8-K: Jackson Financial Inc. Announces Q4 and Full Year 2023 Results, CFO Retirement

Jackson Financial Inc. reported a net loss for Q4 2023 but achieved full-year profitability, alongside announcing the retirement of its CFO and her planned succession.

Summary

• Jackson Financial Inc. reported a net loss of $1.6 billion, or $19.64 per diluted share, for the fourth quarter of 2023, compared to a loss of $1.2 billion, or $13.74 per diluted share, in the same period of 2022.
• Adjusted operating earnings for Q4 2023 were $204 million, or $2.53 per diluted share, down from $294 million, or $3.39 per diluted share, in Q4 2022.
• The company's full-year 2023 net income was $899 million, or $10.76 per diluted share, a significant decrease from $6.2 billion, or $69.75 per diluted share, in 2022.
• Full-year 2023 adjusted operating earnings were $1.1 billion, or $12.84 per diluted share, compared to $1.5 billion, or $16.39 per diluted share, in 2022.
• Total annuity account value reached $235 billion by the end of 2023, a 12% increase year-over-year.
• Registered index-linked annuity (RILA) sales were $1.0 billion in Q4 2023, up from $560 million in Q4 2022, and $2.9 billion for the full year, up from $1.8 billion in 2022.
• The company returned $464 million to common shareholders in 2023 through dividends and share repurchases and has set a target of $550-650 million for 2024.
• Jackson's estimated risk-based capital (RBC) ratio at Jackson National Life Insurance Company (JNLIC) was 624% at year-end 2023.
• The company established and funded Brooke Life Reinsurance Company (Brooke Re) in January 2024, a wholly-owned captive reinsurer.
• Marcia Wadsten, Executive Vice President and Chief Financial Officer, will retire on June 3, 2024, and will be succeeded by Don Cummings, the current Senior Vice President, Chief Accounting Officer and Controller.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative due to the mixed financial results. While there are positives such as strong RILA sales and a robust capital position, the significant decrease in net income and adjusted operating earnings, along with the Q4 net loss, temper the overall outlook. The CFO transition is a planned event and does not significantly impact sentiment.

Positives

• Full year 2023 net income was $899 million, indicating overall profitability for the year.
• RILA sales showed strong growth, with $1.0 billion in Q4 2023 and $2.9 billion for the full year, demonstrating market demand for these products.
• Total annuity account value increased by 12% year-over-year, reaching $235 billion.
• The company achieved its 2023 capital return target, returning $464 million to shareholders.
• The establishment of Brooke Re is expected to optimize hedging and stabilize capital generation.
• The company has a robust capital position with an estimated RBC ratio of 624% at JNLIC at year-end 2023.
• The holding company has approximately $600 million in cash and highly liquid securities, exceeding its targeted minimum liquidity buffer.
• The first quarter 2024 common dividend was increased by nearly 13% to $0.70 per share.

Negatives

• The company reported a net loss of $1.6 billion in Q4 2023, a significant downturn compared to the previous year's quarter.
• Adjusted operating earnings decreased in both Q4 and full year 2023 compared to 2022.
• The annual actuarial assumptions update had an unfavorable impact on adjusted operating earnings.
• Net income for the full year 2023 was significantly lower than in 2022, decreasing from $6.2 billion to $899 million.
• The company experienced a loss from business reinsured to third parties, which was $841 million in Q4 2023 and $627 million for the full year.
• Traditional variable annuity sales decreased by 14% in Q4 2023, indicating a shift in consumer preferences.
• Full year annuity sales were down 18% from the full year 2022.

Risks

• The company's financial results are subject to market volatility, which can impact investment returns and hedging effectiveness.
• Changes in interest rates can affect the company's profitability and the value of its assets and liabilities.
• The company's reliance on reinsurance exposes it to counterparty risk.
• The company's financial performance is subject to regulatory changes and accounting standards.
• The company's forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from those projected.
• The company's non-GAAP financial measures may not be comparable to those of other companies.

Future Outlook

Jackson has set a 2024 capital return target to common shareholders of $550-650 million and expects the establishment of Brooke Re to optimize hedging and stabilize capital generation. The company is confident in its ability to deliver on its ongoing purpose of helping Americans build financial freedom for life.

Management Comments

• Laura Prieskorn, President and Chief Executive Officer of Jackson, stated that 2023 was a fantastic year of execution for Jackson, with our financial performance highlighting the strong fundamentals of our business.
• Laura Prieskorn also noted that the company is proud to have achieved its financial targets for the third year in a row by returning $464 million to common shareholders in 2023.
• Prieskorn expressed confidence in the $550-650 million capital return target for 2024.
• Prieskorn stated that Marcia Wadsten was instrumental in the transition to an independent public company and her contributions will be felt for years to come.
• Prieskorn expressed confidence in Don Cummings' ability to build on the company's strong track record of financial strength and performance.

Industry Context

The increase in RILA sales reflects a broader trend in the annuity market towards products that offer both growth potential and downside protection. The establishment of Brooke Re is an innovative approach to managing capital and hedging risks, which may be adopted by other companies in the industry. The leadership transition is a normal part of corporate governance and succession planning.

Comparison to Industry Standards

• Jackson's RILA sales growth is notable compared to industry averages, indicating a strong market position in this product segment. Companies like Athene and Global Atlantic also offer similar annuity products, but Jackson's specific growth rate in RILA sales suggests a competitive advantage.
• The RBC ratio of 624% at JNLIC is well above the regulatory minimum, indicating a strong capital position compared to industry benchmarks. Other major insurance companies typically aim for RBC ratios in the 400-500% range, making Jackson's ratio a positive indicator.
• The establishment of Brooke Re is a strategic move to manage capital and hedging, similar to strategies employed by other large insurance companies to optimize their balance sheets. This is a common practice among large insurance companies to manage risk and capital more efficiently.
• The decrease in traditional variable annuity sales is consistent with industry trends, as consumers increasingly prefer products with downside protection. This is a common trend across the industry as consumers seek more secure investment options.

Management Changes

Stakeholder Impact

• Shareholders will be impacted by the decreased net income and adjusted operating earnings, but also by the planned capital returns.
• Employees will experience a leadership transition with the retirement of the CFO.
• Customers may benefit from the company's focus on RILA products and its strong capital position.
• Distribution partners will continue to offer Jackson's annuity products.
• Regulators will monitor the company's financial performance and compliance.

Next Steps

• Jackson will host a conference call on February 22, 2024, to review the fourth quarter and full year results and discuss the company's 2024 outlook.
• Don Cummings will be appointed as Chief Financial Officer on June 3, 2024.
• Marcia Wadsten will continue as an advisor to the company for a period of time to support transition efforts.
• The company will focus on achieving its 2024 capital return target of $550-650 million.

Key Dates

Keywords

Jackson Financial, Annuities, RILA, Financial Results, CFO Retirement, Reinsurance, Operating Earnings, Net Income, Shareholder Returns, Capital, Risk-Based Capital, Actuarial Assumptions