Jackson(JXN) - 2021 Q3 - Quarterly Report

Product Launch and Market Position - Jackson Financial reported a successful launch of Market Link Pro and Market Link Pro Advisory in Q4 2021, expanding its product offerings in the Registered Index-Linked Annuities (RILAs) market[276]. - The company has been the top-selling retail annuity provider in the U.S. for eight of the past nine years, according to LIMRA[276]. Financial Performance - Adjusted Operating Earnings for Q3 2021 was $487.4 million, compared to $546.8 million in Q3 2020, reflecting a decrease of 10.1% year-over-year[315]. - Total sales for Q3 2021 reached $4.81 billion, an increase from $4.53 billion in Q3 2020, representing a growth of 6.2%[319]. - Variable annuity sales in Q3 2021 were $4.74 billion, up from $4.46 billion in Q3 2020, indicating a growth of 6.3%[319]. - Fixed index annuity sales dropped to $23.3 million in Q3 2021 from $61.4 million in Q3 2020, a decline of 62.1%[319]. - Net income attributable to Jackson Financial Inc. for Q3 2021 was $206.2 million, a significant recovery from a loss of $396.6 million in Q3 2020[315]. - Total revenues increased by $1,375 million to $1,486 million during the three months ended September 30, 2021, from $111 million during the same period in 2020[332]. Revenue Sources - Jackson Financial's revenues are derived from five primary sources, including fee income, net investment income, premiums, net realized gains, and other income[279]. - Fee income for the three months ended September 30, 2021, was $1,961.9 million, an increase of 17.7% from $1,666.5 million in 2020[330]. - Net investment income decreased to $852.0 million for the three months ended September 30, 2021, down from $881.4 million in 2020, reflecting a decline of approximately 3.3%[330]. Operational Segments - The company operates through three segments: Retail Annuities, Institutional Products, and Closed Life and Annuity Blocks, allowing for diversified revenue streams[278]. - Total institutional product sales for Q3 2021 were $43.4 million, a significant drop from $1.28 billion in Q3 2020[319]. Market and Economic Conditions - The demographic trend indicates that by 2030, 32% of the U.S. population will be aged 55 or older, creating significant demand for the company's products[301]. - The company is closely monitoring the impact of the COVID-19 pandemic, which has caused significant economic turmoil, affecting future business performance[299]. - The interest rate environment is expected to remain low, impacting yields on new investments and potentially increasing statutory reserves, which could adversely affect dividends[296]. - The company faces increased competition due to consolidation in the insurance and financial services industries, which may impact sales and distribution[303]. Reinsurance and Investment Agreements - The company reported a $1.2 billion ceding commission from a funds withheld coinsurance agreement with Athene Life Re Ltd. for reinsurance of fixed and fixed-index annuity product liabilities[271]. - Jackson Financial's investment agreement with Athene Life Re Ltd. involved a $500 million capital investment for a 9.9% voting interest, enhancing its financial position[272]. - A reinsurance agreement with Athene involved ceding a $27.6 billion portfolio of fixed and fixed index annuity liabilities, resulting in approximately $1.2 billion in ceding commissions[288]. Expenses and Costs - The company expects to incur approximately $75 million in one-time expenses related to the operational separation from Prudential, with $63 million incurred during the nine months ended September 30, 2021[289]. - The company anticipates annual recurring expenses of approximately $25 million to $30 million for operating as a stand-alone entity, primarily related to support services[289]. - Total benefits and expenses for the three months ended September 30, 2021, were $1,234.6 million, significantly higher than $643.0 million in 2020, marking an increase of approximately 92%[330]. Investment Performance - Total assets under management (AUM) decreased to $347,567.6 million as of September 30, 2021, from $361,646.3 million at the end of 2020, a reduction of about 3.9%[328]. - Total investments amounted to $74 billion as of September 30, 2021, down from $80 billion as of December 31, 2020[457]. - Available-for-sale debt securities decreased to $52,123 million as of September 30, 2021, from $59,075 million at the end of 2020, primarily due to a decrease in net unrealized gains[458]. Tax and Regulatory Environment - The company believes that changes in U.S. tax laws affecting tax-deferred advantages of annuities could materially decrease demand for its products[307]. - The SECURE Act is expected to create growth opportunities by making it easier for 401(k) programs to offer annuities as an investment option[306].