What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-11-10 compared with 2022-08-10 · 240 added, 224 removed, 1169 unchanged (28% of the section changed)

21 unchanged sentences

The risks and uncertainties included here are not exhaustive.

Our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 7, 2022, (the "2021 Annual Report") and other reports filed with the United States Securities and Exchange Commission (“SEC”) includes additional factors that could affect our businesses and financial performance.

Our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 7, 2022, (the "2021 Annual Report") and other reports filed with the U.S.

Securities and Exchange Commission (“SEC”) includes additional factors that could affect our businesses and financial performance.

Moreover, we operate in a rapidly changing and competitive environment.

61 unchanged sentences

Overview of Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in its entirety and in conjunction with the Condensed Consolidated Financial Statements and related notes contained in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in our 2021 Annual Report.

The following discussion and analysis of our financial condition and results of operations should be read in its entirety and in conjunction with the Condensed Consolidated Financial Statements and related notes contained in Part I, Item 1 of this Report, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in our 2021 Annual Report.

Jackson Financial Inc.

5 unchanged sentences

Executive Summary

This executive summary of Management’s Discussion and Analysis of Financial Condition and Results of Operation highlights selected information and may not contain all of the information that is important to current or potential investors in our securities.

You should read this Quarterly Report on Form 10-Q, together with our 2021 Annual Report, in their entirety for a more detailed description of events, trends, uncertainties, risks and critical accounting estimates affecting us.

This executive summary of Management’s Discussion and Analysis of Financial Condition and Results of Operation highlights selected information and may not contain all the information that is important to current or potential investors in our securities.

You should read this Report, together with our 2021 Annual Report, in their entirety for a more detailed description of events, trends, uncertainties, risks and critical accounting estimates affecting us.

We help Americans grow and protect their retirement savings and income to enable them to pursue financial freedom for life.

7 unchanged sentences

We also offer fixed index annuities and fixed annuities.

In the fourth quarter of 2021, our primary life insurance subsidiary, Jackson National Life Insurance Company and its insurance subsidiaries (“Jackson”) successfully launched Market Link Pro SM and Market Link Pro Advisory SM , its commission and advisory based suite of registered index-linked annuities ("RILA").

In the fourth quarter of 2021, our primary life insurance subsidiary, Jackson National Life Insurance Company (“Jackson”) and its insurance subsidiaries successfully launched Market Link Pro SM and Market Link Pro Advisory SM , its commission and advisory based suite of registered index-linked annuities ("RILA").

Also in the fourth quarter of 2021, we entered the defined contribution market as a carrier in the AllianceBernstein Lifetime Income Strategy ("AllianceBernstein").

We sell our products through a distribution network that includes independent broker-dealers, wirehouses, regional broker-dealers, banks, and independent registered investment advisors, third-party platforms and insurance agents.

We have been the top selling retail annuity company in the United States for nine of the past ten years, according to the Life Insurance Marketing and Research Association ("LIMRA").

Our operating platform is scalable and efficient.

7 unchanged sentences

Item 2 | Management’s Discussion and Analysis | Executive Summary

There are several significant recent events involving us, including:

• Demerger from Prudential plc:

We were previously a majority-owned subsidiary of Prudential plc (“Prudential”), London, England and served as the holding company for its U.S.

The demerger, or separation, from Prudential was completed on September 13, 2021 ("Demerger"), and we are no longer a majority-owned subsidiary of Prudential.

Prudential retained an equity interest in us, which, as a result of sales subsequent to the Demerger, represents 14.3% of our outstanding Class A Common Stock as of June 30, 2022.

Prudential sold additional shares of the Company’s Class A Common Stock during the third quarter of 2022 and as of August 5, 2022 Prudential retained a 9.0% remaining interest in the Company.

There are several significant events involving us, including:

• Demerger from Prudential:

We were previously a majority-owned subsidiary of Prudential, London, England and served as the holding company for its U.S.

The Demerger, or separation, from Prudential was completed on September 13, 2021, and we are now a stand-alone U.S.

public company.

Prudential retained an equity interest in us, which, as a result of sales subsequent to the Demerger, represents 9.1% of our outstanding common stock as of September 30, 2022.

• Common Stock Reclassification:

7 unchanged sentences

In August 2020, the Company contributed $500 million, as a capital contribution to Jackson.

Athene has an equity interest in us, which represents an 8.9% economic interest and an 8.9% voting interest of our outstanding Class A Common Stock as of June 30, 2022.

Athene has an equity interest in us, which as a result of sales subsequent to the Demerger, represents an 9.0% economic interest and an 9.0% voting interest of our outstanding common stock as of September 30, 2022.

• Elimination of Class B Common Stock:

On June 9, 2022, our Second Amended and Restated Certificate of Incorporation was further amended and restated, following shareholder approval, to eliminate the Class B Common Stock.

On June 9, 2022, our shareholders approved the Third Amended and Restated Certificate of Incorporation, which amended and restated the Second Amended and Restated Certificate of Incorporation, to eliminate the Class B Common Stock.

As a result, our Class A Common Stock became simply, common stock.

• Common Stock Repurchases:

Since the Demerger and through June 30, 2022, we have repurchased 11,083,113 shares of our Class A Common Stock for an aggregate consideration of $417 million.

After giving effect to those repurchases and issuances for our share based compensation, we had 9,608,399 of treasury stock and 84,864,727 shares of Class A Common Stock outstanding at June 30, 2022.

Since the Demerger and through September 30, 2022, we have repurchased 12,283,113 shares of our common stock for an aggregate consideration of $456 million.

After giving effect to those repurchases and issuances for our share-based compensation, we had 10,807,076 shares of treasury stock and 83,666,942 shares of common stock outstanding at September 30, 2022.

• As discussed in Note 2 of Notes to Condensed Consolidated Financial Statements in this Report, we will be adopting ASU 2018-12, “Targeted Improvements to the Accounting for Long-Duration Contracts,” (“LDTI”) for our fiscal year beginning January 1, 2023, with a transition date of January 1, 2021.

Based upon the elected transition methods, the Company currently estimates the adoption of the standard will result in a decrease of between approximately $2 billion and $4 billion in the Company’s total equity at the transition date of January 1, 2021.

Market changes since the transition date, primarily higher interest rates, have significantly reduced the estimated negative impact to the Company’s total equity as of June 30, 2022.

See further discussion in Note 2 for the significant changes for this future change in accounting principle.

As a result of market changes since the transition date, primarily higher interest rates, the estimated negative impact at the transition date is trending toward a positive impact, as of September 30, 2022, to the Company’s total equity.

See further discussion in Note 2 for the significant changes associated with this future change in accounting principle.

Item 2 | Management’s Discussion and Analysis | Executive Summary

• As discussed in Note 13 of Notes to Condensed Consolidated Financial Statements in this Report, on August 16, 2022, the U.S.

government enacted the Inflation Reduction Act (“IRA”) which, among other changes, created a new corporate alternative minimum tax (“AMT”) based on adjusted financial statement income, rather than reported taxable income, and imposes a 1% excise tax on corporate stock repurchases.

The AMT provision is effective January 1, 2023.

We expect that we will be subject to the AMT beginning in 2023.

We expect any AMT incurred to be treated as a taxable temporary difference, and recorded as a deferred tax asset, so it is not expected to have a direct impact on total income tax expense;

although it could affect our cash tax liabilities.

As of September 30, 2022, we have not recorded any provision for the AMT.

The calculation of adjusted financial statement income, and therefore the AMT, is subject to the issuance of regulatory guidance by the U.S.

Department of the Treasury, which is expected throughout 2023.

Any excise tax incurred on corporate stock repurchases will generally be recognized as part of the cost basis of the treasury stock acquired and not reported as part of income tax expense.

We continue to monitor developments and regulations associated with the IRA for any potential future impacts on our business, results of operations and financial position.

Item 1A, Risk Factors, in this Report.

Our GAAP results are affected by the potential variability associated with our amortization of deferred acquisition costs and the fact that our use of derivatives does not qualify for GAAP deferral, meaning that the derivatives are marked to market each reporting period.

3 unchanged sentences

Finally, we are affected by various economic, industry and regulatory trends, which are described below under “Macroeconomic, Industry and Regulatory Trends.”

Item 2 | Management’s Discussion and Analysis | Non-GAAP Financial Measures

Non-GAAP Financial Measures

18 unchanged sentences

This adjustment includes the following components:

Item 2 | Management’s Discussion and Analysis | Non-GAAP Financial Measures

• Fees Attributable to Guarantee Benefits:

5 unchanged sentences

Net movements in freestanding derivatives have been excluded from Adjusted Operating Earnings as the market value of these derivatives may vary significantly from period to period as a result of near-term market conditions and therefore are not directly comparable or reflective of the underlying performance of our business;

Item 2 | Management’s Discussion and Analysis | Non-GAAP Financial Measures

• Net Reserve and Embedded Derivative Movements :

3 unchanged sentences

• DAC and Deferred Sales Inducements ("DSI") Impact:

amortization of deferred acquisition costs and deferred sales inducements associated with the items excluded from Adjusted Operating Earnings;

amortization of deferred acquisition costs and DSI associated with the items excluded from Adjusted Operating Earnings;

• Assumption changes:

9 unchanged sentences

GAAP accounting requirements, such as our investments in CLOs, but for which the consolidation effects are not aligned with our economic interest or exposure to those entities.

Item 2 | Management’s Discussion and Analysis | Non-GAAP Financial Measures

Operating income taxes are calculated using the prevailing corporate federal income tax rate of 21% while taking into account any items recognized differently in our financial statements and federal income tax returns, including the dividends received deduction and other tax credits.

For interim reporting periods, the company uses an estimated annual effective tax rate (“ETR”) in computing its tax provision including consideration of discrete items.

Item 2 | Management’s Discussion and Analysis | Non-GAAP Financial Measures

The following is a reconciliation of Adjusted Operating Earnings to net income (loss) attributable to Jackson Financial Inc., the most comparable U.S.

GAAP measure.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

37 unchanged sentences

GAAP measure:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

10 unchanged sentences

Adjusted Operating ROE on average equity 12.4 % 22.5 % 11.9 % 27.4 %

(1) Excludes $(1,677) million and $632 million related to the investments held within the funds withheld account related to the Athene Reinsurance Transaction as of June 30, 2022 and 2021, respectively.

(1) Excludes $(2,316) million and $481 million related to the investments held within the funds withheld account related to the Athene Reinsurance Transaction as of September 30, 2022 and 2021, respectively.

Item 2 | Management’s Discussion and Analysis | Key Operating Measures

Key Operating Measures

We use a number of operating measures that management believes provide useful information about our businesses and the operational factors underlying our financial performance.

We use a number of operating measures, discussed below, that management believes provide useful information about our businesses and the operational factors underlying our financial performance.

Sales of annuities and institutional products include all money deposited by customers into new and existing contracts.

We believe sales statistics are useful to gaining an understanding of, among other things, the attractiveness of our products, how we can best meet our customers’ needs, evolving industry product trends and the performance of our business from period to period.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

7 unchanged sentences

Total Sales $ 3,874 $ 4,812 $ 13,989 $ 14,395

For the three and six months ended June 30, 2022, total sales decreased by $516 million and increased by $532 million compared to the three and six months ended June 30, 2021, respectively.

Lower retail sales were primarily due to decreased sales of our variable annuities with lifetime living benefits, partially offset by sales of our lifetime income solutions offering in the defined contribution market and our new RILA product, that were both launched in the fourth quarter of 2021.

In addition, sales of our institutional products were higher by $201 million and $1,176 million, compared to the three and six months ended June 30, 2021, respectively.

Sales of fixed index and fixed annuities remained at historically low levels although higher rates in 2022 have enabled more frequent pricing actions.

For the three and nine months ended September 30, 2022, total sales decreased by $938 million and $406 million compared to the three and nine months ended September 30, 2021, respectively.

In addition, sales of our institutional products were higher by $271 million and $1,447 million, compared to the three and nine months ended September 30, 2021, respectively.

Sales of fixed index and fixed annuities increased in 2022 due to the rising interest rate environment, which enabled more favorable pricing actions.

Item 2 | Management’s Discussion and Analysis | Key Operating Measures

3 unchanged sentences

We believe account value is a useful metric in providing an understanding of, among other things, the sources of potential fee income generation, potential benefit obligations and risk management priorities.

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(in millions)

2 unchanged sentences

GMWB 5,429 7,318

Other Guarantees - Living Benefits 1,401 1,808

GMIB 1,303 1,808

No Living Benefits 46,819 60,719

Total Variable Annuity Account Value 195,139 257,923

RILA 1,235 110

Fixed Index Annuity (1)

11 unchanged sentences

We believe net flows is a useful metric in providing an understanding of, among other things, sales, ongoing premiums and deposits, the changes in account value from period to period, sources of potential fee income and policyholder behavior.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

4 unchanged sentences

Fixed Annuity (1)

(8) 13 (13) 3

Total Retail Annuities Net Flows, Net of Reinsurance (9) (92) 400 (593)

6 unchanged sentences

(2) Excludes payout annuities and traditional life insurance without account value.

Net flows improved for the three and six months ended June 30, 2022, compared to the three and six months ended June 30, 2021, due primarily to increased sales of both RILA and institutional products which has a positive effect on net flows.

Net flows, net of reinsurance, improved for the three and nine months ended September 30, 2022, compared to the three and nine months ended September 30, 2021, driven by the increased sales of RILA and institutional products which has a positive effect on net flows.

Item 2 | Management’s Discussion and Analysis | Key Operating Measures

3 unchanged sentences

We believe benefit base is a useful metric for our variable annuity policies in providing an understanding of, among other things, fee income generation, potential optional guarantee benefit obligations and risk management priorities.

The following table shows variable annuity account value and benefit base as of June 30, 2022 and December 31, 2021:

June 30, 2022 December 31, 2021

The following table shows variable annuity account value and benefit base as of September 30, 2022 and December 31, 2021:

September 30, 2022 December 31, 2021

Account Value Benefit Base Account Value Benefit Base

13 unchanged sentences

Total $ 195,139 $ 167,757 $ 257,923 $ 165,053

(1) Substantially all of our GMIB benefits are reinsured.

(1) Substantially all our GMIB benefits are reinsured.

Assets Under Management

3 unchanged sentences

We believe AUM is a useful metric for understanding of, among other things, the sources of our earnings, net investment income and performance of our invested assets, customer directed investments and risk management priorities.

June 30, December 31,

September 30, December 31,

(in millions)

14 unchanged sentences

Political events, including the imposition of stay-at-home orders and business shutdowns or other effects arising as a result of the COVID-19 pandemic, civil unrest, tariffs or other barriers to international trade, and the effects that these or other political events could have on levels of economic activity, could also impact our business through impacts on consumers’ behavior or impact on financial markets.

In the short- to medium-term, the potential for increased volatility could pressure sales and reduce demand for our products as consumers consider purchasing alternative products to meet their objectives, especially while prevailing interest rates remain below historical averages.

In addition, low interest rate environments can make it difficult to consistently develop products that are attractive to customers while rising interest rates may make certain product features more attractive.

Our financial performance can be adversely affected by market volatility and equity market declines if fees assessed on the account value of our annuities fluctuate, hedging costs increase and revenues decline due to reduced sales and increased outflows.

4 unchanged sentences

equity markets performed well in 2021 with the S&P 500 generally at or near all-time highs throughout the year.

Through the first half of 2022 equity markets declined and equity volatility increased, resulting in higher hedging costs.

Through the first nine months of 2022 equity markets declined and equity volatility increased, resulting in higher hedging costs.

The financial performance of our hedging program could be impacted by large directional market movements or periods of high volatility.

7 unchanged sentences

The interest rate environment has affected, and will continue to affect our business and financial performance in the future for the following reasons:

• To the extent interest rates continue to increase, consistent with the Federal Reserve’s signals about upcoming interest rate decisions, the effects of low interest rates discussed below will diminish over time.

However, both nominal and real interest rates remain low by historical standards and may continue to be so even after additional rounds of interest rate increases by the Federal Reserve.

During periods of sharp rises in interest rates, the results of our variable annuity business, statutory capital and RBC ratio may be impacted both positively and negatively.

• During periods of sharp rises in interest rates, as we have seen recently as a result of the Federal Reserve's actions and signals about upcoming interest rate decisions, the results of our variable annuity business, statutory capital and RBC ratio may be impacted both positively and negatively.

While rising rates result in hedging losses immediately due to reductions in the market value of interest rate hedges, we would expect lower hedging costs and reduced levels of hedging going forward in a higher interest rate environment.

Further, we expect near-term hedging losses from rising rates may be more than offset by changes in the fair value of the related guaranteed benefit liabilities as was the case in the first half of 2022.

Our statutory capital and RBC ratio may be negatively impacted by rising rates due to minimum required reserving levels (i.e., cash surrender value floor) when reserve releases are limited and unable to offset interest rate hedging losses.

• For the past several years, we have operated in a low interest rate environment.

Our statutory capital, or TAC, may be negatively impacted by rising rates due to minimum required reserving levels (i.e., cash surrender value floor) when reserve releases are limited and unable to offset interest rate hedging losses, while benefiting statutory required capital, or CAL.

The RBC ratio will take into account the interaction of TAC and the CAL movements.

• We operated in a low interest rate environment for several years.

A prolonged low interest rate environment subjects us to increased hedging costs or an increase in the amount of statutory reserves that our insurance subsidiaries are required to hold for optional guaranteed benefits, decreasing statutory surplus, which would adversely affect their ability to pay dividends.

Certain inputs to the statutory models rely on prescribed interest rates, which are, in turn, determined using a historical interest rate perspective with a mean reversion path over the longer term.

At low interest rate levels these prescribed rates could decline further as the NAIC updates the calculations each year, which would adversely impact our statutory capital.

In addition, low interest rates could also increase the perceived value of optional guaranteed benefit features to our customers, which in turn could lead to a higher utilization of withdrawal or annuitization features of annuity policies and higher persistency of those products over time.

Finally, low interest rates would continue to cause an acceleration of DAC amortization or reserve increase due to loss recognition for annuities and interest-sensitive life insurance.

A gradual rise in interest rates would have benefits that are offsetting to a low interest rate environment previously described.

Those potential benefits of rising interest rates include increased new money investment yields, a reduction in hedging requirements and more attractive product features .

• Some of our annuities have a guaranteed minimum interest crediting rate.

• Finally, some of our annuities have a guaranteed minimum interest crediting rate.

These guaranteed minimum interest crediting rates may not be lowered, even if earnings on our investment portfolio decline, resulting in net investment spread compression that negatively impacts earnings.

In addition, we expect more customers to hold policies with comparatively high guaranteed minimum interest crediting rates longer in a low interest rate environment, resulting in lower than previously expected lapse rates.

Conversely, a rise in the average yield on our investment portfolio should positively impact earnings.

More customers are expected to hold policies with comparatively high guaranteed minimum interest crediting rates longer in a low interest rate environment, resulting in lower than previously expected lapse rates.

Similarly, we expect customers would be less likely to hold policies if existing guaranteed minimum interest crediting rates are perceived to have less value as interest rates rise, resulting in higher than previously expected lapse rates.

Item 2 | Management’s Discussion and Analysis | Macroeconomic, Industry and Regulatory Trends

Credit Market Environment

Our financial performance is impacted by conditions in fixed income markets.

After tightening in 2021, credit spreads widened in the first half of 2022.

After tightening in 2021, credit spreads widened in the first nine months of 2022.

As credit spreads widen, the fair value of our existing investment portfolio generally decreases, although we generally expect the widening spreads to increase the yield on new fixed income investments.

4 unchanged sentences

As such, significant credit rating downgrades or payment defaults could negatively impact our RBC ratio.

We continue to closely monitor developments related to the COVID-19 pandemic.

Item 2 | Management’s Discussion and Analysis | Macroeconomic, Industry and Regulatory Trends

We continue to monitor developments related to the COVID-19 pandemic.

The COVID-19 pandemic has caused significant economic and financial turmoil both in the United States and around the world.

While there has been a gradual resumption of activity, COVID-19 and its variants continue to affect activity, and those effects could worsen in the future.

At this time, it is not possible to estimate the long-term effectiveness of any therapeutic treatments and vaccines for COVID-19, or their efficacy with respect to current or future variants or mutations of COVID-19, or the longer-term effects that the COVID-19 pandemic could have on our business.

The extent to which the COVID-19 pandemic impacts our business, results of operations, financial condition and cash flows will depend on future developments which are highly uncertain and cannot be predicted, including the availability and efficacy of vaccines against COVID-19 and against variant strains of the virus.

There has been a steady resumption of activity during 2022, however, at this time it is not possible to estimate the long-term effectiveness of any therapeutic treatments and vaccines for COVID-19, or their efficacy with respect to current or future variants or mutations of COVID-19, or the longer-term effects that the COVID-19 pandemic could have on our business.

The extent to which the COVID-19 pandemic impacts our business, results of operations, financial condition and cash flows will depend on future developments that are highly uncertain and cannot be predicted, including the availability and efficacy of vaccines against COVID-19 and against variant strains of the virus.

Federal and state authorities’ actions could include restrictions of movements.

We are not able to predict the duration and effectiveness of governmental and regulatory actions taken to contain or address the COVID-19 pandemic or the impact of future laws, regulations or restrictions on our business.

We are not able to predict the duration and effectiveness of governmental and regulatory actions that may be taken in the future to contain or address the COVID-19 pandemic or the impact of future laws, regulations or restrictions on our business.

Consumer Behavior

1 unchanged sentence

We believe our products are well positioned to meet this increasing consumer demand.

However, consumer behavior may be impacted by increased economic uncertainty, increased unemployment rates, declining equity markets, lower interest rates and increased volatility of financial markets.

However, consumer behavior may be impacted by increased economic uncertainty, unemployment rates, declining equity markets, significant changes in interest rates and increased volatility of financial markets.

In recent years, we have introduced new products to better address changes in consumer demand and targeted distribution channels which meet changes in consumer preferences.

16 unchanged sentences

This guidance reverses an earlier DOL interpretation suggesting that roll over advice did not constitute investment advice giving rise to a fiduciary relationship.

Because we do not engage in direct distribution of annuities, including IRA products and annuities sold to ERISA plan participants and to IRA owners, we believe that we will have limited exposure to the new Fiduciary Advice Rule.

Because our distribution of annuities is primarily through intermediaries, we believe that we will have limited exposure to the new Fiduciary Advice Rule.

Unlike the DOL’s previous fiduciary rule issued in 2016, compliance with the Fiduciary Advice Rule will not require us or our distributors to provide the disclosures required for exemptive relief under the previous rule.

1 unchanged sentence

The Fiduciary Advice Rule may also lead to changes to our compensation practices and product offerings and increased litigation risk, which could adversely affect our results of operations and financial condition.

We may also need to take certain additional actions in order to comply with or assist our distributors in their compliance with the Fiduciary Advice Rule.

We may also need to take certain additional actions to comply with or assist our distributors in their compliance with the Fiduciary Advice Rule.

Legislative Reforms

4 unchanged sentences

We view these reforms as beneficial to our business model and expect growth opportunities will arise from the new law.

All of our annuities offer investors the opportunity to benefit from tax deferral.

All our annuities offer investors the opportunity to benefit from tax deferral.

tax laws were to change, such that our annuities no longer offer tax-deferred advantages, demand for our products could materially decrease.

3 unchanged sentences

The information contained in the table below should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes elsewhere in this Report:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

8 unchanged sentences

Death, other policy benefits and change in policy reserves, net of deferrals 586 405 2,090 933

Interest credited on other contract holder funds, net of deferrals 217 217 423 440

Interest credited on other contract holder funds, net of deferrals and amortization 224 209 628 630

Interest expense 29 6 73 19

Operating costs and other expenses, net of deferrals 592 699 1,801 2,090

Amortization of deferred acquisition and sales inducement costs 1,198 (264) 1,713 548

Amortization of deferred acquisition costs 564 4 2,276 551

Total benefits and expenses 1,995 1,323 6,868 4,223

26 unchanged sentences

Item 2 | Management’s Discussion and Analysis | Consolidated Results of Operations

Three Months Ended June 30, 2022 compared to Three Months Ended June 30, 2021

Three Months Ended September 30, 2022 compared to Three Months Ended September 30, 2021

Pretax Income (Loss)

Our pretax income (loss) increased by $4,189 million to a pretax income of $3,651 million for the three months ended June 30, 2022, from a pretax loss of $538 million for the three months ended June 30, 2021 primarily due to:

Our pretax income (loss) increased by $1,775 million to a pretax income of $2,027 million for the three months ended September 30, 2022, from a pretax income of $252 million for the three months ended September 30, 2021 primarily due to:

• $2,798 million increase in total net gains (losses) on derivatives and investments as shown in the table below and driven by:

Three Months Ended June 30,

Three Months Ended September 30,

2022 2021 Variance

6 unchanged sentences

Total net gains (losses) on derivatives and investments $ 1,419 $ (1,379) $ 2,798

◦ Higher freestanding derivative gains as a result of gains on our equity derivatives primarily driven by significant market decreases in 2022, compared to market increases in the prior year, partially offset by losses within our interest rate related hedge instruments, reflecting increases in interest rates, compared to the prior year;

◦ Higher benefit recognized on funds withheld reinsurance compared to prior year;

◦ Lower unfavorable movements in reserves for guaranteed benefits, primarily driven by more favorable movements in interest rates, partially offset by unfavorable equity and equity volatility movements compared to prior year.

• $83 million decrease in operating costs and other expenses, net of deferrals, primarily due to lower incentive compensation expenses in 2022, higher separation costs in 2021, and lower asset-based commissions, which are non-deferrable and the result of lower account values during the three months ended June 30, 2022.

This increase was partially offset by:

• $1,462 million increase in amortization of deferred acquisition costs and deferred sales inducement costs driven by higher net freestanding and embedded derivative gains in 2022, leading to higher current period gross profits and, therefore, higher current period amortization.

• $702 million increase in death, other policy benefits and change in policy reserves primarily due to changes in reserves on variable annuity guarantees accounted for as insurance liabilities driven by unfavorable equity movements during the three months ended June 30, 2022 compared to favorable movements during the three months ended June 30, 2021;

◦ Favorable movements in reserves for guaranteed benefits, primarily driven by more favorable increases in interest rates, partially offset by equity market declines compared to the prior year.

◦ Higher benefit recognized on funds withheld reinsurance driven by increased interest rates compared to prior year;

◦ Lower freestanding derivative losses as a result of gains on our equity derivatives primarily driven by market decreases in 2022, compared to relatively flat market movements in the prior year, partially offset by losses within our interest rate related hedge instruments, reflecting increases in interest rates, compared to the prior year.

• $107 million decrease in operating costs and other expenses, net of deferrals, primarily due to lower incentive compensation expenses in 2022 and lower asset-based non-deferrable commissions due to lower account values during the three months ended September 30, 2022.

These increases were partially offset by:

• $560 million increase in amortization of deferred acquisition costs driven by higher net freestanding and embedded derivative gains in 2022, leading to higher current period gross profits and, therefore, higher current period amortization.

• $197 million decrease in net investment income as a result of lower income on limited partnership investments, which are recorded on a one quarter lag;

• $181 million increase in death, other policy benefits and change in policy reserves primarily due to changes in reserves on variable annuity guarantees accounted for as insurance liabilities driven by unfavorable equity movements during the three months ended September 30, 2022 compared to relatively flat movements during the three months ended September 30, 2021;

• $155 million decrease in fee income primarily due to decrease in average variable annuity account values stemming from unfavorable separate account performance in 2022;

• $17 million higher interest expense incurred in the current year primarily related to our senior notes.

• $23 million higher interest expense incurred in the current year primarily related to our senior notes, which refinanced our term loan facilities.

Item 2 | Management’s Discussion and Analysis | Consolidated Results of Operations

Income tax expense increased $771 million to an expense of $717 million for the three months ended June 30, 2022, from a benefit of $54 million for the three months ended June 30, 2021.

The provision for income tax in the current period led to an effective income tax rate of 20% for the three months ended June 30, 2022 compared to the 2021 effective income tax rate of 9%.

Income tax expense increased $575 million to an expense of $559 million for the three months ended September 30, 2022, from a benefit of $16 million for the three months ended September 30, 2021.

The provision for income tax in the current period led to an effective income tax rate of 27% for the three months ended September 30, 2022 compared to the 2021 effective income tax rate of (9)%.

The expense during the three months ended September 30, 2022 increased primarily due to the relationship of the taxable income to the consolidated pre-tax income and the impact of tax adjustments related to prior year returns recorded in the current quarter.

Our ETR differs from the statutory rate of 21% primarily due to the dividends received deduction and utilization of tax credits.

See Note 13 of Notes to Consolidated Financial Statements in our 2021 Annual Report for more information.

Six Months Ended June 30, 2022 compared to Six Months Ended June 30, 2021

Nine Months Ended September 30, 2022 compared to Nine Months Ended September 30, 2021

Pretax Income (Loss)

Our pretax income (loss) increased by $2,990 million to a pretax income of $6,037 million for the six months ended June 30, 2022, from a pretax income of $3,047 million for the six months ended June 30, 2021 primarily due to:

Our pretax income (loss) increased by $4,765 million to a pretax income of $8,064 million for the nine months ended September 30, 2022, from a pretax income of $3,299 million for the nine months ended September 30, 2021 primarily due to:

• $8,085 million increase in total net gains (losses) on derivatives and investments as shown in the table below and driven by:

Six Months Ended June 30,

Nine Months Ended September 30,

2022 2021 Variance

8 unchanged sentences

These gains were partially offset by losses within our interest rate related hedge instruments, reflecting increases in interest rates, as compared to the prior year;

◦ Higher benefit recognized on funds withheld reinsurance compared to prior year;

◦ Higher benefit recognized on funds withheld reinsurance driven by increased interest rates compared to prior year;

◦ More favorable movements in reserves for guaranteed benefits, primarily driven by more favorable increases in interest rates partially offset by unfavorable equity and equity volatility movements, compared to prior year.

Primarily offset by:

◦ Less favorable movements in reserves for guaranteed benefits, primarily driven by unfavorable equity and equity volatility movements, partially offset by more favorable movements in interest rates, compared to prior year;

◦ Losses on sales of securities recognized on gains (losses) excluding derivatives and funds withheld assets, compared to prior year gains.

• $74 million decrease in operating costs and other expenses, net of deferrals, primarily due to lower asset-based commissions, which are non-deferrable and the result of lower account values during the six months ended June 30, 2022, and higher separation costs in 2021.

These favorable variances were partially offset by higher incentive compensation in 2022.

• $62 million increase in fee income primarily due to increases in benefit based guarantee fee income compared to prior year, partially offset by decreases in variable fee income.

• $289 million decrease in operating costs and other expenses, net of deferrals, primarily due to lower deferred compensation in 2022, lower asset-based non-deferrable commissions due to lower account values during the nine months ended September 30, 2022, and higher separation costs in 2021.

Item 2 | Management’s Discussion and Analysis | Consolidated Results of Operations

This increase was partially offset by:

• $1,165 million increase in amortization of deferred acquisition costs and deferred sales inducement costs driven by higher net freestanding derivative gains in 2022, leading to higher current period gross profits and, therefore, higher current period amortization;

• $986 million increase in death, other policy benefits and change in policy reserves primarily due changes in reserves on variable annuity guarantees accounted for as insurance liabilities driven by unfavorable equity movements in 2022 compared to favorable movements in 2021;

These increases were partially offset by:

• $1,725 million increase in amortization of deferred acquisition costs driven by higher net freestanding derivative and embedded derivative gains in 2022, leading to higher current period gross profits and, therefore, higher current period amortization;

• $1,157 million increase in death, other policy benefits and change in policy reserves primarily due to changes in reserves on variable annuity guarantees accounted for as insurance liabilities driven by unfavorable equity movements in 2022 compared to favorable movements in 2021;

• $546 million decrease in net investment income as a result of lower income on limited partnership investments, which are recorded on a one quarter lag;

• $31 million higher interest expense incurred in the current year primarily related to our senior notes.

Income tax expense increased $516 million to an expense of $1,047 million for the six months ended June 30, 2022, from an expense of $531 million for the six months ended June 30, 2021.

The provision for income tax in the current period led to an effective income tax rate of 18% for the six months ended June 30, 2022 compared to the 2021 effective income tax rate of 18%.

• $109 million decrease in fee income primarily due to decreases in variable fee income and asset management fees compared to prior year, partially offset by increases in benefit-based guarantee fee income;

• $54 million higher interest expense incurred in the current year primarily related to our senior notes, which refinanced our term loan facilities.

Income tax expense increased $1,091 million to an expense of $1,606 million for the nine months ended September 30, 2022, from an expense of $515 million for the nine months ended September 30, 2021.

The provision for income tax in the current period led to an effective income tax rate of 20% for the nine months ended September 30, 2022 compared to the 2021 effective income tax rate of 17%.

The expense during the nine months ended September 30, 2022 increased primarily due to the relationship of the taxable income to the consolidated pre-tax income and the impact of tax adjustments related to prior year returns recorded in the current quarter.

Our ETR differs from the statutory rate of 21% primarily due to the dividends received deduction and utilization of tax credits.

9 unchanged sentences

Also, see Note 3 to Condensed Consolidated Financial Statements for further information regarding the calculation of pretax adjusted operating earnings:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

25 unchanged sentences

Retail Annuities

The following table sets forth, for the periods presented, certain data underlying the results for our Retail Annuities segment.

The following table sets forth, for the periods presented, certain data underlying the pretax adjusted operating earnings (non-GAAP) results for our Retail Annuities segment.

The information contained in the table below should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes appearing elsewhere in this Report:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

3 unchanged sentences

Fee income $ 1,002 $ 1,194 $ 3,144 $ 3,433

Premiums 3 2 6 15

Net investment income 72 180 299 541

3 unchanged sentences

Operating Benefits and Expenses

Death, other policy benefits and change in policy reserves 9 11 25 17

Interest credited on other contract holder funds 71 66 139 133

Death, other policy benefits and change in policy

reserves, net of deferrals 5 38 54 90

Interest credited on other contract holder funds, net of

deferrals and amortization 72 56 191 168

Interest expense 8 6 19 17

Operating costs and other expenses, net of deferrals 541 614 1,648 1,780

Amortization of deferred acquisition costs and deferred sales inducement costs 346 (31) 503 73

Amortization of deferred acquisition costs 100 160 602 232

Total Operating Benefits and Expenses 726 874 2,514 2,287

1 unchanged sentence

The following table summarizes a roll forward of activity affecting account value for our Retail Annuities segment for the periods indicated:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

11 unchanged sentences

Item 2 | Management’s Discussion and Analysis | Segment Results of Operations

Three Months Ended June 30, 2022 compared to Three Months Ended June 30, 2021

Three Months Ended September 30, 2022 compared to Three Months Ended September 30, 2021

Pretax Adjusted Operating Earnings

Pretax Adjusted Operating Earnings decreased $465 million to $218 million for the three months ended June 30, 2022 from $683 million for the three months ended June 30, 2021 primarily due to:

• $377 million increase in amortization of deferred acquisition costs and deferred sales inducement costs primarily due to lower separate account returns, which led to decreased expected future gross profits, and therefore higher current period amortization during 2022;

Pretax adjusted operating earnings decreased $163 million to $364 million for the three months ended September 30, 2022 from $527 million for the three months ended September 30, 2021 primarily due to:

• $192 million decrease in fee income primarily due to a decrease in average variable annuity account values stemming from unfavorable separate account performance in 2022;

1 unchanged sentence

These decreases were partially offset by:

• $44 million decrease in operating costs and other expenses, net of deferrals, primarily due to lower asset-based commissions, which are non-deferrable and the result of lower account values during the three months ended June 30, 2022, and lower incentive compensation expenses in 2022.

Six Months Ended June 30, 2022 compared to Six Months Ended June 30, 2021

• $60 million decrease in amortization of deferred acquisition costs primarily due to higher projected separate account returns during the current quarter, driven by the release of the historical returns from the mean reversion formula, and a negative impact from this same item for three months ended September 30, 2021;

• $73 million decrease in operating costs and other expenses, net of deferrals, primarily due to lower asset-based non-deferrable commissions due to lower account values during the three months ended September 30, 2022, and lower incentive compensation expenses in 2022.

Nine Months Ended September 30, 2022 compared to Nine Months Ended September 30, 2021

Pretax Adjusted Operating Earnings

Pretax Adjusted Operating Earnings decreased $628 million to $624 million for the six months ended June 30, 2022 from $1,252 million for the six months ended June 30, 2021 primarily due to:

• $430 million increase in amortization of deferred acquisition costs and deferred sales inducement costs primarily due to lower separate account returns, which led to decreased expected future gross profits, and therefore higher current period amortization during 2022;

• $107 million decrease in net investment income primarily due to lower levels of investment income on private equity and other limited partnership investments, when compared to the same period in 2021;

Pretax adjusted operating earnings decreased $791 million to $988 million for the nine months ended September 30, 2022 from $1,779 million for the nine months ended September 30, 2021 primarily due to:

• $370 million increase in amortization of deferred acquisition costs primarily due to lower separate account returns during 2022, which led to decreased expected future gross profits, and therefore higher current period amortization during 2022;

• $289 million decrease in fee income primarily due to a decrease in average variable annuity account values stemming from unfavorable separate account performance in 2022;

• $242 million decrease in net investment income primarily due to lower levels of investment income on private equity and other limited partnership investments, when compared to the same period in 2021.

These decreases were partially offset by:

• $16 million decrease in operating costs and other expenses, net of deferrals, primarily due to lower asset-based commissions, which are non-deferrable and the result of lower account values during 2022.

This favorable variance was partially offset by higher incentive compensation in 2022.

• $132 million decrease in operating costs and other expenses, net of deferrals, primarily due to lower asset-based non-deferrable commissions due to lower account values during 2022, and lower deferred compensation expenses in 2022.

Account Value

2 unchanged sentences

Institutional Products

The following table sets forth, for the periods presented, certain data underlying the results for our Institutional Products segment.

The following table sets forth, for the periods presented, certain data underlying the pretax adjusted operating earnings (non-GAAP) results for our Institutional Products segment.

The information contained in the table below should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes appearing elsewhere in this Report.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

6 unchanged sentences

Operating Benefits and Expenses

Interest credited on other contract holder funds 47 48 86 100

Interest credited on other contract holder funds, net of

deferrals and amortization 51 47 137 147

Interest expense — (2) — —

3 unchanged sentences

The following table summarizes a roll forward of activity affecting account value for our Institutional Products segment for the periods indicated:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

8 unchanged sentences

Balance as of end of period $ 8,358 $ 8,839 $ 8,358 $ 8,839

Three Months Ended June 30, 2022 compared to Three Months Ended June 30, 2021

Pretax Adjusted Operating Earnings

Pretax Adjusted Operating Earnings increased $13 million to $19 million for the three months ended June 30, 2022 from $6 million for the three months ended June 30, 2021 primarily due to increased investment income compared to prior year.

Six Months Ended June 30, 2022 compared to Six Months Ended June 30, 2021

Three Months Ended September 30, 2022 compared to Three Months Ended September 30, 2021

Pretax Adjusted Operating Earnings

Pretax Adjusted Operating Earnings increased $26 million to $42 million for the six months ended June 30, 2022 from $16 million for the six months ended June 30, 2021 primarily due to increased investment income and a decrease in interest credited compared to prior year.

Pretax adjusted operating earnings remained relatively flat at $20 million for the three months ended September 30, 2022 from $21 million for the three months ended September 30, 2021.

Item 2 | Management’s Discussion and Analysis | Segment Results of Operations

Nine Months Ended September 30, 2022 compared to Nine Months Ended September 30, 2021

Pretax Adjusted Operating Earnings

Pretax adjusted operating earnings increased $25 million to $62 million for the nine months ended September 30, 2022 from $37 million for the nine months ended September 30, 2021 primarily due to increased investment income and a decrease in interest credited, partially offset by increased losses on operating derivatives, driven by interest rate and foreign exchange movements, compared to prior year.

Account Value

Institutional product account value decreased from $8,910 million at June 30, 2021 to $8,483 million at June 30, 2022.

Institutional product account value decreased from $8,839 million at September 30, 2021 to $8,358 million at September 30, 2022.

The decline in account value was driven by continued maturities of the existing contracts and funding agreements, partially offset by new issuances in 2022.

Closed Life and Annuity Blocks

The following table sets forth, for the periods presented, certain data underlying the results for our Closed Life and Annuity Blocks segment.

The following table sets forth, for the periods presented, certain data underlying the pretax adjusted operating earnings (non-GAAP) results for our Closed Life and Annuity Blocks segment.

The information contained in the table below should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes appearing elsewhere in this Report.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

9 unchanged sentences

Operating Benefits and Expenses

Death, other policy benefits and change in policy reserves 217 192 459 413

Interest credited on other contract holder funds 99 103 198 207

Death, other policy benefits and change in policy

reserves, net of deferrals 176 216 636 629

Interest credited on other contract holder funds, net of

deferrals and amortization 101 106 300 315

Operating costs and other expenses, net of deferrals 22 38 74 131

Amortization of deferred acquisition costs and deferred sales inducement costs — 2 4 7

Amortization of deferred acquisition costs 3 4 7 11

Total Operating Benefits and Expenses 302 364 1,017 1,086

Pretax Adjusted Operating Earnings $ 33 $ 68 $ 31 $ 203

Three Months Ended June 30, 2022 compared to Three Months Ended June 30, 2021

Three Months Ended September 30, 2022 compared to Three Months Ended September 30, 2021

Pretax Adjusted Operating Earnings

Pretax Adjusted Operating Earnings decreased $50 million to $6 million for the three months ended June 30, 2022 from $56 million for the three months ended June 30, 2021 primarily due to:

Pretax adjusted operating earnings decreased $35 million to $33 million for the three months ended September 30, 2022 from $68 million for the three months ended September 30, 2021 primarily due to:

• $79 million decrease in net investment income primarily due to lower levels of investment income on private equity and other limited partnership investments, when compared to the same period in 2021.

• $25 million increase in death, other policy benefit and change in policy reserves as a result of higher death claims and less favorable reserve movements in 2022 compared to 2021.

Six Months Ended June 30, 2022 compared to Six Months Ended June 30, 2021

Item 2 | Management’s Discussion and Analysis | Segment Results of Operations

This decrease was partially offset by:

• $40 million decrease in death, other policy benefits and change in policy reserves, net of deferrals, primarily due to lower death claims.

Nine Months Ended September 30, 2022 compared to Nine Months Ended September 30, 2021

Pretax Adjusted Operating Earnings

Pretax Adjusted Operating Earnings decreased $137 million to $(2) million for the six months ended June 30, 2022 from $135 million for the six months ended June 30, 2021 primarily due to:

Pretax adjusted operating earnings decreased $172 million to $31 million for the nine months ended September 30, 2022 from $203 million for the nine months ended September 30, 2021 primarily due to:

• $201 million decrease in net investment income primarily due to lower levels of investment income on private equity and other limited partnership investments, when compared to the same period in 2021.

• $46 million increase in death, other policy benefit and change in policy reserves as a result of higher death claims and less favorable reserve movements in 2022 compared to 2021.

Item 2 | Management’s Discussion and Analysis | Segment Results of Operations

This decrease was partially offset by:

• $57 million decrease in operating costs and other expenses, net of deferrals, primarily due to deferred compensation expenses in 2022.

Corporate and Other

Corporate and Other includes the operations of PPM Holdings, Inc., the holding company of PPM, and unallocated corporate revenue and expenses, as well as certain eliminations and consolidation adjustments.

The following table sets forth, for the periods presented, certain data underlying the results for Corporate and Other.

The following table sets forth, for the periods presented, certain data underlying the pretax adjusted operating earnings (non-GAAP) results for Corporate and Other.

The information contained in the table below should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes appearing elsewhere in this Report.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

10 unchanged sentences

Operating costs and other expenses, net of deferrals 28 31 74 111

Amortization of deferred acquisition costs and deferred sales inducement costs 8 8 17 15

Amortization of deferred acquisition costs 1 10 18 25

Total Operating Benefits and Expenses 50 43 146 138

Pretax Adjusted Operating Earnings $ (13) $ (45) $ (16) $ (54)

Three Months Ended June 30, 2022 compared to Three Months Ended June 30, 2021

Item 2 | Management’s Discussion and Analysis | Segment Results of Operations

Three Months Ended September 30, 2022 compared to Three Months Ended September 30, 2021

Pretax Adjusted Operating Earnings

Pretax adjusted operating earnings decreased $16 million to nil for the three months ended June 30, 2022 from $16 million for the three months ended June 30, 2021 primarily due to the following:

• $18 million higher interest expense incurred in the current year primarily related to our senior notes;

this decrease was partially offset by:

• $14 million decrease in operating costs and other expenses, net of deferrals, primarily due to lower incentive compensation expenses in 2022.

Six Months Ended June 30, 2022 compared to Six Months Ended June 30, 2021

Pretax adjusted operating earnings increased $32 million to $(13) million for the three months ended September 30, 2022 from $(45) million for the three months ended September 30, 2021 primarily due to the following:

• $45 million increase in net investment income primarily due to higher net investment income resulting from higher levels of capital, as the investment income on that excess capital remains in the Corporate and Other segment.

This increase was partially offset by:

• $19 million higher interest expense incurred in the current year primarily related to our Senior Notes, which refinanced our term loan facilities.

Nine Months Ended September 30, 2022 compared to Nine Months Ended September 30, 2021

Pretax Adjusted Operating Earnings

Pretax adjusted operating earnings increased $6 million to $(3) million for the six months ended June 30, 2022 from $(9) million for the six months ended June 30, 2021 primarily due to the following:

Pretax adjusted operating earnings increased $38 million to $(16) million for the nine months ended September 30, 2022 from $(54) million for the nine months ended September 30, 2021 primarily due to the following:

• $56 million increase in net investment income primarily due to higher net investment income resulting from an increased excess capital position, as the investment income on that excess capital remains in the Corporate and Other segment;

• $11 million decrease in operating costs and other expenses, net of deferrals, primarily due to lower compensation expenses in 2022.

• $37 million decrease in operating costs and other expenses, net of deferrals, primarily due to deferred compensation expenses in 2022.

This increase was partially offset by:

• $52 million higher interest expense incurred in the current year primarily related to our senior notes.

Item 2 | Management’s Discussion and Analysis | Investments

Our investment portfolio primarily consists of fixed-income securities and loans, primarily publicly-traded corporate and government bonds, private securities and loans, asset-backed securities and mortgage loans.

7 unchanged sentences

We may also use other third-party investment managers for certain niche asset classes.

As of June 30, 2022, Apollo managed $22 billion of cash and investments and other third-party investment managers represented approximately $185 million of investments.

As of September 30, 2022, Apollo managed $21 billion of cash and investments and other third-party investment managers represented approximately $191 million of investments.

Item 2 | Management’s Discussion and Analysis | Investments

Our investment program seeks to generate a competitive rate of return on our invested assets to support the profitable growth of our business, while maintaining investment portfolio allocations within the company’s risk tolerance.

This means seeking to maximize risk-adjusted return within the context of a largely fixed income portfolio while also managing exposure to downside risk in a stressed environment, regulatory and rating agency capital models, overall portfolio yield, diversification and correlation with other investments and company exposures.

This means maximizing risk-adjusted return within the context of a largely fixed income portfolio while also managing exposure to downside risk in a stressed environment, regulatory and rating agency capital models, overall portfolio yield, diversification and correlation with other investments and company exposures.

Our Investment Committee has specified a target strategic asset allocation (“SAA”) that is designed to deliver the highest expected return within a defined risk tolerance while meeting other important objectives such as those mentioned in the prior paragraph.

3 unchanged sentences

Recognizing the trade-offs between the level of risk, required capital, liquidity and investment return, the largest allocation within our investment portfolio is to investment grade fixed income securities.

As previously mentioned, our investment manager accesses a broad universe of potential investments to construct the investment portfolio and takes into account the benefits of diversification across various sectors, collateral types and asset classes.

As previously mentioned, our investment manager accesses a broad universe of potential investments to construct the investment portfolio and considers the benefits of diversification across various sectors, collateral types and asset classes.

To this end, our SAA and investment portfolio includes allocations to public and private corporate bonds (both investment grade and high yield), mortgage loans, structured securities, private equity and U.S.

1 unchanged sentence

Treasury securities, while lower yielding than other alternatives, provide a higher level of liquidity and play a role in managing our interest rate exposure.

As of June 30, 2022 and December 31, 2021, we had total investments of $67.1 billion and $74.2 billion, respectively.

Item 2 | Management’s Discussion and Analysis | Investments

As of September 30, 2022 and December 31, 2021, we had total investments of $65.9 billion and $74.2 billion, respectively.

Portfolio Composition

The following table summarizes the carrying values of our investments:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Investments excluding Funds Withheld Funds Withheld Total Investments excluding Funds Withheld Funds Withheld Total

10 unchanged sentences

Total investments $ 42,363 $ 23,527 $ 65,890 $ 45,874 $ 28,353 $ 74,227

Available-for-sale debt securities decreased to $43,478 million at June 30, 2022 from $51,547 million at December 31, 2021, primarily due to a decrease in net unrealized gain and sales, consistent with the decrease in underlying policy liabilities.

The amortized cost of debt securities, available-for-sale, decreased from $51,206 million as of December 31, 2021 to $50,331 million as of June 30, 2022.

Further, net unrealized gains on these assets decreased from a net unrealized gain of $2,178 million as of December 31, 2021 to a net unrealized loss of $4,702 million as of June 30, 2022.

Available-for-sale debt securities decreased to $41,681 million at September 30, 2022 from $51,547 million at December 31, 2021, primarily due to a decrease in net unrealized gain.

The amortized cost of debt securities, available-for-sale, decreased from $51,206 million as of December 31, 2021 to $51,094 million as of September 30, 2022.

Further, net unrealized gains on these assets decreased from a net unrealized gain of $2,178 million as of December 31, 2021 to a net unrealized loss of $7,156 million as of September 30, 2022.

Item 2 | Management’s Discussion and Analysis | Investments

Other Invested Assets

1 unchanged sentence

We expect to reinvest in new LPs as attractive opportunities become available.

The increase in Other Invested Assets from December 31, 2021 to June 30, 2022 primarily resulted from the increased valuations of limited partnership investments.

Item 2 | Management’s Discussion and Analysis | Investments

The increase in Other Invested Assets from December 31, 2021 to September 30, 2022 primarily resulted from the increased valuations of limited partnership investments.

Debt Securities

At June 30, 2022 and December 31, 2021, the amortized cost, allowance for credit loss, gross unrealized gains and losses, and fair value of debt securities, including trading securities and securities carried at fair value under the fair value option, were as follows (in millions):

June 30, 2022 Amortized

At September 30, 2022 and December 31, 2021, the amortized cost, allowance for credit loss, gross unrealized gains and losses, and fair value of debt securities, including trading securities and securities carried at fair value under the fair value option, were as follows (in millions):

September 30, 2022 Amortized

Cost Allowance for Credit Loss Gross

55 unchanged sentences

Securities Carrying Value

June 30, December 31,

September 30, December 31,

Investment Rating 2022 2021

10 unchanged sentences

Unrealized Losses

The following tables summarize the amount of gross unrealized losses, fair value and the number of securities aggregated by investment category and length of time that individual debt securities have been in a continuous loss position (dollars in millions):

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Less than 12 months Less than 12 months

24 unchanged sentences

Unrealized # of Unrealized # of

Losses securities Losses securities

Losses securities (1)

government securities $ 1,008 $ 3,894 43 $ 301 $ 3,297 23

2 unchanged sentences

Corporate securities 4,360 22,582 2,936 238 7,004 797

3,008 22,230 2,728 238 7,004 797

Residential mortgage-backed 52 364 292 3 185 121

2 unchanged sentences

Total temporarily impaired securities $ 7,236 $ 39,923 4,868 $ 612 $ 15,141 1,448

(1) Certain corporate securities contain multiple lots and fit the criteria of both aging groups.

(1) Certain securities contain multiple lots and fit the criteria of both aging groups.

The increase in rates on U.S.

Treasury securities and the widening credit spreads of investment grade corporate securities resulted in the reduction in fair values and increase in unrealized losses during the six months ended June 30, 2022.

Of the $6,624 million total increase in unrealized losses and the $24,782 million additional fair value on securities with an associated unrealized loss, $2,784 million and $5,219 million, respectively, are associated with assets subject to funds withheld agreements.

3 unchanged sentences

The following table summarizes net gains (losses) on derivatives and investments (in millions):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

4 unchanged sentences

Credit loss income (expense) on mortgage loans (5) 14 (2) 62

71 (18) 83 50

Net gains (losses) excluding derivatives and funds withheld assets (6) 37 (131) 204

8 unchanged sentences

The following table summarizes our holdings:

June 30, December 31,

September 30, December 31,

(in millions)

4 unchanged sentences

Mortgage Loans

C ommercial mortgage loans of $10.8 billion and $10.5 billion at June 30, 2022 and December 31, 2021, respectively, are reported net of an allowance for credit losses of $77 million and $85 million at each date, respectively.

At June 30, 2022, commercial mortgage loans were collateralized by properties located in 38 states, the District of Columbia, and Europe.

Residential mortgage loans of $1,170 million and $939 million at June 30, 2022 and December 31, 2021, respectively, are reported net of an allowance for credit losses of $3 million and $9 million at each date, respectively.

C ommercial mortgage loans of $10.5 billion and $10.5 billion at September 30, 2022 and December 31, 2021, respectively, are reported net of an allowance for credit losses of $76 million and $85 million at each date, respectively.

At September 30, 2022, commercial mortgage loans were collateralized by properties located in 38 states, the District of Columbia, and Europe.

Residential mortgage loans of $1,280 million and $939 million at September 30, 2022 and December 31, 2021, respectively, are reported net of an allowance for credit losses of $3 million and $9 million at each date, respectively.

Loans were collateralized by properties located in 50 states, the District of Columbia, Mexico, and Europe.

1 unchanged sentence

The table below presents the carrying value, net of allowance of credit loss, of our mortgage loans by property type:

June 30, December 31,

September 30, December 31,

(in millions)

8 unchanged sentences

The table below presents the carrying value, net of allowance for credit loss, of our mortgage loans by region:

June 30, December 31,

September 30, December 31,

(in millions)

14 unchanged sentences

The following table provides information about the credit quality of our mortgage loans:

June 30, December 31,

September 30, December 31,

(in millions)

11 unchanged sentences

Total mortgage loans $ 11,731 $ 11,482

(1) As of June 30, 2022 and December 31, 2021, includes $56 million and $202 million of loans purchased when the loans were greater than 90 days delinquent and $15 million and $5 million of loans in process of foreclosure, respectively, and are supported with insurance or other guarantees provided by various governmental programs.

(1) As of September 30, 2022 and December 31, 2021, includes $48 million and $202 million of loans purchased when the loans were greater than 90 days delinquent and $14 million and $5 million of loans in process of foreclosure, respectively, and are supported with insurance or other guarantees provided by various governmental programs.

The following table provides a summary of the allowance for credit losses related to our mortgage loans:

September 30,

(in millions)

Balance at beginning of period $ 94 $ 179

Balance at beginning of year $ 94 $ 179

Provision (release) (15) (83)

3 unchanged sentences

Delinquency status is determined from the date of the first missed contractual payment.

At June 30, 2022, there was $18 million of recorded investment, $19 million of unpaid principal balance, no related loan allowance, $12 million of average recorded investment, and no investment income recognized on impaired residential mortgage loans.

At September 30, 2022, there was $17 million of recorded investment, $18 million of unpaid principal balance, no related loan allowance, $15 million of average recorded investment, and no investment income recognized on impaired residential mortgage loans.

At December 31, 2021, there was $6 million of recorded investment, $7 million of unpaid principal balance, no related loan allowance, $2 million of average recorded investment, and no investment income recognized on impaired residential mortgage loans.

2 unchanged sentences

The following table presents the aggregate contractual or notional amounts and the fair values of our freestanding and embedded derivatives instruments (in millions):

June 30, 2022

September 30, 2022

Contractual/ Assets Liabilities Net

9 unchanged sentences

Put-swaptions 22,000 — 1,781 (1,781)

Treasury futures (2)

Interest rate futures (2)

Total return swaps 739 80 — 80

6 unchanged sentences

Registered index linked annuity embedded derivatives (4)

N/A — 10 (10)

Total embedded derivatives N/A 484 977 (493)

27 unchanged sentences

Put-swaptions 19,000 133 — 133

Treasury futures (2)

Interest rate futures (2)

Total return swaps — — — —

25 unchanged sentences

Our sources of net investment income are as follows (in millions) :

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

17 unchanged sentences

Net investment income $ 640 $ 837 $ 2,022 $ 2,568

(1) Includes unrealized gains and losses on trading securities and includes $(95) million and $(85) million as of June 30, 2022 and 2021, respectively, related to the change in fair value for securities carried under the fair value option.

(2) Includes management fees, administrative fees, legal fees, and other expenses related to the consolidation of certain investments.

(3) Includes interest expense and market appreciation on deferred compensation, investment software expense, custodial fees, and other bank fees;

(1) Includes unrealized gains and losses on trading securities and includes $(8) million and $(103) million for the three and nine months ended September 30, 2022, respectively, and $(1) and $37 million for the three and nine months ended September 30, 2021, respectively, related to the change in fair value for securities carried under the fair value option.

(2) Includes interest expense and change in fair value related to notes issued by consolidated VIE's, management fees, administrative fees, legal fees, and other expenses related to the consolidation of certain investments.

(3) Includes interest expense, investment software expense, custodial fees, and other bank fees;

institutional product issuance related expenses;

19 unchanged sentences

As an insurance company, a substantial portion of our profits are derived from fee income and the invested assets backing our policy and contract liabilities, which includes separate account liabilities, reserves for future policy benefits and claims payable and other contract holder funds.

As of June 30, 2022, 88% of our policy and contract liabilities were in our Retail Annuities segment, 3% were in our Institutional Products segment and 9% were in our Closed Life and Annuity Blocks segment.

As of September 30, 2022, 88% of our policy and contract liabilities were in our Retail Annuities segment, 3% were in our Institutional Products segment and 9% were in our Closed Life and Annuity Blocks segment.

The table below represents a breakdown of our policy and contract liabilities:

June 30, 2022 Separate Accounts Reserves for future policy benefits Other contract holder funds Total

September 30, 2022 Separate Accounts Reserves for future policy benefits Other contract holder funds Total

(in millions)

32 unchanged sentences

Total $ 248,949 $ 18,667 $ 58,726 $ 326,342

As of June 30, 2022, $196.2 billion or 73% of our policy and contract liabilities were backed by separate accounts assets.

As of September 30, 2022, $185.0 billion or 72% of our policy and contract liabilities were backed by separate accounts assets.

These separate account assets backed reserves primarily related to our variable annuities.

3 unchanged sentences

As a result, revenue derived from asset-based fee income is similarly subject to variability in line with the variability of the underlying separate account assets.

As of June 30, 2022, $49.8 billion or 18% of our policy and contract liabilities were backed by our investment portfolio and $24.0 billion reinsured by Athene, were backed by funds withheld assets.

As of September 30, 2022, $49.3 billion or 19% of our policy and contract liabilities were backed by our investment portfolio and $23.2 billion reinsured by Athene, were backed by funds withheld assets.

Our variable annuity fixed account option, variable annuity guaranteed benefit and other reserves, our RILA and fixed annuities and fixed index annuities reserves, not reinsured, our Institutional Products segment reserves, as well as our Closed Life and Annuity Blocks segment reserves, were primarily backed by our investment portfolio.

As of June 30, 2022, our general account policy and contract liabilities, net of those ceded to Athene, were composed of 1% for registered index linked annuities, 5% for fixed index annuities and fixed deferred and payout annuities, 17% for Institutional Products segment, 21% for fixed account option variable annuities, 8% for guaranteed benefit and other variable annuity reserves, and a 48% Closed Life and Annuity Block segment reserves.

As of June 30, 2022, 39% of our fixed annuity and fixed index annuity policy and contract liabilities were subject to surrender charges of at least 5% or at market value in the event of discretionary withdrawal by customers.

As of June 30, 2022, 100% of our RILA policy and contract liabilities were subject to surrender charges of at least 5% or at market value in the event of discretionary withdrawal by customers.

As of September 30, 2022, our general account policy and contract liabilities, net of those ceded to Athene, were composed of 3% for registered index linked annuities, 5% for fixed index annuities and fixed deferred and payout annuities, 17% for Institutional Products segment, 21% for fixed account option variable annuities, 6% for guaranteed benefit and other variable annuity reserves, and a 48% Closed Life and Annuity Block segment reserves.

As of September 30, 2022, 38% of our fixed annuity and fixed index annuity policy and contract liabilities were subject to surrender charges of at least 5% or at market value in the event of discretionary withdrawal by customers.

As of September 30, 2022, 100% of our RILA policy and contract liabilities were subject to surrender charges of at least 5% or at market value in the event of discretionary withdrawal by customers.

We have the discretion, subject to contractual limitations and minimums, to reset the crediting terms on the majority of our fixed index annuities and fixed annuities.

As of June 30, 2022, 92% of fixed annuity, fixed-indexed annuity, and the fixed accounts of RILA and variable annuity correspond to crediting rates that are at the guaranteed minimum crediting rate.

As of September 30, 2022, 94% of fixed annuity, fixed-indexed annuity, and the fixed accounts of RILA and variable annuity correspond to crediting rates that are at the guaranteed minimum crediting rate.

Liabilities for other contract holder funds are policy account balances on interest-sensitive life insurance, fixed annuities, fixed index annuities, RILA and variable annuity or variable life insurance contract allocations to fixed fund options.

33 unchanged sentences

Our ability to generate and maintain sufficient liquidity and capital depends on the profitability of the businesses, timing of cash flows on investments and products, general economic conditions and access to the capital markets and the alternate sources of liquidity and capital described herein.

The discussion below describes our liquidity and capital resources for the six months ended June 30, 2022 and 2021.

The discussion below describes our liquidity and capital resources for the nine months ended September 30, 2022 and 2021.

The following table presents a summary of our cash flow activity for the periods set forth below:

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions)

9 unchanged sentences

The primary liquidity concern with respect to these cash flows is the risk of early contract holder and policyholder benefit payments.

Cash flows provided by (used in) operating activities of $2,096 million for the six months ended June 30, 2022 were relatively flat compared to the $2,148 million for the six months ended June 30, 2021.

Cash flows provided by (used in) operating activities decreased $594 million to $2,941 million for the nine months ended September 30, 2022 from $3,535 million for the nine months ended September 30, 2021.

This decrease was primarily due to lower investment income as a result of lower income on limited partnership investments in 2022, compared to the prior year.

Cash flows provided by (used in) Investing Activities

4 unchanged sentences

The primary liquidity concerns with respect to these cash flows are the risk of default by debtors or market disruptions that might impact the timing of investment related cash flows as well as derivative collateral needs.

Cash flows provided by (used in) investing activities increased $2,035 million to $2,615 million during the six months ended June 30, 2022 from $580 million during the six months ended June 30, 2021.

This increase was primarily due to inflows related to derivative settlements in 2022 compared to outflows in 2021, partially offset by lower sales of funds withheld assets in 2022, as compared to 2021.

Cash flows provided by (used in) investing activities increased $1,845 million to $2,469 million during the nine months ended September 30, 2022 from $624 million during the nine months ended September 30, 2021.

This increase was primarily due to inflows related to our hedging program for derivative settlements and collateral predominantly resulting from movements in the equity markets in 2022 compared to outflows in 2021, partially offset by lower sales of funds withheld assets in 2022, as compared to 2021.

Item 2 | Management’s Discussion and Analysis | Liquidity and Capital Resources

3 unchanged sentences

The primary liquidity concerns with respect to these cash flows are market disruption and the risk of early policyholder withdrawal.

Cash flows provided by (used in) financing activities increased $1,135 million to $(2,076) million during the six months ended June 30, 2022 from $(3,211) million during the six months ended June 30, 2021.

This increase was primarily due to decreased withdrawals of policyholders' account balances during 2022 compared to 2021, partially offset by outflows related to the settlement of our repurchase agreements, compared to inflows in the prior year.

Cash flows provided by (used in) financing activities increased $996 million to $(2,700) million during the nine months ended September 30, 2022 from $(3,696) million during the nine months ended September 30, 2021.

This increase was primarily due to decreased withdrawals of policyholders' account balances during 2022 compared to 2021.

This favorable variance was partially offset by higher inflows in the prior year related to debt agreements entered into in 2021.

Statutory Capital

3 unchanged sentences

The formula takes into account the risk characteristics of the insurer, including asset risk, insurance risk, interest rate risk, market risk and business risk and is calculated on an annual basis.

The formula is used as an early warning regulatory tool to identify possible inadequately capitalized insurers for purposes of initiating regulatory action, and not as a means to rank insurers generally.

As of June 30, 2022, our insurance companies were well in excess of the minimum required capital levels.

The formula is used as an early warning regulatory tool to identify possible inadequately capitalized insurers for purposes of initiating regulatory action, and not to rank insurers generally.

As of September 30, 2022, our insurance companies were well in excess of the minimum required capital levels.

Jackson is also subject to risk-based capital guidelines that provide a method to measure the adjusted capital that a life insurance company should have for regulatory purposes, taking into account the risk characteristics of Jackson’s investments and products.

10 unchanged sentences

Subject to these limitations, our insurance company subsidiaries are permitted to pay ordinary dividends based on calculations specified under insurance laws of the relevant state of domicile, subject to prior notification to the appropriate regulatory agency.

Any distributions above the amount permitted by statute in any twelve-month period are considered to be extraordinary dividends, and the approval of the appropriate regulator is required prior to payment.

Any distributions above the amount permitted by statute in any twelve-month period are considered extraordinary dividends, and the approval of the appropriate regulator is required prior to payment.

In Michigan, the Director of the Michigan Department of Insurance and Financial Services (the Michigan Director of Insurance) may limit, or not permit, the payment of dividends from either Jackson or Brooke Life, Jackson's direct parent company, if it determines that the surplus of either these subsidiaries is not reasonable in relation to their outstanding liabilities and is not adequate to meet their financial needs, as required by Michigan insurance law.

7 unchanged sentences

Brooke Life subsequently paid a $510 million ordinary dividend to its ultimate parent, Jackson Financial.

In addition, Brooke Life also paid $45 million of interest associated with the $2 billion surplus note between Brooke Life and Jackson Finance, LLC ("Jackson Finance"), a subsidiary of Jackson Financial.

In addition, for the three and nine months ended September 30, 2022, Brooke Life paid $45 million and $90 million of interest associated with the $2 billion surplus note between Brooke Life and Jackson Finance, LLC ("Jackson Finance"), a subsidiary of Jackson Financial, respectively.

The maximum distribution permitted by law or contract is not necessarily indicative of an insurer’s actual ability to pay such distributions, which may be constrained by business and other considerations, such as imposition of withholding tax, the impact of such distributions on surplus, which could affect the insurer’s ratings or competitive position, the ability to generate new annuity sales and the ability to pay future dividends or make other distributions.

9 unchanged sentences

Liquidity requirements are principally for purchases of new investments, management of derivative related margin requirements, repayment of principal and interest on debt, payments of interest on surplus notes, funding of insurance product liabilities including payments for policy benefits, surrenders, maturities and new policy loans, funding of expenses including payment of commissions, operating expenses and taxes.

As of June 30, 2022, Jackson’s outstanding surplus notes and bank debt included $ 63 million of bank loans from the Federal Home Loan Bank of Indianapolis ("FHLBI"), collateralized by mortgage-related securities and mortgage loans and $250 million of surplus notes maturing in 2027.

As of September 30, 2022, Jackson’s outstanding surplus notes and bank debt included $ 62 million of bank loans from the Federal Home Loan Bank of Indianapolis ("FHLBI"), collateralized by mortgage-related securities and mortgage loans and $250 million of surplus notes maturing in 2027.

Significant increases in interest rates could create sudden increases in surrender and withdrawal requests by customers and contract holders, and result in increased liquidity requirements at our insurance company subsidiaries.

2 unchanged sentences

Most of the life insurance and annuity products Jackson offers permit the policyholder or contract holder to withdraw or borrow funds or surrender cash values.

As of June 30, 2022, approximately half of Jackson’s general account reserves are either not surrenderable, included surrender charges greater than 5%, or market value adjustments to discourage early withdrawal of policy and contract funds.

As of September 30, 2022, approximately half of Jackson’s general account reserves are either not surrenderable, included surrender charges greater than 5%, or market value adjustments to discourage early withdrawal of policy and contract funds.

The liquidity sources for our insurance company subsidiaries are their cash, short-term investments, sales of publicly traded bonds, insurance premiums, fees charged on our products, sales of annuities and institutional products, investment income, commercial repurchase agreements and utilization of a short-term borrowing facility with the FHLBI.

1 unchanged sentence

Jackson’s principal sources of liquidity to meet unexpected cash outflows associated with sudden and severe increases in surrenders and withdrawals or benefit payments are its portfolio of liquid assets and its net operating cash flows.

As of June 30, 2022, the portfolio of cash, short-term investments and privately and publicly traded securities and equities, which are unencumbered and unrestricted to sale, amounted to $24.4 billion.

As of September 30, 2022, the portfolio of cash, short-term investments and privately and publicly traded securities and equities, which are unencumbered and unrestricted to sale, amounted to $23.6 billion.

Our Indebtedness

On June 8, 2022, the Company issued $750 million aggregate principal amount of its senior unsecured notes, consisting of $400 million aggregate principal amount of 5.170% Senior Notes due June 8, 2027 (the “2027 Notes”) and $350 million aggregate principal amount of 5.670% Senior Notes due June 8, 2032 (the “2032 Notes”).

The net proceeds of the 2027 Notes and 2032 Notes were used, together with cash on hand, to repay the Company’s $750 million aggregate principal amount term loan due February 2023.

On November 23, 2021, the Company issued $1.6 billion aggregate principal amount of its senior unsecured notes consisting of $600 million aggregate principal amount of 1.1% Senior Notes due November 22, 2023 (the “2023 Senior Notes”), $500 million aggregate principal amount of 3.1% Senior Notes due November 23, 2031 (the “2031 Senior Notes”) and $500 million aggregate principal amount of 4.0% Senior Notes due November 23, 2051 (the “2051 Senior Notes” and, together with the 2023 Senior Notes and the 2031 Senior Notes, the “Senior Notes”).

The proceeds of the Senior Notes were used, together with cash on hand, to repay the Company’s $1.6 billion aggregate principal amount term loan that was due May 2022.

On June 8, 2022, the Company issued $750 million aggregate principal amount of its senior unsecured notes, consisting of $400 million aggregate principal amount of 5.170% Senior Notes due June 8, 2027 and $350 million aggregate principal amount of 5.670% Senior Notes due June 8, 2032.

The net proceeds of these notes were used, together with cash on hand, to repay the Company’s $750 million aggregate principal amount term loan due February 2023.

On November 23, 2021, the Company issued $1.6 billion aggregate principal amount of its senior unsecured notes consisting of $600 million aggregate principal amount of 1.125% Senior Notes due November 22, 2023, $500 million aggregate principal amount of 3.125% Senior Notes due November 23, 2031, and $500 million aggregate principal amount of 4.000% Senior Notes due November 23, 2051.

The proceeds of these notes were used, together with cash on hand, to repay the Company’s $1.6 billion aggregate principal amount term loan that was due May 2022.

Item 2 | Management’s Discussion and Analysis | Liquidity and Capital Resources

6 unchanged sentences

The credit agreement contains financial maintenance covenants, including a minimum adjusted consolidated net worth test of no less than 70% of our adjusted consolidated net worth as of the date of the Demerger (taking into account 50% of the proceeds of any additional equity issuances) and a maximum consolidated indebtedness to total capitalization ratio test not to exceed 35%.

We were in compliance with these covenants at June 30, 2022.

We were in compliance with these covenants at September 30, 2022.

Surplus Notes

2 unchanged sentences

Interest is payable semi-annually on March 15th and September 15th of each year.

Interest expense on the notes was $5 million and $10 million for both the three and six months ended June 30, 2022 and 2021, respectively.

Interest expense on the notes was $5 million and $15 million for both the three and nine months ended September 30, 2022 and 2021, respectively.

Under Michigan Insurance Law, for statutory reporting purposes, the surplus notes are not part of the legal liabilities of the Company and are considered surplus funds.

4 unchanged sentences

Advances are in the form of either notes or funding agreements issued to FHLBI.

As of June 30, 2022 and December 31, 2021, Jackson held a bank loan with an outstanding balance of $63 million and $67 million, respectively.

As of September 30, 2022 and December 31, 2021, Jackson held a bank loan with an outstanding balance of $62 million and $67 million, respectively.

Dividend and Stock Repurchase

9 unchanged sentences

JFI is a holding company and has no direct operations.

All of our business operations are conducted through our subsidiaries.

All our business operations are conducted through our subsidiaries.

Any dividends we pay or stock repurchases we make will depend upon the funds legally available for distribution, including dividends or distributions from our subsidiaries to us.

5 unchanged sentences

Dividends to Shareholders and Share Repurchases

During the second quarter of 2022, we paid a cash dividend of $0.55 per share on JFI's Class A Common Stock totaling $50 million.

On August 8, 2022, our Board of Directors approved a third quarter cash dividend on JFI's Common Stock of $0.55 per share, payable on September 15, 2022 to shareholders of record on September 1, 2022.

We repurchased a total of 1,870,854 shares and a total of 5,304,464 shares of Class A Common Stock for an aggregate purchase price of $66 million and $206 million in the three and six months ended June 30, 2022, respectively, which were funded with cash on hand.

During the third quarter of 2022, we paid a cash dividend of $0.55 per share on JFI's common stock totaling $49 million.

On November 7, 2022, our Board of Directors approved a fourth quarter cash dividend on JFI's common stock of $0.55 per share, payable on December 15, 2022 to shareholders of record on December 1, 2022.

We repurchased a total of 1,200,000 shares and a total of 6,504,464 shares of common stock for an aggregate purchase price of $39 million and $245 million in the three and nine months ended September 30, 2022, respectively, which were funded with cash on hand.

See Note 18 to Condensed Consolidated Financial Statements in this Report for further information on dividends to shareholders and share repurchases.

7 unchanged sentences

Financial strength ratings are based upon factors of concern to customers, distribution partners and ceding companies and are not directed toward the protection of investors.

Financial strength ratings are not recommendations to buy, sell or hold securities and they may be revised or revoked at any time at the sole discretion of the rating organization.

Financial strength ratings are not recommendations to buy, sell or hold securities and may be revised or revoked at any time at the sole discretion of the rating organization.

Item 2 | Management’s Discussion and Analysis | Liquidity and Capital Resources

As of August 5, 2022, the financial strength ratings of our principal insurance subsidiaries were as follows :

As of November 3, 2022, the financial strength ratings of our principal insurance subsidiaries were as follows :

Best Fitch Moody’s S&P

7 unchanged sentences

Outlook stable

In evaluating a company’s financial strength, the rating agencies evaluate a variety of factors including our strategy, market positioning and track record, our mix of business, profitability, leverage and liquidity, the adequacy and soundness of our reinsurance, the quality and estimated market value of our assets, the adequacy of our surplus, our capital structure, and the experience and competence of our management.

In evaluating a company’s financial strength, the rating agencies evaluate a variety of factors including our strategy, market positioning and track record, mix of business, profitability, leverage and liquidity, the adequacy and soundness of our reinsurance, the quality and estimated market value of our assets, the adequacy of our surplus, our capital structure, and the experience and competence of our management.

In addition to the financial strength ratings, rating agencies use an outlook statement to indicate a short- or medium-term trend which, if continued, may lead to a rating change.

26 unchanged sentences

Off–Balance Sheet Arrangements

We do not have any off–balance sheet arrangements as of June 30, 2022.

We do not have any off–balance sheet arrangements as of September 30, 2022.

Item 3 | Quantitative and Qualitative Disclosures about Market Risk

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis