What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-08 compared with 2023-08-08 · 312 added, 385 removed, 1006 unchanged (41% of the section changed)

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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.

JNAM Jackson National Asset Management LLC, a Company subsidiary.

PPMH PPM Holdings, Inc., a Company subsidiary

Jackson Jackson National Life Insurance Company, our primary operating subsidiary.

Brooke Life Brooke Life Insurance Company, our subsidiary and the direct parent company of Jackson National Life Insurance Company.

Jackson Finance Jackson Finance, LLC, our subsidiary.

JNAM Jackson National Asset Management LLC, our subsidiary.

PPMH PPM Holdings, Inc., our subsidiary

PPM PPM America, Inc., a subsidiary of PPMH

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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.

(i) assets managed by PPM, including our investment portfolio (but excluding assets held in funds withheld accounts for reinsurance transactions) and third-party assets (including our former parent and its affiliates) and (ii) the separate account assets of our Retail Annuities segment managed and administered by JNAM.

Benefit base A notional amount (not actual cash value) used to calculate guaranteed benefits within an owner's 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.

DAC (Deferred acquisition costs) Represent the incremental costs related directly to the successful acquisition of new and certain renewal insurance policies and annuity contracts.

The recognition of those costs has been deferred, and the deferred amounts are shown on the balance sheet as an asset subject to amortization over the estimated lives of those policies and contracts.

Deferred tax asset or Deferred tax liability Assets or liabilities that are recorded for the difference between financial reporting, or book basis, and tax basis of an asset or a liability.

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

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 after which rates may reset (up or down) based upon market rates for a trailing historical period, subject to the specified minimum rate.

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

Guarantee Fees Fees charged on annuities for optional benefit guarantees offered on our annuity contracts.

Guaranteed Benefits:

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.

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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.

MRB (Market Risk Benefit A contract or contract feature that both provides protection to the contract holder from other-than-nominal capital market risk and exposes the insurance entity to other-than-nominal capital market risk.

MRB (Market Risk Benefit A contract or contract feature that provides protection to the contract holder from other-than-nominal capital market risk while exposing the insurance entity to other-than-nominal capital market risk.

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.

Net flows Net flows represent the net change in customer account balances during a period after reflecting gross premium inflows and surrenders, withdrawals and benefit payment outflows.

Net flows do not include 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.

RBC Ratio The ratio of statutory total adjusted capital to company action level required capital.

A formal calculation is made once per year at year end.

In other periods, the ratio is estimated.

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.

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The Company's demerger from Prudential was completed on September 13, 2021 (the "Demerger").

See Note 1 to Condensed Consolidated Financial Statements for further discussion of the Demerger.

Jackson Financial’s primary operating subsidiary, Jackson National Life Insurance Company, is licensed to sell group and individual annuity products (including immediate, registered index-linked, deferred fixed, fixed index, fixed 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.

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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 , a commission and an 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 earn revenues predominantly from fee income, spread income resulting from what we earn on investments versus our interest credited to contract holders, and margins on other insurance products.

Our profitability is dependent on our ability to properly price and manage risk on insurance and annuity products, to manage our portfolio of investments effectively, and to control costs through expense discipline.

We experience net income volatility due to the fact that we do not directly use hedging to offset the movement in our U.S.

Generally Accepted Accounting Principles ("GAAP") market risk benefit liabilities as market conditions change from period to period.

Our core dynamic hedging program seeks to offset changes in the economic liability associated with variable annuity guaranteed benefits due to market movements, while our macro hedging program seeks to protect statutory capital under a range of stress scenarios.

We do not directly seek to offset the movement in our market risk benefit liabilities from changes in market conditions.

As a result, the changes in the fair value of the derivatives used as part of the hedging program are not expected to match the movements in the market risk benefit liabilities resulting in volatility from changes in fair value recorded to net income.

Accordingly, we evaluate and manage the performance of our business using Adjusted Operating Earnings, a non-GAAP financial measure that reduces the impact of market volatility by excluding changes in fair value of freestanding and embedded derivative instruments, market risk benefits and other items.

See “Non-GAAP Financial Measures” below for information regarding our non-GAAP financial measures and reconciliations to the most comparable U.S.

GAAP measures.

We manage our business through three 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.

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

public company.

Prudential retained an equity interest in us after the Demerger.

As a result of sales subsequent to the Demerger, Prudential has no remaining equity interest in the Company as of June 30, 2023.

• Common Stock Repurchases:

Since the Demerger and through June 30, 2023, we have repurchased 16,541,752 shares of our common stock for an aggregate consideration of $611 million.

After giving effect to those repurchases and issuances for our share-based compensation, we had 12,570,175 shares of treasury stock and 81,910,831 shares of common stock outstanding at June 30, 2023.

See Note 20 of the Notes to Condensed Consolidated Financial Statements for further information on our share repurchases.

• 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 June 30, 2023, we have not recorded any provision for the AMT.

The cal culation 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 in evaluating our results.

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

The table below presents selected financial and operating measures:

Nine Months Ended September 30,

(in millions)

Net income (loss) attributable to Jackson Financial Inc.

common shareholders 2,469 7,336

Adjusted Operating Earnings (1)

Amount of shares repurchased under share repurchase program 188 245

Dividends on common shares 159 151

Return on Equity ("ROE") Attributable to Common Shareholders 38.9 % 109.4 %

Adjusted Operating ROE Attributable to Common Shareholders on average equity (1)

11.6 % 17.7 %

(1) Non-GAAP Financial Measure.

Management's Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures” for information regarding our non-GAAP financial measures and reconciliations to the most comparable U.S.

GAAP measures.

Recent Events of Note

• Capital Returned to Common Shareholders:

Since January 1, 2023 through September 30, 2023, we have returned $347 million to our common shareholders consisting of $159 million in dividends and $188 million in common share repurchases.

Our capital return target for common shareholders for 2023 is $450-$550 million.

Share repurchases, net of issuances for our share-based compensation, have reduced our outstanding shares of common stock from 82,690,098 at December 31, 2022 to 80,051,900 at September 30, 2023.

See Note 20 of the Notes to Condensed Consolidated Financial Statements for further information on our share repurchases.

• RILA Product:

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 , a commission and an advisory based suite of registered index-linked annuities ("RILA").

In the second quarter of 2023, we enhanced our RILA suite of products with the launch of Jackson Market Link Pro SM II and Jackson Market Link Pro Advisory SM II.

See “Key Operating Measures – Sales” below for information regarding RILA sales.

• Defined Contribution Market:

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

• Inflation Reduction Act of 2022 ("IRA"):

As discussed in Note 15 of Notes to Condensed Consolidated Financial Statements in this report, a new corporate alternative minimum tax (“CAMT”) based on adjusted financial statement income, rather than reported taxable income, became effective January 1, 2023.

We will be subject to the CAMT in 2023.

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

although it could affect our cash tax liabilities.

As of September 30, 2023, the Company has recorded an estimate of $450 million for the provision for the CAMT based on the Company's interpretation of guidance with an offsetting increase to the deferred tax asset for the credit carryover resulting in no impact to total tax expense.

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

Department of the Treasury.

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.

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

Key Operating Measures

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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.

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

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

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

2023 2022 2023 2022

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(1) Includes payout annuities

For the three and six months ended June 30, 2023, total sales decreased by $935 million and $2,918 million compared to the three and six months ended June 30, 2022, respectively.

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 higher by $103 million and lower by $223 million, compared to the three and six months ended June 30, 2022, respectively.

Sales of fixed index and fixed annuities increased in 2023 due to the higher interest rate environment, which enabled more favorable pricing actions.

Sales of fixed index annuities increased in 2023 due to the higher interest rate environment, which enabled more favorable pricing actions.

Account Value

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

June 30, 2023 December 31, 2022

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

September 30, 2023 December 31, 2022

(in millions)

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(1) Net of reinsurance.

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

Net flows represent the net change in customer account balances during a period, including gross premiums, surrenders, withdrawals and benefits.

Net flows represent the net change in customer account balances during a period, reflecting gross premiums received and surrenders, withdrawals and benefits payments.

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 June 30, Six Months Ended June 30,

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

2023 2022 2023 2022

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(1) Net of reinsurance.

Net flows, net of reinsurance, decreased for the three and six months ended June 30, 2023, compared to the three and six months ended June 30, 2022, driven by decreased variable annuity sales.

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

Net flows, net of reinsurance, decreased for the three and nine months ended September 30, 2023, compared to the three and nine months ended September 30, 2022, driven by increased variable annuity surrenders and withdrawals coupled with decreased variable annuity sales, partially offset by increased RILA sales.

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.

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

The following table shows variable annuity account value and benefit base as of June 30, 2023 and December 31, 2022:

June 30, 2023 December 31, 2022

The following table shows variable annuity account value and benefit base as of September 30, 2023 and December 31, 2022:

September 30, 2023 December 31, 2022

Account Value Benefit Base Account Value Benefit Base

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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 our former parent, and other third parties, and (iii) the separate account assets of our Retail Annuities segment that Jackson National Asset Management LLC ("JNAM") manages and administers.

Total AUM reflects exclusions between segments to avoid double counting.

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

June 30, December 31,

September 30, December 31,

(in millions)

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Total AUM $ 293,677 $ 290,549

PPM manages the majority of our investment portfolio and provides investment management services to our former parent's 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.

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

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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 future pandemics, 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.

Political events, including future pandemics, 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 any of their individual 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.

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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 June 30, 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 half of 2023 (as equity markets increased and equity volatility eased), 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.

Our financial performance is impacted by equity market performance.

On our variable annuities, the fees we earn that are not associated with guaranteed benefits are mainly based on the account value, which changes with equity market levels.

In addition, 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 also are exposed to basis risk, which results from our inability to purchase or sell hedge assets whose performance is directly correlated to the performance of the funds into which customers allocate their assets.

We make available to customers funds where we believe we can transact in sufficiently correlated hedge assets, yet 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.

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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:

The interest rate environment has affected, and will continue to affect, our business and financial performance 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 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.

Rising interest rates also impact the hedging results of our variable annuity business as the market value of interest rate hedges decline, thereby 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 six months ended June 30, 2023.

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, which are reduced with an increase in interest rates.

• 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.

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• 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.

The risk based capital, or 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, at times the cash surrender value floor materially affects the CAL calculation (in addition to reserves), rising rates can, and have, negatively affected the RBC ratio as well.We are considering additional methods of moderating the impact of the cash surrender value floor on TAC, CAL and RBC.

However, at times when the cash surrender value floor materially affects the CAL calculation (in addition to reserves), rising rates can, and have, negatively affected the RBC ratio as well.

We are pursuing additional methods of moderating the impact of the cash surrender value floor on TAC, CAL and RBC.

The implementation of any such method would be subject to Board and regulatory approval.

We can provide no assurance that any such method will be approved or the timing or impact of any adoption and implementation.

• 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.

We can provide no assurance that any such method will be approved or the timing or impact of any such adoption and implementation.

• Low interest rate environments could also subject 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 our insurance subsidiaries' ability to pay dividends.

Certain inputs to the statutory models rely on prescribed interest rates, which are determined using an 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.

• 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.

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In the current rising interest rate environment, the interest crediting rate on those GMICRs has increased.

Conversely, in a falling interest rate environment they will eventually decrease;

Conversely, in a falling interest rate environment interest crediting rate 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.

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Credit Market Environment

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

After tightening in 2021, credit spreads widened in 2022 and remained relatively unchanged in the first half of 2023.

Conditions in fixed income markets impact our financial performance.

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.

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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.

The COVID-19 pandemic disrupted our business and contributed to additional operating costs in prior years.

Other similar 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.

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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;

We have risk management plans in place and were 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 that many retirees 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.

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

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.

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, highlight 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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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.

federal and state levels 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.

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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.

The Department of Labor (the “DOL”) issued a regulatory action, effective February 16, 2021, that reinstated 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").

The related guidance provided by the DOL broadened the circumstances under which financial institutions, including insurance companies, could be considered fiduciaries under ERISA or the Federal income tax code.

The rule and accompanying guidance faced hurdles, including a February 2023 U.S.

District Court decision that vacated the roll over portion of the guidance, ruling that the DOL exceeded its authority in this area.

On October 31, 2023, the DOL initiated another significant rulemaking process in this area.

The department issued proposed revisions to the definition of fiduciary and related Prohibited Transaction Exemptions (PTE) (the “Fiduciary Advice Rule”), redefining what constitutes fiduciary “investment advice” to ERISA plans and IRAs.

The newest proposal again extends fiduciary status to one-time rollover recommendations and broadens the circumstances under which financial institutions, including insurance companies, could be considered fiduciaries under ERISA or the Federal income tax code, despite the recent U.S.

District Court decision.

The proposal also narrows the applicability of PTE 84-24 specific to insurance commissions for annuity recommendations to independent insurance agents recommending non-securities products.

The changes to PTE 84-24 also impose certain supervisory obligations on insurance carriers that are similar to those already covered under the National Association of Insurance Commissioner’s (NAIC) Suitability in Annuity Transactions Model Regulation.

The proposal is subject to a 60-day comment period and a final rulemaking will be effective 60 days after publication in the Federal Register.

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.

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

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

Nonetheless, because the distribution of annuities is primarily through intermediaries, most of which have implemented systems and processes to align to existing state and federal fiduciary and/or best interest standards, we believe that we will have more limited exposure to the new Fiduciary Advice Rule.

While the rule may not have a material impact on our business, it may impede certain investors’ access to financial advice or annuities that provide guaranteed income streams.

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 provided individuals with greater access to retirement products.

Namely, it made 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.

SECURE 2.0 contains provisions that expand automatic enrollment programs, increase the age for 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.

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

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

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Cybersecurity Event

Progress Software Corporation disclosed a zero-day vulnerability, which is a previously unknown flaw, in its MOVEit Transfer software (“MOVEit”) that could enable malicious actors to gain unauthorized access to sensitive files and information.

MOVEit is now the subject of a widely reported cybersecurity event impacting numerous organizations and governmental agencies.

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

Jackson determined that Jackson’s information at one of our third-party vendors, Pension Benefit Information, LLC (“PBI”), was impacted by this event.

Jackson, and many other insurance carriers, use PBI to satisfy our regulatory obligations to search various databases to determine the death of certain life insurance policyholders or annuity contract holders.

As previously disclosed in our Form 10-Q for the quarter ended June 30, 2023, Jackson determined that Jackson’s information at one of our third-party vendors, Pension Benefit Information, LLC (“PBI”), was impacted by a cybersecurity breach involving Progress Software Corporation’s MOVEit Transfer software.

This service helps Jackson to identify possible beneficiaries for death benefits.

According to PBI, an unknown actor exploited the MOVEit flaw to access PBI’s systems and download certain data.

Our current assessment indicates that personally identifiable information relating to approximately 850,000 of Jackson’s customers was obtained by that unknown actor from PBI’s systems.

PBI has informed Jackson that it has rectified the MOVEit vulnerability.

Separately, Jackson experienced unauthorized access to two servers as a result of the MOVEit zero-day vulnerability, however, the scope and nature of the data accessed on those servers was significantly less than the PBI impact.

Notably, the unauthorized actor did not gain access to any other systems or software, there was no interruption of Jackson’s business operations, and we believe there was no impact to our financial results.

Jackson, with assistance of third-party cybersecurity specialists, promptly launched an investigation into the unauthorized access, secured Jackson’s servers, patched the identified MOVEit vulnerability, and conducted a forensic analysis.

Our assessment is that a subset of information relating to certain partner organizations and individuals, including certain customers of Jackson, was obtained from the two affected servers.

Jackson notified law enforcement, as well as our primary insurance regulators, and we will continue to keep them informed.

Further, we have completed appropriate notification to the affected individuals and applicable regulators.

In addition, affected individuals are eligible to receive credit monitoring and identity theft services.

At this time, we do not believe the incident has a material adverse effect on the business, operations, or financial results of Jackson Financial.

Our assessment indicated that personally identifiable information relating to approximately 850,000 of Jackson’s customers was obtained by that unknown actor from PBI’s systems.

PBI informed Jackson that it rectified the MOVEit vulnerability.

Separately, Jackson experienced unauthorized access to two servers as a result of the MOVEit flaw;

however, the scope and nature of the data accessed on those servers was significantly less than the PBI impact.

Our assessment was that a subset of information relating to certain partner organizations and individuals, including certain customers of Jackson, was obtained from the two affected servers.

At this time, we do not believe the incident or related litigation will have a material adverse effect on the business, operations, or financial results of Jackson Financial.

Non-GAAP Financial Measures

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

Adjusted Operating Earnings equals our Net income (loss) attributable to Jackson Financial Inc.

common shareholders (which excludes income attributable to non-controlling interest and dividends on preferred stock) adj usted to eliminate the impact of the following items:

Adjusted Operating Earnings equals our Net income (loss) attributable to Jackson Financial Inc's common shareholders (which excludes income attributable to non-controlling interest and dividends on preferred stock) adjusted to eliminate the impact of the items described in the following numbered paragraphs.

These items are excluded as they may vary significantly from period to period due to near-term market conditions or are otherwise not directly comparable or reflective of the underlying performance of our business.

We believe these exclusions provide investors a better picture of the drivers of our underlying performance.

Net Hedging Results :

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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.

We believe excluding these items removes the impact to both revenue and related expenses associated with Guaranteed Benefits and Net Hedging Results.

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.

(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.

Change in Value of Funds Withheld Embedded Derivative and Net investment income on funds withheld assets:

(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.

(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.

Other items :

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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.

1 unchanged sentence

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

The following is a reconciliation of Adjusted Operating Earnings to net income (loss) attributable to Jackson Financial Inc.

common shareholders, the most comparable U.S.

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

GAAP measure.

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

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

2023 2022 2023 2022

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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.

We use Adjusted Operating Return on Equity ("ROE") Attributable to Common Shareholders to manage our business and evaluate our financial performance which:

(i) 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 Preferred Stock and 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.

and (ii) is calculated by dividing our Adjusted Operating Earnings by average Adjusted Book Value Attributable to Common Shareholders.

Adjusted Book Value Attributable to Common Shareholders excludes Preferred Stock and AOCI attributable to Jackson Financial, which 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 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 is more useful to investors in analyzing trends in our business.

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

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GAAP measure:

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

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

2023 2022 2023 2022

12 unchanged sentences

Adjusted Operating ROE Attributable to Common Shareholders on average equity 11.8 % 14.5 % 11.6 % 17.7 %

(1) Excludes $(1,930) million and $(1,677) million related to the investments held within the funds withheld account related to the Athene Reinsurance Transaction as of June 30, 2023 and 2022, respectively, are not attributable to Jackson Financial Inc.

(1) Excludes $(2,261) million and $(2,317) million related to the investments held within the funds withheld account related to the Athene Reinsurance Transaction as of September 30, 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.

3 unchanged sentences

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

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

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

2023 2022 2023 2022

31 unchanged sentences

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

Three Months Ended June 30, 2023 compared to Three Months Ended June 30, 2022

Three Months Ended September 30, 2023 compared to Three Months Ended September 30, 2022

Pretax Income (Loss)

Our pretax income (loss) decreased by $2,674 million to $1,465 million for the three months ended June 30, 2023, from $4,139 million for the three months ended June 30, 2022 primarily due to:

Our pretax income (loss) increased by $977 million to $3,502 million for the three months ended September 30, 2023, from $2,525 million for the three months ended September 30, 2022 primarily due to:

• $1,463 million favorable movements in market risk benefits (gains) losses, due primarily to more favorable changes in interest rates during the three months ended September 30, 2023, as well as less unfavorable current quarter separate account returns compared to the prior year quarter;

• $142 million increase in net investment income as a result of higher income on bonds, driven by higher yields in 2023 compared to the prior year quarter, and higher income on limited partnership investments, which are recorded on a one quarter lag;

• $42 million increase in fee income primarily due to higher average separate account values compared to the prior year quarter.

These increases were partially offset by:

• $535 million decrease in total net gains (losses) on derivatives and investments as shown in the table below and driven by:

Three Months Ended June 30,

Three Months Ended September 30,

2023 2022 Variance

6 unchanged sentences

Total net gains (losses) on derivatives and investments $ (176) $ 359 $ (535)

◦ Freestanding derivative losses from our equity derivatives during the three months ended June 30, 2023 primarily driven by market increases in 2023, compared to decreases in the prior year.

◦ Losses recognized on funds withheld reinsurance were driven by the significant rise in interest rates during 2022 which resulted in income reported for the movement in the embedded derivative compared to 2023, which were more stable;

◦ Losses excluding derivatives and funds withheld assets were driven by losses on disposals of debt securities during the three months ended September 30, 2023;

• $60 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;

• $77 million increase in operating costs and other expenses, net of deferrals, primarily due to an increase in incentive compensation and deferred compensation expenses during the three months ended June 30, 2023 compared to the prior year quarter.

• $34 million higher interest expense incurred during the three months ended June 30, 2023 primarily related to interest on our repurchase agreements and other short-term borrowings;

These decreases were partially offset by:

• $3,754 million favorable movements in market risk benefits (gains) losses, net, primarily driven by positive fund performance during the three months ended June 30, 2023 as compared to negative fund performance in the prior year quarter.

This was partially offset by smaller increases in interest rates in the current quarter compared to the prior year quarter.

Income tax expense decreased $600 million to an expense of $245 million for the three months ended June 30, 2023, from an expense of $845 million for the three months ended June 30, 2022.

The provision for income tax in the current period led to an effective income tax rate ("ETR") of 17% for the three months ended June 30, 2023 compared to the 2022 ETR of 21%.

The expense during the three months ended June 30, 2023 decreased 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 15 of Notes to Consolidated Financial Statements in our audited Consolidated Financial Statements, as recast in our Current Report on Form 8-K filed May 10, 2023 and Note 15 of Notes to Condensed Consolidated Financial Statements in this report for more information.

• $34 million increase in operating costs and other expenses, net of deferrals, primarily due to an increase in incentive and deferred compensation expenses during the three months ended September 30, 2023 and higher asset-based non-deferrable commissions, due to higher account values during the three months ended September 30, 2023, compared to the prior year quarter;

• $31 million increase in (gain) loss from updating actual benefit cash flows used in the net premium ratio, net of death, other policy benefits, and change in policy reserves primarily due to higher other policy benefits, partially offset by a greater decrease in reserves due to the payout of persistency bonuses on a sub block of business;

• $20 million higher interest expense incurred during 2023 primarily related to interest on our repurchase agreements and other short-term borrowings.

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

Six Months Ended June 30, 2023 compared to Six Months Ended June 30, 2022

Income tax expense increased $55 million to an expense of $712 million for the three months ended September 30, 2023, from an expense of $657 million for the three months ended September 30, 2022.

The provision for income tax in the current period led to an effective income tax rate ("ETR") of 20.5% for the three months ended September 30, 2023 compared to the September 30, 2022 ETR of 25.9%.

The change in the ETR during the three months ended September 30, 2023 compared to the three months ended September 30, 2022 was due to the relationship of the taxable income to the consolidated pre-tax income and the impact of tax adjustments related to prior year returns recorded in the current quarter.

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

Nine Months Ended September 30, 2023 compared to Nine Months Ended September 30, 2022

Pretax Income (Loss)

Our pretax income (loss) decreased by $7,341 million to $(589) million for the six months ended June 30, 2023, from $6,752 million for the six months ended June 30, 2022 primarily due to:

Our pretax income (loss) decreased by $6,364 million to $2,913 million for the nine months ended September 30, 2023, from $9,277 million for the nine months ended September 30, 2022 primarily due to:

• $9,657 million decrease in total net gains (losses) on derivatives and investments as shown in the table below and driven by:

Six Months Ended June 30,

Nine Months Ended September 30,

2023 2022 Variance

6 unchanged sentences

Total net gains (losses) on derivatives and investments $ (5,821) $ 3,836 $ (9,657)

◦ Freestanding derivative losses on our equity derivatives primarily driven by market increases in 2023, compared to decreases in the prior year, partially offset by lower amounts of losses within our interest rate related hedge instruments, reflecting slight decreases in interest rates, compared to increasing interest rates in the prior year.

◦ Freestanding derivative losses on our equity derivatives were primarily driven by market increases in 2023, compared to decreases in the prior year, partially offset by lower amounts of losses within our interest rate related hedge instruments, reflecting lower interest rate increases in 2023, compared to the prior year.

• $234 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;

• $103 million decrease in fee income primarily due to lower average separate account values compared to prior year;

• $57 million higher interest expense incurred during 2023 primarily related to interest on our senior notes, repurchase agreements and other short-term borrowings;

• $27 million increase in operating costs and other expenses, net of deferrals, primarily due to an increase in deferred compensation expenses during 2023 compared to the prior year, partially offset by lower asset-based non-deferrable commissions and lower sub-advisor expenses due to lower account values.

• $77 million higher interest expense incurred during 2023 primarily related to interest on our repurchase agreements, senior notes, and other short-term borrowings;

• $61 million increase in operating costs and other expenses, net of deferrals, primarily due to an increase in deferred compensation expenses during 2023 compared to the prior year, partially offset by lower asset-based non-deferrable commissions and lower sub-advisor expenses due to lower account values, and lower taxes, licenses and fees compared to prior year.

These decreases were partially offset by:

1 unchanged sentence

This was partially offset by less favorable movements in interest rates in 2023, compared to prior year;

• $110 million decrease in death, other policy benefits, and change in policy reserves, net of (gain) loss from updating actual benefit cash flows used in the net premium ratio, partially offset by a $25 million increase in our allowance for reinsurance credit losses related to a specific reinsurer which was recently ordered into liquidation.

Income tax expense decreased $1,546 million to a tax benefit of $313 million for the six months ended June 30, 2023, from an expense of $1,233 million for the six months ended June 30, 2022.

The provision for income tax in the current period led to an ETR of 53% for the six months ended June 30, 2023 compared to the 2022 ETR of 18%.

The change in the ETR during the six months ended June 30, 2023 compared to the six months ended June 30, 2022 was due to the relationship of taxable income to consolidated pre-tax income.

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

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

• $154 million increase in net investment income as a result of higher income on bonds, driven by higher yields in 2023 compared to prior year, partially offset by lower income on limited partnership investments, which are recorded on a one quarter lag;

• $79 million decrease in death, other policy benefits, and change in policy reserves, net of (gain) loss from updating actual benefit cash flows used in the net premium ratio, primarily due to greater decrease in reserves due to the payout of persistency bonuses on a sub block of business, partially offset by a $25 million increase in our allowance for reinsurance credit losses related to a specific reinsurer which was recently ordered into liquidation.

Income tax expense decreased $1,491 million to an expense of $399 million for the nine months ended September 30, 2023, from an expense of $1,890 million for the nine months ended September 30, 2022.

The provision for income tax in the current period led to an ETR of 13.8% for the nine months ended September 30, 2023 compared to the September 30, 2022 ETR of 20.5%.

The change in the ETR during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was due to the relationship of the taxable income to the consolidated pre-tax income and the impact of tax adjustments related to prior year returns recorded in the current quarter.

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

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

Segment Results of Operations

6 unchanged sentences

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 June 30, Six Months Ended June 30,

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

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

2023 2022 2023 2022

20 unchanged sentences

Pretax income (loss) attributable to Jackson Financial Inc.

3,485 2,536 2,892 9,226

Income tax expense (benefit) 712 657 399 1,890

Net income (loss) attributable to Jackson Financial Inc.

2,773 1,879 2,493 7,336

Dividends on preferred stock 11 — 24 —

Net income (loss) attributable to Jackson Financial Inc common shareholders $ 1,204 $ 3,263 $ (293) $ 5,457

Net income (loss) attributable to Jackson Financial Inc.

common shareholders $ 2,762 $ 1,879 $ 2,469 $ 7,336

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

2 unchanged sentences

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

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

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

2023 2022 2023 2022

18 unchanged sentences

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

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

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

2023 2022 2023 2022

13 unchanged sentences

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

Three Months Ended June 30, 2023 compared to Three Months Ended June 30, 2022

Three Months Ended September 30, 2023 compared to Three Months Ended September 30, 2022

Pretax Adjusted Operating Earnings

Pretax adjusted operating earnings decreased $97 million to $328 million for the three months ended June 30, 2023 from $425 million for the three months ended June 30, 2022 primarily due to:

• $32 million decrease in fee income primarily due to lower average separate account values compared to prior year;

• $26 million increase in interest expense incurred in the current year primarily related to interest on our repurchase agreements and other short-term borrowings;

Pretax adjusted operating earnings increased $24 million to $354 million for the three months ended September 30, 2023 from $330 million for the three months ended September 30, 2022 primarily due to:

• $45 million increase in spread income primarily due to $63 million higher investment income, partially offset by $18 million higher interest credited driven by resetting minimum interest crediting rates on variable annuity fixed rate options in the first quarter of 2023;

• $36 million increase in fee income primarily due to higher average separate account values compared to the prior year quarter.

These increases were partially offset by:

• $19 million increase 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 higher other policyholder benefits in 2023;

• $14 million decrease in income (loss) on operating derivatives primarily due to the increase in floating rates in 2023;

• $18 million decrease in spread income primarily due to $35 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 $17 million higher investment income;

• $14 million increase in operating costs and other expenses, net of deferrals, primarily due to an increase in incentive compensation and deferred compensation expenses in 2023.

Six Months Ended June 30, 2023 compared to Six Months Ended June 30, 2022

• $14 million increase in operating costs and other expenses, net of deferrals, primarily due to higher asset-based non-deferrable commissions, due to higher account values during the three months ended September 30, 2023, compared to the prior year quarter;

• $11 million increase in interest expense incurred in the current year primarily related to interest on our repurchase agreements and other short-term borrowings.

Nine Months Ended September 30, 2023 compared to Nine Months Ended September 30, 2022

Pretax Adjusted Operating Earnings

Pretax adjusted operating earnings decreased $166 million to $684 million for the six months ended June 30, 2023 from $850 million for the six months ended June 30, 2022 primarily due to:

Pretax adjusted operating earnings decreased $142 million to $1,038 million for the nine months ended September 30, 2023 from $1,180 million for the nine months ended September 30, 2022 primarily due to:

• $129 million decrease in fee income primarily due to lower average separate account values compared to prior year;

1 unchanged sentence

• $49 million increase in interest expense incurred in the current year primarily related to interest on our repurchase agreements and other short-term borrowings.

• $37 million decrease in spread income primarily due to $76 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 $39 million higher investment income.

These decreases were partially offset by:

• $56 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 2023, partially offset by an increase in deferred compensation expenses in 2023;

• $42 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 2023, and lower taxes, licenses, and fees compared to prior year, partially offset by an increase in deferred compensation expenses in 2023;

• $32 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;

• $8 million increase in spread income primarily due to $102 million higher investment income, partially offset by $94 million higher interest credited driven by resetting minimum interest crediting rates on variable annuity fixed rate options in the first quarter of 2023.

Account Value

4 unchanged sentences

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

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

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

2023 2022 2023 2022

12 unchanged sentences

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

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

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

2023 2022 2023 2022

8 unchanged sentences

Balance as of end of period $ 8,712 $ 8,358 $ 8,712 $ 8,358

Three Months Ended June 30, 2023 compared to Three Months Ended June 30, 2022

Three Months Ended September 30, 2023 compared to Three Months Ended September 30, 2022

Pretax Adjusted Operating Earnings

Pretax adjusted operating earnings decreased $2 million to $17 million for the three months ended June 30, 2023 from $19 million for the three months ended June 30, 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.

Pretax adjusted operating earnings increased $1 million to $21 million for the three months ended September 30, 2023 from $20 million for the three months ended September 30, 2022 primarily due to higher investment income, which was predominately offset by increased interest credited on contract holder funds due to higher crediting rates on new business and higher interest expense.

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

Six Months Ended June 30, 2023 compared to Six Months Ended June 30, 2022

Nine Months Ended September 30, 2023 compared to Nine Months Ended September 30, 2022

Pretax Adjusted Operating Earnings

Pretax adjusted operating earnings decreased $16 million to $26 million for the six months ended June 30, 2023 from $42 million for the six months ended June 30, 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.

Pretax adjusted operating earnings decreased $15 million to $47 million for the nine months ended September 30, 2023 from $62 million for the nine months ended September 30, 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 increased from $8,483 million at June 30, 2022 to $8,887 million at June 30, 2023.

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

Institutional product account value increased from $8,358 million at September 30, 2022 to $8,712 million at September 30, 2023.

The increase in account value was driven by new issuances and increased interest credited due to higher crediting rates on new business , partially offset by continued maturities of the existing contracts and funding agreements.

Closed Life and Annuity Blocks

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

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

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

2023 2022 2023 2022

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

Three Months Ended June 30, 2023 compared to Three Months Ended June 30, 2022

Three Months Ended September 30, 2023 compared to Three Months Ended September 30, 2022

Pretax Adjusted Operating Earnings

Pretax adjusted operating earnings decreased $5 million to $7 million for the three months ended June 30, 2023 from $12 million for the three months ended June 30, 2022 primarily due to:

Pretax adjusted operating earnings decreased $70 million to $6 million for the three months ended September 30, 2023 from $76 million for the three months ended September 30, 2022 primarily due to:

• $22 million increase 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 higher other policy benefits, partially offset by a greater decrease in reserves due to the payout of persistency bonuses on a sub block of business;

• $18 million decrease in income on operating derivatives primarily due to the increase in floating rates during 2023;

• $23 million increase in operating costs and other expenses, net of deferrals, primarily due to an increase in incentive compensation and deferred compensation expenses in 2023.

These decreases were partially offset by:

• $43 million decrease in death, other policy benefits, and change in policy reserves, net of (gain) loss from updating actual benefit cash flows used in the net premium ratio, partially offset by a $25 million increase in our allowance for reinsurance credit losses related to a specific reinsurer which was recently ordered into liquidation.

Six Months Ended June 30, 2023 compared to Six Months Ended June 30, 2022

• $18 million increase in operating costs and other expenses, net of deferrals, primarily due to an increase in incentive and deferred compensation expenses in 2023.

Nine Months Ended September 30, 2023 compared to Nine Months Ended September 30, 2022

Pretax Adjusted Operating Earnings

Pretax adjusted operating earnings decreased $16 million to $(13) million for the six months ended June 30, 2023 from $3 million for the six months ended June 30, 2022 primarily due to:

Pretax adjusted operating earnings decreased $86 million to $(7) million for the nine months ended September 30, 2023 from $79 million for the nine months ended September 30, 2022 primarily due to:

• $70 million decrease in income on operating derivatives primarily due to the increase in floating rates during 2023;

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These decreases were partially offset by:

• $107 million decrease in death, other policy benefits, and change in policy reserves, net of (gain) loss from updating actual benefit cash flows used in the net premium ratio, partially offset by a $25 million increase in our allowance for reinsurance credit losses related to a specific reinsurer which was recently ordered into liquidation.

• $85 million decrease in death, other policy benefits, and change in policy reserves, net of (gain) loss from updating actual benefit cash flows used in the net premium ratio, primarily due to a greater release reserves due to the payout of persistency bonuses on a sub block of business, partially offset by a $25 million increase in our allowance for reinsurance credit losses related to a specific reinsurer which was recently ordered into liquidation.

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

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

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

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

2023 2022 2023 2022

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Pretax Adjusted Operating Earnings $ (26) $ (12) $ (116) $ 2

Three Months Ended June 30, 2023 compared to Three Months Ended June 30, 2022

Three Months Ended September 30, 2023 compared to Three Months Ended September 30, 2022

Pretax Adjusted Operating Earnings

Pretax adjusted operating earnings decreased $55 million to $(47) million for the three months ended June 30, 2023 from $8 million for the three months ended June 30, 2022 primarily due to the following:

• $42 million increase in operating costs and other expenses, net of deferrals, primarily due to an increase in incentive compensation and deferred compensation expenses in 2023;

Pretax adjusted operating earnings decreased $14 million to $(26) million for the three months ended September 30, 2023 from $(12) million for the three months ended September 30, 2022 primarily due to the following:

• $6 million decrease in net investment income;

• $4 million decrease in income on operating derivatives primarily due to the increase in floating rates in 2023.

Six Months Ended June 30, 2023 compared to Six Months Ended June 30, 2022

Nine Months Ended September 30, 2023 compared to Nine Months Ended September 30, 2022

Pretax Adjusted Operating Earnings

Pretax adjusted operating earnings decreased $104 million to $(90) million for the six months ended June 30, 2023 from $14 million for the six months ended June 30, 2022 primarily due to the following:

Pretax adjusted operating earnings decreased $118 million to $(116) million for the nine months ended September 30, 2023 from $2 million for the nine months ended September 30, 2022 primarily due to the following:

• $58 million increase in operating costs and other expenses, net of deferrals, primarily due an increase in deferred compensation expenses in 2023;

• $30 million decrease in income on operating derivatives primarily due to the increase in floating rates in 2023;

• $11 million higher interest expense incurred in the current year primarily related to our senior notes.

• $16 million decrease in net investment income.

Item 2 | Management’s Discussion and Analysis | Investments

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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.

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 is affected 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.

Our overall investment strategy seeks 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.

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

As of June 30, 2023, Apollo managed $17.9 billion of cash and investments and other third-party investment managers managed approximately $208 million of investments.

As of September 30, 2023, Apollo managed $16.7 billion of cash and investments and other third-party investment managers managed approximately $181 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.

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

As of June 30, 2023 and December 31, 2022, we had total investments of $64.3 billion and $65.9 billion, respectively.

Item 2 | Management’s Discussion and Analysis | Investments

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The following table summarizes the carrying values of our investments:

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

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

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Total investments $ 41,569 $ 19,554 $ 61,123 $ 43,073 $ 22,873 $ 65,946

Available-for-sale debt securities decreased to $42,063 million at June 30, 2023 from $42,489 million at December 31, 2022, primarily due to an increase in net unrealized losses.

The amortized cost of available-for-sale debt securities decreased from $48,798 million as of December 31, 2022 to $47,872 million as of June 30, 2023.

Further, net unrealized losses were $6,286 million as of December 31, 2022 compared to $5,792 million as of June 30, 2023.

Available-for-sale debt securities decreased to $39,078 million at September 30, 2023 from $42,489 million at December 31, 2022, primarily due to dispositions and an increase in net unrealized losses.

The amortized cost of available-for-sale debt securities decreased from $48,798 million as of December 31, 2022 to $46,203 million as of September 30, 2023.

Further, net unrealized losses, after adjusting for allowance for credit loss, were $6,286 million as of December 31, 2022 compared to $7,099 million as of September 30, 2023.

Other Invested Assets

Other invested assets decreased to $3,503 million at June 30, 2023 from $3,595 million at December 31, 2022, primarily due to a sale of limited partnerships in the funds withheld portfolio.

Other invested assets decreased to $3,553 million at September 30, 2023 from $3,595 million at December 31, 2022 .

Debt Securities

At June 30, 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):

At September 30, 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):

Item 2 | Management’s Discussion and Analysis | Investments

June 30, 2023 Amortized

September 30, 2023 Amortized

Cost Allowance for Credit Loss Gross

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The following table summarizes our holdings:

June 30, December 31,

September 30, December 31,

(in millions)

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Mortgage Loans

C ommercial mortgage loans of $9.7 billion and $10.2 billion at June 30, 2023 and December 31, 2022, respectively, are reported net of an allowance for credit losses of $154 million and $91 million at each date, respectively.

At June 30, 2023, commercial mortgage loans were collateralized by properties located in 37 states, the District of Columbia, and Europe.

Residential mortgage loans of $1.1 billion and $1.3 billion at June 30, 2023 and December 31, 2022, respectively, are reported net of an allowance for credit losses of $8 million and $4 million at each date, respectively.

At September 30, 2023, commercial mortgage loans were collateralized by properties located in 37 states, the District of Columbia, and Europe.

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:

June 30, December 31,

September 30, December 31,

(in millions)

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Total Commercial (1)

$ 9,594 $ 10,241

Residential (2)

Total $ 10,612 $ 11,549

(1) N et of an allowance for credit losses of $195 million and $91 million at September 30, 2023 and December 31, 2022, respectively.

(2) Net of an allowance for credit losses of $5 million and $4 million at September 30, 2023 and December 31, 2022, respectively.

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:

June 30, December 31,

September 30, December 31,

(in millions)

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

June 30, December 31,

September 30, December 31,

(in millions)

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Total mortgage loans $ 10,612 $ 11,549

(1) As of June 30, 2023 and December 31, 2022, includes $28 million and $41 million of loans purchased when the loans were greater than 90 days delinquent and $9 million and $12 million of loans in process of foreclosure, respectively, and are supported with insurance or other guarantees provided by various governmental programs.

(1) As of September 30, 2023 and December 31, 2022, includes $26 million and $41 million of loans purchased when the loans were greater than 90 days delinquent and $7 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:

September 30,

(in millions)

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Balance at end of period $ 200 $ 79

(1) At June 30, 2023, the $82 million increase in the allowance for credit loss resulted primarily from two mezzanine loans experiencing stress around payoff, or refinance, of the loans for which the Company continues to assess options with the lending group and borrowers.

(1) At September 30, 2023, the $105 million allowance for credit losses are primarily from two mezzanine loans experiencing stress around payoff, or refinance, of the loans for which the Company continues to assess options with the lending group and borrowers.

Item 2 | Management’s Discussion and Analysis | Investments

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

At June 30, 2023, there was $13 million of recorded investment, $14 million of unpaid principal balance, no related loan allowance, $15 million of average recorded investment, and no investment income recognized on impaired residential mortgage loans.

Accrued interest amounting to $2 million and nil were written off as of September 30, 2023 and 2022, respectively, relating to loans that were greater than 90 days delinquent or in the process of foreclosure.

At September 30, 2023, there was $23 million of recorded investment, $26 million of unpaid principal balance, no related loan allowance, $17 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):

June 30, 2023

Contractual/ Assets Liabilities Net

Notional Fair Fair Fair Value

Value Value Asset (Liability)

Freestanding derivatives

Cross-currency swaps $ 1,854 $ 108 $ 143 $ (35)

Equity index call options 12,000 486 — 486

Equity index futures (2)

Equity index put options 41,500 283 — 283

Interest rate swaps 7,728 5 241 (236)

Put-swaptions 19,500 — 1,362 (1,362)

Interest rate futures (2)

Total return swaps 1,460 — 40 (40)

Total freestanding derivatives 135,758 882 1,786 (904)

Embedded derivatives

Fixed index annuity embedded derivatives (3)

N/A — 970 (970)

Registered index linked annuity embedded derivatives (3)

N/A — 639 (639)

Total embedded derivatives N/A — 1,609 (1,609)

Derivatives related to funds withheld under reinsurance treaties

Cross-currency swaps 158 20 1 19

Cross-currency forwards 1,401 44 29 15

Funds withheld embedded derivative (4)

N/A 2,901 — 2,901

Total derivatives related to funds withheld under reinsurance treaties 1,559 2,965 30 2,935

Total $ 137,317 $ 3,847 $ 3,425 $ 422

(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.

Item 2 | Management’s Discussion and Analysis | Investments

December 31, 2022

Contractual/ Assets Liabilities Net

Notional Fair Fair Fair Value

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)

Equity index put options 30,500 958 — 958

Interest rate swaps 7,728 5 231 (226)

Interest rate swaps - cleared (2)

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.

Note 5 – Derivative Instruments of Notes to Condensed Consolidated Financial Statements presents the aggregate contractual or notional amounts and the fair values of our freestanding and embedded derivatives instruments as of September 30, 2023 and December 31, 2022.

Evaluation of Invested Assets

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Amounts for actuarial liabilities are computed and reported on the Condensed Consolidated Financial Statements in conformity with GAAP.

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

As of June 30, 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.

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 recast to reflect the adoption of LDTI in our Current Report on Form 8-K filed May 10, 2023.

Our policy and contract liabilities includes separate account liabilities, reserves for future policy benefits and claims payable and other contract holder funds.

As of September 30, 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:

June 30, 2023 Separate Accounts Reserves for future policy benefits Other contract holder funds Market Risk Benefits Total

September 30, 2023 Separate Accounts Reserves for future policy benefits Other contract holder funds Market Risk Benefits Total

(in millions)

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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 $639 million and $205 million at June 30, 2023 and December 31, 2022 , respectively.

(2) Includes the embedded derivative liabilities related to fixed index annuity in other contract holder funds of $970 million and $931 million at June 30, 2023 and December 31, 2022 , respectively.

(1) Includes the embedded derivative liabilities in other contract holder funds related to RILA of $676 million and $205 million at September 30, 2023 and December 31, 2022 , respectively.

(2) Includes the embedded derivative liabilities related to fixed index annuity in other contract holder funds of $956 million and $931 million at September 30, 2023 and December 31, 2022 , respectively.

Item 2 | Management’s Discussion and Analysis | Policy and Contract Liabilities

As of June 30, 2023, $212.7 billion or 77% of our policy and contract liabilities were backed by separate account assets.

As of September 30, 2023:

• $202.9 billion or 76% 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 June 30, 2023, $45.0 billion of our policy and contract liabilities were backed by our investment portfolio and $20.3 billion reinsured by Athene, were backed by funds withheld assets.

As of June 30, 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.

• $43.2 billion of our policy and contract liabilities were backed by our investment portfolio.

• $19.5 billion of our policy and contract liabilities were reinsured by Athene and backed by funds withheld assets.

As of September 30, 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 June 30, 2023, 94% of fixed annuity, fixed-indexed annuity, and the fixed accounts of RILA and variable annuity correspond to crediting rates that are at the guaranteed minimum crediting rate.

As of September 30, 2023, 94% of fixed annuity, fixed-indexed annuity, and the fixed accounts of RILA and variable annuity correspond to crediting rates that are at the guaranteed minimum crediting rate.

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.

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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 six months ended June 30, 2023 and 2022.

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 alternate sources of liquidity and capital described herein.

The discussion below describes our liquidity and capital resources for the nine months ended September 30, 2023 and 2022.

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

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions)

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

Cash flows provided by (used in) operating activities increased $495 million to $2,547 million for the six months ended June 30, 2023 from $2,052 million for the six months ended June 30, 2022.

Cash flows provided by (used in) operating activities increased $735 million to $3,676 million for the nine months ended September 30, 2023 from $2,941 million for the nine months ended September 30, 2022.

This was primarily due to the timing of settlements of receivables and payables as well as lower acquisition costs.

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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 $5,419 million to $(2,804) million during the six months ended June 30, 2023 from $2,615 million during the six months ended June 30, 2022.

Cash flows provided by (used in) investing activities decreased $3,154 million to $(685) million during the nine months ended September 30, 2023 from $2,469 million during the nine months ended September 30, 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.

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

Cash flows provided by (used in) financing activities increased $91 million to $(1,941) million during the six months ended June 30, 2023 from $(2,032) million during the six months ended June 30, 2022.

This increase was primarily due to proceeds from repurchase agreements and issuance of our preferred stock, partially offset by decreased deposits driven by lower variable annuity sales in 2023 compared to 2022.

Cash flows provided by (used in) financing activities decreased $1,827 million to $(4,527) million during the nine months ended September 30, 2023 from $(2,700) million during the nine months ended September 30, 2022.

This decrease was primarily due to decreased deposits driven by lower variable annuity sales in 2023 compared to 2022, partially offset by lower payments on repurchase agreements and proceeds from the issuance of our preferred stock.

Statutory Capital

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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 June 30, 2023, our insurance companies were well in excess of the minimum required capital levels.

As of September 30, 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.

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At times the cash surrender value floor materially affects the CAL calculation in addition to reserve levels.

We are considering additional methods of moderating the impact of the cash surrender value floor on TAC, CAL and RBC.

We are pursuing additional methods of moderating the impact of the cash surrender value floor on TAC, CAL and RBC.

The implementation of any such method would be subject to Board and regulatory approval.

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Our principal sources of liquidity and our anticipated capital position are described in the following paragraphs.

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, preferred stock and other 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.

Any declaration of cash dividends or stock repurchases is 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, preferred stock and other 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 stock or approve any further increase in the existing, or any new, common stock repurchase program, or as to the amount of any such cash dividends or stock repurchases.

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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”).

On March 13, 2023, the Company issued and sold depositary shares representing interests in our Fixed-Rate Reset Noncumulative Perpetual Preferred Stock, Series A.

After underwriting discounts and expenses, we received net proceeds of approximately $533 million.

See Note 20 of the Notes to Condensed Consolidated Financial Statements for more information.

During the second quarter of 2023, we paid a cash dividend of $0.59444 per depositary share and $0.62 per share on JFI's preferred and common stock totaling $13 million and $53 million, respectively.

On August 7, 2023, our Board of Directors approved a third quarter cash dividend on JFI's common stock of $0.62 per share, payable on September 14, 2023 to shareholders of record on August 31, 2023.

The Company also declared a cash dividend of $0.50 per depositary share (the "Depositary Shares"), 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 October 2, 2023, to Depositary Shares shareholders of record at the close of business on August 31, 2023.

We repurchased a total of 1,394,797 shares and a total of 3,116,534 shares of common stock for an aggregate purchase price of $47 million and $117 million in the three and six months ended June 30, 2023, respectively, which were funded with cash on hand.

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

During the third quarter of 2023, we paid a cash dividend of $0.50 per depositary share and $0.62 per share on JFI's preferred and common stock totaling $11 million and $52 million, respectively.

On November 6, 2023, our Board of Directors approved a fourth quarter cash dividend on JFI's common stock of $0.62 per share, payable on December 14, 2023 to shareholders of record on November 30, 2023.

The Company also declared a cash dividend of $0.50 per depositary share.

The dividend will be payable on January 2, 2024, to Depositary Shares shareholders of record at the close of business on November 30, 2023.

We repurchased a total of 1,873,727 shares and a total of 4,990,261 shares of common stock for an aggregate purchase price of $71 million and $188 million in the three and nine months ended September 30, 2023, respectively, which were funded with cash on hand.

See Note 20 of the Notes to Condensed Consolidated Financial Statements in this report for further information on dividends to shareholders and share repurchases.

During the second quarter of 2023, Jackson Financial Inc.

purchased certain private equity fund investments from Jackson National Life Insurance Company for $452 million, with a carrying value of $502 million, as part of rebalancing Jackson National Life Insurance Company's portfolio mix.

Jackson Financial Inc.

expects to divest these investments in future quarters.

The Company recognized a $50 million loss expected from this future divestiture in Net Investment Income within the consolidated financial statements as of June 30, 2023, and has excluded this loss from adjusted operating earnings as a non-operating item.

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

During the second quarter of 2023, Jackson Financial purchased certain private equity fund investments from Jackson National Life Insurance Company for $452 million, with a carrying value of $502 million, as part of rebalancing Jackson National Life Insurance Company's portfolio mix.

Jackson Financial sold these investments in October 2023.

The Company estimated a loss of approximately $93 million which it recognized in Net Investment Income within the consolidated financial statements for the nine months ended September 30, 2023, of which $76 million of this loss was attributable to Jackson Financial.

Distributions from our Insurance Company Subsidiaries

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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.

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

In addition, for the three and nine months ended September 30, 2023, Brooke Life paid $45 million and $90 million of interest associated with the $2 billion surplus note between Brooke Life and Jackson Finance, LLC ("Jackson Finance"), a subsidiary of Jackson Financial.

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.

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We believe our insurance company subsidiaries have sufficient statutory capital and surplus to maintain their desired financial strength rating.

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

Insurance Company Subsidiaries’ Liquidity

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

As of June 30, 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.

As of September 30, 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.

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.

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Collateral posting requirements can result in material liquidity needs for our insurance subsidiaries.

As of June 30, 2023, we were in a net collateral payable position of $498 million, which is down from $689 million as of December 31, 2022.

As of September 30, 2023, we were in a net collateral payable position of $450 million, which is down from $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 June 30, 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.

As of September 30, 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.

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

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 June 30, 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 $21.1 billion.

As of September 30, 2023, the portfolio of cash, short-term investments and privately- and publicly-traded securities and equities that are unencumbered and unrestricted to sale, amounted to $21.2 billion.

Our Indebtedness

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

In November 2021 and June 2022, the Company issued an aggregate of $2,350 million principal amount of its senior notes, shown as Long-term debt on the Condensed Consolidated Balance Sheet.

The proceeds of the note issuances were used, together with cash on hand, to retire the Company’s previously outstanding term loans.

$600 million of these notes mature on November 22, 2023, and are expected to be paid with cash on hand at maturity.

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

Revolving Credit and Short-Term Borrowing Facilities

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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 June 30, 2023.

We were in compliance with these covenants at September 30, 2023.

Jackson is a party to an Uncommitted Money Market Line Credit Agreement dated April 6, 2023 among Jackson, Jackson Financial, and Société Générale.

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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.

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

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.

These surplus notes 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 $7 million and $12 million for the three and six months ended June 30, 2023, respectively and interest expense on the notes was $5 million and $10 million for the three and six months ended June 30, 2022, respectively.

Interest expense on the notes was $6 million and $18 million for the three and nine months ended September 30, 2023, respectively and interest expense on the notes was $5 million and $15 million for the three and nine months ended September 30, 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.

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 that the director determines to be available for such payments under Michigan Insurance Law.

Federal Home Loan Bank

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

As of June 30, 2023 and December 31, 2022, Jackson held a bank loan with an outstanding balance of $58 million and $62 million, respectively.

As of September 30, 2023 and December 31, 2022, Jackson held a bank loan with an outstanding balance of $58 million and $62 million, respectively.

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

Financial Strength Ratings

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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 August 3, 2023, the financial strength ratings of our principal insurance subsidiaries were as follows :

Best Fitch Moody’s S&P

As of November 3, 2023, the financial strength ratings of our principal insurance subsidiaries were as follows :

Best Fitch Moody’s (1)

Jackson National Life Insurance Company

Rating A A A3 A

Outlook stable stable negative stable

Outlook stable stable stable stable

Jackson National Life Insurance Company of New York

Rating A A A3 A

Outlook stable stable negative stable

Outlook stable stable stable stable

Brooke Life Insurance Company

Outlook stable

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

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.

(1) On October 20, 2023, Moody's downgraded Jackson Financial Inc.'s issuer rating from Baa2 to Baa3 as well as the insurance financial strength rating for Jackson National Life Insurance Company and Jackson National Life Insurance Company of New York from A2 to A3 and changed its outlook from "negative" to "stable."

In evaluating our 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.

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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.

Item 2 | Management’s Discussion and Analysis | Impact of Recent Accounting Pronouncements

Impact of Recent Accounting Pronouncements

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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, as recast to reflect the adoption of LDTI in our Current Report on Form 8-K filed May 10, 2023 .

Item 2 | Management’s Discussion and Analysis | Summary of Critical Accounting Estimates

• income taxes and the ability to realize certain deferred tax benefits

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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.

For non-participating traditional life insurance contracts and limited pay life-contingent contracts , which include 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.

Item 2 | Management’s Discussion and Analysis | Summary of Critical Accounting Estimates

Reserves for future policy benefits for non-participating traditional and limited-payment insurance contracts are measured using the net premium ratio (NPR) measurement model.

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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.

Item 2 | Management’s Discussion and Analysis | Summary of Critical Accounting Estimates

Additional Liabilities - Universal Life-type

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See Note 9 - Reserve for Future Policy Benefits and Claims Payable of the Notes to Condensed Consolidated Financial Statements for additional information on these accounting policies.

Item 2 | Management’s Discussion and Analysis | Summary of Critical Accounting Estimates

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.

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 market risk benefits, or MRBs.

All long-duration insurance contracts and certain investment contracts are subject to MRB evaluation.

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Withdrawal rates on contracts with a GMWB vary based on attained age, tax qualification status, GMWB type and GMWB benefit provisions.

Item 2 | Management’s Discussion and Analysis | Summary of Critical Accounting Estimates

• 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.

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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.

For additional information regarding our account value by optional guarantee benefit, see Business–Our Segments–Retail Annuities–Variable Annuities in our 2022 Annual Report.

Item 2 | Management’s Discussion and Analysis | Summary of Critical Accounting Estimates

Variable annuity guaranteed benefit features classified as MRBs, which have explicit fees, are measured using the attributed fee method.

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See Note 12 - Market Risk Benefits of the Notes to Condensed Consolidated Financial Statements for additional information on these accounting policies.

Item 2 | Management’s Discussion and Analysis | Summary of Critical Accounting Estimates

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.

We periodically review actual and anticipated experience compared to the previously mentioned 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.

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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.

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 or MRB.

Accordingly, the reinsured MRB is recorded at fair value using internally developed models consistent with those used to value our direct MRBs.

Item 2 | Management’s Discussion and Analysis | Summary of Critical Accounting Estimates

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 June 30, 2023.

See Note 13 - Long-term Debt regarding lender commitment under the Company's revolving credit facility and Note 16 - Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements regarding unfunded investment commitments to limited partnerships and limited liability companies.

Item 3 | Quantitative and Qualitative Disclosures about Market Risk

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis