indicates that surrenders tend to decline during down equity markets as benefits become more in the money. Looking at pretax adjusted operating earnings for our segments on Slide eight, a continued positive environment for spread products was offset by higher general and administrative expenses in our retail annuity segment compared to the first quarter of last year, primarily a result of seasonality and compensation expense. Results for retail annuities were down from the fourth quarter of last year, primarily because of declines in average variable annuity AUM due to lower equity markets and lower spread income due in part to lower levels of limited partnership income in the current quarter. Jackson's earnings power is supported by the level of assets under management as growing non variable annuity net flows and strong separate account returns have built our average retail annuity AUM to $246,000,000,000 up from $242,000,000,000 in the first quarter of twenty twenty four. For our Institutional segment, pretax adjusted operating earnings were down from the first quarter of last year, reflecting lower spread income and were broadly in line with the fourth quarter of last year.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

Our higher level of new business activity in 2024 has continued into 2025 and we will maintain our opportunistic approach in the institutional marketplace. Our Closed Block segment reported pretax adjusted operating earnings that were improved from the first quarter of last year due to higher net investment income. Results were up sequentially due to the assumptions review impacts on pretax adjusted operating earnings in the fourth quarter of last year. Slide nine includes a waterfall comparison of our first quarter pretax adjusted operating earnings of $442,000,000 to the GAAP pretax loss attributable to Jackson Financial of $23,000,000 Our hedging program reported a consolidated net hedge loss of $134,000,000 in the first quarter. Our move to a more economic hedging approach in 2024 has clearly provided more stability in our non operating results and capital generation, which has continued into 2025.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

Our hedging program is supported by a stable stream of guaranteed benefit fees that are assessed on the benefit base rather than account value. This approach provides stability to the guarantee fees even in periods when markets decline. Guarantee fees for the first quarter were $800,000,000 and totaled $3,100,000,000 over the trailing twelve months. During the first quarter, our hedge results included a net gain of about $1,000,000,000 on hedging assets supporting our variable annuity and RILEB business. This gain was primarily from interest rate hedges as long term interest rates were down about 30 basis points during the quarter and a gain on equity hedges reflecting modestly lower equity markets.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

Changes in market risk benefits or MRB were driven in part by the same interest rate and equity market movements leading to a $2,200,000,000 offset to the hedging assets gain. As a reminder, changes in the MRB relate primarily to our variable annuity business and include the impact of equity index implied volatility, which was elevated during the quarter. Changes in implied volatility do not impact our Brook Re MRB measurement since its modified GAAP methodology uses a fixed volatility assumption designed to promote balance sheet stability. The reserve and embedded derivative gain of $333,000,000 during the first quarter primarily reflects decreases in RILA reserves resulting from lower equity markets. The RILA business continues to provide an economic equity risk offset to our variable annuity guarantee business, which results in hedging efficiencies.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

We believe the first quarter results demonstrate that our hedging program continues to be effective in improving the stability of our capital generation in managing the economic risks of our business. Slide 10 highlights our capital generation and free cash flow for the quarter. As previously discussed, Jackson adheres to an earn it, then pay it philosophy for capital return. This philosophy is built upon three pillars, the generation of free capital where we earn it, the creation of free cash flow where we pay it, and ultimately the return of capital to our common shareholders. After tax statutory capital generation was $441,000,000 in the first quarter of twenty twenty five.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

We believe this metric offers helpful insight into the underlying strength of our business and provides the foundation for making capital allocation decisions about future organic growth, pursuing strategic inorganic opportunities and returning capital to shareholders. Pre capital generation was $4.00 $7,000,000 reflecting the change in required capital or CAL resulting from our strong and diversified new business results during the quarter. Free capital generation represents excess capital that is available to support cash distributions to the holding company subject to regulatory considerations and desired RBC ratio levels at the operating company. With the strong start to the year, free capital generation is on pace to exceed the $1,000,000,000 plus expectation for full year 2025 we communicated last quarter. We believe this leaves us well positioned to continue to deliver on our strategic and operational objectives as well as our capital return targets for 2025 even when considering recent market volatility.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

Free cash flow grew substantially in the current quarter, once again illustrating the stability of our capital generation. In the first quarter of twenty twenty five, approximately 60% of free capital generation or $240,000,000 was distributed to JFI, which brings our trailing twelve month total to nearly $1,100,000,000 After covering expenses and other cash flow items at the holding company, the resulting free cash flow of $213,000,000 in the quarter brought the trailing twelve month total to nearly $1,000,000,000 Let me just reiterate this. Over the last twelve months, distributed $1,100,000,000 to the holding company and generated free cash flow of $960,000,000 a very strong result. The outcome of our strong free capital generation and growing free cash flow allowed us to return $231,000,000 to common shareholders in the quarter, up 44% from last year's first quarter on a per diluted share basis. On a trailing twelve month basis, we have returned nearly $700,000,000 and we are highly confident in our ability to meet our full year 2025 capital return target.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

Overall, these results highlight Jackson's strong capital generation profile and stable cash distributions to JFI, which have enhanced value for our shareholders. Slide 11 summarizes our formidable capital and liquidity position for the quarter. The profitability of our in force business driven by fee income from our variable annuity based contract and growing spread based earnings provided statutory capital generation of $441,000,000 during the first quarter. The current quarter capital generation includes a tax benefit driven by utilization of net operating losses and additional admitted deferred tax assets. As we have discussed in prior calls, we plan to take smaller periodic distributions from Jackson National Life and during the first quarter we distributed $240,000,000 After accounting for the impact of this distribution reduction in deferred tax asset admissibility, Jackson's total adjusted capital or TAC increased and ended the quarter at $5,200,000,000 Required capital at Jackson National Life has continued to remain stable as was apparent in our first quarter results with estimated CAL slightly higher reflecting our diversified new business activity.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

Our estimated RBC ratio was up from the fourth quarter of twenty twenty four to 585% and remains well above our minimum of four twenty five percent. We believe Jackson is operating from a position of strength considering the elevated market volatility and macro environment experienced since the end of the first quarter. During the first quarter of twenty twenty five, Brookree continued to operate as expected and we did see a modest increase in equity from our year end level of $2,100,000,000 Brook Re's capitalization remains well above our minimum operating capital level and our risk management framework, which reflects a variety of detailed scenarios. During our last earnings call, we committed to sharing any capital contributions to or distributions of capital from Brookree and we can confirm that we did not take either of those actions with Brookree during the quarter. Going forward, we will continue to manage Brookree on a self sustaining basis given the long term nature of its liabilities.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

Our holding company cash and highly liquid asset position at the end of the quarter was more than $600,000,000 which continues to be above our minimum buffer and provides substantial financial flexibility. The modest decline from the year end level was the result of capital returns during the quarter. Overall, our first quarter twenty twenty five results demonstrate positive momentum in our business and the strength of our balance sheet and capital position. Before turning the call back to Laura, I want to provide some additional context on the performance of our business since the end of the first quarter considering the market volatility we've seen. During early April, we experienced historic levels of market volatility and uncertainty comparable to the levels we observed during other times of extreme market stress.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

Our hedging program performed well during this period, providing substantial payoffs and stabilizing our equity position at Brookree. As we previously communicated, periods of heightened volatility combined with major equity market and interest rate shifts can be challenging environments for dynamic hedging programs. After ending 2024 at $2,100,000,000 in equity, Brookry saw modest growth in the first quarter and experienced some decline during April due to the heightened level of market volatility. Importantly, we remain in a very healthy position relative to our risk management framework and minimum operating capital. Brook Re was initially structured and capitalized to withstand stressful market environments and we are pleased with the performance of our hedging program during April.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

Brook Re did not require any capital contributions during April and the hard assets at Brook Re have increased since its formation. Jackson has a long track record of successfully managing through multiple market environments and we will continue to execute on our strong risk management framework going forward. As we discussed on prior calls, following the establishment of Brookree, our capital position and RBC ratio at Jackson National Life is much less sensitive to equity market movements. This results in the economics at Jackson National Life being more like an asset management business. As a result of Brook Re, the main impact of lower equity markets is on AUM and future capital generation rather than a large immediate reduction in capital or RBC.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

While declines in AUM reduced the level of future capital generation at Jackson National Life, it will continue to be materially positive given the size of our in force book, profits from our growing RILE business and our efficient operating platform. From a spread business perspective, our conservative investment portfolio is positioned well for times of volatility with diversification and strong credit quality throughout the portfolio. Lastly, we entered the second quarter of twenty twenty five in a very healthy financial position with significant levels of excess capital, a conservative investment portfolio and a strong liquidity position at the holding company. We have a consistent history of prudent pricing and product design, a focus on balance sheet strength and a track record of strong risk management across market environments. We are well positioned to continue delivering on our strategic and operational objectives as well as our capital return targets for 2025.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

I'll now turn the call back to Laura.

Laura Prieskorn
Laura Prieskorn
CEO, President & Director at Jackson Financial

Thank you, Don. Our first quarter results are a solid start to the year and we look forward to future opportunities to discuss our progress. We remain dedicated to serving financial professionals and their clients with the goal of helping Americans grow and protect their retirement savings and income. As always, I'd like to recognize the efforts of our associates whose talent and dedication remain our greatest strength. At this time, I'll turn the call over to the operator for questions.

Operator

First question is from the line of Suneet Kamath with Jefferies. Your line is now open.

Suneet Kamath
Senior Research Analyst at Jefferies & Company Inc

Thanks. Good morning. So we've all seen these media reports that have indicated your interest in potentially acquiring in the annuity business. I'm not asking you to comment on that. Of course, you can if you want to.

Suneet Kamath
Senior Research Analyst at Jefferies & Company Inc

But just more broadly, I was just curious if you could kind of give us your philosophy as it relates to inorganic growth or M and A. Thanks.

Laura Prieskorn
Laura Prieskorn
CEO, President & Director at Jackson Financial

Good morning, Suneet. Thank you for the question. In terms of growth opportunities for us, I would share that we have completed successful bolt on acquisitions in the past with Life of Georgia, Realick, and John Hancock. Those were all three different transactions. And going forward, any opportunity that we would evaluate would be done in comparison to the value we would receive from share buybacks or balance sheet strengthening.

Suneet Kamath
Senior Research Analyst at Jefferies & Company Inc

Okay. And then I guess, separate question. You talked about growing the spread based products. And as we think about the landscape, it seems like most of the companies that are, pursuing a similar strategy have an alternative asset management partner in some way, shape or form. I think you stand out as an exception there.

Suneet Kamath
Senior Research Analyst at Jefferies & Company Inc

So just wondering if you could provide some thoughts on how you think about that strategy? And do you think it puts you at a competitive disadvantage relative to some of those peers that have already kind of moved in that direction? Yes.

Laura Prieskorn
Laura Prieskorn
CEO, President & Director at Jackson Financial

Thank you for that question. It is a market that we approach with discipline, and the the competitive landscape certainly has become very active with the growth that you've seen over the last couple of years. We continue to evaluate the the competitiveness and, reprice our our products actively. I think as we, you know, continue to move forward, we stay open to, you know, ideas and opportunities to change how we compete in that market. But if, you know, Don had stated in his prepared remarks, you know, we're continuing to see growth in sales and spread products, and, you know, we'll maintain the discipline that that we've had in in the past.

Laura Prieskorn
Laura Prieskorn
CEO, President & Director at Jackson Financial

And, if opportunities present itself for us to do something different to compete, we'll we'll be open to, what those opportunities are.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

And I I might just add there, Sydney. Go ahead.

Suneet Kamath
Senior Research Analyst at Jefferies & Company Inc

Sure.

Suneet Kamath
Senior Research Analyst at Jefferies & Company Inc

Go ahead.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

Oh, yeah. You can you can have a follow-up. But I might just add there in terms of, you know, spread products, we consider Rilla a spread product. And so you've seen that we've had a fair amount of success there without having to have a relationship like you're describing. We do see that more common on the traditional kinds of spread products, in particular with MYGAs and fixed index annuities.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

But we do think we can be very competitive and remain competitive in the RIOA space. We've grown that business from essentially zero over the last few years to about $12,000,000,000 in AUM.

Suneet Kamath
Senior Research Analyst at Jefferies & Company Inc

Got it. If I could just sneak one more in. You made an interesting comment in your prepared remarks about fee based advisers selling more annuities. Just wondering kind of if you can unpack that a little bit. What's driving it?

Suneet Kamath
Senior Research Analyst at Jefferies & Company Inc

And and how do you structure a product for that type of adviser? Thanks.

Laura Prieskorn
Laura Prieskorn
CEO, President & Director at Jackson Financial

Yes. Thank you for that question. And I'll, ask Scott to share remarks about, how we've approached that market and, you know, what we see in terms of the opportunity there.

Scott Romine
Scott Romine
President & CEO of Jackson National Life Distributors LLC at Jackson Financial

Yeah. Thank you. So the the the fee based for for us, it's it's all about, providing choice to advisers. And whatever's in the best interest of the client adviser relationship, we're agnostic. If they prefer the relationship calls for commission or fee based, we want to make sure that we provide an adequate solution.

Scott Romine
Scott Romine
President & CEO of Jackson National Life Distributors LLC at Jackson Financial

A lot of that has been our ability to build out modeling and financial planning tools that fee based advisers use. It's the ability to use all of our products in either a fee based or commission wrapper. And it's the growth of the RIA space as well.

Suneet Kamath
Senior Research Analyst at Jefferies & Company Inc

Okay. Thanks for the answers.

Operator

Thank you for your question. Next question is from the line of Tom Gallagher with Evercore ISI. Your line is now open.

Thomas Gallagher
Senior Managing Director at Evercore

Good

Thomas Gallagher
Senior Managing Director at Evercore

morning. First question for Don. When you mentioned, I guess, there was some impact on capital in April in Brookree, it didn't require a capital contribution. Guess, we don't know what your target capital level is compared to the $2,100,000,000 of capital that's there. So I'm not sure if there's a big buffer.

Thomas Gallagher
Senior Managing Director at Evercore

But maybe can you just dimension how big of an impact was the capital the impact to capital that you saw from April experience? Was it large, modest, somewhere in between? And I don't know if you're able to provide any sort of sensitivity relative to the $2,100,000,000 Is there a good buffer there to think about? Thanks.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

Tom. Thanks for that question. So in terms of what we saw in April at Brook Re, I would describe it as a fairly modest impact. And I think maybe it would be helpful just to kind of reiterate some of our prior disclosures related to Brookree. In particular, when we capitalized the company in the first quarter of last year, we had a total capital of about 1,900,000,000.0 and that included cash and investments or what we call hard assets of about $700,000,000 And as I mentioned in the prepared remarks, other than that initial formation, we've not made any capital contributions to or taken any capital out of Brookry, and that continues up until now.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

Obviously, we did see some impact in April, as I mentioned in the prepared remarks, but was fairly modest. In terms of the level of capitalization and how we think about that and sort of the buffer that we have, there's two components that you need to keep in mind. First of all, there's the minimum operating capital, which you can think about that as sort of the regulatory level of capitalization. And it's very similar to an NAIC RBC framework. However, given that we use modified GAAP accounting for Brookree, we have translated some of the components related to market risk to a more appropriate metric, and it captures something that is similar to the CTE98 framework that exists on a statutory basis.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

And then the second component, and this is what we focus on probably more than the regulatory because it's capital that's above and beyond the minimum operating capital, and that's our internal risk framework. And, you know, we designed that framework to ensure that we've got sufficient capital above that minimum level following adverse scenarios. And it looks at, you know, multiple time frames, and it targets maintaining capital so that we've got excess capital above the minimum in more than 95% of scenarios. And when we initially capitalized Brookree, we have disclosed this previously that we were above that level, kind of closer to the ninety eighth percentile. And as of the end of the first quarter, we're in a much stronger position than we were when we originally capitalized Brookree.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

So that's kind of gives you should give you a sense of how we look at capitalization and capital adequacy of Brookree. We do feel like we have a buffer given this framework of focusing on the regulatory capital and above and beyond that, our risk framework capital.

Thomas Gallagher
Senior Managing Director at Evercore

That is helpful, Don. Appreciate it. The my follow-up is just on the I think it was mentioned statutory capital generation and statutory earnings benefited there was a tax benefit in the current quarter, something about the DTA. How big of an impact was that on capital generation in the quarter?

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

Yes. We haven't quantified that, Tom. But actually, there's two things that impact taxes for us in the first quarter. The first one is fairly straightforward. When our pretax capital generation increases, that allows us to admit more of our non admitted DTA.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

And we have about a $1,300,000,000 roughly non admitted DTA at J and L. And so that was about half of the impact. And then the other piece was related to being able to utilize NOLs.

Thomas Gallagher
Senior Managing Director at Evercore

Got you. Thank you.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

Thank you.

Operator

Thank you for your question. Next question is from the line of Ryan Krueger with KBW. Your line is now open.

Ryan Krueger
Managing Director at Keefe, Bruyette & Woods (KBW)

Hey, thanks. Good morning. Could you remind us what we've updated on the potential sensitivity to market rates and also the impact you think could require a capital contribution to Burkree. I believe you gave us those at one point, but, I think, you know, your capital, you could have changed since then, but, we can come in and update there.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

Hey, Ryan. You were kind of breaking up there on that question, but I think maybe if I could just confirm, you're asking about the sensitivities to sort of market levels and interest rates on our capital generation. Did I get that right?

Ryan Krueger
Managing Director at Keefe, Bruyette & Woods (KBW)

Sorry. No. You had given sensitivities to or, I guess, scenarios that could require you to contribute capital to the degree in the past, and I think they related to market rates and volatility, and I was just seeing if you could give us an updated view of that.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

I think I got it. So yeah. So so we did, in the past, we have described the type of scenario that would potentially require us to inject capital into Brookree. And I do think that, you know, the experience that we saw in April was a good test for us, and and, you know, we didn't have to put any capital in. But in general, those scenarios that would, you know, involve a need for capital at Brookree would be scenarios where there's a very, very high level of volatility combined with a deep equity stress and or a combination of equity and interest rate stresses.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

And these would generally be environments similar the global financial crisis or the COVID shock that we experienced in 2020.

Ryan Krueger
Managing Director at Keefe, Bruyette & Woods (KBW)

I guess just as a as a quick follow-up to that, like, how important is the duration of of the elevated volatility? So, obviously, we you know, April was probably a month on a stand alone basis that was similar to the the stress scenarios, but it was also only one month. Is is it would it require a scenario where volatility was was particularly elevated for, you know, a a pretty extended period of time, like a year?

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

Yeah. I'll start on that, and maybe I'll ask Brian, who runs our ALN and our head program, to chime in. But you know, I think it it would be an environment where it's elevated for a longer period of time than than we just experienced. And I think, you know, the key thing that we look at with respect to to Brook Ray is the internal risk management framework that I described earlier in response to another question. And we do design that so that we're making sure that we've got sufficient capital in kind of those deep tail scenarios.

Don Cummings
Don Cummings
EVP & CFO at Jackson Financial

But maybe I'll just let Brian just provide a little bit more color around volatility. Thanks, Don. Yes, I

Executive

would agree that the longer the duration, the more problematic it would be. But at the same time, we do have a combination of both futures and options, and those options help to protect against realized volatility. And so to the extent that you are in that regime, you can potentially add more options. And I would note that we did continue to add options during Q1 and during Q2 as well to kind of mitigate that potential realized volatility risk. And from an option standpoint, we also have the ability to be flexible on the types of options we buy depending on the implied volatility regime to make sure we manage our costs as well.

Ryan Krueger
Managing Director at Keefe, Bruyette & Woods (KBW)

Thank you.

Operator

Thank you for your question. There are currently no further questions registered. There are no additional questions waiting at this time. So I'll pass the call back to Laura Priestkorn, CEO, for any closing remarks.

Laura Prieskorn
Laura Prieskorn
CEO, President & Director at Jackson Financial

Thank you. We appreciate your continued interest in Jackson and the questions that we received today. As you've heard this morning, Jackson's strong performance during the first quarter reinforces the resilience of our business and the value our products have in the lives of Americans planning for retirement. We look forward to continuing these discussions and sharing our progress toward our 2025 targets after next quarter. Thank you.

Operator

That concludes the conference call. Thank you for your participation. You may now disconnect your lines.

Executives
Analysts
    • Suneet Kamath
      Senior Research Analyst at Jefferies & Company Inc
    • Thomas Gallagher
      Senior Managing Director at Evercore
    • Ryan Krueger
      Managing Director at Keefe, Bruyette & Woods (KBW)
    • Executive
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Key Takeaways

  • Jackson delivered $376 million in adjusted operating earnings in Q1 2025, up 13% year-over-year and more than 20% per share, reflecting strong spread income and consistent share repurchases.
  • Retail annuity sales exceeded $4 billion (+9% YoY), with variable annuities up 9% (including Elite Access growth) and RILA sales of $1.2 billion (+3%) driven by new features and expanded distribution.
  • Capital and liquidity remain robust with a 585% RBC ratio, $441 million in statutory capital generation, over $600 million in holding company liquidity, and a Q2 cash dividend of $0.80 per share.
  • Jackson’s hedging and risk management proved effective during Q1 market volatility, with Brook Re maintaining strong hard assets (~$2.1 billion) and requiring no additional capital contributions despite historic swings.
  • Fee-based advisory sales grew 28%, underpinned by digital tools and product flexibility, while the company maintains a disciplined approach to spread products including fixed and fixed indexed annuities.
AI Generated. May Contain Errors.
Earnings Conference Call
Jackson Financial Q1 2025
00:00 / 00:00

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