JXN-PA — Jackson Financial Inc.

Summary of Jackson Financial, Inc. Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Adjusted Operating Earnings: $455 million for Q4 2025, reflecting continued strength in spread-based products.
• Adjusted Operating EPS: $6.61, a 33% increase year-over-year; adjusted EPS after notable items was $6.43.
• Free Capital Generation: Over $1 billion for the second consecutive year; $235 million in Q4.
• Capital Returned to Shareholders: $862 million for the full year, with a quarterly dividend increase to $0.90 per share (up 13%).
• RBC Ratio: 567%, indicating strong capital position.
• Retail Annuity Sales: Nearly $20 billion for the full year, the highest since 2019, with record RILA sales of $2.3 billion in Q4.

2. Strategic Updates and Business Highlights

• Partnership with TPG: Closed a strategic partnership aimed at accelerating growth in spread-based business and enhancing capital efficiency.
• Product Innovation: Launched new fixed index annuity, Jackson Income Assurance, contributing to sales growth. RILA sales rose 22% for the year.
• Captive Reinsurer: Initial funding for Hickory Re completed, expected to enhance capital generation and provide additional cash flow.
• Investment Strategy: Focus on diversifying asset allocation with a shift towards higher-yielding asset classes.

3. Forward Guidance and Outlook

• 2026 Financial Targets: Anticipate free capital generation to reach or exceed $1.2 billion. Capital return targets raised to $900 million to $1.1 billion.
• Growth Expectations: Continued momentum in RILA and FIA sales anticipated, with a focus on expanding distribution partnerships.
• Market Sensitivity: Expect surrender activity to remain tied to equity market performance, with a cautious outlook on variable annuity net flows.

4. Bad News, Challenges, or Points of Concern

• Variable Annuity Outflows: Elevated net outflows due to aging policyholder base and market conditions, although offset by strong investment performance.
• Actuarial Assumption Review: Resulted in a $360 million unfavorable impact primarily from higher reserves related to lapses and utilization assumptions.
• Hedging Losses: Reported a $405 million net loss from hedging activities, driven by equity index volatility.
• Pressure on Capital Generation: Noted lower-than-expected capital generation in Q4 due to market volatility and higher surrenders.

5. Notable Q&A Insights

• Capital Levels: Discussion on the capital structure of Brooke Re and its ability to maintain self-sustainability despite recent headwinds.
• Growth from TPG Partnership: Management optimistic about the partnership's potential to enhance sales and diversify product offerings, although it may take a couple of years to offset variable annuity outflows.
• Hickory Re's Role: Clarification that cash flows from Hickory Re could be remitted to the holding company, supporting future capital returns.
• Lapse Rates: Acknowledgment of increased lapse rates impacting variable annuities, with management confident in the robustness of their actuarial review process.

Overall, Jackson Financial reported strong financial performance in 2025, with significant growth in annuity sales and capital returns, while navigating challenges related to variable annuity outflows and market volatility. The strategic partnership with TPG and the establishment of Hickory Re are positioned to support future growth and stability.