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Jackson(JXN) - 2021 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In 2021, adjusted operating earnings reached $2.4 billion, exceeding the prior year by over $500 million, with a 22% increase in pretax adjusted operating earnings from the previous year [13][18] - The company ended the year with total adjusted capital of $6.6 billion and an RBC ratio of 580% at Jackson National Life Insurance [15][71] - Fourth quarter adjusted operating earnings were $7.48 per share, reflecting a 30% increase in adjusted pretax operating earnings compared to the previous year's quarter [22][48] Business Line Data and Key Metrics Changes - The retail annuity segment accounted for nearly two-thirds of total growth in pretax adjusted operating earnings, with retail annuity account values reaching $259 billion, up nearly 13% from the prior year [14][25] - Fourth quarter annuity sales were at their highest level for the year at $5 billion, up modestly from the prior year's quarter [26] - Fee-based advisory sales reached a record level of $1.3 billion, up from $1 billion last year, indicating strong growth in this segment [27] Market Data and Key Metrics Changes - The overall annuity sales for the industry in 2021 were at their highest level since 2008, with a 27% increase in traditional variable annuity and RILA sales combined, totaling $125 billion [28][29] - The company entered the defined contribution market with a partnership with AllianceBernstein, indicating potential growth opportunities in this area [30] Company Strategy and Development Direction - The company aims to maintain a balanced approach to capital management while investing in growth and delivering targeted capital returns to shareholders [77] - Jackson Financial is focused on expanding and diversifying its product offerings and distribution channels, maintaining its position as a leader in the retirement income and savings solutions market [76][77] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate various market conditions, emphasizing the stability of their fee income stream that supports hedging budgets [86] - The company anticipates continued sales momentum in 2022, supported by a diverse set of products and an expanding distribution network [27][30] Other Important Information - The company announced an increase in shareholder dividends and share repurchase authorization, targeting a capital return of $425 million to $525 million for the calendar year 2022 [10][18] - The company completed $211 million in share repurchases and paid $50 million in dividends by the end of 2021, maintaining cash and liquidity of over $600 million at the holding company [68][69] Q&A Session Summary Question: Is the $600 million dividend typical going forward? - Management indicated that the $600 million dividend reflects a strong year for the business and may be slightly elevated compared to historical averages [80] Question: What about the remaining $90 million from the dividend? - The remaining $90 million will eventually make its way to the holding company through financing arrangements [82] Question: How does the current macro environment affect RBC calculations? - Management noted that market downturns could lead to increased reserves or capital requirements, but they are well-prepared for such fluctuations [84][85] Question: What is the expected capital return target for 2022? - The capital return target of $425 million to $525 million is based on the business's performance and is viewed as sustainable [88][89] Question: What are the annual hedging costs? - The company collects approximately $2.5 billion in guarantee fees annually, with hedging costs expected to increase in a volatile market environment [92][93] Question: Will the company generate positive RBC capital in a market correction? - Management indicated that they would need to close the books to determine the impact on RBC, but they have a good buffer to absorb market downturns [100][104] Question: What are the qualitative impacts of LDTI? - Management expects an increase in reserves due to the shift to fair value accounting under LDTI, with potential changes in GAAP earnings volatility [108][109]