JACKSON FINANCIAL 2026 THIRD QUARTER EARNINGS CALL - JACKSON FINANCIAL INC

Explicit Guidance:

• Full-Year 2026 Free Capital Generation: Management expects to achieve at least $1.2 billion, maintaining confidence in this target despite RBC headwinds from trailing 12-month fixed annuity sales, which are expected to moderate absent further meaningful sales increases.
• Full-Year 2026 Capital Return to Shareholders: The target range remains $900 million to $1.1 billion; based on current progress, capital return is expected at or above the midpoint of this range.
• 2026 Earnings per Share: Adjusted operating earnings per diluted share were $7.55; excluding $0.24 notable items and normalizing to the 15% tax guidance, this equals $7.67 per share.
• Tax Rate Guidance: The guidance for the effective tax rate remains 15% (actual for Q3 was 13.7%).
• RBC Ratio Targets: The Risk-Based Capital (RBC) risk appetite remains at 425%; the estimated RBC ratio at quarter-end was 524%.

Business-Segment Outlook:

• RILA Franchise: Expect continued growth driven by the June launch of Market Link Pro 4 and Market Link Pro Advisory 4 (industry-first Dow Jones Industrial Average options); Q3 RILA sales reached a record $3 billion (up 44% YoY).
• Spread Products: Diversification continues to accelerate, with spread-based products accounting for 58% of retail annuity sales in Q3; FIA and Fixed Index Annuities are expected to drive further long-term earnings growth and expanded access to attractive investment opportunities via the TPG partnership.
• Variable Annuities (VA): While strong equity markets may drive higher surrenders, significant investment gains (> $17 billion YTD) are expected to support robust fee income; the "in-force" business mix is increasingly balanced between VA and spread products (spread products and investment-only VAs now represent >40% of the enforced book).
• PPM America: Viewed as a strategic differentiator with AUM approaching $102 billion; the partnership with TPG is expected to continue enhancing new money yields and asset sourcing capabilities for both retail and institutional spread businesses.
• Institutional Products: Strong demand for spread lending products is expected to sustain sales momentum; Q3 institutional sales totaled $755 million.

Market and Competitive Outlook:

• Distribution Reach: Jackson remains the #1 provider in traditional variable annuities and a top-three RILA provider; leadership in the advisory channel is maintained (RILA, FIA, and Elite Access accounted for ~80% of advisory sales YTD).
• Direct-to-Consumer (AARP): The exclusive AARP annuity program is positioned to expand access to affluent households without advisors; initial launch is targeted for 10 states in November, with a national availability target in the first half of 2027.
• Product Innovation: Recent launches include Jackson Fixed Index Accumulation and Jackson Fixed Index Accumulation Advisory (offering five index options and four crediting methods) and Single Premium Immediate Annuity enhancements with cost-of-living adjustment features.
• Net Flows: Total retail annuity net outflows have improved for three consecutive quarters, declining 22% YTD compared to the prior year, driven by healthy net inflows in RILA and fixed annuities.

Macro / Industry Outlook:

• Interest Rates & Equities: Acknowledged that rising rates and equity markets create path-dependent hedge results (e.g., Q3 hedge losses driven by rates, offset by gains in RILA/FIA YTD); management anticipates continued volatility but maintains confidence in managing these dynamics.
• Regulatory Environment: Management expects no changes to the captive insurance structure (Brookry and Hickory Ree) following the Michigan gubernatorial election, citing compliance with established Michigan statutory frameworks.
• Lapse Rates: Anticipating modestly higher lapse rates in the future based on emerging data, which is being incorporated into the ongoing Q4 comprehensive assumption review; results of this review will be detailed at year-end.

Strategic Initiatives:

• AARP Program Launch: Exclusive provider of annuities for AARP members; focuses on fixed and spread products via a digital platform, aiming to diversify distribution beyond advisors.
• TPG Partnership: Strategic collaboration is expanding to deepen access to attractive investment opportunities (specifically lower-middle-market direct lending) and enhance new money yields.
• Captive Strategy: Continued evaluation of opportunities to enhance the captive strategy (Brookry and Hickory Ree) focusing on policyholder protection, economic risk management, and capital efficiency; additional transparency on Brookry's financial position (hard assets vs. MRB) is expected at year-end 2026.
• Liquidity Management: Expanded revolving credit facility to $1.25 billion (maturing 2031) and issued $750 million in senior debt to pre-fund 2027 maturities; holding company liquidity is well above the minimum buffer.

Risks and Headwinds to Outlook:

• Hedging Mismatch: Potential timing mismatch between the three-year settlement period for Brookry and the long-duration nature of Variable Annuity guarantees (MRBs); management mitigates this via steady fee streams and internal offsetting trades between VA and RILA hedging programs.
• Capital Constraints: RBC-related headwinds from fixed annuity sales may impact free capital generation, though the magnitude is expected to moderate.
• Market Volatility: Liquidity headwinds at Brookry could arise if equities and interest rates continue to rise significantly, though the enterprise has substantial flexibility to support the captive.
• Lapse Assumptions: The ongoing Q4 assumption review may result in adjustments to lapse rates, which could impact statutory reserves and capital requirements, though unexpected policy behavior has remained contained.

Management Tone on the Future:

• Confidence Level: High confidence in achieving full-year financial targets ($1.2B free capital generation, $900M-$1.1B capital return) and delivering on long-term profitability goals.
• Strategic Shift: Repeated emphasis on the success of diversifying the earnings profile (shifting from pure VA to spread-based products) creating a "more balanced and durable earnings profile."
• Capital Philosophy: Reiteration of the "earn it then pay it" philosophy, supported by strong cash generation and a resilient balance sheet.

Miscellaneous:

• Brookry Capitalization: Initially capitalized with $700 million; hard assets have increased since formation due to cumulative fees exceeding settlement payments.
• Hedging Effectiveness: Q3 net hedge result was a $479 million gain (excluding implied volatility); YTD 2026 saw ~$4.1B in VA hedge losses partially offset by ~$2.2B in RILA/FIA gains.
• Liquidity Position: Total available liquidity at the holding company was approximately $4 billion (including cash, securities, and undrawn revolver); Jackson National Life maintained nearly $32 billion in affordable liquidity.