Executive Summary / Key Takeaways

• Diversified Growth Engine: Jackson Financial is successfully executing a strategy of product diversification, with strong growth in Registered Index-Linked Annuities (RILAs) and fixed annuities complementing its core variable annuity business, leading to robust sales and spread income expansion.
• Robust Capital Generation & Return: The company consistently generates significant free capital and free cash flow, enabling aggressive share repurchases and a growing dividend, with 2025 capital returns projected to exceed the initial target range of $700-$800 million.
• Advanced Risk Management with Brooke Re: The establishment of Brooke Re, a Michigan-based captive reinsurer, has significantly enhanced capital stability and hedging efficiency, allowing Jackson to manage variable annuity guarantees more economically and reduce sensitivity to market volatility.
• Technological Edge in Product and Distribution: Jackson differentiates itself through continuous product innovation, including RILA 3.0 with principal protection and new fixed index annuities, alongside digital tools for financial professionals that streamline client engagement and product selection.
• Attractive Valuation: Despite strong operational performance and a clear capital return strategy, Jackson Financial trades at a significant discount to its industry peers on key valuation metrics, suggesting potential for multiple expansion.

A New Chapter in Retirement Security: Jackson Financial's Strategic Evolution

Jackson Financial Inc. ($JXN) stands as a focused financial services company dedicated to helping Americans secure their financial futures, primarily through a comprehensive suite of annuity products. Operating in a dynamic industry shaped by evolving demographics and regulatory shifts like the SECURE Acts, Jackson has strategically adapted its business model to meet the increasing demand for retirement income solutions. The company's overarching strategy centers on diversifying its product offerings, maintaining disciplined risk management, and consistently returning capital to shareholders, all built upon a foundation of technological innovation and a robust distribution network.

Jackson's journey has been marked by strategic evolution. After its incorporation in 2006 and a pivotal shift in 2012 to acquire mature life insurance blocks rather than originating new policies, the company honed its focus on the U.S. market. A significant structural change occurred on January 1, 2024, with the formation of Brooke Life Reinsurance Company (Brooke Re), a Michigan captive reinsurer. This move was instrumental in ceding liabilities associated with certain variable annuity guaranteed benefit riders, allowing Jackson to moderate the impact of the cash surrender value floor on its statutory capital and enhance hedging efficiency. This strategic realignment has been critical in providing greater capital stability and more predictable financial results.

The company's competitive landscape is populated by major financial services firms such as Prudential Financial Inc. (PRU), MetLife Inc. (MET), Lincoln National Corporation (LNC), and Principal Financial Group Inc. (PFG). Jackson differentiates itself through a specialized focus on retail annuities and lifetime income solutions, which allows for a more tailored approach to U.S. retail investors compared to the broader, multinational strategies of some larger competitors. While larger rivals may benefit from greater scale and global reach, Jackson's strength lies in its extensive U.S.-centric distribution network and specialized product expertise, which can translate into efficient sales and strong customer loyalty in its target markets.

Technological Edge and Product Innovation

Jackson's commitment to technological differentiation and innovation is a cornerstone of its competitive strategy. The company continuously invests in digital transformation initiatives to improve customer experience and streamline operations, enhancing online platforms and leveraging data analytics to better understand customer needs.

A prime example of this is the RILA Digital Ecosystem, which received a 2024 Insurance Technology Impact award from Datos Insights. This one-stop-shop tool illustrates the benefits of RILAs, providing a customized, real-time look at how a RILA could fit within a client's holistic financial plan. The data-driven tool enables clients to generate individual, hypothetical scenarios of various RILA options, detailing product function within a financial plan. This innovation aims to make RILA offerings more accessible, transparent, and understandable, enhancing the digital experience for financial professionals and their clients.

Further product innovation is evident in the RILA 3.0 (Market Link Pro III and Market Link Pro Advisory III), launched in the second quarter of 2025. This product offers a NASDAQ 100 Index option and full principal protection options, directly addressing investor risk concerns while providing growth potential. The 100% principal protection feature, while not unique to the industry, is new for Jackson and remains capital-light in its requirements. Additionally, the Jackson Income Assurance Suite, a new fixed index annuity launched in August 2025, features an embedded guaranteed minimum withdrawal benefit (GMWB) designed to meet consumer demand for income and protected growth.

These technological advancements and product innovations offer tangible benefits: they enhance Jackson's competitive moat by providing differentiated solutions that are highly valued by distribution partners and clients. They contribute to financial performance by driving sales growth, expanding market share in high-demand product segments, and supporting sustainable investment spread income. The digital tools also streamline the advisor-client relationship, saving time and ensuring data-driven recommendations aligned with specific retirement goals.

Segment Performance and Financial Strength

Jackson's financial performance in the first nine months of 2025 reflects the success of its diversified strategy and robust risk management. The company reported adjusted operating earnings of $433 million for the third quarter of 2025, an increase of over 20% from the prior year, primarily driven by its Retail Annuities business. For the nine months ended September 30, 2025, adjusted operating earnings reached $1,159 million, compared to $1,094 million in the same period of 2024.

Retail Annuities: A Growth Catalyst

The Retail Annuities segment is Jackson's core growth engine. For the three months ended September 30, 2025, operating revenues were $1,411 million, a 5.0% increase from the prior year. Pretax adjusted operating earnings for the quarter rose 7.9% to $494 million. Sales in this segment reached $5,362 million in Q3 2025, marking its highest level since Jackson became an independent company. This growth was primarily fueled by RILA and traditional variable annuities. RILA sales hit a record $2,066 million in Q3 2025, accounting for 38% of overall retail annuity sales, with RILA account balances approaching $18 billion, a 74% increase from the prior year. Variable annuity sales also increased 8% from a year ago, with sales of variable annuities without a lifetime benefit growing 24% for the first nine months of 2025. The segment's average AUM has grown to $263 billion, supporting strong fee income.

Institutional Products: Opportunistic Expansion

The Institutional Products segment demonstrated strong growth, with operating revenues increasing 46.5% to $148 million for Q3 2025. Pretax adjusted operating earnings for the quarter were $31 million, an 82.4% increase from the prior year. Sales in this segment surged 33.9% to $1,003 million in Q3 2025, reflecting strong demand for spread lending and an opportunistic approach in the institutional marketplace. The segment's account value grew to $10,877 million, a 37.2% increase from September 30, 2024, driven by increased funding agreement-backed note (FABN) and commercial paper (FABCP) funding agreements.

Closed Life and Annuity Blocks: Stable Contribution

The Closed Life and Annuity Blocks segment, comprising acquired businesses, reported operating revenues of $318 million for Q3 2025, up 7.8% year-over-year. Pretax adjusted operating earnings increased 114.3% to $15 million for the quarter. This segment's spread income benefited from higher income on limited partnerships and a decrease in interest credited due to the ongoing run-off of the closed block of life business.

Corporate and Other: Investment Management Expertise

The Corporate and Other segment, which includes PPM America, Inc. (PPM), Jackson's investment management subsidiary, saw pretax adjusted operating earnings improve by $36 million to $35 million for Q3 2025. This was primarily due to lower general and administrative expenses and an increase in net investment income. PPM manages approximately half of Jackson's assets under management and provides investment services to third parties across five verticals, including public and private fixed income, CLO management, commercial mortgage debt, and private equity . PPM's enhanced asset sourcing capabilities support the competitiveness and profitability of Jackson's spread-based products.

Capital Management and Shareholder Returns

Jackson adheres to an "earn it, then pay it" philosophy for capital return, built upon generating free capital, converting it to free cash flow, and ultimately returning it to common shareholders . Through the first nine months of 2025, free capital generation exceeded $1 billion, and free cash flow was $719 million . Distributions to the holding company totaled $815 million for the same period .

The company's capital position is robust, with an estimated Risk-Based Capital (RBC) ratio of 579% at the end of Q3 2025, significantly above its minimum target of 425% . This exceptional capital provides a substantial cushion against market volatility and ample capacity for future growth. Jackson's Board of Directors authorized a $1 billion increase to its common share repurchase authorization on September 18, 2025, with $1.10 billion remaining as of October 24, 2025 . The company repurchased 1.64 million shares for $154 million in Q3 2025, bringing year-to-date repurchases to 5.52 million shares for $484 million . Total capital returned to common shareholders reached $657 million year-to-date through Q3 2025, and the company expects to exceed its 2025 target range of $700 million to $800 million.

Risk Mitigation and Competitive Differentiation

Jackson's disciplined risk management is a core strength, particularly in managing its variable annuity business. The establishment of Brooke Re on January 1, 2024, as a Michigan captive reinsurer, has been a significant differentiator . This structure allows Jackson to manage its profitable variable annuity block without the constraint of the cash surrender value floor, aligning its hedging more closely with the underlying economics of the guarantees . Brooke Re's modified GAAP methodology uses a fixed volatility assumption for Market Risk Benefit (MRB) measurement, promoting balance sheet stability and reducing sensitivity to equity market movements at Jackson National Life.

The RILA business further enhances hedging efficiency by providing a natural offset to the equity risk of variable annuity guarantees. While RILA and variable annuity guarantees are reserved and capitalized separately, their offsetting equity risks create hedging efficiencies through fully settled internal trades, reducing the need for external equity hedging . This structure ensures that even if RILA's equity risk were to surpass that of variable annuities, it would merely shift the external hedging need from downside to upside protection, without requiring additional reserves .

Jackson's investment portfolio is conservatively managed, with low exposure to commercial office loans (less than 2%) and below investment-grade securities (less than 1%). Regional bank exposure is also minimal at approximately 1% of the portfolio. The company's hedging program has proven effective, even during periods of heightened market volatility, such as early April 2025, when it performed well without requiring capital contributions to Brooke Re .

Outlook and Valuation

Jackson Financial is well-positioned for continued growth and shareholder value creation. For 2025, the company expects free capital generation in excess of $1 billion under normal market conditions . This strong capital generation, combined with its robust balance sheet and holding company liquidity, supports its increased capital return target of $700 million to $800 million for the year, which is expected to be exceeded .

The company's strategic focus on product diversification, particularly the growth of RILA and new fixed index annuities, is expected to drive future sales and sustainable investment spread income. Jackson's ongoing investments in technology, such as the new digital experience for financial professionals and paperless annuity replacement, are designed to enhance distribution relationships and operational efficiency .

Despite its strong operational performance, consistent capital returns, and clear strategic direction, Jackson Financial appears attractively valued. The company trades at a Forward P/E ratio of 4.72, representing a significant discount compared to its industry average Forward P/E of 11.17. Its Price-to-Sales ratio of 0.95 indicates that investors pay 95 cents for each dollar of sales. This valuation, coupled with a free cash flow yield of approximately 14% for the trailing 12 months, suggests that the market may be underappreciating Jackson's intrinsic value and long-term potential.

Conclusion

Jackson Financial Inc. has demonstrated a compelling investment thesis built on a foundation of strategic diversification, robust capital management, and innovative risk mitigation. The company's successful pivot towards a multi-product annuity portfolio, particularly the rapid growth of RILAs and new fixed index annuities, is driving strong sales and earnings, while its core variable annuity business continues to generate substantial fee income. The strategic implementation of Brooke Re and an economic hedging approach have significantly stabilized capital and enhanced the predictability of financial results, proving resilient even amidst market volatility.

With a commitment to returning capital to shareholders through aggressive buybacks and a growing dividend, Jackson is actively enhancing shareholder value. Its technological advancements in product design and digital distribution further solidify its competitive standing in the evolving retirement planning landscape. Despite these strengths and a clear path for sustained capital generation, Jackson's current valuation presents a compelling opportunity for discerning investors, suggesting that the market has yet to fully recognize the company's transformed profile and long-term profitability potential.