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Item 2. Management’s Discussion and Analysis

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 
 
 FORWARD-LOOKING STATEMENTS – CAUTIONARY LANGUAGE 
 
 The information in this Quarterly Report on 10-Q (this “report”) contains forward-looking statements about future events and circumstances and their effects upon revenues, expenses and business opportunities. Generally speaking, any statement in this Form 10-Q not based upon historical fact is a forward-looking statement. Forward-looking statements can also be identified by the use of forward-looking or conditional words, such as “could,” “should,” “can,” “continue,” “estimate,” “forecast,” “intend,” “look,” “may,” “will,” “expect,” “believe,” “anticipate,” “plan,” “remain,” “confident” and “commit” or similar expressions. In particular, statements regarding plans, strategies, prospects, targets and expectations regarding the business and industry are forward-looking statements. They reflect expectations, are not guarantees of performance and speak only as of the dates the statements are made. We caution investors that these forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from those projected, expressed, or implied. Factors that could cause actual results to differ materially from those in the forward-looking statements include those reflected in Part I, Item 1A. Risk Factors and Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 1, 2023, (the "2022 Annual Report") and elsewhere in Jackson Financial Inc.’s filings with the U.S. Securities and Exchange Commission (the "SEC"). Except as required by law, Jackson Financial Inc. does not undertake to update such forward-looking statements. You should not rely unduly on forward-looking statements. 
 
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 Item 2 | Management’s Discussion and Analysis | Available Information & Principal Definitions 

 Available Information 
 
 We make available free of charge, through our website, investors.jackson.com, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, our proxy statements, and any amendments to those reports or statements as soon as reasonably practicable after these materials are electronically filed with, or furnished to, the SEC. We use our website as a routine channel for distribution of important information, including news releases, analyst presentations, financial information, and corporate governance information. The content of Jackson’s website is not incorporated by reference into this Report or in any other report or document filed with the SEC, and any references to Jackson’s website are intended to be inactive textual references only. The SEC’s website, www.sec.gov, contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. 
 
 Principal Definitions, Abbreviations, and Acronyms Used in the Text and Notes of this Report 
 
 we, us, our and the Company Jackson Financial Inc. and its consolidated subsidiaries, unless the context refers only to Jackson Financial Inc. as a corporate entity (which we refer to as "JFI" or "Jackson Financial") 
 Jackson Jackson National Life Insurance Company, a Company subsidiary. 
 Brooke Life Brooke Life Insurance Company, a Company subsidiary and the direct parent company of Jackson National Life Insurance Company. 
 Jackson Finance Jackson Finance, LLC, a Company subsidiary. 
 PPMH PPM Holdings, Inc., a Company subsidiary 
 PPM PPM America, Inc., a subsidiary of PPMH 
 ACL Allowance for credit loss 
 Account value or account balance The amount of money in a customer’s account. For example, the value increases with additional premiums and investment gains, and it decreases with withdrawals, investment losses and fees. 
 Athene Athene Life Re Ltd. and its affiliates and permitted transferees, including Athene Co-Invest Reinsurance Affiliate 1A Ltd. 
 Athene Reinsurance Transaction The funds withheld coinsurance agreement entered into with Athene on June 18, 2020, effective June 1, 2020, to reinsure a 100% quota share of a block of our in-force fixed and fixed index annuity liabilities in exchange for approximately $1.2 billion in ceding commissions 
 Athene Transactions The Athene Reinsurance Transaction and the Athene Equity Investment, together. 
 AUM (Assets under management) Investment assets that are managed by one of our subsidiaries and includes: (i) the assets in our investment portfolio managed by PPM, which excludes assets held in funds withheld accounts for reinsurance transactions, (ii) third-party assets managed by PPM, including those for Prudential and its affiliates or third parties, and (iii) the separate account assets of our Retail Annuities segment that Jackson National Asset Management, LLC ("JNAM") manages and administers. 
 Benefit base A notional amount (not actual cash value) used to calculate the owner’s guaranteed benefits within an annuity contract. The death benefit and living benefit within the same contract may have different benefit bases. 
 CMBS Commercial mortgage-backed securities 
 DAC (Deferred acquisition costs) Represent the incremental costs related directly to the successful acquisition of new and certain renewal insurance policies and annuity contracts and which have been deferred on the balance sheet as an asset. 
 Deferred tax asset or Deferred tax liability Assets or liabilities that are recorded for the difference between book basis and tax basis of an asset or a liability. 
 Fixed Annuity An annuity that guarantees a set annual rate of return with interest at rates we determine, subject to specified minimums. Credited interest rates are guaranteed not to change for certain limited periods of time. 

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 Item 2 | Management’s Discussion and Analysis | Available Information & Principal Definitions 

 Fixed Index Annuity An annuity with an ability to share in the upside from certain financial markets, such as equity indices, and provides downside protection. 
 Form 10 Form 10 registration statement registering the Company’s Class A Common Stock under the Securities Exchange Act of 1934, as amended, which became effective on August 6, 2021. 
 General account assets The assets held in the general accounts of our insurance companies. 
 GIC Guaranteed investment contract 
 Guarantee Fees Fees charged on annuities for optional benefit guarantees 
 GMAB (Guaranteed minimum accumulation benefit) An add-on benefit (enhanced benefits available for an additional cost) which entitles an owner to a minimum payment, typically in lump-sum, after a set period of time, typically referred to as the accumulation period. The minimum payment is based on the benefit base, which could be greater than the underlying account value. 
 GMDB (Guaranteed minimum death benefit) An add-on benefit (enhanced benefits available for an additional cost) that guarantees an owner’s beneficiaries are entitled to a minimum payment based on the benefit base, which could be greater than the underlying account value, upon the death of the owner. 
 GMIB (Guaranteed minimum income benefit) An add-on benefit (available for an additional cost) where an owner is entitled to annuitize the policy and receive a minimum payment stream based on the benefit base, which could be greater than the payment stream resulting from current annuitization of the underlying account value. 
 GMWB (Guaranteed minimum withdrawal benefit) An add-on benefit (available for an additional cost) where an owner is entitled to withdraw a maximum amount of their benefit base each year, for which cumulative payments to the owner could be greater than the underlying account value. 
 GMWB for Life (Guaranteed minimum withdrawal benefit for life) An add-on benefit (available for an additional cost) where an owner is entitled to withdraw the guaranteed annual withdrawal amount each year, for the duration of the policyholder’s life, regardless of account performance. 
 NAIC National Association of Insurance Commissioners 
 NAV Net asset value 
 Net flows Net flows represent the net change in customer account balances during a period, including gross premiums, surrenders, withdrawals and benefits. Net flows exclude investment performance, interest credited to customer accounts and policy charges. 
 RBC (Risk-based capital) Statutory minimum level of capital that is required by regulators for an insurer to support its operations. 
 RILA A registered index-linked annuity that offers market index-linked investment options, subject to a cap, and offers a variety of guarantees designed to modify or limit losses. 
 
 RMBS Residential mortgage-backed securities 
 Variable annuity A type of annuity that offers tax-deferred investment into a range of asset classes and a variable return, which offers insurance features related to potential future income payments. 
 VIE Variable interest entity 

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

 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 report, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in our 2022 Annual Report. 
 
 Jackson Financial Inc. (“Jackson Financial”) along with its subsidiaries (collectively, the “Company,” which also may be referred to as “we,” “our” or “us”), is a financial services company focused on helping Americans grow and protect their retirement savings and income to enable them to pursue financial freedom for life. Jackson Financial, domiciled in the United States (“U.S.”), was previously a majority-owned subsidiary of Prudential plc (“Prudential”), London, England and was the holding company for Prudential’s U.S. operations. The Company's demerger from Prudential was completed on September 13, 2021 (the "Demerger"), and the Company no longer is a majority-owned subsidiary of Prudential. See Note 1 to Condensed Consolidated Financial Statements for further discussion of the Demerger. Jackson Financial’s primary life insurance subsidiary, Jackson National Life Insurance Company, is licensed to sell group and individual annuity products (including immediate, registered index-linked, deferred fixed, fixed index and variable annuities), and various protection products, primarily whole life, universal life and variable universal life and term life insurance products in all 50 states and the District of Columbia. 
 
 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 the information that is important to current or potential investors in our securities. You should read this report, together with our 2022 Annual Report, in its 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. We believe that we are uniquely positioned in our markets because of our differentiated products, well-known brand and disciplined risk management. Our market leadership is supported by our efficient and scalable operating platform and industry-leading distribution network. We believe these core strengths will enable us to grow profitably as an aging, U.S. population transitions into retirement. 
 
 We offer a diverse suite of annuities to retail investors in the U.S. Our variable annuities have been among the best-selling products of their kind in the U.S. primarily due to the differentiated features we offer as compared to our competitors, in particular the wider range of investment options and greater freedom to invest across multiple investment options. We also offer fixed index annuities and fixed annuities. In the fourth quarter of 2021, our primary life insurance subsidiary, Jackson and its insurance subsidiaries successfully launched Jackson Market Link Pro SM and Jackson 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. 
 
 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. 
 
 Our operating platform is scalable and efficient. We administer approximately 78% of our in-force policies on our in-house policy administration platform. The remainder of our business is administered through established third-party arrangements. We believe that our operating platform provides us with a competitive advantage by allowing us to grow efficiently and provide superior customer service. 
 
 We manage our business through three segments: Retail Annuities, Institutional Products, and Closed Life and Annuity Blocks. We report certain activities and items that are not included in these segments, including the results of PPM Holdings, Inc., the holding company of PPM, which manages the majority of our general account investment portfolio, in Corporate and Other. See Note 3 of Notes to Condensed Consolidated Financial Statements for further information on our segments. 
 
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 Item 2 | Management’s Discussion and Analysis | Executive Summary 

 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. operations. 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 7.1% of our outstanding common stock as of March 31, 2023. 
 
 • Common Stock Repurchases: Since the Demerger and through March 31, 2023, we have repurchased 15,146,955 shares of our common stock for an aggregate consideration of $564 million. After giving effect to those repurchases and issuances for our share-based compensation, we had 13,431,514 shares of treasury stock and 81,044,318 shares of common stock outstanding at March 31, 2023. 
 
 • Inflation Reduction Act of 2022: As discussed in Note 15 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 imposed a 1% excise tax on corporate stock repurchases. The AMT provision became 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 March 31, 2023, 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, financial condition, results of operations and cash flows. 
 
 An understanding of several key operating measures, including sales, account value, net flows, benefit base and assets under management ("AUM"), is helpful to evaluating our results. See “Key Operating Measures” below. Finally, we are affected by various economic, industry and regulatory trends, which are described below under “Macroeconomic, Industry and Regulatory Trends.” 
 
 Impact of Recent Accounting Pronouncements 
 
 For a complete discussion of new accounting pronouncements affecting us, s ee Note 2 of Notes to Condensed Consolidated Financial Statements. 
 
 As discussed in Note 2 of Notes to Condensed Consolidated Financial Statements in this report, we adopted Accounting Standards Update ("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 adoption of LDTI resulted in a decrease in total equity of $3.0 billion as of the transition date of January 1, 2021, comprised of a reduction in accumulated other comprehensive income ("AOCI") of $0.4 billion and a reduction in retained earnings of $2.6 billion. The adoption of the standard resulted in increases in net income attributable to Jackson Financial Inc. of $489 million and $234 million for the years ended December 31, 2022 and 2021, respectively, and also resulted in an increase in total equity of $223 million and a decrease of $2.8 billion for the years ended December 31, 2022 and 2021, respectively, from the amounts reported prior to the adoption of LDTI. The change in the equity impact from the transition date was primarily due to higher interest rates and is comprised of a reduction in retained earnings that is more than offset by an increase in AOCI. See further discussion in Note 2- New Accounting Standards of the Notes to Condensed Consolidated Financial Statements for the significant changes associated with this change in accounting principle. 
 
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 Item 2 | Management’s Discussion and Analysis | Non-GAAP Financial Measures 

 Non-GAAP Financial Measures 
 
 In addition to presenting our results of operations and financial condition in accordance with U.S. GAAP, we use and report, selected non-GAAP financial measures. Management believes that the use of these non-GAAP financial measures, together with relevant U.S. GAAP financial measures, provides a better understanding of our results of operations, financial condition and the underlying performance drivers of our business. These non-GAAP financial measures should be considered supplementary to our results of operations and financial condition that are presented in accordance with U.S. GAAP and should not be viewed as a substitute for the U.S. GAAP financial measures. Other companies may use similarly titled non-GAAP financial measures that are calculated differently from the way we calculate such measures. Consequently, our non-GAAP financial measures may not be comparable to similar measures used by other companies. These non-GAAP financial measures should not be viewed as substitutes for the most directly comparable financial measures calculated in accordance with U.S. GAAP. 
 
 Adjusted Operating Earnings 
 
 Adjusted Operating Earnings is an after-tax non-GAAP financial measure, which we believe should be used to evaluate our financial performance on a consolidated basis by excluding certain items that may be highly variable from period to period due to accounting treatment under U.S. GAAP or that are non-recurring in nature, as well as certain other revenues and expenses that we do not view as driving our underlying performance. Adjusted Operating Earnings should not be used as a substitute for net income as calculated in accordance with U.S. GAAP. However, we believe the adjustments to net income are useful for gaining an understanding of our overall results of operations. 
 
 Adjusted Operating Earnings equals our net income adjusted to eliminate the impact of the following items: 
 
 1. Net Hedging Results : Comprised of: (i) fees attributed to guaranteed benefits; (ii) changes in the fair value of freestanding derivatives used to manage the risk associated with market risk benefits and other guaranteed benefit features; (iii) the movements in reserves, market risk benefits, guaranteed benefit features accounted for as embedded derivative instruments, and related claims and benefit payments; (iv) amortization of the balance of unamortized deferred acquisition costs at the date of transition to current accounting guidance on January 1, 2021 associated with items excluded from adjusted operating earnings prior to transition; and (v) the impact on the valuation of Guaranteed Benefits and Net Hedging Results arising from changes in underlying actuarial assumptions. These items are excluded from adjusted operating earnings as they may vary significantly from period to period due to near-term market conditions and therefore are not directly comparable or reflective of the underlying performance of our business. We believe this approach appropriately removes the impact to both revenue and related expenses associated with Guaranteed Benefits and Net Hedging Results and provides investors a better picture of the drivers of our underlying performance. 
 
 2. Net Realized Investment Gains and Losses : Comprised of: (i) realized investment gains and losses associated with the periodic sales or disposals of securities, excluding those held within our trading portfolio; and (ii) impairments of securities, after adjustment for the non-credit component of the impairment charges. These items are excluded from pretax adjusted operating earnings as they may vary significantly from period to period due to near-term market conditions and therefore are not directly comparable or reflective of the underlying performance of our business. We believe this approach provides investors a better picture of the drivers of our underlying performance. 
 
 3. Change in Value of Funds Withheld Embedded Derivative and Net investment income on funds withheld assets : Composed of: (i) the change in fair value of funds withheld embedded derivatives; and (ii) net investment income on funds withheld assets related to funds withheld reinsurance transactions. These items are excluded from pretax adjusted operating earnings as they are not reflective of the underlying performance of our business. We believe this approach provides investors a better picture of the drivers of our underlying performance. 
 
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 Item 2 | Management’s Discussion and Analysis | Non-GAAP Financial Measures 

 4. Other items : Comprised of: (i) the impact of investments that are consolidated in our financial statements due to U.S. GAAP accounting requirements, such as our investments in collateralized loan obligations (CLOs), but for which the consolidation effects are not consistent with our economic interest or exposure to those entities, and (ii) one-time or other non-recurring items, such as costs relating to our separation from Prudential. These items are excluded from adjusted operating earnings as they are not reflective of the underlying performance of our business. We believe this approach provides investors a better picture of the drivers of our underlying performance. 
 
 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. 
 
 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 March 31, 
 2023 2022 
 (in millions) 
 Net income (loss) attributable to Jackson Financial Inc. $ (1,497) $ 2,194 
 Income tax expense (benefit) (558) 388 
 Pretax income (loss) attributable to Jackson Financial Inc (2,055) 2,582 
 Non-operating adjustments (income) loss: 
 Guaranteed benefits and hedging results: 
 Fees attributable to guarantee benefit reserves (780) (764) 
 Net movement in freestanding derivatives 2,512 1,476 
 Market risk benefits (gains) losses, net (174) (1,907) 
 Net reserve and embedded derivative movements 189 40 
 Amortization of DAC associated with non-operating items at date of transition to LDTI 153 173 
 
 Total guaranteed benefits and net hedging results 1,900 (982) 
 Net realized investment (gains) losses 68 130 
 Net realized investment (gains) losses on funds withheld assets 673 (1,028) 
 Net investment income on funds withheld assets (307) (260) 
 
 Other items 23 3 
 Total non-operating adjustments 2,357 (2,137) 
 Pretax Adjusted Operating Earnings 302 445 
 Operating income taxes 31 68 
 Adjusted Operating Earnings $ 271 $ 377 

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

 Adjusted Book Value Attributable to Common Shareholders and Adjusted Operating ROE Attributable to Common Shareholders 
 
 We use Adjusted Operating Return on Equity ("ROE") Attributable to Common Shareholders to manage our business and evaluate our financial performance. Adjusted Operating ROE Attributable to Common Shareholders excludes items that vary from period to period due to accounting treatment under U.S. GAAP or that are non-recurring in nature, as such items may distort the underlying performance of our business. We calculate Adjusted Operating ROE Attributable to Common Shareholders by dividing our Adjusted Operating Earnings by average Adjusted Book Value Attributable to Common Shareholders. Adjusted Book Value Attributable to Common Shareholders excludes AOCI attributable to Jackson Financial Inc. AOCI attributable to Jackson Financial Inc. does not include AOCI arising from investments held within the funds withheld account related to the Athene Reinsurance Transaction. We exclude AOCI attributable to Jackson Financial Inc. from Adjusted Book Value Attributable to Common Shareholders because our invested assets are generally invested to closely match the duration of our liabilities, which are longer duration in nature, and therefore we believe period-to-period fair market value fluctuations in AOCI to be inconsistent with this objective. We believe excluding AOCI attributable to Jackson Financial Inc. is more useful to investors in analyzing trends in our business. Changes in AOCI within the funds withheld account related to the Athene Reinsurance Transaction offset the related non-operating earnings from the Athene Reinsurance Transaction resulting in a minimal net impact on Adjusted Book Value of Jackson Financial Inc. 
 
 Adjusted Book Value Attributable to Common Shareholders and Adjusted Operating ROE Attributable to Common Shareholders should not be used as substitutes for total shareholders’ equity and ROE as calculated using annualized net income and average equity in accordance with U.S. GAAP. However, we believe the adjustments to equity and earnings are useful to gaining an understanding of our overall results of operations. 
 
 The following is a reconciliation of Adjusted Book Value Attributable to Common Shareholders to total shareholders’ equity and a comparison of Adjusted Operating ROE Attributable to Common Shareholders to ROE Attributable to Common Shareholders, the most comparable U.S. GAAP measure: 
 
 Three Months Ended March 31, 
 2023 2022 
 (in millions) 
 Net income (loss) attributable to Jackson Financial Inc. $ (1,497) $ 2,194 
 Adjusted Operating Earnings 271 377 
 
 Total shareholders' equity $ 8,638 $ 8,194 
 Less: Preferred stock 533 — 
 Total common shareholders' equity 8,105 8,194 
 
 Adjustments to total common shareholders’ equity: 
 
 Exclude AOCI attributable to Jackson Financial Inc. (1) 
 476 (567) 
 Adjusted Book Value Attributable to Common Shareholders $ 8,581 $ 7,627 
 
 ROE Attributable to Common Shareholders (71.5) % 110.8 % 
 Adjusted Operating ROE Attributable to Common Shareholders on average equity 11.7 % 21.2 % 
 
 (1) Excludes $(1,832) million and $(686) million related to the investments held within the funds withheld account related to the Athene Reinsurance Transaction as of March 31, 2023 and 2022, respectively, are not attributable to Jackson Financial Inc. and are therefore not included as an adjustment to total shareholders’ equity in the reconciliation of Adjusted Book Value Attributable to Common Shareholders to total shareholders’ equity. 
 
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 Item 2 | Management’s Discussion and Analysis | Key Operating Measures 

 Key Operating Measures 
 
 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 
 
 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 March 31, 
 2023 2022 
 (in millions) 
 Sales 
 Variable annuities $ 2,474 $ 4,575 
 RILA 533 199 
 Fixed Index Annuities 62 19 
 Fixed Annuities (1) 
 71 4 
 Total Retail Annuity Sales 3,140 4,797 
 
 Total Institutional Product Sales 649 975 
 
 Total Sales $ 3,789 $ 5,772 

 (1) Includes payout annuities 
 
 For the three months ended March 31, 2023, total sales decreased by $1,983 million compared to the three months ended March 31, 2022. Lower retail sales were primarily due to decreased sales of our variable annuities with lifetime living benefits, partially offset by RILA sales. In addition, sales of our institutional products were lower by $326 million, compared to the three months ended March 31, 2022. Sales of fixed index and fixed annuities increased in 2023 due to the higher interest rate environment, which enabled more favorable pricing actions. 
 
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 Item 2 | Management’s Discussion and Analysis | Key Operating Measures 

 Account Value 
 
 Account value generally equals the account value of our variable annuities, RILA, fixed index annuities, fixed annuities, interest sensitive life, and institutional products. It reflects the total amount of customer invested assets that have accumulated within a respective product and equals cumulative customer contributions, which includes gross deposits or premiums, plus accrued credited interest plus or minus the impact of market movements, as applicable, less withdrawals and various fees. 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. 
 
 March 31, 2023 December 31, 2022 
 (in millions) 
 Account Value 
 GMWB For Life $ 156,046 $ 149,706 
 GMWB 5,849 5,674 
 GMIB 1,364 1,356 
 No Living Benefits 50,658 49,073 
 Total Variable Annuity Account Value 213,917 205,809 
 
 RILA 2,501 1,875 
 
 Fixed Index Annuity (1) 
 491 415 
 Fixed Annuity (1) 
 1,206 1,219 
 Total Fixed & Fixed Index Annuity Account Value (1) 
 1,697 1,634 
 
 Payout Annuity (1) 
 655 649 
 
 Total Retail Annuities Account Value (1) 
 $ 218,770 $ 209,967 
 
 Total Institutional Products Account Value $ 8,691 $ 9,019 
 
 Total Closed Life and Annuity Blocks Account Value (1) 
 $ 8,272 $ 8,288 
 
 (1) Net of reinsurance. 
 
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 Item 2 | Management’s Discussion and Analysis | Key Operating Measures 

 Net Flows 
 
 Net flows represent the net change in customer account balances during a period, including gross premiums, surrenders, withdrawals and benefits. Net flows exclude investment performance, interest credited to customer accounts, transfers between fixed and variable benefits for variable annuities and policy charges. 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 March 31, 
 2023 2022 
 (in millions) 
 Net Flows: 
 Variable Annuity $ (1,774) $ 2 
 RILA 516 198 
 Fixed Index Annuity (1) 
 70 (6) 
 Fixed Annuity (1) 
 (11) 16 
 Payout Annuity (1) 
 (26) (29) 
 Total Retail Annuities Net Flows (1) 
 (1,225) 181 
 Net flows ceded (1,203) (586) 
 Total Retail Annuities net flows, gross of reinsurance $ (2,428) $ (405) 
 
 Total Institutional Products Net Flows $ (391) $ 316 
 
 Total Closed Life and Annuity Blocks Net Flows (1) 
 $ (47) $ (80) 
 
 (1) Net of reinsurance. 
 
 Net flows, net of reinsurance, decreased for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, driven by decreased variable annuity sales and increased withdrawals for institutional products. 
 
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 Item 2 | Management’s Discussion and Analysis | Key Operating Measures 

 Benefit Base 
 
 Benefit base refers to a notional amount that represents the value of a customer’s guaranteed benefit, and therefore may be a different value from the invested assets in a customer’s account value. The benefit base may be used to calculate the fees for a customer’s guaranteed benefits within an annuity contract. The guaranteed death benefit and guaranteed living benefit within the same contract may not have the same benefit base. 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 March 31, 2023 and December 31, 2022: 
 
 March 31, 2023 December 31, 2022 
 Account Value Benefit Base Account Value Benefit Base 
 (in millions) 
 No Living Benefits $ 50,658 N/A $ 49,073 N/A 
 By Guaranteed Living Benefits: 
 GMWB for Life 156,046 190,077 149,706 189,814 
 GMWB 5,849 5,592 5,674 5,655 
 GMIB (1) 
 1,364 1,889 1,356 1,929 
 
 Total $ 213,917 $ 197,558 $ 205,809 $ 197,398 
 
 By Guaranteed Death Benefit: 
 Return of AV (No GMDB) $ 25,878 N/A $ 25,049 N/A 
 Return of Premium 163,826 138,469 157,339 138,419 
 Highest Anniversary Value 12,549 14,115 12,128 14,272 
 Rollup 3,287 4,640 3,229 4,695 
 Combination HAV/Rollup 8,377 10,260 8,064 10,297 
 Total $ 213,917 $ 167,484 $ 205,809 $ 167,683 
 
 (1) Substantially all our GMIB benefits are reinsured. 
 
 Assets Under Management 
 
 AUM, or assets under management, refers to investment assets that are managed by one of our subsidiaries and includes: (i) the assets in our investment portfolio managed by PPM, which excludes assets held in funds withheld accounts for reinsurance transactions, (ii) third-party assets managed by PPM, including those for Prudential and its affiliates or third parties, and (iii) the separate account assets of our Retail Annuities segment that Jackson National Asset Management ("JNAM") manages and administers. Total AUM reflects exclusions between segments to avoid double counting. 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. 
 
 March 31, December 31, 
 2023 2022 
 (in millions) 
 Jackson Invested Assets $ 44,476 $ 44,486 
 
 Third Party Invested Assets (including CLOs) 27,689 26,993 
 Total PPM AUM 72,165 71,479 
 Total JNAM AUM 227,764 219,070 
 Total AUM $ 299,929 $ 290,549 

 PPM manages the majority of our investment portfolio and provides investment management services to Prudential affiliates in Asia, former affiliates in the United Kingdom, and other third parties across markets, including public fixed income, private equity, private debt and commercial real estate. 
 
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 Item 2 | Management’s Discussion and Analysis | Macroeconomic, Industry and Regulatory Trends 

 Macroeconomic, Industry and Regulatory Trends 
 
 We discuss a number of trends and uncertainties below that we believe could materially affect our future business performance, including our results of operations, our investments, our cash flows, and our capital and liquidity position. 
 
 Macroeconomic and Financial Market Conditions 
 
 Our business and results of operations are affected by macroeconomic factors. The level of interest rates and shape of the yield curve, credit and equity market performance and equity volatility, regulation, tax policy, the level of U.S. employment, inflation and the overall economic growth rate can affect both our short and long-term profitability. Monetary and fiscal policy in the U.S., or similar actions in foreign nations, could result in increased volatility in financial markets, including interest rates, currencies and equity markets, and could impact our business in both the short-term and medium-term. Political events, including precautions with 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. 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. 
 
 In early March through late April, several regional U.S. banks were taken over by federal regulators with the Federal Deposit Insurance Corporation ("FDIC") being named the receiver. These bank failures raised concern among investors and depositors regarding the solvency and liquidity of regional banks across the country, leading to increased stress on the banking sector. In response, the FDIC invoked a systemic risk exception allowing the government to ensure repayment of all amounts on deposit at the failed banks. We continue to monitor and analyze the ongoing situation in the banking sector. Except for assets held as part of reinsurance arrangements within our funds withheld portfolios, where the Company does not have exposure to default risk, the Company's general account portfolio had no exposure to Silicon Valley Bank ("SVB"), Signature Bank, First Republic Bank, and Credit Suisse Additional Tier 1 debt as of March 31, 2023. 
 
 Equity Market Environment 
 
 Our financial performance is impacted by the performance of equity markets. For example, our variable annuities earn fees based on the account value, which changes with equity market levels. After a very volatile 2020, U.S. equity markets performed well in 2021, with the S&P 500 generally at or near all-time highs throughout the year. In 2022, equity markets declined, and equity volatility increased, resulting in higher hedging costs. While that reversed in the first quarter of 2023 (as markets increased and equity volatility eased somewhat), the financial performance of our hedging program could be impacted by any future large directional market movements, or periods of high volatility. In particular, our hedges could be less effective in periods of large directional movements or we could experience more frequent or more costly rebalancing in periods of high volatility, which would lead to adverse performance versus our hedge targets and increased hedging costs. Further, we are also exposed to basis risk, which results from our inability to purchase or sell hedge assets whose performance is perfectly correlated to the performance of the funds into which customers allocate their assets. We make funds available to customers where we believe we can transact in sufficiently correlated hedge assets, and we anticipate some variance in the performance of our hedge assets and customer funds. This variance may result in our hedge assets outperforming or underperforming the customer assets they are intended to match. This variance may be exacerbated during periods of high volatility, leading to a mismatch in our hedge results relative to our hedge targets and U.S GAAP results. 
 
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 Item 2 | Management’s Discussion and Analysis | Macroeconomic, Industry and Regulatory Trends 

 Interest Rate Environment 
 
 The interest rate environment has affected, and will continue to affect our business and financial performance in the future for the following reasons: 
 
 • 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, impact investment related activity including investment income returns, net investment spread results, new money rates, mortgage loan prepayments, and bond redemptions. Due to increases in interest rates, the yield on new investments has generally exceeded the yield on asset maturities and redemptions (runoff yield). Rising interest rates also impact the hedging results of our variable annuity business as the market value of interest rate hedges decline driving immediate hedging losses. We would expect lower hedging costs and reduced levels of hedging going forward. 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 for the three months ended March 31, 2023. 
 
 • Interest rate increases also expose us to disintermediation risk, where higher rates make currently sold fixed annuity products more attractive while simultaneously reducing the market value of assets backing our liabilities. This creates an incentive for our customers to lapse their products in an environment where selling assets causes us to realize losses. 
 
 • Additionally, our statutory total adjusted capital ("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. The RBC ratio may increase or decrease depending on the interaction between movements in TAC and movements in statutory required capital (the company action level, or "CAL”), which could impact available dividends from our insurance subsidiaries. CAL will generally decline in rising interest rate environments. However, the cash surrender value floor may also materially affect the CAL calculation (in addition to reserves), potentially leading to rising rates negatively impacting the RBC ratio as well. 
 
 • 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 determined using a historical interest rate perspective with a mean reversion path over the longer term. 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, some of our annuities have guaranteed minimum interest crediting rates (“GMICRs”) that limit our ability to reduce crediting rates. If earnings on our investment portfolio decline, those GMICRs may result in net investment spread compression that negatively impacts earnings. Many of our annuities have GMICRs that reset at contractually specified times after issue. In the current rising interest rate environment, those GMICRs have increased. Conversely, in a falling interest rate environment they will eventually decrease; however, there may be a lag between interest rate movements and the GMICR reset, temporarily limiting our ability to lower crediting rates. When policies have comparatively high GMICRs, in a subsequent low interest rate environment more customers are expected to hold on to their policies, which may result in lower lapses than previously expected. 
 
 Credit Market Environment 
 
 Our financial performance is impacted by conditions in fixed income markets. After tightening in 2021, credit spreads widened in 2023 and remained relatively unchanged in the first quarter of 2023. 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. Conversely, as credit spreads tighten, the fair value of our existing investment portfolio generally increases, and the yield available on new investment purchases decreases. While changing credit spreads impact the fair value of our investment portfolio, this revaluation is generally reflected in our AOCI. The revaluation will impact net income for realized gains or losses from the sale of securities, the change in fair value of trading securities or securities carried at fair value under the fair value election, or potential changes in the allowance for credit loss ("ACL"). In addition, if credit conditions deteriorate due to a recession or other negative credit events in capital markets, we could experience an increase in defaults and other-than-temporary-impairments (“OTTI”). 
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 Item 2 | Management’s Discussion and Analysis | Macroeconomic, Industry and Regulatory Trends 

 OTTI in our underlying investments would result in a reduction in TAC held by our insurance company subsidiaries. Also, shifts in the credit quality or credit rating downgrades of our investments as a result of stressed credit conditions may also impact the level of regulatory required statutory capital for our insurance company subsidiaries. As such, significant credit rating downgrades along with elevated defaults and OTTI losses would negatively impact our RBC ratio, which could impact available dividends from our insurance subsidiaries. 
 
 Pandemics and Other Public Health Crises 
 
 The COVID-19 pandemic disrupted our business and contributed to additional operating costs over the past several years. While the effects of that pandemic appear to be subsiding, other pandemics, epidemics or disease outbreaks in the U.S. or globally could disrupt our business by affecting how we protect and interact with our critical workforce, customers, key vendors, third-party suppliers, or counterparties with whom we transact. Disruption could result from an inability of those persons to work or transact effectively due to illness, quarantines, and government actions in response to public health emergencies. The extent and severity of governmental actions will necessarily depend on the extent and severity of the perceived emergency. We have risk management plans in place and have been able to navigate through COVID-19 with remote and hybrid work environments; however, those plans may be challenged by a new public health emergency. 
 
 Consumer Behavior 
 
 We believe that many retirees have begun to look to tax-efficient savings products as a tool for addressing their unmet need for retirement planning. We believe our products are well positioned to meet this increasing consumer demand. 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. 
 
 Demographics 
 
 We expect demographic trends in the U.S. population, in particular the increase in the number of retirement age individuals, to generate significant demand for our products. In addition, the potential risk to government social safety net programs and shifting of responsibility for retirement planning and financial security from employers and other institutions to employees, highlights the need for individuals to plan for their long-term financial security and will create additional opportunities to generate sustained demand for our products. We believe we are well positioned to capture the increased demand generated by these demographic trends. 
 
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 Item 2 | Management’s Discussion and Analysis | Macroeconomic, Industry and Regulatory Trends 

 Regulatory Policy 
 
 We operate in a highly regulated industry. Our insurance company subsidiaries are regulated primarily at the state level, with some policies and products also subject to federal regulation. As such, regulations recently approved or currently under review at both the U.S. federal and state level could impact our business model, including statutory reserve and capital requirements. We anticipate that our ability to respond to changes in regulation and other legislative activity will be critical to our long-term financial performance. In particular, the following could materially impact our business: 
 
 Department of Labor Fiduciary Advice Rule 
 
 The Department of Labor (“DOL”) has issued a regulatory action (the “Fiduciary Advice Rule”) effective February 16, 2021, that reinstates the text of the DOL’s 1975 investment advice regulation defining what constitutes fiduciary “investment advice” to Employee Retirement Income Security Act ("ERISA") plans and individual retirement accounts ("IRAs") and provides guidance interpreting such regulation. The guidance provided by the DOL broadens the circumstances under which financial institutions, including insurance companies, could be considered fiduciaries under ERISA or the Federal income tax code. In particular, the DOL states that a recommendation to “roll over” assets from a qualified retirement plan to an IRA, or from an IRA to another IRA, can be considered fiduciary investment advice if provided by someone with an existing relationship with the ERISA plan or an IRA owner (or in anticipation of establishing such a relationship). This guidance reverses an earlier DOL interpretation suggesting that roll over advice did not constitute investment advice giving rise to a fiduciary relationship. However, the guidance has been subject to court challenges. In one recent decision issued in February 2023, a U.S. district court in Florida vacated the roll over portion of the guidance, ruling that the DOL exceeded its authority in this area by issuing guidance without going through a rulemaking process. 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. However, we continue to analyze the impact of the Fiduciary Advice Rule, and, while we cannot predict the rule’s impact, it could have an adverse effect on sales of annuities through our distribution partners. 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 to comply with or assist our distributors in their compliance with the Fiduciary Advice Rule. 
 
 Legislative Reforms 
 
 Congress approved the Setting Every Community Up for Retirement Enhancement Act of 2019 (the "SECURE Act") on December 20, 2019. The SECURE Act provides individuals with greater access to retirement products. Namely, it makes it easier for 401(k) programs to offer annuities as an investment option by, among other things, creating a statutory safe harbor in ERISA for a retirement plan’s selection of an annuity provider. The SECURE Act represents the largest overhaul to retirement plans in over a decade. On December 29, 2022, SECURE 2.0 Act of 2022 (“SECURE 2.0”) was signed into law as part of a larger omnibus appropriations bill. SECURE 2.0 contains provisions that expand automatic enrollment programs, increase the age of required minimum distributions, and eliminate age requirements for traditional IRA contributions. These changes are intended to expand and increase Americans’ retirement savings. We view these reforms as beneficial to our business model and expect growth opportunities will arise from the new laws. 
 
 Tax Laws 
 
 All our annuities offer investors the opportunity to benefit from tax deferral. If U.S. tax laws were to change, such that our annuities no longer offer tax-deferred advantages, demand for our products could materially decrease. 
 
 100 

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

 Consolidated Results of Operations 
 
 The following table sets forth, for the periods presented, certain data from our Condensed Consolidated Income Statements. 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 March 31, 
 2023 2022 
 (in millions) 
 Revenues 
 Fee income $ 1,888 $ 2,012 
 Premiums 25 37 
 Net investment income: 
 Net investment income excluding funds withheld assets 415 430 
 Net investment income on funds withheld assets 307 260 
 Total net investment income 722 690 
 Net gains (losses) on derivatives and investments: 
 Net gains (losses) on derivatives and investments (2,726) (1,566) 
 Net gains (losses) on funds withheld reinsurance treaties (673) 1,028 
 Total net gains (losses) on derivatives and investments (3,399) (538) 
 Other income 15 20 
 Total revenues (749) 2,221 
 
 Benefits and Expenses 
 Death, other policy benefits and change in policy reserves, net of deferrals 228 300 
 (Gain) loss from updating future policy benefits cash flow assumptions, net 14 15 
 Market risk benefits (gains) losses, net (174) (1,907) 
 Interest credited on other contract holder funds, net of deferrals and amortization 285 197 
 Interest expense 43 20 
 Operating costs and other expenses, net of deferrals 616 666 
 
 Amortization of deferred acquisition costs 293 317 
 Total benefits and expenses 1,305 (392) 
 Pretax income (loss) (2,054) 2,613 
 Income tax expense (benefit) (558) 388 
 Net income (loss) (1,496) 2,225 
 Less: Net income (loss) attributable to noncontrolling interests 1 31 
 Net income (loss) attributable to Jackson Financial Inc. $ (1,497) $ 2,194 
 
 Adjusted Operating Earnings 
 Net income (loss) attributable to Jackson Financial Inc. $ (1,497) $ 2,194 
 Income tax expense (benefit) (558) 388 
 Pretax income (loss) attributable to Jackson Financial Inc (2,055) 2,582 
 Non-operating adjustments (income) loss: 
 Guaranteed benefits and hedging results: 
 Fees attributable to guarantee benefit reserves (780) (764) 
 Net movement in freestanding derivatives 2,512 1,476 
 Market risk benefits (gains) losses, net (174) (1,907) 
 Net reserve and embedded derivative movements 189 40 
 Amortization of DAC associated with non-operating items at date of transition to LDTI 153 173 
 
 Total guaranteed benefits and net hedging results 1,900 (982) 
 Net realized investment (gains) losses 68 130 
 Net realized investment (gains) losses on funds withheld assets 673 (1,028) 
 Net investment income on funds withheld assets (307) (260) 
 Other items 23 3 
 Total non-operating adjustments 2,357 (2,137) 
 Pretax Adjusted Operating Earnings 302 445 
 Operating income taxes 31 68 
 Adjusted Operating Earnings $ 271 $ 377 

 101 

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

 Three Months Ended March 31, 2023 compared to Three Months Ended March 31, 2022 
 
 Pretax Income (Loss) 
 
 Our pretax income (loss) decreased by $4,667 million to $(2,054) million for the three months ended March 31, 2023, from $2,613 million for the three months ended March 31, 2022 primarily due to: 
 
 • $2,861 million decrease in total net gains (losses) on derivatives and investments as shown in the table below and driven by: 
 
 Three Months Ended March 31, 
 2023 2022 Variance 
 (in millions) 
 Net gains (losses) excluding derivatives and funds withheld assets $ (68) $ (130) $ 62 
 
 Net gains (losses) on freestanding derivatives (2,549) (1,440) (1,109) 
 Net gains (losses) on embedded derivatives (excluding funds withheld reinsurance) (109) 4 (113) 
 Net gains (losses) on derivative instruments (2,658) (1,436) (1,222) 
 Net gains (losses) on funds withheld reinsurance (673) 1,028 (1,701) 
 Total net gains (losses) on derivatives and investments $ (3,399) $ (538) $ (2,861) 

 ◦ Higher freestanding derivative losses as a result of losses on our equity derivatives primarily driven by market increases in 2023, compared to decreases in the prior year, partially offset by gains within our interest rate related hedge instruments, reflecting decreases in interest rates, compared to increasing interest rates in the prior year. 
 ◦ Lower benefit recognized on funds withheld reinsurance driven by decreasing interest rates during the current quarter compared to rising interest rates in the prior year; and 
 
 • $1,733 million unfavorable movements in market risk benefits (gains) losses, net, primarily driven by declining interest rates in 2023, compared to increasing rates in the prior year. This was partially offset by positive separate account returns and decreases in implied equity market volatility in 2023, as compared to negative separate account returns and increased volatility in the prior year; 
 • $124 million decrease in fee income primarily due to lower average separate account values compared to prior year. 
 • $88 million increase in interest credited on contract holder funds, net of deferrals, primarily due to an increase in flexible annual minimum interest rates on variable annuity general account funds and higher crediting rates on new institutional business. 
 
 These decreases were partially offset by: 
 
 • $73 million decrease in death, other policy benefits, and change in policy reserves, net of (gain) loss from updating future policy benefits cash flow assumptions, primarily due to lower death claims and lower other policyholder benefits in 2023; and 
 • $50 million decrease in operating costs and other expenses, net of deferrals, primarily due to lower asset-based non-deferrable commissions and lower sub-advisor expenses due to lower account values during the three months ended March 31, 2023. 
 
 102 

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

 Income Taxes 
 
 Income tax expense decreased $946 million to a benefit of $558 million for the three months ended March 31, 2023, from an expense of $388 million for the three months ended March 31, 2022. The provision for income tax in the current period led to an effective income tax rate of 27.2% for the three months ended March 31, 2023 compared to the 2022 effective income tax rate of 15.0%. The benefit during the three months ended March 31, 2023 increased primarily due to the relationship of the taxable income to the consolidated pre-tax income. 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 2022 Annual Report for more information. 
 
 Segment Results of Operations 
 
 We manage our business through three segments: Retail Annuities, Institutional Products, and Closed Life and Annuity Blocks. We report certain activities and items that are not included in these segments, including the results of PPM Holdings, Inc., the holding company of PPM, within Corporate and Other. The following tables and discussion represent an overall view of our results of operations for each segment. 
 
 Pretax Adjusted Operating Earnings by Segment 
 
 The following table summarizes pretax adjusted operating earnings (non-GAAP) from the Company's business segment operations and also provides a reconciliation of the segment measure to net income on a consolidated GAAP basis. Also, see Note 3 of the Notes to Condensed Consolidated Financial Statements for further information regarding the calculation of pretax adjusted operating earnings: 
 
 Three Months Ended March 31, 
 2023 2022 
 (in millions) 
 Pretax Adjusted Operating Earnings by Segment: 
 Retail Annuities $ 356 $ 425 
 Institutional Products 9 23 
 Closed Life and Annuity Blocks (20) (9) 
 Corporate and Other (43) 6 
 Pretax Adjusted Operating Earnings 302 445 
 Pre-tax reconciling items from adjusted operating income to net income (loss) attributable to Jackson Financial Inc.: 
 Guaranteed benefits and hedging results: 
 Fees attributable to guarantee benefit reserves 780 764 
 Net movement in freestanding derivatives (2,512) (1,476) 
 Market risk benefits gains (losses), net 174 1,907 
 Net reserve and embedded derivative movements (189) (40) 
 Amortization of DAC associated with non-operating items at date of transition to LDTI (153) (173) 
 
 Total guaranteed benefits and hedging results (1,900) 982 
 Net realized investment gains (losses) (68) (130) 
 Net realized investment gains (losses) on funds withheld assets (673) 1,028 
 
 Net investment income on funds withheld assets 307 260 
 Other items (23) (3) 
 Total pre-tax reconciling items (2,357) 2,137 
 Pretax income (loss) attributable to Jackson Financial Inc. (2,055) 2,582 
 Income tax expense (benefit) (558) 388 
 Net income (loss) attributable to Jackson Financial Inc. $ (1,497) $ 2,194 

 103 

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

 Retail Annuities 
 
 The following table sets forth, for the periods presented, certain data underlying the pretax adjusted operating earnings 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 March 31, 
 2023 2022 
 (in millions) 
 Retail Annuities: 
 Operating Revenues 
 Fee income $ 975 $ 1,108 
 Premiums 4 3 
 Net investment income 136 114 
 Income (loss) on operating derivatives (10) 11 
 Other income 9 11 
 Total Operating Revenues 1,114 1,247 
 
 Operating Benefits and Expenses 
 Death, other policy benefits and change in policy reserves, net of deferrals (15) 32 
 (Gain) loss from updating future policy benefits cash flow assumptions, net (2) (3) 
 Interest credited on other contract holder funds, net of deferrals and amortization 98 57 
 Interest expense 17 5 
 Operating costs and other expenses, net of deferrals 522 592 
 Amortization of deferred acquisition costs 138 139 
 Total Operating Benefits and Expenses 758 822 
 
 Pretax Adjusted Operating Earnings $ 356 $ 425 

 The following table summarizes a roll-forward of activity affecting account value for our Retail Annuities segment for the periods indicated: 
 
 Three Months Ended March 31, 
 2023 2022 
 (in millions) 
 Retail Annuities Account Value: 
 Balance as of beginning of period $ 209,967 $ 260,135 
 Premiums and deposits 3,197 4,852 
 Surrenders, withdrawals, and benefits (4,422) (4,671) 
 Net flows (1,225) 181 
 Investment performance 10,528 (16,727) 
 Change in value of equity option 108 (4) 
 Interest credited 99 56 
 Policy charges and other (707) (690) 
 Balance as of end of period, net of ceded reinsurance 218,770 242,951 
 Ceded reinsurance 20,952 24,519 
 Balance as of end of period, gross of reinsurance $ 239,722 $ 267,470 

 104 

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

 Three Months Ended March 31, 2023 compared to Three Months Ended March 31, 2022 
 
 Pretax Adjusted Operating Earnings 
 
 Pretax adjusted operating earnings decreased $69 million to $356 million for the three months ended March 31, 2023 from $425 million for the three months ended March 31, 2022 primarily due to: 
 
 • $133 million decrease in fee income primarily due to lower average separate account values compared to prior year; 
 • $21 million decrease in income (loss) on operating derivatives primarily due to the increase in floating rates in 2023; and 
 • $19 million decrease in spread income primarily due to $41 million higher interest credited driven by resetting minimum interest crediting rates on variable annuity fixed rate options in the first quarter of 2023, partially offset by $22 million higher investment income. 
 
 These decreases were partially offset by: 
 
 • $70 million decrease in operating costs and other expenses, net of deferrals, primarily due to lower asset-based non-deferrable commissions and lower sub-advisor expenses due to lower account values during the three months ended March 31, 2023, and lower incentive compensation expenses in 2023; and 
 • $46 million decrease in death, other policy benefits, and change in policy reserves, net of (gain) loss from updating future policy benefits cash flow assumptions, primarily due to lower other policyholder benefits in 2023. 
 
 Account Value 
 
 Retail annuities account value, net of reinsurance, decreased $24.2 billion between periods primarily due to negative variable annuity separate account returns driven by unfavorable market performance in 2022, as well as negative net flows over the period, primarily from variable annuities. 
 
 Institutional Products 
 
 The following table sets forth, for the periods presented, certain data underlying the pretax adjusted operating earnings 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 March 31, 
 2023 2022 
 (in millions) 
 Institutional Products: 
 Operating Revenues 
 Net investment income $ 102 $ 64 
 Income (loss) on operating derivatives (12) (1) 
 
 Total Operating Revenues 90 63 
 
 Operating Benefits and Expenses 
 Interest credited on other contract holder funds, net of deferrals and amortization 76 39 
 Interest expense 4 — 
 Operating costs and other expenses, net of deferrals 1 1 
 Total Operating Benefits and Expenses 81 40 
 
 Pretax Adjusted Operating Earnings $ 9 $ 23 

 105 

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

 The following table summarizes a roll-forward of activity affecting account value for our Institutional Products segment for the periods indicated: 
 
 Three Months Ended March 31, 
 2023 2022 
 (in millions) 
 Institutional Products: 
 Balance as of beginning of period $ 9,019 $ 8,830 
 Premiums and deposits 649 975 
 Surrenders, withdrawals, and benefits (1,040) (659) 
 Net flows (391) 316 
 Credited Interest 76 39 
 Policy Charges and other (13) (12) 
 Balance as of end of period $ 8,691 $ 9,173 

 Three Months Ended March 31, 2023 compared to Three Months Ended March 31, 2022 
 
 Pretax Adjusted Operating Earnings 
 
 Pretax adjusted operating earnings decreased $14 million to $9 million for the three months ended March 31, 2023 from $23 million for the three months ended March 31, 2022 primarily due to increased interest credited on contract holder funds due to higher crediting rates on new business and increased losses on operating derivatives, partially offset by higher investment income. 
 
 Account Value 
 
 Institutional product account value decreased from $9,173 million at March 31, 2022 to $8,691 million at March 31, 2023. The decline in account value was driven by continued maturities of the existing contracts and funding agreements, partially offset by new issuances. 
 
 106 

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

 Closed Life and Annuity Blocks 
 
 The following table sets forth, for the periods presented, certain data underlying the pretax adjusted operating earnings results for our Closed Block 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 March 31, 
 2023 2022 
 (in millions) 
 Closed Life and Annuity Blocks: 
 Operating Revenues 
 Fee income $ 117 $ 121 
 Premiums 23 37 
 Net investment income 177 189 
 Income (loss) on operating derivatives (10) 15 
 Other income 4 8 
 Total Operating Revenues 311 370 
 
 Operating Benefits and Expenses 
 Death, other policy benefits and change in policy reserves, net of deferrals 163 225 
 (Gain) loss from updating future policy benefits cash flow assumptions, net 16 18 
 Interest credited on other contract holder funds, net of deferrals and amortization 111 101 
 Operating costs and other expenses, net of deferrals 39 32 
 Amortization of deferred acquisition costs 2 3 
 Total Operating Benefits and Expenses 331 379 
 
 Pretax Adjusted Operating Earnings $ (20) $ (9) 

 Three Months Ended March 31, 2023 compared to Three Months Ended March 31, 2022 
 
 Pretax Adjusted Operating Earnings 
 
 Pretax adjusted operating earnings decreased $11 million to $(20) million for the three months ended March 31, 2023 from $(9) million for the three months ended March 31, 2022 primarily due to: 
 
 • $25 million decrease in income on operating derivatives primarily due to the increase in floating rates during 2023. 
 • $12 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 2022. 
 
 These decreases were partially offset by: 
 
 • $64 million decrease in death, other policy benefits, and change in policy reserves, net of (gain) loss from updating future policy benefits cash flow assumptions, primarily due to lower death claims. 
 
 107 

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

 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 pretax adjusted operating earnings 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 March 31, 
 2023 2022 
 (in millions) 
 Corporate and Other: 
 Operating Revenues 
 Fee income $ 13 $ 16 
 Net investment income 22 34 
 Income (loss) on operating derivatives (4) 10 
 Other income 2 1 
 Total Operating Revenues 33 61 
 
 Operating Benefits and Expenses 
 Interest expense 22 15 
 Operating costs and other expenses, net of deferrals 54 40 
 
 Total Operating Benefits and Expenses 76 55 
 
 Pretax Adjusted Operating Earnings $ (43) $ 6 

 Three Months Ended March 31, 2023 compared to Three Months Ended March 31, 2022 
 
 Pretax Adjusted Operating Earnings 
 
 Pretax adjusted operating earnings decreased $49 million to $(43) million for the three months ended March 31, 2023 from $6 million for the three months ended March 31, 2022 primarily due to the following: 
 • $14 million decrease in income on operating derivatives primarily due to the increase in floating rates in 2023; 
 • $14 million increase in operating costs and other expenses, net of deferrals, primarily due to higher deferred compensation expenses in 2023; and 
 • $12 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 2022. 
 • $7 million higher interest expense primarily related to our senior notes. See Note 13 - Long-Term Debt of Notes to Condensed Consolidated Financial Statements . 
 
 108 

 Item 2 | Management’s Discussion and Analysis | Investments 

 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. Asset-backed securities include mortgage-backed and other structured securities. The fair value of these and our other invested assets fluctuates depending on market and other general economic conditions and the interest rate environment and could be adversely impacted by other economic factors. 
 
 Investment Strategy 
 
 Our overall investment strategy is to maintain a diversified and largely investment grade fixed income portfolio that is capital efficient, achieves risk-adjusted returns that support competitive pricing for our products, generates profitable growth of our business and maintains adequate liquidity to support our obligations. The investments within our investment portfolio are primarily managed by PPM, our wholly-owned registered investment advisor. Our investment strategy benefits from PPM’s ability to originate investments directly, as well as participate in transactions originated by banks, investment banks, commercial finance companies and other intermediaries. Certain investments held in funds withheld accounts for reinsurance transactions are managed by Apollo Insurance Solutions Group LP ("Apollo"), an Athene affiliate, see Note 8 - Reinsurance of Notes to Condensed Consolidated Financial Statements for further details. We may also use other third-party investment managers for certain niche asset classes. As of March 31, 2023, Apollo managed $19.0 billion of cash and investments and other third-party investment managers managed approximately $186 million of 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 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. The fixed income portion of the SAA is assessed relative to a customized index of public corporate bonds that represents a close approximation of the maturity profile of our liabilities and a credit quality mix that is consistent with our risk tolerance. PPM’s objective is to outperform this index on a number of measures including portfolio yield, total return and capital loss due to downgrades and defaults. While PPM has access to a broad universe of potential investments, we believe grounding the investment program with a customized public corporate index that can be easily tracked and monitored helps guide PPM in meeting the risk and return expectations and assists with performance evaluation. 
 
 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 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. Treasury securities. These U.S. 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 March 31, 2023 and December 31, 2022, we had total investments of $66.9 billion and $65.9 billion, respectively. 
 
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 Item 2 | Management’s Discussion and Analysis | Investments 

 Portfolio Composition 
 
 The following table summarizes the carrying values of our investments: 
 
 March 31, 2023 December 31, 2022 
 Investments excluding Funds Withheld Funds Withheld Total Investments excluding Funds Withheld Funds Withheld Total 
 (in millions) 
 Debt Securities, available-for-sale, net of allowance for credit losses $ 30,510 $ 13,264 $ 43,774 $ 28,867 $ 13,622 $ 42,489 
 Debt Securities, at fair value under fair value option 2,093 162 2,255 2,014 159 2,173 
 Debt securities, trading, at fair value 101 — 101 100 — 100 
 Equity securities, at fair value 152 73 225 316 77 393 
 Mortgage loans, net of allowance for credit losses 6,907 4,004 10,911 6,840 4,127 10,967 
 Mortgage loans, at fair value under fair value option — 480 480 — 582 582 
 Policy loans 936 3,441 4,377 942 3,435 4,377 
 Freestanding derivative instruments 993 58 1,051 1,192 78 1,270 
 Other invested assets 2,890 821 3,711 2,802 793 3,595 
 Total investments $ 44,582 $ 22,303 $ 66,885 $ 43,073 $ 22,873 $ 65,946 

 Available-for-sale debt securities increased to $43,774 million at March 31, 2023 from $42,489 million at December 31, 2022, primarily due to an decrease in net unrealized losses. The amortized cost of available-for-sale debt securities increased from $48,798 million as of December 31, 2022 to $49,026 million as of March 31, 2023. Further, net unrealized losses were $6,286 million as of December 31, 2022 compared to $5,223 million as of March 31, 2023. 
 
 Other Invested Assets 
 
 In June 2021, we entered into an arrangement to sell $420 million of limited partnership investments, of which $236 million and $168 million were sold in the second and third quarter of 2021, respectively, and the remainder was sold in January 2022. The increase in Other Invested Assets from December 31, 2022 to March 31, 2023 primarily resulted from additional private equity funding in the current period. 
 
 Debt Securities 
 
 At March 31, 2023 and December 31, 2022, 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): 
 
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 March 31, 2023 Amortized 
Cost Allowance for Credit Loss Gross
Unrealized
Gains Gross Unrealized 
Losses Fair
Value 
 U.S. government securities $ 5,775 $ — $ 1 $ 883 $ 4,893 
 Other government securities 1,712 3 2 204 1,507 
 Corporate securities 
 Utilities 6,008 — 38 574 5,472 
 Energy 3,060 1 13 321 2,751 
 Banking 2,228 15 5 208 2,010 
 Healthcare 3,167 — 16 370 2,813 
 Finance/Insurance 4,518 4 14 535 3,993 
 Technology/Telecom 2,383 1 6 243 2,145 
 Consumer goods 2,517 — 17 288 2,246 
 Industrial 1,761 — 10 142 1,629 
 Capital goods 2,074 — 8 152 1,930 
 Real estate 1,763 — 1 213 1,551 
 Media 1,243 — 3 142 1,104 
 Transportation 1,549 — 6 184 1,371 
 Retail 1,299 — 7 148 1,158 
 Other (1) 
 2,117 — 6 140 1,983 
 Total Corporate Securities 35,687 21 150 3,660 32,156 
 Residential mortgage-backed 466 5 14 47 428 
 Commercial mortgage-backed 1,768 — — 174 1,594 
 Other asset-backed securities 5,974 — 9 431 5,552 
 Total Debt Securities $ 51,382 $ 29 $ 176 $ 5,399 $ 46,130 
 
 (1) No single remaining industry exceeds 3% of the portfolio. 
 
 December 31, 2022 Amortized 
Cost Allowance for Credit Loss Gross
Unrealized
Gains Gross Unrealized 
Losses Fair
Value 
 U.S. government securities $ 6,192 $ — $ 1 $ 1,008 $ 5,185 
 Other government securities 1,719 2 1 251 1,467 
 Corporate securities 
 Utilities 5,893 — 27 695 5,225 
 Energy 3,006 10 7 390 2,613 
 Banking 1,994 — 2 234 1,762 
 Healthcare 2,956 — 8 439 2,525 
 Finance/Insurance 4,497 4 8 621 3,880 
 Technology/Telecom 2,333 1 2 296 2,038 
 Consumer goods 2,463 — 10 378 2,095 
 Industrial 1,675 — 8 173 1,510 
 Capital goods 1,982 — 3 196 1,789 
 Real estate 1,723 — 1 225 1,499 
 Media 1,230 — 1 175 1,056 
 Transportation 1,576 — 3 214 1,365 
 Retail 1,312 — 5 182 1,135 
 Other (1) 
 2,056 — 1 178 1,879 
 Total Corporate Securities 34,696 15 86 4,396 30,371 
 Residential mortgage-backed 510 6 19 59 464 
 Commercial mortgage-backed 1,821 — — 183 1,638 
 Other asset-backed securities 6,133 — 8 504 5,637 
 Total Debt Securities $ 51,071 $ 23 $ 115 $ 6,401 $ 44,762 
 
 (1) No single remaining industry exceeds 3% of the portfolio. 
 
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 Item 2 | Management’s Discussion and Analysis | Investments 

 Evaluation of Available-For-Sale Debt Securities 
 
 See Note 4 - Investments of Notes to Condensed Consolidated Financial Statements for information about how we evaluate our available-for-sale debt securities for credit loss. 
 
 Equity Securities 
 
 Equity securities consist of investments in common and preferred stock holdings and mutual fund investments. Common and preferred stock investments generally arise out of previous private equity investments or other settlements rather than as direct investments. Mutual fund investments typically represent investments made in our own mutual funds to seed those structures for external issuance at a later date. The following table summarizes our holdings: 
 
 March 31, December 31, 
 2023 2022 
 (in millions) 
 Common Stock $ 76 $ 82 
 Preferred Stock 119 133 
 Mutual Funds 30 178 
 Total $ 225 $ 393 

 Mortgage Loans 
 
 C ommercial mortgage loans of $10.2 billion and $10.2 billion at March 31, 2023 and December 31, 2022, respectively, are reported net of an allowance for credit losses of $139 million and $91 million at each date, respectively. At March 31, 2023, commercial mortgage loans were collateralized by properties located in 37 states, the District of Columbia, and Europe. Residential mortgage loans of $1,146 million and $1308 million at March 31, 2023 and December 31, 2022, respectively, are reported net of an allowance for credit losses of $7 million and $4 million at each date, respectively. Residential mortgage loans were collateralized by properties located in 50 states, the District of Columbia, Mexico, and Europe. 
 
 The table below presents the carrying value, net of allowance of credit loss, of our mortgage loans by property type: 
 
 March 31, December 31, 
 2023 2022 
 (in millions) 
 Commercial: 
 Apartment $ 3,513 $ 3,558 
 Hotel 1,006 1,015 
 Office 1,732 1,795 
 Retail 2,063 2,085 
 Warehouse 1,931 1,788 
 Total Commercial $ 10,245 $ 10,241 
 Residential 1,146 1,308 
 Total $ 11,391 $ 11,549 

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 Item 2 | Management’s Discussion and Analysis | Investments 

 The table below presents the carrying value, net of allowance for credit loss, of our mortgage loans by region: 
 
 March 31, December 31, 
 2023 2022 
 (in millions) 
 United States: 
 East North Central $ 1,175 $ 1,116 
 East South Central 536 546 
 Middle Atlantic 1,651 1,677 
 Mountain 580 627 
 New England 367 371 
 Pacific 2,682 2,850 
 South Atlantic 2,339 2,313 
 West North Central 589 572 
 West South Central 943 920 
 Total United States 10,862 10,992 
 Foreign 529 557 
 Total $ 11,391 $ 11,549 

 The following table provides information about the credit quality of our mortgage loans: 
 
 March 31, December 31, 
 2023 2022 
 (in millions) 
 Commercial mortgage loans 
 Loan to value ratios: 
 Less than 70% $ 9,623 $ 9,586 
 70% - 80% 393 424 
 80% - 100% 196 197 
 Greater than 100% 33 34 
 Total 10,245 10,241 
 
 Residential mortgage loans 
 Performing 1,072 1,230 
 Nonperforming (1) 
 74 78 
 Total 1,146 1,308 
 
 Total mortgage loans $ 11,391 $ 11,549 

 (1) As of March 31, 2023 and December 31, 2022, includes $41 million and $41 million of loans purchased when the loans were greater than 90 days delinquent and $11 million and $12 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: 
 
 March 31, 
 2023 2022 
 (in millions) 
 Balance at beginning of year $ 95 $ 94 
 
 Provision (release) (1) 
 51 (10) 
 Balance at end of period $ 146 $ 84 

 (1) At March 31, 2023, the $51 million increase in the allowance for credit loss resulted primarily from a single mezzanine loan experiencing stress around payoff, or refinance, of the loan for which the Company continues to assess options with the lending group and borrower. 
 
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 The Company’s mortgage loans that are current and in good standing are accruing interest. Interest is not accrued on loans greater than 90 days delinquent and in process of foreclosure, when deemed uncollectible. Delinquency status is determined from the date of the first missed contractual payment. 
 
 At March 31, 2023, there was $15 million of recorded investment, $16 million of unpaid principal balance, no related loan allowance, $16 million of average recorded investment, and no investment income recognized on impaired residential mortgage loans. 
 
 At December 31, 2022, there was $15 million of recorded investment, $16 million of unpaid principal balance, no related loan allowance, $18 million of average recorded investment, and no investment income recognized on impaired residential mortgage loans. 
 
 Derivative Instruments 
 
 The following table presents the aggregate contractual or notional amounts and the fair values of our freestanding and embedded derivatives instruments (in millions): 
 
 March 31, 2023 
 
 Contractual/ Assets Liabilities Net 
 Notional Fair Fair Fair Value 
 Amount (1) 
 Value Value Asset (Liability) 
 Freestanding derivatives 
 Cross-currency swaps $ 1,854 $ 75 $ 123 $ (48) 
 Equity index call options 17,500 247 — 247 
 Equity index futures (2) 
 16,328 — — — 
 Equity index put options 43,500 643 — 643 
 Interest rate swaps 7,728 7 148 (141) 
 Interest rate swaps - cleared (2) 
 1,500 — — — 
 Put-swaptions 22,000 — 1,157 (1,157) 
 Interest rate futures (2) 
 81,365 — — — 
 Total return swaps 1,318 — 61 (61) 
 Total freestanding derivatives 193,093 972 1,489 (517) 
 Embedded derivatives 
 Fixed index annuity embedded derivatives (3) 
 N/A — 963 (963) 
 Registered index linked annuity embedded derivatives (3) 
 N/A — 421 (421) 
 Total embedded derivatives N/A — 1,384 (1,384) 
 Derivatives related to funds withheld under reinsurance treaties 
 Cross-currency swaps 158 23 1 22 
 Cross-currency forwards 1,417 56 20 36 
 Funds withheld embedded derivative (4) 
 N/A 2,788 — 2,788 
 Total derivatives related to funds withheld under reinsurance treaties 1,575 2,867 21 2,846 
 Total $ 194,668 $ 3,839 $ 2,894 $ 945 

 (1) The notional amount for swaps and swaptions represents the stated principal balance used as a basis for calculating payments. The contractual amount for futures and options represents the market exposure of open positions. 
 
 (2) Variation margin is considered settlement resulting in the netting of cash received/paid for variation margin against the fair value of the trades. 
 
 (3) Included within other contract holder funds on the Condensed Consolidated Balance Sheets. The non-performance risk adjustment is included in the balance above. 
 
 (4) Included within funds withheld payable under reinsurance treaties on the Condensed Consolidated Balance Sheets. 
 
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 December 31, 2022 
 
 Contractual/ Assets Liabilities Net 
 Notional Fair Fair Fair Value 
 Amount (1) 
 Value Value Asset (Liability) 
 Freestanding derivatives 
 Cross-currency swaps $ 1,825 $ 73 $ 104 $ (31) 
 Equity index call options 17,500 106 — 106 
 Equity index futures (2) 
 19,760 — — — 
 Equity index put options 30,500 958 — 958 
 Interest rate swaps 7,728 5 231 (226) 
 Interest rate swaps - cleared (2) 
 1,500 — — — 
 Put-swaptions 25,000 — 1,711 (1,711) 
 Interest rate futures (2) 
 105,261 — — — 
 Total return swaps 739 31 — 31 
 Total freestanding derivatives 209,813 1,173 2,046 (873) 
 Embedded derivatives 
 Fixed index annuity embedded derivatives (3) 
 N/A — 931 (931) 
 Registered index linked annuity embedded derivatives (3) 
 N/A — 205 (205) 
 Total embedded derivatives N/A — 1,136 (1,136) 
 Derivatives related to funds withheld under reinsurance treaties 
 Cross-currency swaps 158 23 1 22 
 Cross-currency forwards 1,490 74 18 56 
 Funds withheld embedded derivative (4) 
 N/A 3,158 — 3,158 
 Total derivatives related to funds withheld under reinsurance treaties 1,648 3,255 19 3,236 
 Total $ 211,461 $ 4,428 $ 3,201 $ 1,227 

 (1) The notional amount for swaps and swaptions represents the stated principal balance used as a basis for calculating payments. The contractual amount for futures and options represents the market exposure of open positions. 
 
 (2) Variation margin is considered settlement resulting in the netting of cash received/paid for variation margin against the fair value of the trades. 
 
 (3) Included within other contract holder funds on the Condensed Consolidated Balance Sheets. The non-performance risk adjustment is included in the balance above. 
 
 (4) Included within funds withheld payable under reinsurance treaties on the Condensed Consolidated Balance Sheets. 
 
 Evaluation of Invested Assets 
 
 We perform regular evaluations of our invested assets. On a monthly basis, management identifies those investments that may require additional monitoring and carefully reviews the carrying value of such investments to determine whether specific investments should be placed on a non-accrual status and if an allowance for credit loss is required. In making these reviews, management principally considers the adequacy of any collateral, compliance with contractual covenants, the borrower’s recent financial performance, news reports and other externally generated information concerning the issuer’s affairs. In the case of publicly traded bonds, management also considers market value quotations, where available. For mortgage loans, management generally considers information concerning the mortgaged property, including factors impacting the current and expected payment status of the loan and, if available, the current fair value of the underlying collateral. For investments in partnerships, management reviews the financial statements and other information provided by the general partners. 
 
 To determine an allowance for credit loss, we consider a security’s forecasted cash flows as well as the severity of depressed fair values. Investment income is not accrued on securities in default and otherwise where the collection is uncertain. Subsequent receipts of interest on such securities are generally used to reduce the cost basis of the securities. The provisions for impairment on mortgage loans are based on losses expected by management to be realized on transfers of mortgage loans to real estate, on the disposition and settlement of mortgage loans and on mortgage loans that management believes may not be collectible in full. Accrual of interest on mortgage loans is generally suspended when principal or interest payments on mortgage loans are past due more than 90 days. Interest is then accounted for on a cash basis. 
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 Item 2 | Management’s Discussion and Analysis | Policy and Contract Liabilities 

 Policy and Contract Liabilities 
 
 We establish, and carry as liabilities, actuarially determined amounts that are calculated to meet policy obligations or to provide for future annuity payments. Amounts for actuarial liabilities are computed and reported on the Condensed Consolidated Financial Statements in conformity with GAAP. For more details on Policyholder Liabilities, see "Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates” included in our 2022 Annual Report. 
 
 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 March 31, 2023, 89% of our policy and contract liabilities were in our Retail Annuities segment, 3% were in our Institutional Products segment and 8% were in our Closed Life and Annuity Blocks segment. 
 
 The table below represents a breakdown of our policy and contract liabilities: 
 
 March 31, 2023 Separate Accounts Reserves for future policy benefits Other contract holder funds Market Risk Benefits Total 
 (in millions) 
 Variable Annuities $ 203,990 $ — $ 9,927 $ 318 $ 214,235 
 RILA 1 
 — — 2,501 4 2,505 
 Fixed Annuities — — 11,082 2 11,084 
 Fixed Index Annuities 2 
 — — 11,375 26 11,401 
 Payout Annuities — 1,067 847 — 1,914 
 Other Annuities 304 — — — 304 
 Total Retail Annuities 204,294 1,067 35,732 350 241,443 
 Total Institutional Products — — 8,691 — 8,691 
 Total Closed Life and Annuity Blocks 72 9,737 12,495 6 22,310 
 Total Policy and Contract Liabilities 204,366 10,804 56,918 356 272,444 
 Claims payable and other — 1,565 176 — 1,741 
 Total $ 204,366 $ 12,369 $ 57,094 $ 356 $ 274,185 

 December 31, 2022 Separate Accounts Reserves for future policy benefits Other contract holder funds Market Risk Benefits Total 
 (in millions) 
 Variable Annuities $ 195,550 $ — $ 10,259 $ 767 $ 206,576 
 RILA 1 
 — — 1,875 5 1,880 
 Fixed Annuities — — 11,696 — 11,696 
 Fixed Index Annuities 2 
 — — 11,787 17 11,804 
 Payout Annuities — 1,042 837 — 1,879 
 Other Annuities 285 — — — 285 
 Total Retail Annuities 195,835 1,042 36,454 789 234,120 
 Total Institutional Products — — 9,019 — 9,019 
 Total Closed Life and Annuity Blocks 71 9,726 12,534 8 22,339 
 Total Policy and Contract Liabilities 195,906 10,768 58,007 797 265,478 
 Claims payable and other — 1,550 183 — 1,733 
 Total $ 195,906 $ 12,318 $ 58,190 $ 797 $ 267,211 

 (1) Includes the embedded derivative liabilities in other contract holder funds related to RILA of $421 million and $205 million at March 31, 2023 and December 31, 2022 , respectively. 
 (2) Includes the embedded derivative liabilities related to fixed index annuity in other contract holder funds of $963 million and $931 million at March 31, 2023 and December 31, 2022 , respectively. 
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 Item 2 | Management’s Discussion and Analysis | Policy and Contract Liabilities 

 As of March 31, 2023, $204.4 billion or 75% of our policy and contract liabilities were backed by separate account assets. These separate account assets backed reserves primarily related to our variable annuities. Separate account liabilities are fully funded by cash flows from the customer’s corresponding separate account assets and are set equal to the fair value of such invested assets. We generate revenue on our separate account liabilities primarily from asset-based fee income. Separate account assets and associated liabilities are subject to variability driven by the performance of the underlying investments, which are exposed to fluctuations in equity markets and bond fund valuations. 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 March 31, 2023, $47.0 billion of our policy and contract liabilities were backed by our investment portfolio and $21.1 billion reinsured by Athene, were backed by funds withheld assets. As of March 31, 2023, 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 March 31, 2023, 93% 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. 
 
 See Note 9, Note 10, Note 11 and Note 12 of Notes to Condensed Consolidated Financial Statements for additional discussion on accounting policies around Reserves for future policy benefits and claims payable, Other contract holder funds, Separate account assets and liabilities and MRBs. 
 
 Liquidity and Capital Resources 
 
 Liquidity is our ability to generate sufficient cash flows to meet the cash requirements of operating, investing and financing activities. Capital refers to our long-term financial resources available to support the business operations and contribute to future growth. 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 three months ended March 31, 2023 and 2022. 
 
 Cash Flows 
 
 The following table presents a summary of our cash flow activity for the periods set forth below: 
 
 Three Months Ended March 31, 
 2023 2022 
 (in millions) 
 Net cash provided by (used in) operating activities $ 1,461 $ 833 
 Net cash provided by (used in) investing activities (2,882) (202) 
 Net cash provided by (used in) financing activities (1,099) (582) 
 Net increase (decrease) in cash, cash equivalents, and restricted cash (2,520) 49 
 Cash, cash equivalents, and restricted cash at beginning of period 4,301 2,631 
 Total cash, cash equivalents, and restricted cash at end of period $ 1,781 $ 2,680 

 Cash flows from Operating Activities 
 
 The principal operating cash inflows from our insurance activities come from insurance premiums, fees charged on our products and net investment income. The principal operating cash outflows are the result of annuity and life insurance benefits, interest credited on other contract holder funds, operating expenses and income tax, as well as interest expense. The primary liquidity concern with respect to these cash flows is the risk of early contract holder and policyholder benefit payments. 
 
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 Item 2 | Management’s Discussion and Analysis | Liquidity and Capital Resources 

 Cash flows provided by (used in) operating activities increased $628 million to $1,461 million for the three months ended March 31, 2023 from $833 million for the three months ended March 31, 2022. This was primarily due to the timing of settlements of receivables and payables as well as lower acquisition costs. 
 
 Cash flows from Investing Activities 
 
 The principal cash inflows from our investment activities come from repayments of principal, proceeds from maturities and sales of investments, as well as settlements of freestanding derivatives. The principal cash outflows relate to purchases of investments and settlements of freestanding derivatives. It is not unusual to have a net cash outflow from investing activities because cash inflows from insurance operations are typically reinvested to fund insurance liabilities. We closely monitor and manage these risks through our comprehensive investment risk management process. 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, which could result in material liquidity needs for our insurance subsidiaries. 
 
 Cash flows provided by (used in) investing activities decreased $2,680 million to $(2,882) million during the three months ended March 31, 2023 from $(202) million during the three months ended March 31, 2022. This decrease was primarily due to outflows related to our hedging program for derivative settlements and collateral predominantly resulting from market increases in 2023. 
 Cash flows from Financing Activities 
 
 The principal cash inflows from our financing activities come from deposits of funds associated with policyholder account balances, issuance of securities and lending of securities. The principal cash outflows come from withdrawals associated with policyholder account balances, repayment of debt, and the return of securities on loan. 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 decreased $517 million to $(1,099) million during the three months ended March 31, 2023 from $(582) million during the three months ended March 31, 2022. This decrease was primarily due to decreased deposits driven by lower variable annuity and institutional sales in 2023 compared to 2022, partially offset by inflows from our issuance of preferred stock in 2023. 
 
 Statutory Capital 
 
 Our insurance company subsidiaries have statutory surplus above the level needed to meet current regulatory requirements. RBC requirements are used as minimum capital requirements by the NAIC and the state insurance departments to identify companies that merit regulatory action. RBC is based on a formula that incorporates both factor-based components (applied to various asset, premium, claim, expense and statutory reserve items) and model-based components. 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 to rank insurers generally. As of March 31, 2023, 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. 
 
 Holding Company Liquidity 
 
 As a holding company with no business operations of its own, Jackson Financial primarily derives cash flows from dividends and interest payments from its insurance subsidiaries. These principal sources of liquidity are expected to be supplemented by cash and short-term investments held by Jackson Financial and access to bank lines of credit and the capital markets. We intend to maintain a minimum amount of cash and highly liquid securities at Jackson Financial adequate to fund two years of holding company fixed net expenses, which may change over time as we refinance existing debt or make changes to our debt and capital structure, and is currently targeted at $250 million. The main uses of liquidity for Jackson Financial are interest payments and debt repayment, holding company operating expenses, payment of dividends and other distributions to shareholders, which may include stock repurchases, and capital contributions, if needed, to our insurance company subsidiaries. Our principal sources of liquidity and our anticipated capital position are described in the following paragraphs. 
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 Item 2 | Management’s Discussion and Analysis | Liquidity and Capital Resources 

 Any declaration of cash dividends or stock repurchases will be at the discretion of JFI’s Board of Directors and will depend on our financial condition, earnings, liquidity and capital requirements, regulatory constraints, level of indebtedness, contractual restrictions with respect to paying cash dividends or repurchasing stock, restrictions imposed by Delaware law, general business conditions and any other factors that JFI’s Board of Directors deems relevant in making any such determination. Therefore, there can be no assurance that we will pay any cash dividends to holders of our common stock or approve any further increase in the existing, or any new, stock repurchase program, or as to the amount of any such cash dividends or stock repurchases. 
 
 Delaware law requires that dividends be paid and stock repurchases made only out of “surplus,” which is defined as the fair market value of our net assets, minus our stated capital; or out of the current or the immediately preceding year’s earnings. JFI is a holding company and has no direct operations. All of 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. The states in which our insurance subsidiaries are domiciled impose certain restrictions on our insurance subsidiaries’ ability to pay dividends to their parent companies. These restrictions are based in part on the prior year’s statutory income and surplus, as well as earned surplus. Such restrictions, or any future restrictions adopted by the states in which our insurance subsidiaries are domiciled, could have the effect, under certain circumstances, of significantly reducing dividends or other amounts payable by our subsidiaries without affirmative approval of state regulatory authorities. See “Risk Factors—Risks relating to Financing and Liquidity - As a holding company, Jackson Financial depends on the ability of its subsidiaries to pay dividends and make other distributions to meet its obligations and liquidity needs, including servicing debt, dividend payments and stock repurchases.” 
 
 On March 13, 2023, the Company issued and sold 22,000,000 depositary shares (the “Depositary Shares”), each representing a 1/1,000th fractional interest in a share of the Company’s Fixed-Rate Reset Noncumulative Perpetual Preferred Stock, Series A, $25,000 liquidation preference per share (equivalent to $25 per Depositary Share), with a 5-year dividend rate reset period and noncumulative dividends (the “Series A Preferred Stock”). After underwriting discounts and expenses, we received net proceeds of approximately $533 million. See Note 20 - Equity of the Notes to Condensed Consolidated Financial Statements for more information. 
 
 During the first quarter of 2023, we paid a cash dividend of $0.62 per share on JFI's common stock totaling $54 million. On May 8, 2023, our Board of Directors approved a second quarter cash dividend on JFI's common stock of $0.62 per share, payable on June 15, 2023 to shareholders of record on June 1, 2023. The Company also announced the declaration of a cash dividend of $0.59444 per depositary share, each representing a 1/1,000th interest in a share of Fixed-Rate Reset Noncumulative Perpetual Preferred Stock, Series A. The dividend will be payable on June 30, 2023, to shareholders of record at the close of business on June 1, 2023. 
 
 During the first quarter of 2023, we repurchased a total of 1,721,737 shares of common stock for an aggregate purchase price of $70 million, which were funded with cash on hand. 
 
 See Note 20 to Condensed Consolidated Financial Statements in this Report for further information on dividends to shareholders and share repurchases. 
 
 Distributions from our Insurance Company Subsidiaries 
 
 The ability of our insurance company subsidiaries to pay dividends is limited by applicable laws and regulations of the jurisdictions where such subsidiaries are domiciled as well as agreements entered into with regulators. These laws and regulations require, among other things, our insurance company subsidiaries to maintain minimum solvency requirements and limit the amount of dividends these subsidiaries can pay. 
 
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 Item 2 | Management’s Discussion and Analysis | Liquidity and Capital Resources 

 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 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 of these subsidiaries is not reasonable in relation to their outstanding liabilities and is not adequate to meet their financial needs, as required by the Michigan Insurance Code of 1956. Unless otherwise approved by the Michigan Director of Insurance, dividends may only be paid from earned surplus. Also, surplus note arrangements and interest payments must be approved by the Michigan Director of Insurance and such interest payments to related parties reduce the otherwise calculated ordinary dividend capacity for that period. In New York, all dividends require approval from the NYSDFS. 
 
 For 2023, Jackson and Brooke Life have total ordinary dividend capacity, based on 2022 statutory capital and surplus and statutory net gain from operations, subject to the availability of earned surplus, of $3,688 million and $501 million, respectively. Brooke Life, as the sole owner of our other insurance company subsidiaries, including Jackson and Jackson National Life NY, is the direct recipient of any dividend payments from those subsidiaries and must make dividend payments to its ultimate parent company, Jackson Financial, in order for any funds from our insurance company subsidiaries to reach Jackson Financial. As such, Jackson Financial’s ability to receive dividend payments from our insurance company subsidiaries is effectively limited by Brooke Life’s ability to make dividend payments to Jackson Financial. 
 
 On March 1, 2023, Jackson paid a $450 million ordinary dividend and remitted a $150 million return of capital to its parent company, Brooke Life. Brooke Life subsequently paid a $360 million ordinary dividend and remitted a $150 million return of capital to its ultimate parent, Jackson Financial. In addition, for the quarter ended March 31, 2023, Brooke Life 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. 
 
 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 credit and financial strength ratings or competitive position, the ability to generate new annuity sales and the ability to pay future dividends or make other distributions. Further, state insurance laws and regulations require that the statutory surplus of our insurance subsidiaries following any dividend or distribution must be reasonable in relation to their outstanding liabilities and adequate for the insurance subsidiaries’ financial needs. Along with solvency regulations, another primary consideration in determining the amount of capital used for dividends is the level of capital needed to maintain desired financial strength ratings from rating agencies, including A.M. Best, S&P, Moody’s and Fitch. Given recent economic events that have affected the insurance industry, both regulators and rating agencies could become more conservative in their methodology and criteria, including increasing capital requirements for insurance company subsidiaries. We believe our insurance company subsidiaries have sufficient statutory capital and surplus to maintain their desired financial strength rating. 
 
 Insurance Company Subsidiaries’ Liquidity 
 
 The liquidity requirements for our insurance company subsidiaries primarily relate to the liabilities associated with their insurance and reinsurance activities, operating expenses and income taxes. Liabilities arising from insurance and reinsurance activities include the payment of policyholder benefits when due, cash payments in connection with policy surrenders and withdrawals and policy loans. 
 
 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 March 31, 2023, Jackson’s outstanding surplus notes and bank debt included $ 58 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. 
 
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 Item 2 | Management’s Discussion and Analysis | Liquidity and Capital Resources 

 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. Significant increases in interest rates or equity markets may also result in higher margin and collateral requirements on our derivative portfolio. The derivative contracts are an integral part of our risk management program, especially for the management of our variable annuities program, and are managed in accordance with our hedging and risk management program. Our cash flows associated with collateral received from counterparties and posted with counterparties fluctuates with changes in the market value of the underlying derivative contract and/or the market value of the collateral. The net collateral position depends on changes in interest rates and equity markets related to the amount of the exposures hedged. Collateral posting requirements can result in material liquidity needs for our insurance subsidiaries. As of March 31, 2023, we were in a net collateral payable position of $545 million compared to $689 million as of December 31, 2022. 
 
 Other factors that are not directly related to interest rates can also give rise to an increase in liquidity requirements, including, changes in ratings from rating agencies, general policyholder concerns relating to the life insurance industry (e.g., the unexpected default of a large, unrelated life insurer) and competition from other products, including non-insurance products such as mutual funds, certificates of deposit and newly developed investment products. 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 March 31, 2023, approximately half of Jackson’s general account reserves are not surrenderable, included surrender charges greater than 5%, or included 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 their products, sales of annuities and institutional products, investment income, commercial repurchase agreements and utilization of a short-term borrowing facility with the FHLBI. 
 
 Jackson uses a variety of asset liability management techniques to provide for the orderly provision of cash flow from investments and other sources as policies and contracts mature in accordance with their normal terms. 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 March 31, 2023, the portfolio of cash, short-term investments and privately and publicly traded securities and equities, which are unencumbered and unrestricted to sale, amounted to $22.6 billion. 
 
 Our Indebtedness 
 
 Senior Notes 
 
 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. 
 
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 Item 2 | Management’s Discussion and Analysis | Liquidity and Capital Resources 

 Revolving Credit and Short-Term Borrowing Facilities 
 
 On February 24, 2023, the Company entered into a revolving credit facility (the "2023 Revolving Credit Facility") with a syndicate of banks and Bank of America, N.A., as Administrative Agent. The 2023 Revolving Credit Facility replaced an existing revolving credit facility that was due to expire in February 2024. The 2023 Revolving Credit Facility provides for borrowings for working capital and other general corporate purposes under aggregate commitments of $1.0 billion, with a sub-limit of $500 million available for letters of credit. The 2023 Revolving Credit Facility further provides for the ability to request, subject to customary terms and conditions, an increase in commitments thereunder by up to an additional $500 million. Commitments under the 2023 Revolving Credit Facility terminate on February 24, 2028. Interest on borrowings may be based on a “Base Rate” (as defined in the 2023 Revolving Credit Facility) plus an adder ranging from 0.125% to 0.875%, or a “Term SOFR Rate” (as defined in the 2023 Revolving Credit Facility) plus an adder ranging from 1.125% to 1.875%. The applicable adder is based upon the ratings assigned to the Company’s senior, unsecured, non-credit enhanced debt. 
 
 The credit agreement governing the 2023 Revolving Credit Facility contains a number of customary representations and warranties, affirmative and negative covenants and events of default (including a change of control provision). 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 September 30, 2022 (plus (to the extent positive) or minus (to the extent negative) 70% of the impact on such adjusted consolidated net worth resulting from the application of a one-time transition adjustment for the LDTI accounting change for insurance contracts, and plus 50% of the aggregate amount of any increase in adjusted consolidated net worth resulting from equity issuances by the Company and its consolidated subsidiaries after September 30, 2022) and a maximum consolidated indebtedness to total capitalization ratio test not to exceed 35%. We were in compliance with these covenants at March 31, 2023. 
 
 Jackson is a party to an Uncommitted Money Market Line Credit Agreement dated April 6, 2023 among Jackson, Jackson Financial, and Société Générale. This agreement is an uncommitted short-term cash advance facility that provides an additional form of liquidity to Jackson and to Jackson Financial. The aggregate borrowing capacity under the agreement is $500 million and each cash advance request must be at least $100 thousand. The interest rate is set by the lender at the time of the borrowing and is fixed for the duration of the advance. Jackson and Jackson Financial are jointly and severally liable to repay any advance under the agreement, which must be repaid prior to the last day of the quarter in which the advance was drawn. As of May 9, the Company has not borrowed on this line of credit. 
 
 Surplus Notes 
 
 On March 15, 1997, our subsidiary, Jackson, issued 8.2% surplus notes in the principal amount of $250 million due March 15, 2027. These surplus notes were issued pursuant to Rule 144A under the Securities Act of 1933, as amended, and are unsecured and subordinated to all present and future indebtedness, policy claims and other creditor claims and may not be redeemed at the option of the Company or any holder prior to maturity. Interest is payable semi-annually on March 15th and September 15th of each year. Interest expense on the notes was $5 million and $5 million for the three months ended March 31, 2023 and 2022, 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. Payments of interest or principal may only be made with the prior approval of the Michigan Director of Insurance and only out of surplus earnings which the director determines to be available for such payments under Michigan Insurance Law. 
 
 Federal Home Loan Bank 
 
 Jackson is a member of the regional FHLBI primarily for the purpose of participating in its collateralized loan advance program with funding facilities. Membership requires us to purchase and hold a minimum amount of FHLBI capital stock, plus additional stock based on outstanding advances. Advances are in the form of either notes or funding agreements issued to FHLBI. As of March 31, 2023 and December 31, 2022, Jackson held a bank loan with an outstanding balance of $58 million and $62 million, respectively. 
 
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 Item 2 | Management’s Discussion and Analysis | Liquidity and Capital Resources 

 Financial Strength Ratings 
 
 Our access to funding and our related cost of borrowing, the attractiveness of certain of our subsidiaries’ products to customers, our attractiveness as a reinsurer to potential ceding companies and requirements for derivatives collateral posting are affected by our credit ratings and financial strength ratings, which are periodically reviewed by the rating agencies. Financial strength ratings and credit ratings are important factors affecting consumer confidence in an insurer and its competitive position in marketing products as well as critical factors considered by ceding companies in selecting a reinsurer. 
 
 Our principal insurance company subsidiaries are rated by A.M. Best, S&P, Moody’s and Fitch. Financial strength ratings represent the opinions of rating agencies regarding the financial ability of an insurer or reinsurer to meet its obligations under an insurance policy or reinsurance arrangement and generally involve quantitative and qualitative evaluations by rating agencies of a company’s financial condition and operating performance. Generally, rating agencies base their financial strength ratings upon information furnished to them by the company and upon their own investigations, studies and assumptions. 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 may be revised or revoked at any time at the sole discretion of the rating organization. 
 
 As of May 3, 2023, the financial strength ratings of our principal insurance subsidiaries were as follows : 
 
 Company A.M. Best Fitch Moody’s S&P 
 Jackson National Life Insurance Company 
 Rating A A A2 A 
 Outlook stable stable negative stable 
 Jackson National Life Insurance Company of New York 
 Rating A A A2 A 
 Outlook stable stable negative stable 
 Brooke Life Insurance Company 
 Rating A 
 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, 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. A positive outlook indicates a rating may be raised and a negative outlook indicates a rating may be lowered. A stable outlook is assigned when ratings are not likely to be changed. Outlooks should not be confused with expected stability of the issuer’s financial or economic performance. A stable outlook does not preclude a rating agency from changing a rating at any time without notice. 
 
 A.M. Best, S&P, Moody’s and Fitch review their ratings of insurance companies from time to time. There can be no assurance that any particular rating will continue for any given period of time or that it will not be changed or withdrawn entirely if, in their judgment, circumstances so warrant. While the degree to which ratings adjustments will affect sales of our annuities and institutional products, and persistency is unknown, if our ratings are negatively adjusted for any reason, we believe we could experience a material decline in the sales in our individual channel, origination in our institutional channel, and the persistency of our existing business. 
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 Item 2 | Management’s Discussion and Analysis | Summary of Critical Accounting Estimates 

 Summary of Critical Accounting Estimates 
 
 The preparation of financial statements in conformity with U.S. GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in our Condensed Consolidated Financial Statements included elsewhere in this report. The most critical estimates are presented below. 
 
 The below critical accounting estimates are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates” and Notes 1 and 2 of the Notes to the Consolidated Financial Statements included in our 2022 Annual Report. 
 
 • income taxes and the ability to realize certain deferred tax benefits 
 • valuation and impairment of investments, including estimates related to expectations of credit losses on certain financial assets 
 • valuation of freestanding derivative instruments 
 • valuation of embedded derivatives 
 • net investment income 
 • contingent liabilities 
 • consolidation of variable interest entities 
 
 The below critical accounting estimates are updated from our 2022 Annual Report for the adoption of LDTI. 
 
 Reserves for Future Policy Benefits and Claims Payable 
 
 We establish reserves for future policy benefits to, or on behalf of, customers in the same period in which the policy is issued or acquired, using methodologies prescribed by U.S. GAAP. 
 
 Reserves for Future Policy Benefits 
 
 For non-participating traditional life insurance contracts and limited pay life-contingent contracts , which includes term, whole life, and payout annuities with significant insurance risk, reserves for future policy benefits represents the present value of estimated future policy benefits to be paid to or on behalf of policyholders in future periods and certain related expenses less the present value of estimated future net premiums. 
 
 Reserves for future policy benefits for non-participating traditional and limited-payment insurance contracts are measured using the net premium ratio (NPR) measurement model. The NPR measurement model accrues for future policy benefits in proportion to the premium revenue recognized. The reserve for future policy benefits is derived from the Company's best estimate of future net premium and future benefits and expenses, which is based on best estimate assumptions including mortality, persistency, claims expense, and discount rate. On an annual basis, or as circumstances warrant, we conduct a comprehensive review of our current best estimate assumptions based on our experience, industry benchmarking, and other factors, as applicable. Expense assumptions are updated based on estimates of expected non-level costs, such as termination or settlement costs, and costs after the premium-paying period and exclude acquisition costs or any costs that are required to be charged to expenses as incurred. Updates to assumptions are applied on a retrospective basis, and each reporting period the reserve for future policy benefits is updated to reflect actual experience to date. 
 
 The Company establishes cohorts, which are product groupings used to measure reserves for future policy benefits. In determining cohorts, the Company considered both qualitative and quantitative factors, including the issue year, type of product, product features, and legal entity. 
 
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 Item 2 | Management’s Discussion and Analysis | Summary of Critical Accounting Estimates 

 The discount rate used to estimate reserves for future policy benefits is consistent with an upper-medium grade (low-credit risk) fixed-income corporate instrument yield, which has been interpreted to represent a single-A corporate instrument yield. This discount rate curve is determined by fitting a parametric function to yields to maturity and related times to maturity of market observable single-A rated corporate instruments. The discount rate used to recognize interest accretion on the reserves for future policy benefits is locked at the initial measurement of the cohort. Each reporting period, the reserve for future policy benefits is remeasured using the current discount rate. The difference between the reserve calculated using the current discount rate and the reserve calculated using the locked-in discount rate is recorded in other comprehensive income. 
 
 Additional Liabilities - Universal Life-type 
 
 The Company issues universal life plans with secondary guarantees and interest-sensitive life plans. The primary reserves for these policies are the contract holder account balances reported within the other contract holder funds line of the balance sheet. Where these contracts provide additional benefits beyond the account balance or base insurance coverage that are not market risk benefits or embedded derivatives, liabilities in addition to the policyholder’s account value are recognized. These additional liabilities for annuitization, death and other insurance benefits are reported within reserves for future policy benefits and claims payable. The methodology uses a benefit ratio defined as a constant percentage of the assessment base. This ratio is multiplied by current period assessments to determine the reserve accrual for the period. The assumptions used in the measurement of the additional liabilities for annuitization, death and other insurance benefits are based on best estimate assumptions including mortality, persistency, investment returns, and discount rates. These assumptions are similarly subject to the annual review process discussed above. 
 
 Other Future Policy Benefits and Claims Payable 
 
 In conjunction with a prior acquisition, we recorded a fair value adjustment related to certain annuity and interest-sensitive life blocks of business to reflect the cost of the interest guarantees within the in-force liabilities, based on the difference between the guaranteed interest rate and an assumed new money guaranteed interest rate. This adjustment is recorded in reserves for future policy benefits and claims payable. This component of the acquired reserves is reassessed at the end of each period, taking into account changes in the in-force block. Any resulting change in the reserve is recorded as a change in policy reserve through the consolidated income statements. 
 
 In addition, life and annuity claims liabilities in course of settlement are included in other future policy benefits and claims payable. 
 
 See Note 9- Reserve for Future Policy Benefits and Claims Payable to Condensed Consolidated Financial Statements for additional information on these accounting policies. 
 
 Market Risk Benefits 
 
 Contracts or contract features that provide protection to the contract holder from capital market risk and expose the Company to other-than-nominal capital market risk are classified as MRBs. All long-duration insurance contracts and certain investment contracts are subject to MRB evaluation. MRBs are measured at fair value at the contract level and can be in either an asset or liability position. For contracts that contain multiple MRB features, the MRBs are valued together as a single compound MRB. 
 
 The use of models and assumptions used to determine fair value of MRBs requires a significant amount of judgement. The significant assumptions used in the MRB fair value calculations are: 
 
 • Mortality rates - These vary by attained age, tax qualification status, guaranteed benefit election, and duration. The range used reflects ages from the minimum issue age for the benefit through age 95, which corresponds to the typical maturity age. A mortality improvement assumption is also applied. 
 • Base lapse rates - These vary by contract-level factors, such as product type, surrender charge schedule and optional benefits election. Lapse rates are further adjusted based on the degree to which a guaranteed benefit is in-the-money, with lower lapse applying when benefits are more in-the-money. Lapse rates are also adjusted to reflect lower lapse expectations when guaranteed benefits are utilized. 
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 Item 2 | Management’s Discussion and Analysis | Summary of Critical Accounting Estimates 

 • Utilization rates - These represents the expected percentage of contracts that will utilize the benefit through annuitization (GMIB) or commencement of withdrawals (GMWB). Utilization may vary by benefit type, attained age, duration, tax qualification status, benefit provision, and degree to which the guaranteed benefit is in-the-money. 
 • Withdrawal rates - These represent the percentage of annual withdrawal assumed relative to the maximum allowable withdrawal amount under the free partial withdrawal provision or the GMWB, as applicable. Free partial withdrawal rates vary based on the product type and duration. Withdrawal rates on contracts with a GMWB vary based on attained age, tax qualification status, GMWB type and GMWB benefit provisions. 
 • Non-performance risk adjustment - This is applied as a spread over the risk-free rate to determine the rate used to discount the related cash flows and varies by projection year. 
 • Long-term equity volatility - This represents the equity volatility beyond the period for which observable equity volatilities are available. 
 See Note 6- Fair Value Measurements to Consolidated Financial Statements for additional information. 
 
 Variable Annuities 
 
 We issue variable contracts through our separate accounts for which investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contract holder. Certain of these contracts include contract provisions by which we contractually guarantee to the contract holder either a) return of no less than total deposits made to the account adjusted for any partial withdrawals, b) total deposits made to the account adjusted for any partial withdrawals plus a minimum return, or c) the highest account value on a specified anniversary date adjusted for any withdrawals following the contract anniversary. These guarantees include benefits that are payable upon the depletion of funds (GMWB), in the event of death (GMDB), at annuitization (GMIB), or at the end of a specified period (GMAB). Substantially all of our GMIB benefits are reinsured. GMIB benefits and GMAB benefits were discontinued in 2009 and 2011, respectively. For additional information regarding our account value by optional guarantee benefit, see Business–Our Segments–Retail Annuities–Variable Annuities in the 2022 Annual Report. 
 
 Variable annuity guaranteed benefit features classified as MRBs, which have explicit fees, are measured using the attributed fee method. Under the attributed fee method, fair value is measured as the difference between the present value of projected future liabilities and the present value of projected attributed fees. At the inception of the contract, the Company attributes to the MRB a portion of total fees expected to be assessed against the contract holder to offset the projected claims over the lifetime of the contract. The attributed fee is expressed as a percentage of total projected future fees at inception of the contract. This percentage of total projected fees is considered a fixed term of the MRB feature and is held static over the life of the contract. This percentage may not exceed 100% of the total projected contract fees as of contract inception. As the Company may issue contracts that have projected future liabilities greater than the projected future guaranteed benefit fees at issue, the Company may also attribute mortality and expense charges when performing this calculation. In subsequent valuations, both the present value of future projected liabilities and the present value of projected attributed fees are remeasured based on current market conditions and policyholder behavior assumptions. 
 
 Fixed Index Annuities 
 
 The longevity riders issued on fixed index annuities are classified as MRBs and measured at fair value. Similar to the variable annuity guaranteed benefits features, these contracts have explicit fees and are measured using the attributed fee method. The Company attributes a percentage of total projected future fees expected to be assessed against the policyholder to offset the projected future claims over the lifetime of the contract. If the fees attributed are insufficient to offset the claims at issue, the shortfall is borrowed from the host contract rather than recognizing a loss at inception. 
 
 RILA 
 
 RILA guaranteed benefit features are classified as MRBs and measured at fair value. Unlike variable or fixed index annuities, RILA products do not have explicit fees and are measured using an option-based method. The fair value measurement represents the present value of future claims payable by the MRB feature. At inception, the value of the MRB is deducted from the value of the contract resulting in no gain or loss. 
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 Item 2 | Management’s Discussion and Analysis | Summary of Critical Accounting Estimates 

 See Note 12- Market Risk Benefits of the Notes to Condensed Consolidated Financial Statements for additional information on these accounting policies. 
 
 Reinsurance 
 
 Accounting for reinsurance requires extensive use of assumptions and estimates, particularly related to the future performance of the underlying business and the potential impact of counterparty credit risk with respect to reinsurance receivables. We periodically review actual and anticipated experience compared to the aforementioned assumptions used to establish assets and liabilities relating to ceded and assumed reinsurance and evaluate the financial strength of counterparties to our reinsurance agreements. Counterparty credit risk may be managed through the use of letters of credit, collateral trusts or on balance sheet funds withheld agreements. Assets held under funds withheld agreements are included on our balance sheets and subject to triggers embedded within the relevant reinsurance agreements. 
 
 Additionally, for each of our reinsurance agreements, we determine whether the agreement provides indemnification against loss or liability relating to insurance risk, in accordance with applicable accounting standards. We review all contractual features, including those that may limit the amount of insurance risk to which the reinsurer is subject or features that delay the timely reimbursement of claims. 
 
 For reinsurance contracts, reinsurance recoverable balances are generally calculated using methodologies and assumptions that are consistent with those used to calculate the direct liabilities. For non-participating traditional life insurance contracts and limited pay life-contingent contracts, there may be reinsurance contracts executed subsequent to the direct contract issue dates, and market interest rates may have changed between the date that the underlying insurance contracts were issued and the date the reinsurance contract is recognized in the financial statements, resulting in the underlying discount rate differing between the direct and reinsured business. 
 
 Our guaranteed minimum income benefits (GMIBs) are reinsured with an unrelated party. For contracts that only ceded the GMIB feature of our annuity products, the reinsurance contract in its entirety is classified as a reinsured market risk benefit. Accordingly, the reinsured market risk benefit is recorded at fair value using internally developed models consistent with those used to value our direct market risk benefits. 
 
 See Note 8- Reinsurance of the Notes to Condensed Consolidated Financial Statements for additional information on these accounting policies. 
 
 Off–Balance Sheet Arrangements 
 
 We do not have any off–balance sheet arrangements as of March 31, 2023. 
 
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 Item 3 | Quantitative and Qualitative Disclosures about Market Risk
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.
Jackson Financial Inc. 10-Q

Item 2. Management’s Discussion and Analysis
