PART I—FINANCIAL INFORMATION Item 1. Financial Statements This section presents Jackson Financial Inc.'s unaudited condensed consolidated financial statements for Q3 2024 and FY2023, including core statements and notes Condensed Consolidated Balance Sheets Total assets grew to $345,662 million by September 30, 2024, primarily from separate account assets, with equity reaching $10,907 million Condensed Consolidated Balance Sheet Highlights (in millions) | Metric | Sep 30, 2024 (Unaudited) | Dec 31, 2023 | | :---------------------- | :----------------------- | :----------- | | Total Assets | $345,662 | $330,255 | | Total Liabilities | $334,755 | $319,921 | | Total Equity | $10,907 | $10,334 | | Separate Account Assets | $235,037 | $219,656 | | Total Investments | $63,003 | $60,855 | - Total assets increased by $15,407 million (4.66%) from December 31, 2023, to September 30, 2024, primarily due to increases in separate account assets and total investments6 - Total equity increased by $573 million (5.54%) from December 31, 2023, to September 30, 20246 Condensed Consolidated Income Statements For Q3 2024, the company reported a net loss of $466 million, a significant decrease from prior year net income, driven by market risk benefits and derivatives Condensed Consolidated Income Statement Highlights (in millions, except per share data) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total Revenues | $2,121 | $2,585 | $3,046 | $2,201 | | Total Benefits and Expenses | $2,700 | $(917) | $2,404 | $(712) | | Pretax Income (Loss) | $(579) | $3,502 | $642 | $2,913 | | Net Income (Loss) attributable to Jackson Financial Inc. | $(469) | $2,773 | $601 | $2,493 | | Net Income (Loss) attributable to Jackson Financial Inc. common shareholders | $(480) | $2,762 | $568 | $2,469 | | Basic EPS | $(6.37) | $33.66 | $7.41 | $29.95 | | Diluted EPS | $(6.37) | $33.35 | $7.34 | $29.20 | - Pretax income (loss) decreased by $4,081 million for the three months ended September 30, 2024, to $(579) million, primarily due to unfavorable movements in market risk benefits and net gains/losses on derivatives and investments450451 - Basic EPS for the three months ended September 30, 2024, was $(6.37), a significant decline from $33.66 in the prior year quarter8 Condensed Consolidated Statements of Comprehensive Income (Loss) Comprehensive income for Q3 2024 was $777 million, a decrease from the prior year, while the nine-month period saw an increase to $1,043 million, influenced by unrealized gains/losses on securities Condensed Consolidated Statements of Comprehensive Income (Loss) Highlights (in millions) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income (loss) | $(466) | $2,790 | $618 | $2,514 | | Change in unrealized gains (losses) on securities with no credit impairment, net of tax | $1,679 | $(1,223) | $1,170 | $(787) | | Change in current discount rate related to reserve for future policy benefits, net of tax | $(219) | $199 | $(103) | $160 | | Change in non-performance risk on market risk benefits, net of tax | $(184) | $(783) | $(614) | $(1,158) | | Total other comprehensive income (loss) | $1,243 | $(1,822) | $425 | $(1,809) | | Comprehensive income (loss) attributable to Jackson Financial Inc. | $774 | $951 | $1,026 | $684 | - Total other comprehensive income (loss) significantly improved to $1,243 million for the three months ended September 30, 2024, from a loss of $1,822 million in the prior year, primarily due to a positive change in unrealized gains on securities11 Condensed Consolidated Statements of Equity Total equity for Jackson Financial Inc. increased to $10,907 million by September 30, 2024, driven by net income and other comprehensive income, partially offset by dividends and treasury stock purchases Condensed Consolidated Statements of Equity Highlights (in millions) | Metric | Sep 30, 2024 | Dec 31, 2023 | | :----------------------------------------- | :----------- | :----------- | | Total Shareholders' Equity | $10,698 | $10,170 | | Noncontrolling Interests | $209 | $164 | | Total Equity | $10,907 | $10,334 | | Net income (loss) attributable to JFI | $(469) | $601 | | Other comprehensive income (loss) | $1,243 | $425 | | Dividends on common stock | $(54) | $(164) | | Purchase of treasury stock | $(113) | $(343) | - Total equity increased by $573 million from December 31, 2023, to September 30, 20241214 - Treasury stock purchases amounted to $113 million for the three months ended September 30, 2024, and $343 million for the nine months ended September 30, 20241214 Condensed Consolidated Statements of Cash Flows Net cash from operating activities increased to $4,268 million for the nine months ended September 30, 2024, while investing activities used $(4,321) million, and financing activities provided $423 million Condensed Consolidated Statements of Cash Flows Highlights (in millions) | Metric | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :-------------------------------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $4,268 | $3,676 | | Net cash provided by (used in) investing activities | $(4,321) | $(685) | | Net cash provided by (used in) financing activities | $423 | $(4,527) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $370 | $(1,536) | | Total cash, cash equivalents, and restricted cash at end of period | $3,061 | $2,765 | - Net cash provided by operating activities increased by $592 million (16.1%) for the nine months ended September 30, 2024, compared to the prior year521 - Net cash used in investing activities increased by $3,636 million, primarily due to increased purchases of debt securities, partially offset by lower outflows related to hedging program for derivative settlements and collateral523 - Net cash provided by financing activities increased by $4,950 million, driven by higher deposits from RILA and fixed sales and increased proceeds from repurchase agreements, partially offset by prior year preferred stock issuance proceeds525 Note 1. Business and Basis of Presentation Jackson Financial Inc. (JFI) is a U.S.-domiciled financial services company focused on retirement savings, with financial statements prepared under U.S. GAAP and reclassifications made in 2024 for improved performance representation - Jackson Financial Inc. (JFI) is a financial services company focused on retirement savings and income, operating through subsidiaries like Jackson National Life Insurance Company, PPM America, Inc., and Brooke Life Reinsurance Company2022 - Effective January 1, 2024, interest rate swaps for duration management were recharacterized to support hedging of variable annuity market risk benefits, with settlements now classified as non-operating29 - Interest costs related to portfolio leverage transactions were reclassified from Interest Expense to Net Investment Income, impacting both GAAP Net Income and non-GAAP pretax adjusted operating earnings32 Note 2. New Accounting Standards The company adopted ASU 2020-04 (Reference Rate Reform) with no material impact and is evaluating ASU 2023-07 and ASU 2023-09 for future adoption - Adopted ASU 2020-04, 'Reference Rate Reform,' deferring the sunset date to December 31, 2024, with no material impact on Condensed Consolidated Financial Statements35 - Evaluating ASU 2023-07, 'Improvements to Reportable Segment Disclosures,' effective for annual periods after December 15, 2023, and interim periods after December 15, 2024; no early adoption planned3637 - Evaluating ASU 2023-09, 'Improvements to Income Tax Disclosures,' effective for annual periods after December 15, 2024; transition method and timing of adoption are being determined38 Note 3. Segment Information The company operates through Retail Annuities, Institutional Products, and Closed Life and Annuity Blocks, measuring performance using non-GAAP pretax adjusted operating earnings, with Retail Annuities reporting $458 million in Q3 2024 - The company's reportable segments are Retail Annuities, Institutional Products, and Closed Life and Annuity Blocks, with a Corporate and Other segment for unallocated activities39 - Pretax adjusted operating earnings, a non-GAAP measure, is used to evaluate segment performance by excluding highly variable or non-recurring items like net hedging results and realized investment gains/losses495051 Pretax Adjusted Operating Earnings by Segment (in millions) | Segment | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :----------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Retail Annuities | $458 | $354 | $1,342 | $1,038 | | Institutional Products | $17 | $21 | $77 | $47 | | Closed Life and Annuity Blocks | $7 | $6 | $61 | $(7) | | Corporate and Other | $(71) | $(26) | $(207) | $(116) | | Total Pretax Adjusted Operating Earnings | $411 | $355 | $1,273 | $962 | Note 4. Investments The company's investment portfolio, primarily fixed-income securities and loans, totaled $63,003 million by September 30, 2024, with 92.7% in investment grade debt securities - Investment strategy focuses on fixed-income securities and loans to match asset yield with interest-sensitive liabilities and earn stable returns65 Debt Securities Composition by Rating (Fair Value, % of Total) | Investment Rating | Sep 30, 2024 | Dec 31, 2023 | | :--------------------------- | :----------- | :----------- | | U.S. government securities | 7.6% | 10.1% | | AAA | 6.2% | 6.5% | | AA | 9.4% | 9.0% | | A | 31.8% | 31.5% | | BBB | 37.7% | 35.9% | | Investment grade | 92.7% | 93.0% | | BB | 3.4% | 3.5% | | B and below | 3.9% | 3.5% | | Below investment grade | 7.3% | 7.0% | | Total debt securities | 100.0% | 100.0% | Mortgage Loans by Property Type (in millions, net of ACL) | Property Type | Sep 30, 2024 | Dec 31, 2023 | | :------------ | :----------- | :----------- | | Commercial | $9,114 | $9,562 | | Residential | $882 | $1,001 | | Total | $9,996 | $10,563 | - Unrealized losses on debt securities are primarily due to widening credit spreads or rising risk-free rates, with management expecting recovery of amortized cost for impaired securities80 Note 5. Derivative Instruments The company uses derivative instruments to mitigate market risks, with a total contractual/notional amount of $92,920 million and a net fair value liability of $(1,762) million by September 30, 2024 - Derivative instruments are used to mitigate interest rate, equity market, and foreign exchange risks, but are not designated as hedging instruments for accounting purposes140 Derivative Instruments Summary (in millions) | Metric | Sep 30, 2024 | Dec 31, 2023 | | :------------------------------------------------------------------ | :----------- | :----------- | | Total Contractual/Notional Amount | $92,920 | $119,225 | | Total Freestanding Derivatives (Net Fair Value Asset (Liability)) | $(135) | $(835) | | Total Embedded Derivatives (Net Fair Value Asset (Liability)) | $(3,624) | $(2,090) | | Total Derivatives related to funds withheld (Net Fair Value Asset (Liability)) | $1,997 | $2,483 | | Total Net Fair Value Asset (Liability) | $(1,762) | $(442) | - Net gains (losses) on derivative instruments (excluding funds withheld) for the nine months ended September 30, 2024, were $(4,050) million, compared to $(4,938) million in the prior year, reflecting market movements145 Note 6. Fair Value Measurements The company measures financial instruments at fair value, with total assets of $295,808 million and liabilities of $12,518 million by September 30, 2024, categorized by input observability - Fair values for debt and equity securities are determined using independent pricing services, broker-dealer quotes, or internally derived estimates, prioritizing publicly available information151 Assets Measured at Fair Value on a Recurring Basis (in millions) | Asset Category | Total | Level 1 | Level 2 | Level 3 | | :-------------------------------------- | :----------- | :----------- | :----------- | :----------- | | Debt securities | $45,299 | $3,449 | $40,263 | $1,254 | | Equity securities | $213 | — | $206 | $7 | | Mortgage loans | $432 | — | — | $432 | | Policy loans | $3,535 | — | — | $3,535 | | Freestanding derivative instruments | $295 | — | $295 | — | | Cash and cash equivalents | $3,061 | $3,061 | — | — | | Reinsurance recoverable on market risk benefits | $149 | — | — | $149 | | Market risk benefit assets | $7,615 | — | — | $7,615 | | Separate account assets | $235,037 | — | $235,037 | — | | Total Assets | $295,808 | $6,510 | $276,134 | $13,164 | Liabilities Measured at Fair Value on a Recurring Basis (in millions) | Liability Category | Total | Level 1 | Level 2 | Level 3 | | :-------------------------------------- | :----------- | :----------- | :----------- | :----------- | | Embedded derivative liabilities | $3,624 | — | $3,624 | — | | Funds withheld payable under reinsurance treaties | $1,719 | — | — | $1,719 | | Freestanding derivative instruments | $425 | — | $425 | — | | Notes issued by consolidated VIEs | $2,366 | — | $2,366 | — | | Market risk benefit liabilities | $4,384 | — | — | $4,384 | | Total Liabilities | $12,518 | — | $6,415 | $6,103 | - Significant unobservable inputs (Level 3) for market risk benefits include mortality, lapse, utilization, withdrawal rates, non-performance risk adjustment, and long-term equity volatility, with their increase/decrease impacting fair value197 Note 7. Deferred Acquisition Costs Deferred acquisition costs (DAC) represent capitalized costs for new/renewal insurance business, amortized over expected contract terms, with a total balance of $11,986 million by September 30, 2024 - DAC are capitalized costs for new/renewal insurance business, amortized over expected contract terms using best estimate assumptions for mortality and persistency237239 Deferred Acquisition Costs (DAC) Roll-Forward (in millions) | Metric | Nine Months Ended Sep 30, 2024 | Year Ended Dec 31, 2023 | | :------------------------------------ | :----------------------------- | :---------------------- | | Variable Annuities Balance, beginning of period | $11,967 | $12,699 | | Deferrals of acquisition costs | $308 | $394 | | Amortization | $(802) | $(1,126) | | Variable Annuities balance, end of period | $11,473 | $11,967 | | Other product lines, end of period | $513 | $335 | | Total balance, end of period | $11,986 | $12,302 | Note 8. Reinsurance The company uses reinsurance to limit losses, with recoverables totaling $22,959 million by September 30, 2024, and funds withheld payable under treaties amounting to $18,103 million - The company assumes and cedes reinsurance to limit losses, monitoring reinsurer financial strength; key agreements include Athene Reinsurance and Swiss Re retrocession treaties244245246 Reinsurance Recoverables (excluding MRBs) (in millions) | Reserve Type | Sep 30, 2024 | Dec 31, 2023 | | :--------------------- | :----------- | :----------- | | Life | $5,380 | $5,370 | | Accident and health | $508 | $510 | | Annuity benefits | $16,411 | $18,873 | | Claims liability and other | $660 | $669 | | Total | $22,959 | $25,422 | - Funds withheld payable under reinsurance treaties, including an embedded derivative, totaled $18,103 million as of September 30, 2024263 Note 9. Reserves for Future Policy Benefits and Claims Payable Total reserves for future policy benefits and claims payable were $11,543 million by September 30, 2024, actuarially determined using the net premium ratio model based on best estimate assumptions - Reserves for future policy benefits are measured using the net premium ratio (NPR) model, based on best estimate assumptions and updated annually or as circumstances warrant267 Reserves for Future Policy Benefits and Claims Payable (in millions) | Reserve Type | Sep 30, 2024 | Dec 31, 2023 | | :------------------------------------------ | :----------- | :----------- | | Payout Annuities | $1,143 | $1,090 | | Closed Block Life | $3,847 | $3,994 | | Closed Block Annuity | $4,056 | $4,215 | | Reserves for future policy benefits | $9,046 | $9,299 | | Additional liabilities (Closed Block Life) | $1,104 | $1,153 | | Other future policy benefits and claims payable | $1,393 | $1,446 | | Total Reserves for future policy benefits and claims payable | $11,543 | $11,898 | Weighted Average Duration and Interest Accretion Rates for Reserves | Reserve Type | Sep 30, 2024 (Duration in years) | Sep 30, 2024 (Interest Accretion Rate) | | :--------------------- | :------------------------------- | :------------------------------------- | | Payout Annuities | 7.1 | 4.00% | | Closed Block Life | 7.1 | 3.07% | | Closed Block Annuity | 6.9 | 4.40% | Note 10. Other Contract Holder Funds Other contract holder funds totaled $57,334 million by September 30, 2024, primarily comprising policyholder account balances for universal life-type products and investment contracts, with 94% corresponding to minimum guaranteed interest rates - Other contract holder funds include policyholder account balances for universal life-type products, investment contracts, and embedded derivatives for indexed crediting features289 Other Contract Holder Funds (in millions) | Product Line | Sep 30, 2024 | Dec 31, 2023 | | :------------------------ | :----------- | :----------- | | Payout Annuity | $852 | $860 | | Variable Annuity | $7,509 | $8,396 | | Fixed Annuity | $9,593 | $9,736 | | Fixed Indexed Annuities | $8,990 | $10,243 | | RILA | $10,250 | $5,219 | | Closed Block Life | $10,884 | $11,039 | | Closed Block Annuity | $1,163 | $1,252 | | Institutional Products | $7,929 | $8,406 | | Other Product Lines | $164 | $168 | | Total other contract holder funds | $57,334 | $55,319 | - As of September 30, 2024, approximately 94% of the company's annuity account values (excluding reinsurance) correspond to crediting rates at the minimum guaranteed interest rates304 Note 11. Separate Account Assets and Liabilities Separate account assets and liabilities, carried at fair value, totaled $235,037 million by September 30, 2024, primarily supporting variable annuities with investment risks borne by contract holders - Separate account assets and liabilities, supporting variable annuity and life contracts, are carried at fair value, with investment risks primarily borne by contract holders310 Separate Account Assets and Liabilities (in millions) | Metric | Sep 30, 2024 | Dec 31, 2023 | | :------------------------------------ | :----------- | :----------- | | Variable Annuities | $234,736 | $219,381 | | Other Product Lines | $301 | $275 | | Total Separate Accounts | $235,037 | $219,656 | Variable Annuities by Fund Type (in millions) | Fund Type | Sep 30, 2024 | Dec 31, 2023 | | :---------- | :----------- | :----------- | | Equity | $167,216 | $154,020 | | Bond | $20,242 | $19,801 | | Balanced | $44,531 | $42,831 | | Money Market | $2,747 | $2,729 | | Total | $234,736 | $219,381 | Note 12. Market Risk Benefits Market Risk Benefits (MRBs), protecting contract holders from capital market risk, had a net asset liability of $(3,300) million for variable annuities by September 30, 2024, with an updated non-performance risk adjustment methodology - MRBs are contract features protecting holders from capital market risk, measured at fair value and reported as assets or liabilities317318 Net Market Risk Benefit (MRB) (Assets) Liabilities (in millions) | Metric | Sep 30, 2024 | Dec 31, 2023 | | :------------------------------------ | :----------- | :----------- | | Market risk benefit - (assets) | $(7,615) | $(6,737) | | Market risk benefit - liabilities | $4,384 | $4,785 | | Market risk benefit - net (asset) liability | $(3,231) | $(1,952) | - The non-performance risk adjustment for MRB fair value calculations was updated in June 2023 to be based solely on credit spreads for debt and debt-like instruments issued by the company or its insurance operating subsidiaries328 Note 13. Long-Term Debt The company's long-term debt, primarily senior and surplus notes, had an aggregate carrying value of $2,033 million by September 30, 2024, supported by a $1.0 billion revolving credit facility Long-Term Debt Carrying Value (in millions) | Debt Type | Sep 30, 2024 | Dec 31, 2023 | | :----------------------------- | :----------- | :----------- | | Senior Notes due 2027 | $398 | $398 | | Senior Notes due 2031 | $496 | $495 | | Senior Notes due 2032 | $347 | $347 | | Senior Notes due 2051 | $490 | $490 | | Surplus notes due 2027 | $250 | $250 | | FHLBI bank loans due 2034 & 2035 | — | $57 | | Total long-term debt | $2,033 | $2,037 | - The company has a $1.0 billion revolving credit facility expiring February 24, 2028, and a $500 million uncommitted money market line of credit for liquidity334336 - The 2023 Revolving Credit Facility includes financial maintenance covenants, including a minimum adjusted consolidated net worth test and a maximum consolidated indebtedness to total capitalization ratio not to exceed 35%, with the company in compliance as of September 30, 2024335553 Note 14. Federal Home Loan Bank Advances No FHLBI advances were outstanding by September 30, 2024, a decrease from $250 million at December 31, 2023, with interest expense of $1 million for Q3 2024 - FHLBI advances outstanding were nil at September 30, 2024, down from $250 million at December 31, 2023337 FHLBI Advances Interest Expense (in millions) | Period | Interest Expense | | :------------------------------------ | :--------------- | | Three months ended September 30, 2024 | $1 | | Three months ended September 30, 2023 | $0 | | Nine months ended September 30, 2024 | $4 | | Nine months ended September 30, 2023 | $6 | Note 15. Income Taxes The effective income tax rate (ETR) was 19.3% for Q3 2024 and 3.9% for the nine months, differing from the statutory rate due to deductions, foreign tax credits, and a $295 million decrease in valuation allowance Effective Income Tax Rate (ETR) | Period | ETR | | :------------------------------------ | :------- | | Three months ended September 30, 2024 | 19.3% | | Three months ended September 30, 2023 | 20.5% | | Nine months ended September 30, 2024 | 3.9% | | Nine months ended September 30, 2023 | 13.8% | - The ETR differs from the statutory rate of 21% primarily due to the dividends received deduction, utilization of foreign tax credits, and valuation allowance339 - A $295 million decrease in valuation allowance was recorded for the three months ended September 30, 2024, and a $218 million decrease for the nine months ended September 30, 2024, related to unrealized tax losses in available-for-sale securities344 Note 16. Commitments and Contingencies Management believes ordinary course litigation will not materially affect financial condition, with unfunded commitments totaling $966 million for limited partnerships and $669 million for mortgage loans by September 30, 2024 - Management believes the ultimate disposition of ordinary course litigation will not materially adversely affect the company's financial condition345 Unfunded Commitments as of September 30, 2024 (in millions) | Commitment Type | Amount | | :-------------------------------------------- | :----- | | Limited partnerships and limited liability companies | $966 | | Fixed-rate mortgage loans and other debt securities | $669 | Note 17. Operating Costs and Other Expenses Total operating costs and other expenses increased by $116 million to $742 million for Q3 2024, driven by higher commission and general and administrative expenses Operating Costs and Other Expenses (in millions) | Expense Category | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :----------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Asset-based commission expenses | $285 | $259 | $843 | $764 | | Other commission expenses | $261 | $190 | $691 | $541 | | Sub-advisor expenses | $82 | $80 | $244 | $234 | | General and administrative expenses | $310 | $232 | $839 | $706 | | Deferral of acquisition costs | $(196) | $(135) | $(512) | $(383) | | Total operating costs and other expenses | $742 | $626 | $2,105 | $1,862 | - Total operating costs and other expenses increased by $116 million (18.5%) for the three months ended September 30, 2024, compared to the prior year quarter347 Note 18. Accumulated Other Comprehensive Income (Loss) Accumulated Other Comprehensive Income (Loss) (AOCI) improved to $(2,383) million by September 30, 2024, primarily due to a $1,735 million positive change in unrealized investment gains for Q3 2024 Accumulated Other Comprehensive Income (Loss) (AOCI) Roll-Forward (in millions) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Balance, beginning of period | $(3,626) | $(3,365) | $(2,808) | $(3,378) | | Change in unrealized gains (losses) of investments | $1,735 | $(1,405) | $1,134 | $(958) | | Change in current discount rate - reserve for future policy benefits | $(280) | $254 | $(132) | $204 | | Change in non-performance risk on market risk benefits | $(235) | $(999) | $(783) | $(1,479) | | Other comprehensive income (loss) | $1,243 | $(1,822) | $425 | $(1,809) | | Balance, end of period | $(2,383) | $(5,187) | $(2,383) | $(5,187) | - AOCI improved from $(2,808) million at December 31, 2023, to $(2,383) million at September 30, 2024, primarily due to positive changes in unrealized investment gains349 Note 19. Equity The company issued $533 million in Series A Preferred Stock in March 2023 and authorized a $750 million increase in its common stock repurchase program in August 2024, repurchasing 4,804,666 shares for $319 million by September 30, 2024 - Issued 22,000,000 depositary shares of Series A Preferred Stock in March 2023, raising approximately $533 million in net proceeds352 - Board authorized a $750 million increase in the common stock repurchase program on August 1, 2024357 Share Repurchase Activities (in millions, except shares and price) | Period | Number of Shares Repurchased | Total Payments (in millions) | Average Price Paid Per Share | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | | Total 2023 | 6,502,524 | $255 | $39.27 | | 2024 (January 1 - March 31) | 2,157,372 | $116 | $53.76 | | 2024 (April 1 - June 30) | 1,294,473 | $90 | $69.16 | | 2024 (July 1 - September 30) | 1,352,821 | $113 | $83.39 | | Total 2024 (through Sep 30) | 4,804,666 | $319 | $66.39 | - Outstanding common stock decreased from 78,660,221 shares at December 31, 2023, to 74,351,061 shares at September 30, 2024360 Note 20. Earnings Per Share Basic and diluted EPS for Q3 2024 were $(6.37), a significant decrease from the prior year, reflecting the net loss attributable to common shareholders Earnings Per Share Calculation (in millions, except per share data) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income (loss) attributable to Jackson Financial Inc. common shareholders | $(480) | $2,762 | $568 | $2,469 | | Weighted-average common stock outstanding - basic | 75,374,073 | 82,061,813 | 76,673,053 | 82,432,264 | | Weighted-average common stock outstanding - diluted | 75,374,073 | 82,821,818 | 77,374,548 | 84,541,187 | | Basic EPS | $(6.37) | $33.66 | $7.41 | $29.95 | | Diluted EPS | $(6.37) | $33.35 | $7.34 | $29.20 | - For the three months ended September 30, 2024, all common stock equivalents were anti-dilutive due to the net loss and were excluded from diluted EPS calculation364 Note 21. Subsequent Events Subsequent to September 30, 2024, the Board of Directors approved cash dividends of $0.70 per common share and $0.50 per Series A Preferred Stock depositary share, both payable in December 2024 - On November 1, 2024, the Board approved a cash dividend of $0.70 per common share for Q4 2024, payable December 19, 2024367 - A cash dividend of $0.50 per depositary share for Series A Preferred Stock was also declared, payable December 30, 2024367 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes Jackson Financial Inc.'s financial condition and results, covering key performance, operating measures, macroeconomic trends, non-GAAP reconciliations, and critical accounting estimates Forward-looking Statements - Cautionary Language This section cautions investors that the report contains forward-looking statements subject to risks and uncertainties, and the company does not undertake to update them - The report contains forward-looking statements about future events and circumstances, subject to known and unknown risks and uncertainties369 - Investors are cautioned not to rely unduly on forward-looking statements, and the company does not undertake to update them, except as required by law369 Available Information The company makes its SEC filings and key information available free of charge on its investor relations website - Company's SEC filings (10-K, 10-Q, 8-K, proxy statements) are available free of charge on its investor relations website (investors.jackson.com)372 - The investor relations website is a primary channel for distributing important information, including news releases, analyst presentations, and financial information372 Principal Definitions, Abbreviations and Acronyms Used in the Text and Notes of this Report This section provides a glossary of key terms, abbreviations, and acronyms used throughout the report, defining entities and financial/operational terms - Definitions are provided for key entities: Jackson Financial Inc. (JFI), Jackson National Life Insurance Company (Jackson), Brooke Life Insurance Company, and Brooke Life Reinsurance Company373 - Financial and operational terms defined include Account Value (AV), Assets Under Management (AUM), Deferred Acquisition Costs (DAC), and Risk-Based Capital (RBC)373374 - Various guaranteed benefits are explained: Guaranteed Minimum Accumulation Benefit (GMAB), Guaranteed Minimum Death Benefit (GMDB), Guaranteed Minimum Income Benefit (GMIB), and Guaranteed Minimum Withdrawal Benefit (GMWB)374 Overview of Management's Discussion and Analysis of Financial Condition and Results of Operations This overview emphasizes reading the Management's Discussion and Analysis with the Condensed Consolidated Financial Statements and the 2023 Annual Report, reiterating Jackson Financial Inc.'s identity and operating structure - The discussion and analysis should be read with the Condensed Consolidated Financial Statements and the 2023 Annual Report375 - Jackson Financial Inc. is a U.S.-domiciled financial services company that demerged from Prudential plc on September 13, 2021376 Executive Summary Jackson Financial Inc. aims to help Americans with retirement savings through differentiated products and disciplined risk management, with profitability driven by fee and spread income, and recent capital returns to shareholders - Jackson Financial helps Americans grow and protect retirement savings, leveraging differentiated products, a strong brand, and disciplined risk management378 - Profitability depends on product pricing, risk management, effective investment portfolio management, and cost control379 - Adjusted Operating Earnings, a non-GAAP measure, is used to evaluate performance by excluding market volatility impacts from derivatives and market risk benefits381 - Returned $483 million to common shareholders (dividends and share repurchases) from January 1 to September 30, 2024, with a target of $550-$650 million for the full year385 - Established Brooke Life Reinsurance Company in Q1 2024 to cede variable annuity market risk benefits, optimizing hedging, stabilizing capital generation, and producing more predictable financial results386387389 Key Operating Measures Total sales for the nine months ended September 30, 2024, increased to $14,653 million, driven by higher RILA and fixed annuity sales, with total AUM growing to $334,539 million - Sales, account value, net flows, benefit base, and AUM are key operating measures for evaluating business performance390 Total Sales (in millions) | Product Line | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :---------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total Retail Annuity Sales | $5,272 | $3,312 | $13,192 | $9,556 | | Total Institutional Product Sales | $749 | $112 | $1,461 | $1,065 | | Total Sales | $6,021 | $3,424 | $14,653 | $10,621 | - Higher retail sales for the three and nine months ended September 30, 2024, were primarily due to increased RILA and fixed annuity sales, reflecting consumer interest in locking in crediting rates during declining interest rates392 Total Assets Under Management (AUM) (in millions) | AUM Category | Sep 30, 2024 | Dec 31, 2023 | | :---------------------------- | :----------- | :----------- | | Total PPM AUM | $76,663 | $73,111 | | Total JNAM AUM | $257,876 | $242,727 | | Total AUM | $334,539 | $315,838 | Macroeconomic, Industry, and Regulatory Trends The company's business is significantly affected by macroeconomic factors like interest rates and equity markets, regulatory changes such as the DOL Fiduciary Advice Rule, and demographic trends driving demand for retirement products - Macroeconomic factors like interest rates, equity market performance, and credit market conditions significantly impact the company's financial performance, affecting sales, hedging costs, and investment returns405407409416 - The DOL Fiduciary Advice Rule, redefining 'investment advice' for ERISA plans and IRAs, could adversely affect annuity sales and increase compliance costs, though the company believes its exposure is limited due to existing intermediary systems423426 - Legislative reforms like the SECURE Act and SECURE 2.0 are beneficial, expanding access to retirement products and increasing retirement savings, which is expected to generate demand for the company's offerings428 - Demographic trends, specifically the increasing number of retirement-age individuals in the U.S., are expected to generate significant and sustained demand for the company's retirement products420 Non-GAAP Financial Measures The company uses non-GAAP measures like Adjusted Operating Earnings and Adjusted Operating ROE to clarify underlying business performance, with Adjusted Operating Earnings at $1,094 million for the nine months ended September 30, 2024 - Adjusted Operating Earnings and Adjusted Operating ROE are non-GAAP measures used to evaluate financial performance by excluding highly variable or non-recurring items430431 Adjusted Operating Earnings Reconciliation (in millions) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income (loss) attributable to Jackson Financial Inc. common shareholders | $(480) | $2,762 | $568 | $2,469 | | Pretax income (loss) attributable to Jackson Financial Inc. | $(582) | $3,485 | $625 | $2,892 | | Total non-operating adjustments | $993 | $(3,130) | $648 | $(1,930) | | Pretax adjusted operating earnings | $411 | $355 | $1,273 | $962 | | Less: operating income tax expense (benefit) | $50 | $29 | $146 | $69 | | Adjusted operating earnings before dividends on preferred stock | $361 | $326 | $1,127 | $893 | | Less: dividends on preferred stock | $11 | $11 | $33 | $24 | | Adjusted operating earnings | $350 | $315 | $1,094 | $869 | Adjusted Operating ROE Attributable to Common Shareholders | Metric | Sep 30, 2024 | Sep 30, 2023 | | :------------------------------------------------------------------ | :----------- | :----------- | | ROE Attributable to Common Shareholders | (19.5)% | 129.5% | | Adjusted Operating ROE Attributable to Common Shareholders on average equity | 12.3% | 11.8% | Consolidated Results of Operations For Q3 2024, pretax income decreased by $4,081 million to $(579) million, primarily due to unfavorable market risk benefits and derivative movements, with similar factors impacting the nine-month period Consolidated Results of Operations Highlights (in millions) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total Revenues | $2,121 | $2,585 | $3,046 | $2,201 | | Total Benefits and Expenses | $2,700 | $(917) | $2,404 | $(712) | | Pretax Income (Loss) | $(579) | $3,502 | $642 | $2,913 | | Net Income (Loss) attributable to Jackson Financial Inc. common shareholders | $(480) | $2,762 | $568 | $2,469 | - Pretax income (loss) decreased by $4,081 million for the three months ended September 30, 2024, primarily due to $3,548 million unfavorable movements in market risk benefits and a $506 million decrease in total net gains (losses) on derivatives and investments450451 - For the nine months ended September 30, 2024, pretax income (loss) decreased by $2,271 million, mainly due to $3,058 million unfavorable movements in market risk benefits, partially offset by a $490 million increase in net gains (losses) on derivatives and investments455456 Segment Results of Operations Retail Annuities pretax adjusted operating earnings increased by $104 million to $458 million for Q3 2024, while Institutional Products decreased, and Corporate and Other saw a $45 million decline Pretax Adjusted Operating Earnings by Segment (in millions) | Segment | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :----------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Retail Annuities | $458 | $354 | $1,342 | $1,038 | | Institutional Products | $17 | $21 | $77 | $47 | | Closed Life and Annuity Blocks | $7 | $6 | $61 | $(7) | | Corporate and Other | $(71) | $(26) | $(207) | $(116) | | Total Pretax Adjusted Operating Earnings | $411 | $355 | $1,273 | $962 | - Retail Annuities pretax adjusted operating earnings increased by $104 million for the three months ended September 30, 2024, primarily due to higher fee income and spread income466 - Institutional Products pretax adjusted operating earnings decreased by $4 million for the three months ended September 30, 2024, mainly due to lower spread income472 - Closed Life and Annuity Blocks pretax adjusted operating earnings increased by $1 million for the three months ended September 30, 2024, driven by lower policy benefits, partially offset by decreased premiums476 - Corporate and Other pretax adjusted operating earnings decreased by $45 million for the three months ended September 30, 2024, due to increased operating costs and lower net investment income480 Investments The company's investment portfolio, primarily fixed-income securities and loans, totaled $63,003 million by September 30, 2024, with available-for-sale debt securities increasing to $42,289 million - Investment strategy focuses on a diversified, largely investment-grade fixed income portfolio to achieve risk-adjusted returns, support product pricing, and maintain liquidity483 Total Investments Carrying Values (in millions) | Investment Type | Sep 30, 2024 | Dec 31, 2023 | | :---------------------------------------------------- | :----------- | :----------- | | Debt Securities, available-for-sale | $42,289 | $40,422 | | Debt Securities, at fair value under fair value option | $2,937 | $2,153 | | Equity securities, at fair value | $213 | $394 | | Mortgage loans, net of allowance for credit losses | $9,564 | $10,082 | | Policy loans | $4,453 | $4,399 | | Other invested assets | $2,747 | $2,466 | | Total investments | $63,003 | $60,855 | - Available-for-sale debt securities increased to $42,289 million at September 30, 2024, from $40,422 million at December 31, 2023488 Mortgage Loans by Property Type (in millions, net of ACL) | Property Type | Sep 30, 2024 | Dec 31, 2023 | | :------------ | :----------- | :----------- | | Commercial | $9,114 | $9,562 | | Residential | $882 | $1,001 | | Total | $9,996 | $10,563 | Policy and Contract Liabilities Total policy and contract liabilities were $300,683 million by September 30, 2024, with 79% backed by separate account assets, primarily for variable annuities, and 94% corresponding to minimum guaranteed crediting rates - Policy and contract liabilities are actuarially determined in conformity with U.S. GAAP to meet policy obligations508 Policy and Contract Liabilities Breakdown (in millions) | Liability Category | Sep 30, 2024 | Dec 31, 2023 | | :----------------------------- | :----------- | :----------- | | Separate Accounts | $235,037 | $219,656 | | Reserves for future policy benefits | $10,150 | $10,452 | | Other contract holder funds | $57,170 | $55,151 | | Market Risk Benefits | $(3,231) | $(1,952) | | Claims payable and other | $1,557 | $1,614 | | Total | $300,683 | $284,921 | - As of September 30, 2024, 79% ($235 billion) of policy and contract liabilities were backed by separate account assets, primarily for variable annuities514 - 94% of fixed annuity, fixed-indexed annuity, and fixed accounts of RILA and variable annuities correspond to minimum guaranteed crediting rates as of September 30, 2024515 Liquidity and Capital Resources Net cash from operating activities increased to $4,268 million for the nine months ended September 30, 2024, with holding company liquidity supported by subsidiary dividends and credit lines, and statutory capital remaining strong - Net cash provided by operating activities increased to $4,268 million for the nine months ended September 30, 2024, from $3,676 million in the prior year, primarily due to timing of settlements519521 - Holding company liquidity relies on dividends and interest from insurance subsidiaries, supplemented by cash, short-term investments, and access to credit lines and capital markets529 - Insurance company subsidiaries maintain statutory surplus well above minimum regulatory requirements, with the Brooke Re transaction moderating the impact of the cash surrender value floor526527 - The company has a $1.0 billion revolving credit facility and outstanding senior notes and surplus notes as part of its indebtedness553555 - Financial strength ratings from agencies like A.M. Best, S&P, Moody's, and Fitch are critical for funding access, product attractiveness, and reinsurance activities559 Impact of Recent Accounting Pronouncements This section refers to Note 2 of the Notes to Condensed Consolidated Financial Statements for a complete
Jackson(JXN) - 2024 Q3 - Quarterly Report