Q1 2024 Jackson Financial Inc Earnings Call

May 9, 2024

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Cameron: Good morning. Thank you for attending the Jackson Financial Inc. first quarter 2024 earnings call. My name is Cameron, and I'll be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. And I would now like to pass the conference over to your host, Liz Werner, head of investor relations. You may proceed.

Good morning. Thank you for attending B Jackson Financial Inc. First quarter 2024 earnings call. My name is Cameron and I'll be your moderator for today all lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end and I would now like to pass the conference over to your host Liz Werner head of Investor.

Liz Werner: <unk> you May proceed.

Liz Werner: Good morning, everyone, and welcome to Jackson's First Quarter 2024 Earnings Call. Today's remarks may contain forward-looking statements that are subject to risks and uncertainties. These statements are not guarantees of future performance or events and are based on management's current expectations. Jackson's filings with the SEC provide details on important factors that may cause actual results or events to differ materially. Except as required by law, Jackson is under no obligation to update any forward-looking statements if circumstances or management's estimates or opinions should change.

Liz Werner: Good morning, everyone and welcome to Jacksons first quarter 'twenty 'twenty four earnings call. Today's remarks may contain forward looking statements, which are subject to risks and uncertainties. These statements are not guarantees of future performance or events and are based on management's current expectations.

Liz Werner: Jackson's filings with the SEC provide details on important factors that may cause actual results or events to differ materially.

Liz Werner: Except as required by law Jackson is under no obligation to update any forward looking statements if circumstances or management's estimates or opinions should change.

Liz Werner: Today's remarks also refer to certain non-GAAP financial measures. The reconciliation of those measures to the most comparable U.S. GAAP figures is included in our earnings release, financial supplement, and earnings presentation, all of which are available on the investor relations page of our website at investors.jackson.com. Joining us today are our CEO, Laura Prieskorn, our CFO, Marcia Wadsten, the President of Jackson National Life Distributors, Scott Romine, our Head of Asset Liability Management and Chief Actuary, Steve Binioris, the President and Chief Investment Officer of PPM, Craig Smith, and Chief Accounting Officer and Controller, Don Cummings. At this time, I'll turn the call over to our CEO, Laura Prieskor

Liz Werner: Days remarks also refer to certain non-GAAP financial measures. The reconciliation of those measures to the most comparable U S. GAAP figures is included in our earnings release financial supplement and earnings presentation, all of which are available on the Investor Relations page of our website at investors thought Jackson Dot com.

Speaker Change: Joining us today are our CEO, Laura pre scorn, our CFO Marcia Watson, the president of Jackson National Life distributors, Scott Rowe mine, our head of asset liability management, and Chief Actuary, Steve <unk>, The President and Chief Investment Officer, a P. P M, Craig Smith, and Chief Accounting Officer and controller Dan.

Liz Werner: Coming.

Laura Louene Prieskorn: At this time I'll turn the call over to our CEO, Laura pre scoring.

Laura Louene Prieskorn: Good morning, everyone.

Laura Louene Prieskorn: Good morning, everyone. This marks the first quarter to include the positive impact of Brook Re, our captive reinsurance solution. The hard work and execution that led to the formation of Brooke Ree positions Jackson for long-term capital strength and a continued focus on delivering on our commitments to all stakeholders. Beginning on slide three.

Liz Werner: This marks the first quarter to include the positive impact of Brook re our captive reinsurance solution.

Laura Louene Prieskorn: The hard work and execution that led to the formation of Brook re positions Jackson for long term capital strength and our continued focus on delivering on our commitments to all stakeholders.

Laura Louene Prieskorn: Beginning on slide three.

Laura Louene Prieskorn: We are off to a strong start in 2024, and our first quarter results reflect the expected outcomes of BrookReach. In our 2023 full-year results, we shared the structure of BrookReach and anticipated impacts on Jackson National Life. This quarter, Jackson National's statutory capital generation and risk-based capital, or RBC ratio, increased, consistent with our expectations. As anticipated, we also saw greater alignment between our economic hedging approach and U.S. gap reserving, which led to reduced volatility in net hedging results and, by extension, gap net income.

Laura Louene Prieskorn: We are off to a strong start in 2024, and our first quarter results reflect the expected outcomes of Brook re.

Laura Louene Prieskorn: And our 2023 full year results, we shared this structure of Brook reading and anticipated impacts on Jackson National life.

Laura Louene Prieskorn: This quarter Jackson, National's statutory capital generation and risk based capital or RBC ratio increased consistent with our expectations.

Laura Louene Prieskorn: As anticipated we also saw greater alignment between our economic hedging approach and U S. GAAP, reserving, which led to reduced volatility and that hedging results and by extension GAAP net income.

Laura Louene Prieskorn: Importantly, our statutory capital generation is better aligned with our non-GAAP measure of adjusted operating earnings, as both are primarily driven by the Substantial Assets Under Management, or AUM, supporting our variable annuity-based contracts. As a result, Jackson now has more intuitive, predictable, and stable financial results that better capture the healthy economics and earnings power of our large and profitable book of business. Turning to slide 4, you will see the benefits of our economic hedging were evident in both U.S. GAAP and statutory results in a quarter with significant moves in both equity markets and interest rates. However, we reported a smaller net hedging result compared to prior quarters, which we'll cover in more detail.

Laura Louene Prieskorn: Importantly, our statutory capital generation is better aligned with our non-GAAP measure of adjusted operating earnings as both are primarily driven by the substantial assets under management or AUM supporting our variable annuity based contract.

Laura Louene Prieskorn: As a result, Jackson now has more intuitive predictable and stable financial results that better capture the healthy economics and earnings power of our large and profitable book of business.

Laura Louene Prieskorn: Turning to slide four you will see the benefits of our economic hedging were evident in both U S GAAP and statutory results.

Laura Louene Prieskorn: In a quarter with significant moves in both equity markets and interest rates.

Laura Louene Prieskorn: We reported a smaller net hedging results compared to prior quarters, which we'll cover in more detail.

Laura Louene Prieskorn: We also reported nearly $800 million of gap net income at Jackson Financial. Our adjusted operating earnings of $334 million grew 23% from the first quarter of 2023, benefiting from higher equity markets and a favorable environment for spread income. At Jackson National, statutory capital increased by nearly $400 million, broadly consistent with the level of adjusted operating earnings. This pace of capital generation is well aligned with our financial targets and an expectation of $1 billion or more in annual capital generation under normal market conditions.

Laura Louene Prieskorn: We also reported nearly $800 million of GAAP net income at Jackson financial.

Laura Louene Prieskorn: Our adjusted operating earnings of $334 million grew 23% from the first quarter of 2023 benefiting from higher equity markets and a favorable environment for spread income.

Laura Louene Prieskorn: At Jackson National statutory capital increased by nearly $400 million broadly consistent with the level of adjusted operating earnings.

Laura Louene Prieskorn: This pace of capital generation is well aligned with our financial targets and an expectation for 1 billion or more in annual capital generation under normal market conditions.

Laura Louene Prieskorn: This capital generation drove Jackson National's first-quarter estimated RBC to 555 to 575 percent, up from 543 percent at the beginning of the year after giving effect to the funding of Brooke-Reed. We continue to make progress on diversifying our sales mix with another record quarter of RILA production, driving an overall increase in retail annuity sales of nearly 20% over the prior year's first quarter. Our product innovation continues with the recent launch of Plus Income, a guaranteed lifetime income option now available in our Jackson MarketLink Pro products.

Laura Louene Prieskorn: This capital generation drove Jackson, National's first quarter estimated RBC to 555% to 575% up from 543% at the beginning of the year after giving effect to the funding of broke free.

Laura Louene Prieskorn: We continue to make progress on diversifying our sales mix with another record quarter of Riley production driving an overall increase in retail annuity sales of nearly 20% over the prior year's first quarter.

Laura Louene Prieskorn: Our product innovation continues with the recent launch of plus income a guaranteed lifetime income option now available in our Jackson market linked pro product suite.

Laura Louene Prieskorn: This option enables policyholders to create an immediate income stream or defer withdrawals, providing the opportunity to grow income over time. Along with our Variable Annuity Living Benefit options, the addition of PLUS income to our RILA suite underscores our philosophy of providing product offerings focused on choice, flexibility, and strong consumer value.

Laura Louene Prieskorn: This option enables policyholders to create an immediate income stream or defer withdrawals, providing the opportunity to grow income over time.

Laura Louene Prieskorn: Along with our variable annuity living benefit options. The addition of plus income to our Riley suite underscores our philosophy of providing product offerings focused on choice flexibility and strong consumer value.

Laura Louene Prieskorn: We believe our sustained history of product innovation, strong distribution partnerships, and industry-leading service positions Jackson for continued sales momentum into the future. Overall, these results helped fuel a very positive start to the year in returning capital to common shareholders, delivering $172 million through dividends and share buybacks in the first quarter of 2024. Slide 5 highlights our consistent track record of returning capital through different market environments and conditions. Jackson's capital return to common shareholders has exceeded $1.4 billion in share repurchases and dividends since becoming a standalone public company in September of 2021. As of the end of the first quarter of 2024, cumulative common shares repurchased represented more than 23% of shares outstanding at separation.

Laura Louene Prieskorn: We believe our sustained history of product innovation strong distribution partnerships and industry, leading service position Jackson for continued sales momentum into the future.

Laura Louene Prieskorn: Overall these results helped fuel a very positive start to the year and returning capital to common shareholders delivering $172 million through dividends and share buybacks in the first quarter of 2024.

Laura Louene Prieskorn: Slide five highlights our consistent track record of returning capital through different market environments and conditions.

Laura Louene Prieskorn: Jackson's capital return to common shareholders has exceeded $1 4 billion in share repurchases and dividends since becoming a standalone public company in September of 2021.

Laura Louene Prieskorn: As of the end of the first quarter of 2020 for cumulative common shares repurchased represented more than 23% of shares outstanding at separation.

Laura Louene Prieskorn: This aligns with our balanced approach to capital return, which we believe will continue to serve us well. We continue to view a cash dividend as a valuable stream of sustainable capital return and have cumulatively paid more than $500 million to common shareholders in less than three years. Yesterday, we announced our board's approval of a second quarter shareholder dividend of $0.70 per common share. This reflects our continued confidence and our ability to generate capital in our focus on long-term profitability and in our commitment to increasing shareholder value.

Laura Louene Prieskorn: This aligns with our balanced approach to capital return, which we believe will continue to serve us well.

Laura Louene Prieskorn: We continue to view, our cash dividend is a valuable stream of sustainable capital return and have cumulatively paid more than $500 million to common shareholders in less than three years.

Laura Louene Prieskorn: Yesterday, we announced our board's approval of a second quarter shareholder dividend of 70 cents per common share.

Laura Louene Prieskorn: This reflects our continued confidence in our ability to generate capital and our focus on long term profitability and in our commitment to increasing shareholder value.

Laura Louene Prieskorn: Moving to slide six, maintaining a strong capital position at our operating companies and parent company, Jackson Financial, remains a priority, as evidenced again this quarter. Our first quarter capital return to common shareholders compares favorably with our annual target of $550 to $650 million, and our holding company liquidity as of the end of the first quarter continues to be above our targeted minimum level at nearly $500 million. We ended the first quarter significantly above our RBC minimum of 425%.

Laura Louene Prieskorn: Moving to slide six maintaining a strong capital position at our operating companies and parent company Jackson financial remains a priority as evidenced again this quarter.

Laura Louene Prieskorn: Our first quarter capital return to common shareholders compares favorably with our annual target of $550 million to $650 million and our holding company liquidity as of the end of the first quarter continues to be above our targeted minimum level at nearly $500 million.

Laura Louene Prieskorn: We ended the first quarter significantly above our RBC minimum of 425%.

Laura Louene Prieskorn: Our estimated RBC ratio is between 555 and 575 percent, and our statutory total adjusted capital, or TAC, is approximately $4.7 billion. The greater stability and predictability of these metrics following the implementation of our BRIC re-transaction, along with our expectations for smaller periodic distributions from Jackson National, simplify expectations for our operating company capital position going forward. I'll now turn it over to Marcia to review details of our first quarter finances.

Laura Louene Prieskorn: Our estimated RBC ratio is between 555% to 575% and our statutory total adjusted capital or Tac is approximately $4 $7 billion.

Marcia: The greater stability and predictability of these metrics following the implementation of our brick re transaction along with our expectations for smaller periodic distributions from Jackson National simplifies expectations for our operating company capital position going forward.

Laura Louene Prieskorn: I'll now turn it over to Marcia to review details of our first quarter financials.

Marcia Lynn Wadsten: Thank you, Laura. I'll begin on slide 7 with our first quarter results summary. Adjusted operating earnings of $334 million increased from both 2023's first and fourth quarters, driven by stronger fee and spread earnings. Adjusted book value attributable to common shareholders increased over the first quarter due to healthy adjusted operating earnings and positive net hedging results, which I will discuss in more detail shortly. As a reminder, in the appendix of our earnings presentation, we have included additional general account investment portfolio details that provide breakdowns on both U The information provides helpful insight into our highly rated and diversified commercial mortgage loan portfolio, which is less than 2% of the general account.

Marcia: Thank you Laura I'll begin on slide seven with our first quarter results summary, adjusted operating earnings of $334 million increased from both 2020, Three's first and fourth quarters, driven by stronger fee and spread earnings.

Marcia Lynn Wadsten: Our adjusted book value attributable to common shareholders increased over the first quarter due to healthy adjusted operating earnings and positive net hedging results, which I will discuss in more detail shortly.

Marcia Lynn Wadsten: As a reminder, in the appendix of our earnings presentation. We have included additional general account investment portfolio details that provide breakdowns on both U S GAAP and statutory basis, excluding the assets reinsured third parties through funds withheld agreement.

Marcia Lynn Wadsten: The information provides helpful insight into our highly rated and diversified commercial mortgage loan portfolio, which is less than 2% of the general account Jack.

Marcia Lynn Wadsten: Jackson remains conservatively positioned, with only 1% exposure to below-investment-grade securities on a statutory basis excluding funds withheld after. Slide 8 outlines the notable items included in adjusted operating earnings for the first quarter. Results from limited partnership investments, which report on a one-quarter lag, were slightly above our long-term expectation for a $3 million benefit. However, in the first quarter of 2023, Limited Partnership Income was below our long-term expectation, creating a comparative pre-tax benefit in the current quarter of $23 million.

Marcia Lynn Wadsten: Jackson remains conservatively positioned with only 1% exposure to below investment grade securities on a statutory basis, excluding funds withheld assets.

Marcia Lynn Wadsten: Slide eight outlines the notable items included in adjusted operating earnings for the first quarter.

Marcia Lynn Wadsten: Results from limited partnership investments, which report on a one quarter lag were slightly above our long term expectations for a 3 million dollar benefit.

Marcia Lynn Wadsten: In the first quarter of 2023 limited partnership income was below our long term expectation, creating a comparative pretax benefit in the current quarter of $23 million.

Marcia Lynn Wadsten: In addition to this notable item, both first quarter 2024 and first quarter 2023 benefited from a lower effective tax rate relative to the 15% long-term guidance, with a larger benefit in the prior year's first quarter. This occurred due to higher pre-tax operating earnings in the current quarter, which made tax benefits that are similar on a dollar basis less impactful to the effective tax rate. Adjusted for both the notable item and the tax rate difference, earnings per share were $4.16 in the current quarter compared to $3.18 in the prior year's first quarter, due primarily to the equity market and spread income benefits noted earlier.

Marcia Lynn Wadsten: In addition to the notable item both first quarter 2024, and first quarter 2023 benefited from a lower effective tax rate relative to the 15% long term guidance with a larger benefit in the prior year's first quarter.

Marcia Lynn Wadsten: This occurred due to higher pre tax operating earnings in the current quarter, which made tax benefits that are similar on a dollar basis less impactful to the effective tax rate.

Marcia Lynn Wadsten: Adjusted for both the notable items and the tax rate difference earnings per share were $4 16 in the current quarter compared to $3 18 in the prior years first quarter due primarily to the equity market and spread income benefit noted earlier.

Marcia Lynn Wadsten: Slide nine offers a visual reconciliation of our first quarter 2024 pre-tax adjusted operating earnings of $389 million to the pre-tax income attributable to Jackson Financial of $896 million. Here we see another positive outcome of the Brook Reef solution, as our economic hedging is now better aligned with U.S. gap reserving. As shown in the table, Total Guaranteed Benefits and Hedging Results, or Net Hedge Result, was a gain of $427 million in the first quarter of 2024.

Marcia Lynn Wadsten: Slide nine offers a visual reconciliation of our first quarter 2024 pre tax adjusted operating earnings of $389 million to the pretax income attributable to Jackson financial of $896 million.

Marcia Lynn Wadsten: Here, we see another positive outcome of the brewery solution as our economic hedging is now better aligned with U S. GAAP reserving.

Marcia Lynn Wadsten: As shown in the table total guaranteed benefits and hedging results or net hedge result was a gain of $427 million in the first quarter of 2024.

Marcia Lynn Wadsten: Starting from the top of the table, this gain includes a robust guaranteed benefit fee stream. These guaranteed benefit fees are calculated from the benefit base rather than the account value, which provides stability to the guaranteed benefit fee stream when markets decline.

Marcia Lynn Wadsten: Starting from the top of the table. This gain includes a robust guaranteed benefit fee stream.

Marcia Lynn Wadsten: These guaranteed benefit fees are calculated from the benefit base, rather than the account value, which provides stability to the guarantee fee stream when markets decline.

Marcia Lynn Wadsten: Consistent with our practice, all guarantee fees are presented in non-operating income to align with related hedging and liability movements. During the period, the net hedge result included a loss on freestanding derivatives, primarily due to losses on interest rate hedges in a quarter when interest rates were up across the yield curve, as well as losses on equity hedges in a rising equity market environment. Movements in Net Market Risk Benefits, or Net MRB, benefited from the same equity market and interest rate movements, which broadly offset the freestanding derivative results.

Marcia Lynn Wadsten: Consistent with our practice I'll guarantee fees are presented in nonoperating income to align with related hedging and liability movements.

Marcia Lynn Wadsten: During the period. The net hedge result included a loss on freestanding derivatives, primarily due to losses on interest rate hedges in a quarter, where interest rates were up across the yield curve.

Marcia Lynn Wadsten: As well as losses on equity hedges in a rising equity market environment.

Marcia Lynn Wadsten: Movements in net market risk benefits, our net MRV benefited from the same equity market and interest rate movements, which broadly offset the freestanding derivative results.

Marcia Lynn Wadsten: This illustrates the improved alignment between the hedging and the related hedged items following the Brook re-implementation. The Reserve and Embedded Derivative Movement's loss primarily reflects losses on RILA reserves resulting from higher equity markets. This RILA business provides a natural equity offset to the Guaranteed Variable Annuity business on the book, which results in hedging efficiencies that increase as the RILA block grows. The Deferred Acquisition Cost or DAC amortization included in the Net Hedge Result is associated with the non-operating portion of DAC as of the transition date to LBTI.

Marcia Lynn Wadsten: This illustrates the improved alignment between the hedging and the related hedged items following the brokerage implementation.

Marcia Lynn Wadsten: The reserve an embedded derivative movements loss, primarily reflects losses on Riley reserves, resulting from higher equity markets.

Marcia Lynn Wadsten: This roller business provides a natural equity offset to the guaranteed variable annuity business on the books.

Marcia Lynn Wadsten: Which results in hedging efficiencies that increase as the Raila block grows.

Marcia Lynn Wadsten: The deferred acquisition costs or DAC amortization included in the net hedge result is associated with the non operating portion of deck as of the transition date to LPTA.

Marcia Lynn Wadsten: This non-operating DAC will continue to run off over time, and the amount of quarterly amortization should decline slowly from the current level. Non-operating results also included $69 million in gains from business reinsured to third parties. This resulted from a loss on a funds withheld reinsurance treaty due to the change in the associated embedded derivative value netted against the related net investment income.

Marcia Lynn Wadsten: This nonoperating DAC will continue to run off over time, and the amount of quarterly amortization should decline slowly from the current level.

Marcia Lynn Wadsten: Non operating results also included $69 million in gains from business reinsured to third parties.

Marcia Lynn Wadsten: This resulted from a loss on a funds withheld reinsurance treaty due to the change in the associated embedded derivative value netted against the related net investment income.

Marcia Lynn Wadsten: These non-operating items, which can be volatile from period to period, are offset by changes in Accumulated Other Comprehensive Income, or AOCI, in the funds withheld account related to reinsurance, resulting in a minimal net impact on Jackson's adjusted book value. Furthermore, these items do not impact our statutory capital or free cash flow. Our segment results start on slide 10 and focus on retail annuity sales progress. As Laura highlighted, our Ryla product continues to gain momentum with first quarter sales reaching a record level of $1.2 billion, supporting further diversification in our top line.

Marcia Lynn Wadsten: These non operating items, which can be volatile from period to period are offset by changes in accumulated other comprehensive income or OCI in the funds withheld account related to reinsurance.

Marcia Lynn Wadsten: Resulting in a minimal net impact on Jackson's adjusted book value.

Marcia Lynn Wadsten: Furthermore, these items do not impact our statutory capital or free cash flow.

Marcia Lynn Wadsten: Our segment results start on slide 10, and focus on retail annuity sales progress as Laura highlighted our roller product continues to gain momentum with first quarter sales, reaching a record level of $1 2 billion supporting further diversification in our top line.

Marcia Lynn Wadsten: Sales of variable annuities were relatively flat compared to the first quarter of 2023 and are consistent with the quarterly pace we've seen since the fourth quarter of 2022. When viewed through a NetFlow lens, the gross sales we are generating in RILA and SPREAD products translated to $1.1 billion of non-VA NetFlow in the first quarter of 2024, which has grown materially over time. These net flows provide valuable economic diversification and hedging efficiency benefits.

Marcia Lynn Wadsten: Sales of variable annuities were relatively flat compared to the first quarter of 2023 and are consistent with the quarterly pace, we've seen since the fourth quarter of 2022.

Marcia Lynn Wadsten: When viewed through a net flow lens. The gross sales, we are generating and raila in spread products translated to $1 1 billion of non VA net flow in the first quarter of 2024, which has grown materially over time.

Marcia Lynn Wadsten: These net flows provide valuable economic diversification and hedging efficiency benefits and importantly, our overall sales mix remains efficient from the standpoint of new business strain.

Marcia Lynn Wadsten: Importantly, our overall sales mix remains efficient from the standpoint of new business strength. Looking at first quarter 2024 pre-tax adjusted operating earnings for our segments on slide 11, higher equity markets and a continued positive environment for spread income have driven solid growth in our retail annuities segment compared to both the first and fourth quarters of 2023. Jackson's earnings power is supported by the growing level of account value, as healthy separate account returns combined with growing non-VA net flows have built up AUM to $248 billion, an increase of 13% from the first quarter of 2023.

Marcia Lynn Wadsten: Looking at first quarter 2024 pre tax adjusted operating earnings for our segments on slide 11.

Marcia Lynn Wadsten: Higher equity markets and a continued positive environment for spread income has driven solid growth in our retail annuity segment compared to both the first and fourth quarters of 2023.

Marcia Lynn Wadsten: Jacksons earnings power is supported by the growing level of account value is.

Marcia Lynn Wadsten: Healthy separate account returns combined with growing non VA net flows have built up.

Marcia Lynn Wadsten: Up to $248 million, an increase of 13% from the first quarter of 2023.

Marcia Lynn Wadsten: For our institutional segment, pre-tax adjusted operating earnings were also up from both prior periods due to higher spread income. Additionally, our Closed Life and Annuity Block segment reported higher pre-tax adjusted operating earnings compared to both prior periods. This is due primarily to reserve decreases as the business runs off and to the annual assumption updates in the fourth quarter of 2023 when comparing sequentially. Slide 12 summarizes our first quarter capital position. The profitability of our variable annuity-based contract was the primary driver of an increase in J&L's total adjusted capital, or TAC, to nearly $4.7 billion.

Marcia Lynn Wadsten: For our institutional segment pre tax adjusted operating earnings were also up from both prior periods due to higher spread income.

Marcia Lynn Wadsten: Our closed life and annuity blocks segment reported higher pretax adjusted operating earnings compared to both prior periods.

Marcia Lynn Wadsten: This is due primarily to reserve decreases as the business runs off.

Marcia Lynn Wadsten: And to the annual assumption updates in the fourth quarter 2023, when comparing sequentially.

Marcia Lynn Wadsten: Slide 12 summarizes our first quarter capital position the profitability of our variable annuity based contract was the primary driver of an increase in Gnl's total adjusted capital or Tac to nearly $4 7 billion.

Marcia Lynn Wadsten: This is an increase of approximately $400 million from the pro-forma January 1st level after adjusting for the impact of Brooke-Ree. Going forward, our Company Action Level required capital, or CAL, is much more stable now that the cash surrender value floor impacts have been removed. Our estimated RBC ratio of between 555 and 575 percent was well above our 425 percent minimum and up from the January 1st pro forma level of 543 percent. We also had a successful first quarter at Brookery, which operated as expected and remains well capitalized.

Marcia Lynn Wadsten: This is an increase of approximately $400 million.

Marcia Lynn Wadsten: From the pro forma January 1st level after reflecting the impact of Brook re.

Marcia Lynn Wadsten: Going forward, our company action level required capital our cow, it's much more stable now that the cash surrender value floor impacts have been removed.

Marcia Lynn Wadsten: Our estimated RBC ratio between 555% to 575% was well above our 425% minimum and up from the January one pro forma level of 543%.

Marcia Lynn Wadsten: We also had a successful first quarter at Berkeley, which operated as expected and remains well capitalized.

Marcia Lynn Wadsten: Our holding company cash and highly liquid asset position at the end of the quarter was nearly $500 million, which continues to be above our minimum buffer. As previously indicated and subject to regulatory approval, we intend to have periodic distributions from our operating company throughout the year with the goal of reducing the RBC volatility that occurred from our past practice of sizable annual dividends. We believe our robust capital position across operating companies provides a favorable financial foundation for future operating company dividends. Overall, I am very pleased with these results, which demonstrate strength in sales, earnings, capital, and holding company liquidity. I'll now turn the call back to Laura.

Marcia Lynn Wadsten: Our holding company cash and highly liquid asset position at the end of the quarter was nearly $500 million.

Laura: Which continues to be above our minimum buffer.

Laura: As previously indicated and subject to regulatory approval, we intend to have periodic distributions from our operating company throughout the year with the goal of reducing the RBC volatility that occurred from our past practice of sizable annual dividend.

Laura: We believe our robust capital position across operating companies provides a favorable financial foundation for future operating company dividends.

Laura: Overall, I'm very pleased with these results, which demonstrate strength and sales earnings capital and holding company liquidity.

Marcia Lynn Wadsten: I'll now turn the call back to Laura.

Laura: Thank you Marcia.

Laura Louene Prieskorn: Our first quarter results show we are off to a great start in 2024, and I'm pleased our brook resolution is performing as expected. I'm quite happy with the results we've produced in the first quarter and energized by the prospects for our business, which I shared today. I look forward to continued success in the remainder of 2024.

Laura: Our first quarter results show, we are off to a great start in 2024 and I am pleased our brokerage solution is performing as expected.

Laura Louene Prieskorn: I'm quite happy with the results we've produced in the first quarter and energized by the prospects for our business shared today.

Laura Louene Prieskorn: I look forward to continued success in the remainder of 2024.

Laura Louene Prieskorn: As always, I'd like to acknowledge our talented Jackson team and their dedication to our purpose in providing long-term solutions for Americans planning for their financial future. Earlier this week, we published our Annual Corporate Responsibility Report, which details how we invest in each other and our communities while continuing to enhance access to our annuity products and take an active role in moving our industry forward. I encourage you to read the report posted on Jackson.com to learn more about these efforts and how they drive business value to support our long-term success.

Laura Louene Prieskorn: As always I'd like to acknowledge our talented Jackson team and their dedication to our purpose and providing long term solutions for Americans planning for their financial futures.

Laura Louene Prieskorn: Earlier this week, we published our annual corporate responsibility report, which details how we invest and each other.

Laura Louene Prieskorn: And our communities, while continuing to enhance access to our annuity products and take an active role in moving our industry forward.

Laura Louene Prieskorn: I encourage you to read the report posted on Jackson Dot com to learn more about these efforts and how they drive business value to support our long term success.

Laura Louene Prieskorn: Finally, as we've previously shared, Marcia is retiring effective June 3rd, and at that time, we expect our board to appoint Don Cummings as chief financial officer. Marcia's leadership, steadfast commitment, and positive contributions will be felt for years to come, and I'm grateful for her dedication and her counsel. It has been an honor to serve Jackson alongside Marcia through the most transformational time in the company's history.

Laura Louene Prieskorn: Finally, as we've previously shared.

Laura Louene Prieskorn: She is retiring effective June 3rd.

Laura Louene Prieskorn: At that time, we expect our board to appoint Don Cummins as Chief Financial Officer.

Laura Louene Prieskorn: Marsh's leadership steadfast commitment and positive contributions will be felt for years to come and I'm grateful for her dedication and her counsel.

Laura Louene Prieskorn: It has been an honor to serve Jackson alongside Marsha through the most transformational time in the Companys history.

Marcia Lynn Wadsten: Thank you, Laura. It has been a privilege to be part of Jackson for my entire career, especially as we were transitioning to and operating as an independent public company. As we turn to the future, I know Don is well positioned to support Jackson's ability to generate capital and maintain our balanced approach to capital management.

Speaker Change: Thank you Laura.

Laura Louene Prieskorn: It has been a privilege to be part of Jackson for my entire career, especially as we were transitioning to an operating as an independent public company as.

Marcia Lynn Wadsten: As we turn to the future I know Don is well positioned to support Jackson's ability to generate capital and maintain our balanced approach to capital management.

Don Cummings: Thanks, Marcia. Good morning, everyone.

Don: Thanks, Marsha good morning, everyone.

Don Cummings: I appreciate the opportunity to take on the role of CFO at Jackson. Over the last three years, I've worked closely with Marcia as we became an independent public company and have learned immensely from her commitment to managing capital for the benefit of all Jackson stakeholders. As we continue to work through the transition, I'm optimistic about the future and look forward to meeting many of you in person in the coming weeks.

Speaker Change: I appreciate the opportunity to take on the role of CFO at Jackson.

Don Cummings: Over the last three years I've worked closely with Marsha is we became an independent public company and have learned immensely from her commitment to managing capital for the benefit of all Jackson stakeholders.

Don Cummings: As we continue to work through the transition I'm optimistic about the future and look forward to meeting many of you in person in the coming weeks.

Laura Louene Prieskorn: Thank you, Marcia and Don. Congratulations to you both as you embrace new experiences. I'll now turn the call over to the operator for questions.

Speaker Change: Thank you Marsha and Don Congratulations to you both as you embrace new experiences.

Laura Louene Prieskorn: I'll now turn the call over to the operator for questions.

Laura Louene Prieskorn: Yeah.

Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If, for any reason, you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. And as a reminder, if you're using a speakerphone, please remember to pick up your handset before asking a question. And we will pause here briefly as questions are registered. And the first question is from the line of Tom Gallagher with Evercore ISI. You may proceed.

Speaker Change: Thank you we will now begin the question and answer session. If you would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to remove a question. Please press star followed by two again to ask a question press Star one and as a reminder, if you are using a speakerphone. Please remember to pick up your handset before asking a question.

Thomas George Gallagher: And we will pause briefly as questions are registered.

Operator: And the first question is from the line of Tom Gallagher with Evercore ISI.

Operator: Proceed.

Operator: Yeah.

Thomas George Gallagher: Good morning. First off, Marcia, best of luck to you.

Thomas George Gallagher: Good morning, first off Marcia best of luck to you.

Thomas George Gallagher: And I guess my questions are both on cash flow. The first one is, So the, I heard your reiteration of the billion dollars of annual capital generation. And then after we consider interest expense, that would probably leave around 900 million available for shareholders. And I know you're committing to a midpoint of 600 million for this year. What happens to the other 300 million, like when you do the waterfall, is that plan to grow excess capital and have buffers for contingencies, or does that get consumed some other way? based on new sales train or something else.

Thomas George Gallagher: And I guess my questions are bolt on cash flow first one is.

Thomas George Gallagher: So I heard your reiteration of the $1 billion of annual capital generation and then after we consider interest expense that would probably leave around $900 billion available.

Thomas George Gallagher: Potentially for shareholders and I know you are committing to.

Thomas George Gallagher: Mid point of 600 million for this year.

Thomas George Gallagher: What happens to the other $300 million like when you when you do the waterfall is that.

Thomas George Gallagher: Planned to grow excess capital buffers for contingencies or does that get consumed some other way.

Thomas George Gallagher: On based on new sales training or something else.

Marcia Lynn Wadsten: Thanks, Tom. I think, you know, it's early days with Brookery.

Speaker Change: Thanks, Tom.

Thomas George Gallagher: I think it's the.

Marcia Lynn Wadsten: Early days with Brooke Res. So we're you know.

Marcia Lynn Wadsten: We set our target for this year with a view that that is sustainable but potentially can grow over time.

Marcia Lynn Wadsten: And you're you know you're you're mapping sense in this and in terms of you know what that means for kind of the net result, after we consider our holding company expenses.

Speaker Change: And then the difference there is really you know something that we you know we will evaluate I guess over time, we've talked in the past about our balanced use of capital will.

Marcia Lynn Wadsten: So we're, you know, we set our target for this year with a view that that is sustainable but potentially can grow over time. And, you know, your, you know, your math makes sense in this, in terms of, you know, what that means for kind of the net result after we consider holding company expenses. And the difference there is really, you know, something that we, you know, we will evaluate, I guess, over time. We've talked in the past about our, you know, balanced use of capital, which, you know, supports balance sheet, you know, balance sheet strengths, as well as new business investment and also return to shareholders.

Marcia Lynn Wadsten: Support balance sheet growth.

Marcia Lynn Wadsten: Balance sheet strength as well as new business investment.

Marcia Lynn Wadsten: And also return to shareholders. So I think as we move through 2024 will have an opportunity to watch the business perform under this arrangement and evaluate our options, but certainly if we had a different mix of business you know that may change the.

Marcia Lynn Wadsten: So I think as we move through 2024, we'll have an opportunity to, you know, watch the business perform under this arrangement and evaluate our options. But certainly, if we had a different mix of businesses, that may change the magnitude of investment for new business. We have a pretty capital efficient business mix today, in terms of what we're writing, but that may be an opportunity that also allows us the opportunity to think about other strategic opportunities that might come along as well.

Marcia Lynn Wadsten: Magnitude of investment for for new business, and we have a pretty capital efficient business mix today.

Marcia Lynn Wadsten: In terms of what we're writing, but that maybe an opportunity.

Marcia Lynn Wadsten: It also allows us the opportunity to think about other strategic opportunities that might come along as well.

Marcia Lynn Wadsten: That makes sense. And then my follow-up question is just looking at your 10 Q; it suggests that the permissible dividend out of Brook Life is a little under 400 million for 2024. And if I look at your current capital plan and whole company cash, it looks like you should be able to still execute it, but you'd probably be a little bit tight at the holding company if that's all you end up taking out this year.

Speaker Change: That makes sense and then my follow up is just looking at your 10-Q. It suggests that the permissible dividend out of broke life is a little under 400 billion for 2024, and if I look at your.

Marcia Lynn Wadsten: Your current capital plan and Holdco cash.

Marcia Lynn Wadsten: It looks like you should be able to still executed, but you'll probably be a little bit tight at the holding company. If that's all you end up taking out this year is there.

Marcia Lynn Wadsten: Is there a plan to take out extraordinary dividends for the year? Maybe talk a little bit about that, because if this lower permitted dividend every year is going to be at a lower level relative to your cash flow, how do you think about extraordinary dividends?

Marcia Lynn Wadsten: Is there a plan to take out extraordinary dividends for the year, maybe talk a little bit about that.

Marcia Lynn Wadsten: Because if this lower.

Marcia Lynn Wadsten: Permissible dividend every year is going to be at a lower level relative to your cash flow. How do you think about extraordinary dividends as an option.

Marcia Lynn Wadsten: Sure, yeah, we, um, you know, first of all, I guess just to... Go back a second. We did talk about the fact that as we began 2024 and moved beyond that, we would change from our kind of annual larger distribution out of the operating company out of J&L just to a more periodic Haydens on that, which was, you know, also meant to kind of contribute toward more RBC stability, which is, you know, just another thing that would bring that out as well as the book read transaction.

Speaker Change: Sure. Yeah. We you know first of all I guess just to just let it go.

Marcia Lynn Wadsten: Go back a second we didn't talk about the fact that.

Marcia Lynn Wadsten: As we began 2024 and move beyond that that we would change from our kind of annual.

Marcia Lynn Wadsten: Larger distribution out of the operating company out of GNL.

Marcia Lynn Wadsten: Just to have more periodic.

Marcia Lynn Wadsten: Cadence on that which was also meant to kind of.

Marcia Lynn Wadsten: Contribute.

Marcia Lynn Wadsten: Toward more RBC stability, which is just another another thing that.

Marcia Lynn Wadsten: Bring that out as well as the Brookfield transaction.

Marcia Lynn Wadsten: We, as we think about 2024 so far, we've already taken a distribution out of J&L to set up and capitalize Brook Re. So as we move through the remainder of this year, we'll look for opportunities as Jackson National Life is performing well and generating capital to be able to support distributions upward to the holding company. And we think we've talked about the fact that J&L is the main engine for capital generation to support those distributions, which, of course, are all subject to regulatory approval.

Marcia Lynn Wadsten: We.

Marcia Lynn Wadsten: As we think about 2024, so far we've already taken a distribution out of GNL to.

Marcia Lynn Wadsten: Set up and capitalized broke free.

Marcia Lynn Wadsten: As we move through the remainder of this year.

Marcia Lynn Wadsten: Well well look for opportunities as Jackson National life is performing well and generating capital to be able to support distributions upward to the holding company and we think we've talked about.

Marcia Lynn Wadsten: You talked about the fact that GNL is the main engine for capital generation to support those distributions, which of course are are all subject to.

Marcia Lynn Wadsten: Regulatory approval and.

Marcia Lynn Wadsten: Really, Brook Re is kind of just the pass-through. The main engine that's generating capital is JNL, and that's where we would look to kind of source those distributions. But I guess I would want to point out that we would expect in the near term many such... Sorry, I meant Brooke White.

Marcia Lynn Wadsten: Really broke re is kind of just the pass through the main engine, that's generating capital as Jan Allen and that's where we would look to kind of source those.

Marcia Lynn Wadsten: Distributions.

Marcia Lynn Wadsten: I guess I would want to point out that.

Marcia Lynn Wadsten: We would expect in the near Tori on many thanks Brooks for flight.

Marcia Lynn Wadsten: I'm sorry, I meant for one, you know, which is the parent company of Jackson. Yeah, but we would probably expect that our distributions would really come from J&L up to Brooklife and then from Brooklife further up to the holding company. That just because the real, you know, Jackson National that is really generating the capital that would fund those distributions. So that would be the starting point of the distributions, and they would just pass through Brooklife into the holding company. And we would expect in the near term those distributions to be extraordinary, but I'd point out that, historically, most of Jackson's dividends would have been extraordinary in nature, so that's not a new situation for us.

Speaker Change: I'm sorry, Brian.

Marcia Lynn Wadsten: Which is the parent to Jackson.

Marcia Lynn Wadsten: Yeah, but we would probably expect that our distributions would really come from GNL up to Brook life, and then from Brook life further up to the holding company.

Marcia Lynn Wadsten: That just because.

Marcia Lynn Wadsten: The real Jackson National that is really generating the capital that would fund those distributions so that would be the starting point of the distributions and they would just pass through Brook life into the holding company.

Marcia Lynn Wadsten: And we would expect in the near term those distributions to be extraordinary, but I'd point out that.

Marcia Lynn Wadsten: Historically.

Marcia Lynn Wadsten: Most of Jackson's dividends would have been extraordinary in nature. So that's not that's not a new a new situation for us.

Marcia Lynn Wadsten: Yeah.

Marcia Lynn Wadsten: Okay, that's, that's really helpful. So, bottom line, you wouldn't expect the permissible dividends to be a gating item this year. No, I think we've, we've, uh...

Marcia Lynn Wadsten: Okay.

Speaker Change: That's really helpful. So bottom line you wouldn't expect the permissible dividends to be a gating item this year.

Marcia Lynn Wadsten: No, I think we've, you know, worked through the extraordinary dividend path alongside our regulator quite often in the past, and that and that would be our approach again.

Marcia Lynn Wadsten: No I think we've we've you know we've worked through the extraordinary dividend.

Marcia Lynn Wadsten: Pass.

Marcia Lynn Wadsten: Long side our regulator.

Marcia Lynn Wadsten: Quite often in the past in that and that would be our approach again.

Marcia Lynn Wadsten: Yeah.

Speaker Change: Great. Thank you.

Suneet Laxman L. Kamath: The next question is from the line of Suneet Kamath with Jeffries. You may proceed.

Marcia Lynn Wadsten: The next question is from the line of Sydney to come off with Jefferies. You May proceed.

Suneet Laxman L. Kamath: Yeah, thanks. Good morning. Just a couple of questions following Tom's line of questioning. Can you just give us a sense of what you'd expect the annual dividend out of Jackson National Life through Brooke to the holding company to be?

Suneet Laxman L. Kamath: Yes, thanks, good morning.

Suneet Laxman L. Kamath: Just a couple of following on Tom's line of questioning can you just give us a sense of what you would expect the annual dividend out of Jackson National life through Brook to the holding company to be.

Marcia Lynn Wadsten: Well, I think I would just look to our capital return target and consideration, of course, of the Holding Company expenses to kind of guide what type of distribution would be needed to support both of those activities that would require funding at the holding company.

Suneet Laxman L. Kamath: Well I think I would just look to our.

Marcia Lynn Wadsten: Capital return target and consideration of course of the.

Marcia Lynn Wadsten: Holding company expenses.

Marcia Lynn Wadsten: Just to kind of guide on what type of distribution would be needed to support both of those activities that would require funding at the holding company.

Marcia Lynn Wadsten: Okay, got it. And then, I guess, as we think about that 400 million in capital generation in the quarter, since I think most of the hedges are now in brokerage, should we think about JNLIC's capital generation to be more, to have greater sensitivity to the markets both up and down relative to what you had before? Is that the right way to think about it?

Speaker Change: Okay got it and then I guess as we think about that $400 million of capital generation in the quarter.

Marcia Lynn Wadsten: Since I think most of the hedges are now in brokerage should we think about <unk> capital generation to be more to have greater sensitivity to the markets, both up and down relative to what you had before is that the right way to think about it.

Marcia Lynn Wadsten: I would say JNL, Capital Generation, should be... less sensitive to the market than what we saw before, simply because the cash surrender value kind of phenomenon created a lot of unique phenomena in terms of how the capital generation would play out, given that we had that significant mismatch between our hedge gain and loss relative to what the reserve, engine, I guess, or AUM based is going to produce a pretty steady level of ease to support that capital generation. Certainly, some fluctuation as AUM fluctuates, but I think there is sort of far less volatility in that given that we don't have that challenge around the mismatch between our liability movements and our hedge moves.

Marcia Lynn Wadsten: I would say Jan L capital generation should be.

Marcia Lynn Wadsten: Less sensitive to the market than what we saw before simply because the cash surrender value.

Marcia Lynn Wadsten: Phenomenon created a lot of.

Marcia Lynn Wadsten: Unique.

Marcia Lynn Wadsten: Unique phenomenon in terms of how the capital generation would play out given that we had that significant mismatch between our hedge gain and loss relative to what the reserve.

Marcia Lynn Wadsten: Increases or decreases would be next to that so I think what we would expect going forward for Jackson is really that the fundamental component of our capital generation. There is driven by Rfps are AUM based fees, which are then of course going to be tied to the size of the AUR. So while we'll have.

Marcia Lynn Wadsten: Some equity sensitivity in that.

Marcia Lynn Wadsten: The AUM.

Marcia Lynn Wadsten: Base could increase or decrease the debt related to market performance.

Marcia Lynn Wadsten: There's going to be a steady.

Marcia Lynn Wadsten: And then I guess, where are you on base that's going to produce.

Marcia Lynn Wadsten: Pretty steady level.

Marcia Lynn Wadsten: To support that capital generation, certainly some fluctuation as AUM fluctuate, but I think sort of far less.

Marcia Lynn Wadsten: Volatility in that given that we don't have that.

Marcia Lynn Wadsten: Challenge around the mismatch between our liability movements in our hedge movements that we had in the past.

Suneet Laxman L. Kamath: Right, I was just talking about just the core earnings from that business; it'll be more like an asset management type of company where it's a fee on AUM as opposed to Got it. Okay.

Marcia Lynn Wadsten: I was just talking about just the core earnings from that business it'll be more like an asset management type of company, where it is.

Suneet Laxman L. Kamath: AUM as opposed to.

Suneet Laxman L. Kamath: And then I guess the last question for me was just, as I looked at your supplement, it looked like the sequential change in statutory operating earnings was down something like 89 million. And I would have thought that we would have seen a bigger delta, just given the fourth quarter had all the business associated with that's now in brokery, in the stat numbers, and this quarter didn't. Is there something that's offsetting that, or is that not the right way to think about it?

Speaker Change: Got it Okay, and then I guess the last question from me was just.

Suneet Laxman L. Kamath: I looked at your supplement it looked like the sequential change in statutory operating earnings was down something like it was.

Suneet Laxman L. Kamath: It sounds like $89 million.

Suneet Laxman L. Kamath: And I would have thought that we would have seen a bigger delta just given the fourth quarter had all the business associated with that is now in broker in the stat numbers in this quarter it doesn't.

Suneet Laxman L. Kamath: Is there something thats offsetting that or is that not the right way to think about it.

Marcia Lynn Wadsten: No, you're thinking about that correctly. You would anticipate a decline from quarter four to quarter one, just given the fact that the guaranteed benefit fees and guaranteed benefit payments, you know, the net of those two would no longer be reflected in Q1. But there are a couple offsetting items, and Diane can highlight them. I think two of the ones that are probably the most material there. Yeah, thanks, Marcia.

Speaker Change: No you're thinking about that correctly.

Diane: You would anticipate from quarter four to quarter, one a decline just given the fact that the guaranteed benefit fees and guaranteed benefit payments.

Diane: Net of those two would no longer be reflected in Q1, but there are a couple of offsetting items and Oh I can highlight.

Diane: I think two of the ones that are probably the most material there yes.

Diane: Yeah, thanks, Marcia. So, Suneet, there were two kinds of positive items that offset the net fee settlement that Marcia described. First of all, we had some interest rate derivative losses that were amortizing through the IMR in the fourth quarter. But, you know, in the first quarter now, those derivatives are passed over to Brook Re, so that didn't repeat, so we got a positive from that. And then the second positive is really just the kind of impact of our RILA hedging efficiency.

Diane: Yes, Thanks Marsha so.

Diane: There were two kind of positive items I'd also.

Diane: The <unk> settlement and Marcia described.

Diane: First of all we had some interest rate derivative losses that were amortizing through the RMR in fourth quarter.

Diane: First quarter now of those derivatives or passed over to agree so that didnt repeat so we got a positive from that.

Diane: And then the second positive is really just the kind of the impact of our.

Diane: As you know, the risk on RILA comes from higher equities, which is a nice offset to the lower equity risk we have on the VAs. The way we set up the reinsurance agreement is that JNL does the hedging, and then we have an internal process to pass those results over to Brooke Reed. So, Rookery is getting the full impact of the VA hedges, and then J&L's got a benefit on the RILA side from not having to do as much hedging externally. So the two of those items combined essentially offset the negative impact of the net settlement on the reinsurance agreement.

Suneet: Hedging efficiency as you know.

Diane: <unk> <unk> from higher equities, which is.

Diane: A nice offset to the lower equity risk we have on the VA.

Diane: The way, we set up the reinsurance agreement is that GNL does the hedging and then we have an internal process to pass those results over to Brook, great. So rookery is getting the full.

Diane: Impact of the VA hedges and then <unk> got a benefit on the <unk> side from not having to do as much hedging external.

Diane: Yes.

Diane: So the two of those items combine essentially offset the negative from.

Diane: And that settlement on the reinsurance agreement.

Suneet Laxman L. Kamath: Got it. I don't know if there's any way you could size those impacts.

Speaker Change: Got it and I don't know if theres any way you could size those impacts.

Diane: Yeah, just big round rough numbers. So the Brookery reinsurance settlement was about $600 million negative positive items that I mentioned, roughly about 500 million. So that's approximately your $100 million decrease that you saw.

Suneet Laxman L. Kamath: Yes.

Suneet Laxman L. Kamath: Big round rough numbers, so the brewery reinsurance settlement about $600 million negative.

Diane: Positive items that I mentioned.

Diane: About 500 million, so thats approximately $100 million a decrease that you saw.

Diane: Okay.

Suneet Laxman L. Kamath: Got it. Okay, that's helpful. Thank you.

Speaker Change: Got it okay. That's helpful. Thank you.

Suneet Laxman L. Kamath: Okay.

Ryan Joel Krueger: The next question is from the line of Ryan Krueger with KBW. You may proceed.

Suneet Laxman L. Kamath: The next question is from the line of Ryan Krueger with K BW you May proceed.

Ryan Joel Krueger: Hey, good morning. Can you give some more color on We have the GAAP hedging results, but can you give us a little bit more color on kind of what happened within Brokery, given some differences between GAAP and the accounting in Brokery on the hedging results, as well as where, you know, I guess, sequentially kind of what the capital position within Brokery did.

Ryan Joel Krueger: Hey, good morning.

Ryan Joel Krueger: First one was on brokerage can you give some more color on that.

Ryan Joel Krueger: We have the gas hedging result, but can you give us a little bit more color on kind of what happened within brokerage given some differences between GAAP and the accounting and broker on the hedging result, as well, whereas where the.

Ryan Joel Krueger: Sequentially.

Ryan Joel Krueger: The capital position within brokerage.

Marcia Lynn Wadsten: Oh, sure, Ryan. So yeah, I think we talked before about the fact that we expected there to be more alignment between the non-operating net hedge gain result in GAAP versus what we would see in Brook Re, but I highlighted that they won't be exactly the same. There's kind of a directional indicator there when you look at the GAAP results. But just to note a couple of things that are differences between them so that we're careful that we're not doing a direct read across.

Speaker Change: Sure Ryan.

Ryan Joel Krueger: So yes, I think we talked before about the fact that we expected there to be more alignment between.

Marcia Lynn Wadsten: Nonoperating net hedge gain result in GAAP versus what we would see in Brooklyn, but it highlighted that they won't be exactly the same.

Marcia Lynn Wadsten: Kind of a directional indicator there when you look at the GAAP results.

Marcia Lynn Wadsten: But just to note a couple of things that are differences between them. So that you know we're careful that we're not doing a direct read across we did mention of course, as we talked and disclosed how the brokerage arrangement with work that we're using a modified GAAP basis over there there's a gap there.

Marcia Lynn Wadsten: We did mention, of course, as we talked and disclosed how the Brook Re arrangement would work that we're using a modified GAAP basis over there versus a GAAP, you know, the GAAP reported results, which we had highlighted a couple of those, you know, modifications. So that just means the liability movements are not going to be, you know, exactly the same as what you see for the MRB result in our non-operating.

Marcia Lynn Wadsten: The GAAP reported results.

Marcia Lynn Wadsten: Which we had highlighted a couple of those modifications.

Marcia Lynn Wadsten: So that just means the liability movements are not going to be you know exactly the same as what you see for MRV. A result in our non operating but again directionally much more aligned than what we would've seen in the past certainly when we would prepare statutory impacts to gap.

Marcia Lynn Wadsten: But again, you know, directionally much more aligned than what we would have seen in the past, certainly when we would compare statutory impacts to GAAP. And then also another point to kind of mention around scope is that the non-operating results under GAAP include impacts related to the RILA business. So you see the embedded derivative component there, which is not something that would translate over into Brook Re since the Ryla Business is not part of what was ceded to Brookery, and naturally, there's also some hedging associated with those Ryla movements as part of the GAAP result that we have. It will not translate over.

Marcia Lynn Wadsten: And then also another point to kind of mention around scope is that the nonoperating results under GAAP include <unk>.

Marcia Lynn Wadsten: Impacts related to the <unk> business. So you see the embedded derivative component, there, which is not something that would translate over into quickly since the roller business is not part of what was ceded to broke right.

Marcia Lynn Wadsten: And naturally Theres also some hedging associated with those <unk> movements.

Marcia Lynn Wadsten: Part of the GAAP result.

Marcia Lynn Wadsten: So just to kind of highlight a few of those things. But I guess just in summary, as we think about how we ended the quarter, in Brook Re, our hedging performed as we expected. Overall, we saw kind of an alignment with reference to what you referenced from the GAAP results. We saw a bit of an increase in the capital position of Brook Re, and we remain certainly very well capitalized compared to our minimum operating capital level requirements.

Marcia Lynn Wadsten: Not translate over so just to kind of highlight a few of those things, but I guess just in summary, as we think about how we ended the.

Marcia Lynn Wadsten: For the quarter.

Marcia Lynn Wadsten: And Brook re hedging performed as we expected.

Marcia Lynn Wadsten: Overall, we saw.

Marcia Lynn Wadsten: Kind of an alignment with reference to what you referenced from the GAAP result, we saw a bit of an increase in the capital position in brokerage and we remain certainly very well capitalized compared to our minimum operating cash.

Marcia Lynn Wadsten: Capital level requirement.

Speaker Change: Got it. Thank you and then maybe just.

Marcia Lynn Wadsten: Going back one more time to be a difference between the $550 million to $650 million of capital return guidance and the kind of expectation for closer to let's say $900 million of free cash flow is it is the primary reason for the difference Jeff Youre, giving us some time to allow the.

Marcia Lynn Wadsten: Is the primary reason for the difference just that you're giving it some time to allow the strategy to play out and demonstrate that it's effective? And then, as we move past this year, assuming things work as intended, you could then step up capital return to something that would be closer to your free cash flow generation? You know, certainly.

Marcia Lynn Wadsten: <unk> to play out and show that and demonstrate that it's effective and then as we move past this year, assuming things work as intended you could then step up capital and a return to something that would be closer to your free cash flow generation.

Marcia Lynn Wadsten: Certainly, time is an important factor here because it is a new arrangement. We want to make sure that we have the opportunity to watch things develop. And as I mentioned earlier, I think we have historically, as we've set our financial targets, including our capital return target, we've spoken to the fact that we've set them with a view that they are sustainable for the long term but have the opportunity to grow. So certainly, we would look for that type of opportunity here. If the performance of the business continues as we expect it will, and that may lead to some positive movements in the future.

Marcia Lynn Wadsten: Yeah, certainly time is the important factor here. It is a new arrangement, we wanted to make sure that we have the opportunity for <unk>.

Marcia Lynn Wadsten: Just watch things develop and you know as I mentioned earlier I think we.

Marcia Lynn Wadsten: Historically as we've said our target returns our financial targets, including our capital return target. We've spoken to the fact that we've set them with a view that they are sustainable for the long term, but have the opportunity to grow so certainly.

Marcia Lynn Wadsten: We will look for that type of an opportunity here should that should the performance of the business continue as we expect it will and that may lead to some positive movements in the future.

Speaker Change: Thank you.

Marcia Lynn Wadsten: Yeah.

Thomas George Gallagher: The next question is from the line of Tom Gallagher with Evercore ISI. You may proceed.

Marcia Lynn Wadsten: The next question is from the line of Tom Gallagher with Evercore ISI you May proceed.

Thomas George Gallagher: Hi, thanks. Just my one follow-up question is when I look at overall retail annuities, the outflows are now near $3 billion, closer to $2 billion of outflows last quarter. Part of that appears to just be the market because your AUM went up for VA. But part of it also looks like the lapse rate went up by about 100 basis points versus Q4 levels and a lot higher from a year ago. Can you talk a little bit about what's going on with persistency and sales? Would you expect this level of flows or outflows to continue, get better, or get worse? Any help on that would be appreciated.

Thomas George Gallagher: Hi, Thanks, just to just my one follow up is when I look at overall retail annuities. The outflows are now near $3 billion.

Thomas George Gallagher: Closer to two 2 billion of outflows last quarter.

Thomas George Gallagher: Part of that is appears to just be market because your AUM went up for VA.

Thomas George Gallagher: But part of it also looks like the lapse rate went up by about 100 basis points versus Q4 levels.

Thomas George Gallagher: And a lot higher from a year ago can you talk a little bit about what's going on.

Thomas George Gallagher: With persistency in sales.

Thomas George Gallagher: Would you expect this level of flows or outflows to continue get better get worse.

Thomas George Gallagher: Any help on that would be appreciated.

Marcia Lynn Wadsten: Sure. Yeah, when we look, Tom, at the VA outflows, I mean, keep it in mind, there's sort of three, you know, buckets within that, right? There are death claims that we're paying, there's full surrender benefits, and then there would be partial withdrawals, probably largely related to the usage of the guaranteed benefits that people bought for the very purpose of being able to draw down on that and support retirement income needs

Speaker Change: Sure Yeah, when we look at Tom at the VA outflows I mean, keeping in mind, there's sort of three buckets.

Marcia Lynn Wadsten: Buckets within that right there that's claims.

Marcia Lynn Wadsten: They were paying their full surrender benefits and then there'll be partial withdrawal.

Marcia Lynn Wadsten: Probably largely related to the usage of the guaranteed benefits that people bought for the very purpose of being able to draw down on that and support retirement income needs. So I think just to kind of take them. One by one I mean, I think mortality benefits as the block ages.

Marcia Lynn Wadsten: So I think, you know, just to kind of take them one by one, I mean, mortality benefits as the block ages, it's just people, policyholders age through time. That's probably a component that you would expect, given the size of our book and, you know, the fact that policyholders are aging over time, that would generally drift upward over time. In terms of sort of that component, that's not necessarily going to be market sensitive.

Marcia Lynn Wadsten: It's just people.

Marcia Lynn Wadsten: Policyholders age through time, that's probably a component that you would expect given the size of our book and and you know the fact that our policyholders are aging over time that win.

Marcia Lynn Wadsten: Generally drift upward over time.

Marcia Lynn Wadsten: In terms of sort of that component, that's not necessarily going to be market sensitive, but as you said.

Marcia Lynn Wadsten: But as you said, when the count values are higher, sometimes that just translates into, you know, absolute or in dollar terms, a little bit higher amounts that go out on these events. When we think about the full surrenders, I think that is the piece that is market sensitive, not only because, as you said, when AUM is higher, the dollar amounts that go out the door are larger, but also because that's an outflow that does tend to react upward or downward based on the moneyness of the guarantees.

Marcia Lynn Wadsten: You know when they count values are higher sometimes that just translates into absolute.

Marcia Lynn Wadsten: In dollar terms, a little bit higher.

Marcia Lynn Wadsten: Amounts that go out on these events when.

Marcia Lynn Wadsten: When we think about the both surrenders I think that is the piece that is market sensitive not only is he said when he was higher in all the dollar amounts that go out the door are larger but also that's it that's the outflow that does tend to react upward or downward based on the money messed up the guarantees.

Marcia Lynn Wadsten: We would typically see in would be in corporate it and our lapse assumptions as a market sensitive kind of dynamic adjustment, there, which means that when benefits are lessened the money there tends to be more outflow when the benefits are more in the money following the market downturn. The last rate declines. So I think you know that.

Marcia Lynn Wadsten: So I think, you know, given the strong market performance we've had recently, we would expect to be at those higher levels of outflow from a full surrender perspective. And then the partial surrender or partial withdrawal, systematic withdrawal type activity being the third bucket, represents probably close to about 30% of our outflows for the quarter. And that is really, again, driven a lot by just the usage of those guarantees, which is exactly what they were designed for.

Marcia Lynn Wadsten: Given the strong market performance. We've had recently, we would expect we would be at those higher levels of outflow from a full surrender perspective.

Marcia Lynn Wadsten: And then the partial surrender a partial withdrawal.

Marcia Lynn Wadsten: Systematic withdrawal type activity being the third bucket represents probably.

Marcia Lynn Wadsten: Close to about 30% of our outflows for the quarter and that is really again driven a lot by just the usage of those guarantees which is exactly what they were designed for and that would be another one that probably over time, you would expect would have more of an upward drift to it as more and more policyholders age into that.

Marcia Lynn Wadsten: And that would be another one that, over time, you would expect would have more of an upward drift to it as more and more policyholders age into that stage of life where they're ready to use those benefits.

Marcia Lynn Wadsten: Stage of life, where they're ready to use those benefits.

Marcia Lynn Wadsten: Yeah.

Marcia Lynn Wadsten: That's, that's helpful. And were any of those three buckets notable in the quarter? Or, you know, when you analyze what happened with surrenders, were they kind of equally split? The buckets are, you know.

Speaker Change: That's that's helpful.

Marcia Lynn Wadsten: Were any of those three buckets notable in the quarter or where you say when when you analyze what happened with surrenders were they kind of equally split.

Marcia Lynn Wadsten: The buckets are, you know, I said about maybe 30% of the partials. I think we'd probably see more like 15% of that being death benefits. So, you know, a little over half would be the full surrenders, and that would be the piece that, as I mentioned, would be more subject to some fluctuation based on just the market conditions, the moneyness of the benefits. That, you know, that would probably be at a higher point at this point, given the strong market performance we've had recently.

Marcia Lynn Wadsten: The buckets are I said about maybe 30% on the partials I think we would.

Marcia Lynn Wadsten: We'd probably see more like 15% of that being death benefit so I'm a.

Marcia Lynn Wadsten: A little over half would be the full surrenders and that would be the piece that as I mentioned would be more subject to some fluctuation based on just the market.

Marcia Lynn Wadsten: Conditions the money, that's what the benefits.

Marcia Lynn Wadsten: That would be one that would probably be more at a higher point at this point given the strong market performance we've had recently.

Speaker Change: Okay. Thank you.

Suneet Laxman L. Kamath: The next question is from the line of Suneet Kamath with Jeffries. You may proceed.

Marcia Lynn Wadsten: The next question is from the line of Sandeep come off at with Jefferies. You May proceed.

Scott Eric Romine: Yeah, thanks for letting me back in. I just wanted to talk about the Ryla product for a second. Can you just talk a little bit about where the growth is coming from and maybe give a sense of which distribution channels you're having the most success with?

Suneet Laxman L. Kamath: Yes, thanks for letting me back in.

Suneet Laxman L. Kamath: Wanted to talk about the <unk> product just for a second can you just talk a little bit about where the growth is coming from and maybe give a sense of which distribution channels.

Scott Eric Romine: You are having the most success in.

Suneet Laxman L. Kamath: Yes, Scott, do you want to take it? Yeah, sure. Thanks for the question, Suneet. We're seeing success with Ryla sales across all of our distribution channels, which really highlights the strength of our distribution partnerships and the breadth of our distribution reach. RILA is doing exactly what it was designed to do. It's, you know, added diversification to our product suite. It's enabled us to bring a protection-oriented solution that has strong consumer value to the market.

Scott Eric Romine: Yes, Scott do you want to take that sure. Thanks for the questions.

Suneet Laxman L. Kamath: We're seeing success with <unk> across all of our distribution channels, which really highlights the strength of our distribution partnerships and the breadth of our distribution reach.

Suneet Laxman L. Kamath: While it is doing exactly what it was designed to do.

Suneet Laxman L. Kamath: Added diversification to our product suite, it's enabled us to bring a protection oriented solution that out strong.

Suneet Laxman L. Kamath: And we're seeing the results of strong sales momentum. We have another record sales quarter, as Laura mentioned. And RILA continues to attract new advisors to Jackson's overall product suite, which continues to expand our overall distribution reach. Laura also mentioned that the new enhancements we just made in April, the plus income optional income rider, and are launching in New York. So we believe that there is ample space for us to carve out a meaningful position in the Ryla landscape, based on our distribution strengths and our competitive product offer.

Suneet Laxman L. Kamath: <unk> to the market.

Suneet Laxman L. Kamath: Seeing the results of strong sales momentum we had another record.

Marcia Lynn Wadsten: Got it. And then just one last one for Marcia.

Suneet Laxman L. Kamath: Sales quarter as Laura mentioned.

Marcia Lynn Wadsten: While it continues to attract new advisors to Jackson's overall product suite, which continues to expand our overall distribution reach.

Marcia Lynn Wadsten: Lower also mentioned the.

Marcia Lynn Wadsten: New announcements, we just make people plus income optional income rider and launching in New York. So we believe there is ample space for us to carve out a meaningful position in the <unk> landscape and are based on our distribution strengths and our competitive product offerings.

Suneet Laxman L. Kamath: You talked about the capital efficiency between RILA and the traditional VA. You know, we had another writer talk about that capital efficiency going away as the RILA block gets to a particular size. I'm assuming you're way away from that given the relative sizes of the business, but just wanted to confirm that. And if there's any sort of rule of thumb in terms of when you might start to see some of that efficiency get eroded, thanks.

Speaker Change: Got it and then just one last one for Marcia.

Suneet Laxman L. Kamath: You talked about the capital efficiency between raila than the traditional VA.

Suneet Laxman L. Kamath: Had another writer talk about that capital efficiency going away as the <unk> block has gotten to a particular size I'm, assuming your way away from that given the relative sizes of the business, but just wanted to confirm that and if there's any sort of rule of thumb in terms of when you might start to see some of that efficiency.

Suneet Laxman L. Kamath: Fee get eroded thanks.

Marcia Lynn Wadsten: Sure, yeah, we did speak to that from an economic perspective and the ability that that has to kind of reduce our net hedging need from an equity perspective, given that offset from a delta perspective. And I think we shared last quarter that that offset from RILA was in the 14% range. And I can say that it has increased with the additional sales over the first quarter to just over 20%. So we're certainly not, we don't have that 100% offset or anything. We've got a ways to go before that.

Speaker Change: Sure, Yes, we did speak to that kind of efficiency from an economic perspective, and the ability that that has to kind of reduce our debt hedging needs from an equity perspective, given that offset from a delta perspective and.

Marcia Lynn Wadsten: I think we shared last quarter that that offset from <unk> within the 14% range and and I can say that you know it has increased with the additional sales over the first quarter to <unk>.

Marcia Lynn Wadsten: Over 20%, so we're certainly not.

Marcia Lynn Wadsten: Don't have that 100% offset or anything we've got a ways to go before that but I would point out that since we have the agree.

Marcia Lynn Wadsten: Structure in place and our VA guarantees are now ceded re following a modified.

Suneet Laxman L. Kamath: But I would point out that since we have the agreed structure in place and our VA guarantees are now, you know, seated to agree to following the modified. Yeah, perspective reporting basis. We don't have that same offset in BM 21. We have the economic offset, which is evident in the efficiencies we get from a hedging perspective. But we don't have the BM 21 offset, so we're not necessarily. We were expecting to see a change in how our capital would be impacted if we were to reach a full offset, a full parity, I guess, between the RILA and the VA books.

Marcia Lynn Wadsten: Yeah with respect our reporting basis.

Suneet Laxman L. Kamath: We don't have that same offset in B M. 21, we have the economic offset which is evident in the efficiencies we get from a hedging perspective, but we don't have the b M 21, offset so we're not necessarily expecting we would see a change in.

Marcia Lynn Wadsten: Got it. And then just one last one, if I could, what is the typical capital charge for an RILA? I don't know if there's a rule of thumb to share, but that would be helpful. Thanks.

Marcia Lynn Wadsten: Our capital would be impacted if we were to reach a full a full offset.

Marcia Lynn Wadsten: Parity I guess between the violent and the VA book.

Marcia Lynn Wadsten: Got it and then just one last one if I could what is the typical capital charge for <unk> I don't know if there's a rule of thumb good share, but that would be helpful. Thanks.

Marcia Lynn Wadsten: Yeah.

Speaker Change: Maybe 5% probably is just kind of an approximate.

Marcia Lynn Wadsten: Up top of our head here.

Speaker Change: At the top of our head here.

Suneet Laxman L. Kamath: Okay, thanks. Good luck, Marcia. Thank you. There are no further questions.

Speaker Change: Okay. Thanks, Good luck Marcia.

Speaker Change: Thank you.

Suneet Laxman L. Kamath: Yeah.

Laura Louene Prieskorn: There are no further questions waiting at this time. I would like to turn the call over to Laura Prieskorn, the CEO, for final remarks. Thank you. We appreciate you joining us today and look forward to speaking with you again soon. Take care. That concludes the Jackson Financial, Inc. first quarter 2024 earnings call. Thank you for your participation, and enjoy the rest of your day.

Suneet Laxman L. Kamath: There are no further questions waiting at this time I would like to turn the call over to Laura <unk>.

Laura Louene Prieskorn: We scored the CEO for final remarks.

Laura Louene Prieskorn: Thank you.

Laura Louene Prieskorn: We appreciate you joining us today and look forward to speaking with you again soon take care.

Laura Louene Prieskorn: That concludes the Jackson Financial Inc. First quarter 2024 earnings call. Thank you for your participation and enjoy the rest of your day.

Laura Louene Prieskorn: Yeah.

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