Jackson Financial Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. Jackson Financial is a U.S. retirement-focused financial services company, principally selling annuities through its Retail Annuities, Institutional Products and Closed Life and Annuity Blocks businesses.
Key financial and operating metrics
| Metric | 2023 | 2022 |
|---|---|---|
| Total revenue | $3.159 billion | $9.863 billion |
| Net income attributable to common shareholders | $899 million | $6.186 billion |
| Adjusted operating earnings, non-GAAP | $1.073 billion | $1.454 billion |
| Total assets | $330.255 billion | $314.983 billion |
| Total shareholders’ equity | $10.170 billion | $8.646 billion |
| Operating cash flow | $5.310 billion | $5.206 billion |
| Cash, cash equivalents and restricted cash at year-end | $2.691 billion | $4.301 billion |
| Long-term debt | $2.037 billion | $2.635 billion |
| Jackson statutory RBC ratio | 624% | 544% |
- GAAP pretax income was $958 million, compared with $7.734 billion in 2022. The revenue and earnings comparison is heavily affected by market-sensitive derivative, investment and reinsurance accounting; the filing does not present a comparable operating margin that isolates these effects.
- Total sales were $13.898 billion, down from $18.135 billion. Retail annuity sales were $12.833 billion, including $9.540 billion of variable annuities and $2.890 billion of RILAs. Variable annuity sales declined, while RILA sales increased.
- Retail annuity account value, net of reinsurance, rose to $235.465 billion from $209.967 billion, supported by positive market performance and RILA inflows. Retail annuity net flows were negative $6.338 billion; variable annuity outflows were partly offset by RILA inflows.
- Net investment income was $2.930 billion, up from $2.761 billion. Total net losses on derivatives and investments were $7.665 billion, versus losses of $837 million in 2022. The 2023 result included $4.804 billion of losses on freestanding derivatives and $1.801 billion of losses related to funds-withheld reinsurance.
- Adjusted operating earnings declined to $1.073 billion from $1.454 billion. Retail Annuities contributed $1.364 billion of pretax adjusted operating earnings; Institutional Products contributed $69 million; Closed Life and Annuity Blocks recorded a $95 million loss; and Corporate and Other recorded a $173 million loss.
- Jackson’s available-for-sale debt securities had $4.401 billion of net unrealized losses at year-end, improved from $6.286 billion in 2022. Mortgage-loan credit-loss allowance rose to $165 million from $95 million, primarily reflecting increased expected losses in office properties.
Material changes and capital allocation
- Common-shareholder capital returns totaled $464 million: $209 million in dividends and $255 million in repurchases. The company repurchased 6.5 million shares during 2023. A further $533 million of net proceeds came from issuing Series A preferred shares.
- Jackson repaid $600 million of senior notes at maturity in November 2023. It reported $2.037 billion of long-term debt at year-end, including $250 million of subsidiary surplus notes due 2027. The parent also has a $1.0 billion revolving credit facility maturing in 2028; the company reported compliance with its covenants.
- Jackson reported $22.4 billion of unrestricted and unencumbered cash, short-term investments and marketable securities available for sale. Net collateral payable on derivatives was $780 million at year-end.
- In the first quarter of 2024, Jackson entered into a 100% funds-withheld coinsurance transaction with captive subsidiary Brooke Re covering specified market risk benefits. The filing says the arrangement is intended to improve hedge efficiency and stabilize statutory capital; the transaction eliminates on consolidation at Jackson Financial. Its stated ceding commission was approximately $1.2 billion.
- Jackson adopted long-duration targeted improvements accounting (LDTI), effective January 1, 2023 with a January 1, 2021 transition date. Adoption reduced opening 2021 total equity by $3.0 billion; the company’s 2022 comparative figures are presented under LDTI.
Outlook, commentary and risks
- The filing provides no specific 2024 earnings or sales guidance. Management cites an aging U.S. population and retirement-income demand as growth opportunities, while emphasizing disciplined product pricing, risk management and capital returns.
- Management attributes lower sales mainly to reduced variable annuity sales, partly offset by RILA growth. It highlights that GAAP earnings can be volatile because the hedging program is not designed to directly offset GAAP market-risk-benefit liability movements. Adjusted operating earnings are used as a supplemental measure, not a substitute for GAAP results.
- Key exposures include equity and interest-rate movements, hedge effectiveness and basis risk, policyholder lapses and withdrawals, credit losses, derivative margin requirements, reinsurer and derivative-counterparty credit risk, and reliance on subsidiary dividends and Federal Home Loan Bank funding.
- The company estimated a $263 million corporate alternative minimum tax provision at the consolidated level, offset by a deferred tax asset, with no direct 2023 income-tax expense impact. Treasury guidance could materially change the estimate and affect cash taxes.
- A 2023 MOVEit-related breach at third-party vendor Pension Benefit Information affected information relating to approximately 850,000 Jackson customers; Jackson also reported unauthorized access to two of its servers. Management said it did not expect the incidents or related litigation to materially affect the business or financial results.
- Jackson is involved in ordinary-course litigation and regulatory matters, including litigation alleging misconduct in insurance-product sales. Management considers a material adverse effect on financial position from ultimate resolution unlikely. The filing also reports that the prior material weakness involving the nonperformance-risk adjustment was remediated by year-end 2023; management and KPMG concluded internal control over financial reporting was effective.
- Other relevant uncertainty includes proposed DOL fiduciary advice rules, market and economic volatility, and the concentration of some investment-management assets with Prudential affiliates, which represent 34% of PPM AUM and may terminate their agreements.
Important facts for investors to verify
- Reconcile 2023 GAAP net income and revenue to adjusted operating earnings, especially the effects of derivatives, market risk benefits and funds-withheld reinsurance.
- Assess the sustainability of negative retail annuity net flows and declining variable annuity sales against RILA growth and market-driven account-value gains.
- Review the effect and implementation of the Brooke Re transaction on statutory capital, RBC, hedge costs and future earnings.
- Monitor statutory capital and holding-company liquidity, subsidiary dividend capacity, derivative collateral needs, debt maturities and FHLB funding dependence.
- Track commercial mortgage credit quality—particularly office exposure—and the development of credit allowances and unrealized investment losses.
- Confirm developments in the CAMT estimate, MOVEit-related customer impacts or litigation, and the status of regulatory and sales-practice matters.