What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-08 compared with 2023-11-08 · 275 added, 476 removed, 842 unchanged (47% of the section changed)

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Risk Factors and Part II, Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 1, 2023, (the "2022 Annual Report"), as Part II, Item 7 was recast to reflect the adoption of LDTI in our Current Report on Form 8-K filed May 10, 2023, and elsewhere in Jackson Financial Inc.’s filings with the U.S.

Securities and Exchange Commission (the "SEC").

Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 28, 2024, (the "2023 Annual Report"), and elsewhere in Jackson Financial Inc.’s filings with the U.S.

Securities and Exchange Commission.

Except as required by law, Jackson Financial Inc.

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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.

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

Brooke Re Brooke Life Reinsurance Company, our subsidiary, and a Michigan based captive reinsurer

Jackson Finance Jackson Finance, LLC, our subsidiary

JNAM Jackson National Asset Management LLC, our subsidiary.

PPMH PPM Holdings, Inc., our subsidiary

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ACL Allowance for credit loss

Account value or account balance The amount of money in a customer’s account.

Account value ("AV") or account balance The amount of money in a customer’s account.

For example, the value increases with additional premiums and investment gains and it decreases with withdrawals, investment losses and fees.

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and its affiliates and permitted transferees, including Athene Co-Invest Reinsurance Affiliate 1A Ltd.

Athene Reinsurance Transaction The funds withheld coinsurance agreement entered into with Athene on June 18, 2020, effective June 1, 2020, to reinsure a 100% quota share of a block of our in-force fixed and fixed index annuity liabilities in exchange for approximately $1.2 billion in ceding commissions

Athene Reinsurance Transaction The funds withheld coinsurance agreement with Athene, entered on June 18, 2020, and effective June 1, 2020, to reinsure a 100% quota share of a block of our in-force fixed and fixed index annuity liabilities in exchange for approximately $1.2 billion in ceding commissions.

AUM ("Assets under management") Investment assets that are managed by one of our subsidiaries and includes:

(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.

(i) assets managed by PPM, including our investment portfolio (but excluding assets held in funds withheld accounts for reinsurance transactions), (ii) third-party assets (including our former parent and its affiliates), and (iii) the separate account assets of our retail annuities 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 and fees due in respect of those guaranteed benefits.

The death benefit and living benefit within the same contract may have different benefit bases.

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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.

The recognition of these costs has been deferred, and the deferred amounts are shown on the balance sheet as an asset, which is 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.

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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.

Credited interest rates are guaranteed not to change for certain limited periods of time, after which rates may reset.

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

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GIC Guaranteed investment contract

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.

Guarantee Fees Fees charged on our annuity contracts for optional benefit guarantees

GMAB ("Guaranteed minimum accumulation benefit") An add-on benefit (enhanced benefits available for an additional cost) that entitles an owner to a minimum payment, typically in lump-sum, after a set period of time, referred to as the accumulation period.

The minimum payment is based on the benefit base, which could be greater than the underlying account value.

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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 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 after reflecting gross premium inflows and surrenders, withdrawals and benefit payment outflows.

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

Net flows do not include investment performance, interest credited to customer accounts and policy charges.

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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.

A formal calculation is made annually during the fourth quarter.

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.

RILA A registered index-linked annuity, which offers market index-linked investment options, subject to a cap, and a variety of guarantees designed to modify or limit losses.

RMBS Residential mortgage-backed securities

Variable annuity A type of annuity that offers tax-deferred investment into a range of asset classes and a variable return, which offers insurance features related to potential future income payments.

Variable annuity An annuity that offers tax-deferred investment into a range of asset classes and a variable return, which offers insurance features related to potential future income payments.

VIE Variable interest entity

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

The following discussion and analysis of our financial condition and results of operations should be read in its entirety and in conjunction with the Condensed Consolidated Financial Statements and related notes contained in Part I, Item 1 of this report, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in our 2022 Annual Report, as recast to reflect the adoption of LDTI in our Current Report on Form 8-K filed May 10, 2023.

Jackson Financial Inc.

(“Jackson Financial” or “JFI”) along with its subsidiaries (collectively, the “Company,” which also may be referred to as “we,” “our” or “us”), is a financial services company focused on helping Americans grow and protect their retirement savings and income to enable them to pursue financial freedom for life.

Jackson Financial, domiciled in the United States (“U.S.”), was previously a subsidiary of Prudential plc (“Prudential”), London, England and was the holding company for Prudential’s U.S.

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

(“Jackson Financial” or “JFI”) along with its subsidiaries (collectively, the “Company,” which also may be referred to as “we,” “our” or “us”), is a financial services company.

Jackson Financial, domiciled in the state of Delaware, United States (“U.S.”), was previously a subsidiary of Prudential plc (“Prudential”), London, England and was the holding company for Prudential’s U.S.

On September 13, 2021, the Company demerged from Prudential (the "Demerger").

Jackson Financial’s primary operating subsidiary, Jackson National Life Insurance Company ("Jackson"), 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, variable universal life and term life insurance products in all 50 states and the District of Columbia.

Executive Summary

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

You should read this report, together with our 2022 Annual Report, as recast to reflect the adoption of LDTI in our Current Report on Form 8-K filed May 10, 2023, in its entirety for a more detailed description of events, trends, uncertainties, risks and critical accounting estimates affecting us.

You should read this report, together with our 2023 Annual Report, in their entirety for a more detailed description of events, trends, uncertainties, risks and critical accounting estimates affecting us.

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

We believe that we are uniquely positioned in our markets because of our differentiated products, well-known brand and disciplined risk management.

Our market leadership is supported by our efficient and scalable operating platform and industry-leading distribution network.

Our market position is supported by our efficient and scalable operating platform and industry-leading distribution network.

We believe these core strengths will enable us to grow profitably as an aging, U.S.

population transitions into retirement.

We 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.

We earn revenues predominantly from fee income, spread income resulting from what we earn on investments versus the interest we credit 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.

Due to funds withheld reinsurance arrangements, including the Athene Reinsurance Transaction, we hold significant assets whose investment performance accrues to the benefit of the related reinsurer.

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.

generally accepted accounting principles ("U.S.

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 use U.S.

GAAP as the basis for hedging liabilities.

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.

As a result, the changes in the fair value of the derivatives used as part of our overall 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.

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

GAAP measures.

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

We manage our business through three segments:

Retail Annuities, Institutional Products, and Closed Life and Annuity Blocks.

We report certain activities and items that are not included in these segments, including the results of PPM Holdings, Inc., the holding company of PPM, which manages the majority of our general account investment portfolio, in Corporate and Other.

See Note 3 of Notes to Condensed Consolidated Financial Statements for further information on our segments.

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

We report in Corporate and Other activities and items that are not included in these segments, including the results of PPM Holdings, Inc., the parent holding company of PPM America Inc.

("PPM"), which manages the majority of our general account investment portfolio.

See Note 3 - Segment Information of the Notes to Condensed Consolidated Financial Statements for further information on our segments.

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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The table below presents selected financial and operating measures:

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions)

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(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.

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

GAAP measures.

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• 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.

Since January 1, 2024 through March 31, 2024, we have returned $172 million to our common shareholders consisting of $56 million in dividends and $116 million in common share repurchases.

Our capital return target for common shareholders for 2024 is $550-$650 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.

Share repurchases, net of issuances for our share-based compensation, have reduced our outstanding shares of common stock from 78,660,221 at December 31, 2023 to 76,621,374 at March 31, 2024.

See Note 19 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

• Brooke Life Reinsurance Company (“Brooke Re”):

During the first quarter of 2024, Jackson entered into a 100% coinsurance with funds withheld reinsurance transaction with Brooke Re with all economics of the transaction effective as of January 1, 2024.

Jackson and Brooke Re are both direct subsidiaries of Brooke Life.

The transaction primarily provides for the cession from Jackson to Brooke Re of liabilities associated with certain guaranteed benefit riders under our variable annuity contracts and similar products of Jackson (“market risk benefits”), both in-force on the effective date of the reinsurance agreement and written in the future ( i.e.

, on a “flow” basis) as well as related future fees, claims and other benefits, and maintenance expenses in exchange for a ceding commission for the in-force business.

Jackson retains the variable annuity base contract, the annuity contract administration of the ceded business, and responsibility for investment management of the assets in the funds withheld account supporting the ceded liabilities.

Brooke Re paid a ceding commission of approximately $1.2 billion to Jackson in connection with the execution of the reinsurance transaction.

The reinsurance transaction eliminates upon consolidation at JFI.

Holding company liquidity at JFI was not impacted by the transaction.

Brooke Re is a Michigan captive insurer regulated by the Michigan Department of Insurance and Financial Services and created in the first quarter of 2024 for the express purpose of serving as the counterparty to the reinsurance transaction with Jackson described above.

Brooke Re was capitalized with assets contributed from Brooke Life of approximately $1.9 billion originating from Jackson as a return of capital to Brooke Life.

Brooke Re utilizes a modified GAAP approach primarily related to market risk benefits, with the intent to increase alignment between assets and liabilities in response to changes in economic factors.

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

The transaction mitigates the impact of the cash surrender value floor on Jackson’s total adjusted capital, statutory required capital, and risk-based capital ("RBC") ratio and enables more efficient economic hedging of the underlying risks of Jackson’s business.

This outcome serves the interests of policyholders by protecting statutory capital through diminished non-economic hedging and related costs.

Overall, this transaction allows us to optimize our hedging, stabilize capital generation, and produce more predictable financial results going forward.

Key Operating Measures

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

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

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

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

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

2023 2022 2023 2022

Three Months Ended March 31,

(in millions)

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(1) Includes payout annuities

Lower retail sales were primarily due to decreased sales of our variable annuities with lifetime living benefits, partially offset by RILA sales.

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

Higher retail sales were primarily due to increased RILA sales, partially offset by decreased sales of our variable annuities with lifetime living benefits.

In addition, sales of our institutional products were lower compared to 2023, reflecting our opportunistic approach to this business, depending on both the risk-adjusted return on investment opportunities available and the prevailing cost of funding required by purchasers.

Account Value

Account value generally equals the account value of our variable annuities, RILA, fixed index annuities, fixed annuities, interest sensitive life, and institutional products.

Account value ("AV") generally equals the account value of our variable annuities, RILA, fixed index annuities, fixed annuities, interest sensitive life, and institutional products.

It reflects the total amount of customer invested assets that have accumulated within a respective product and equals cumulative customer contributions, which includes gross deposits or premiums, plus accrued credited interest plus or minus the impact of market movements, as applicable, less withdrawals and various fees.

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

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

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(in millions)

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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 September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

(in millions)

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Fixed Annuity (1)

10 58 (11) 45

Payout Annuity (1)

(18) (22) (55) (66)

Total Retail Annuities Net Flows (1)

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(1) Net of reinsurance.

Net flows, net of reinsurance, decreased for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, driven by increased variable annuity surrenders and withdrawals, partially offset by increased RILA 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 September 30, 2023 and December 31, 2022:

September 30, 2023 December 31, 2022

The following table shows variable annuity account value and benefit base as of March 31, 2024 and December 31, 2023:

March 31, 2024 December 31, 2023

Account Value Benefit Base Account Value Benefit Base

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Return of Premium 183,376 136,476 174,841 137,287

Highest Anniversary Value 12,313 13,738 12,128 14,272

Highest Anniversary Value ("HAV") 13,698 13,273 13,213 13,522

Rollup 3,426 4,402 3,347 4,484

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Assets Under Management

AUM, or assets under management, refers to investment assets that are managed by one of our subsidiaries and includes:

AUM, or assets under management includes:

(i) investment assets managed by one of our subsidiaries, 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 investment assets of our Retail Annuities segment managed and administered by another subsidiary, JNAM.

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.

September 30, December 31,

March 31, December 31,

(in millions)

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The level of interest rates and shape of the yield curve, credit and equity market performance and equity volatility, regulation, tax policy, the level of U.S.

employment, inflation and the overall economic growth rate can affect both our short- and long-term profitability.

Monetary and fiscal policy in the U.S., or similar actions in foreign nations, could result in increased volatility in financial markets, including interest rates, currencies and equity markets, and could impact our business in both the short-term and medium-term.

Political events, including 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.

employment, inflation and the overall U.S.

economic growth rate can affect both our short- and long-term profitability.

Government actions, including responses to future pandemics, civil unrest, tariffs, sanctions or other barriers to international trade, and the effects that these or other government events could have on levels of U.S.

economic activity, could also impact our business through any of their individual impacts on consumers’ behavior or on financial markets.

In the short- to medium-term, the potential for increased volatility could pressure sales and reduce demand for our products as consumers consider purchasing alternative products to meet their objectives.

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

In early March through late April 2023, several regional U.S.

banks were taken over by federal regulators with the Federal Deposit Insurance Corporation ("FDIC") named as the receiver.

These bank failures raised concern among investors and depositors regarding the solvency and liquidity of regional banks across the country, leading to increased stress on the banking sector.

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 September 30, 2023.

Equity Market Environment

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This variance may result in our hedge assets outperforming or underperforming the customer assets they are intended to match.

This variance may be exacerbated during periods of high volatility, leading to a mismatch in our hedge results relative to our hedge targets and U.S GAAP results.

This variance may be exacerbated during periods of high volatility, leading to a mismatch in our hedge results relative to our hedge targets and U.S.

GAAP results.

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

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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.

• Periods of sharp rises in interest rates, as we have seen as a result of the Federal Reserve’s past 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, 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, which are reduced with an increase in interest rates.

Rising interest rates also impact the hedging results of our variable annuity business as the market value of interest rate hedges decline, thereby driving hedging losses.

We would expect lower hedging costs and reduced levels of hedging going forward after such an increase in 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.

This creates an incentive for our customers to lapse their products in an environment where selling assets causes us to realize losses.

• Additionally, our statutory total adjusted capital ("TAC") may be negatively impacted by rising rates due to minimum required reserving levels (i.e., cash surrender value floor) when reserve releases are limited and unable to offset interest rate hedging losses.

The 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 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 such adoption and implementation.

• With the execution of the Brooke Re transaction in the first quarter of 2024, we are able to largely moderate the impact of the cash surrender value floor going forward.

In the past, our statutory total adjusted capital ("TAC") has been 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 risk-based capital, or RBC, ratio increased or decreased depending on the interaction between movements in TAC and movements in statutory required capital (the company action level, or "CAL”).

• 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.

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Many of our annuities have GMICRs that reset at contractually specified times after issue, subject to a contractually specified minimum GMICR.

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

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

In a rising interest rate environment, these GMICRs can increase over time.

Conversely, in a falling interest rate environment the 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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Conversely, as credit spreads tighten, the fair value of our existing investment portfolio generally increases, and the yield available on new investment purchases decreases.

While changing credit spreads impact the fair value of our investment portfolio, this revaluation is generally reflected in our AOCI.

While changing credit spreads impact the fair value of our investment portfolio, this revaluation is generally reflected in our accumulated other comprehensive income, or AOCI.

The revaluation will impact net income for realized gains or losses from the sale of securities, the change in fair value of trading securities or securities carried at fair value under the fair value election, or potential changes in the allowance for credit loss ("ACL").

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Our insurance company subsidiaries are regulated primarily at the state level, with some policies and products also subject to federal regulation.

As such, regulations recently approved or currently under review at both the U.S.

federal and state 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.

In particular, the following could materially impact our business:

New federal and state regulations could impact our business model, including statutory reserve and capital requirements.

Our ability to respond to changes in regulation and other legislative activity are critical to our long-term financial performance.

T he following regulations could materially impact our business:

Department of Labor 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.

Effective February 16, 2021, the Department of Labor (the “DOL”) issued a regulatory action that defined what constitutes fiduciary “investment advice” to Employee Retirement Income Security Act ("ERISA") plans and individual retirement accounts ("IRAs"), essentially broadening the circumstances under which financial institutions, including insurance companies, could be considered fiduciaries under ERISA or the Federal income tax code.

On April 23, 2024, the DOL adopted a final rule that revised the 2021 definition of fiduciary and related Prohibited Transaction Exemptions (PTE) (combined, the “Fiduciary Advice Rule” or “final rule”), redefining what constitutes fiduciary “investment advice” to ERISA plans and IRAs.

The final rule 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.

The final rule also includes revisions to two PTEs (2020-02 and 84-24) that govern the sale of annuities.

PTE 2020-02 governs the sale of annuity products by financial institutions, including broker-dealers, and any recommendations to purchase securities in qualified plans or from rollover funds.

PTE 84-24 was narrowed to only apply to independent insurance agents recommending non-securities products.

PTE 84-24 also imposes certain supervisory obligations on insurance carriers that are similar to obligations already covered under the National Association of Insurance Commissioner’s (NAIC) Suitability in Annuity Transactions Model Regulation, as well as new compliance policies and procedures.

The final rule takes effect on September 23, 2024, with a one-year phase-in period for a majority of the provisions, based on certain conditions.

We anticipate that the final rule likely will face significant litigation challenges.

We continue to analyze the impact of the adopted Fiduciary Advice Rule and, while we cannot predict the final rule’s impact, it could have an adverse effect on sales of annuities through our distribution partners and result in increased compliance costs to Jackson.

We may need to take 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.

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 have limited exposure to the Fiduciary Advice Rule.

While the final 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 provided individuals with greater access to retirement products.

In recent years, Congress approved legislation beneficial to our business model.

The Setting Every Community Up for Retirement Enhancement Act of 2019 (the "SECURE Act"), approved by Congress on December 20, 2019, provides 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 for required minimum distributions, and eliminate age requirements for traditional IRA contributions.

On December 29, 2022, Congress signed into law the SECURE 2.0 Act of 2022 (“SECURE 2.0”).

SECURE 2.0 expands automatic enrollment programs, increases the age for required minimum distributions, and eliminates 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.

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

Cybersecurity Event

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 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.

Our annuities offer investors the opportunity to benefit from tax deferrals.

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

Non-GAAP Financial Measures

14 unchanged sentences

However, we believe the adjustments to net income are useful for gaining an understanding of our overall results of operations.

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

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.

4 unchanged sentences

(i) fees attributed to guaranteed benefits;

(ii) changes in the fair value of freestanding derivatives used to manage the risk associated with market risk benefits and other guaranteed benefit features;

(ii) changes in the fair value of freestanding derivatives used to manage the risk associated with market risk benefits and other guaranteed benefit features, excluding earned income from periodic settlements and changes in settlement accruals on cross-currency swaps;

(iii) the movements in reserves, market risk benefits, guaranteed benefit features accounted for as embedded derivative instruments, and related claims and benefit payments;

(iv) amortization of the balance of unamortized deferred acquisition costs at the date of transition to current accounting guidance on January 1, 2021 associated with items excluded from adjusted operating earnings prior to transition;

(iv) amortization of the balance of unamortized deferred acquisition costs at the date of transition to current accounting guidance (LDTI) on January 1, 2021 associated with items excluded from adjusted operating earnings prior to transition;

and (v) the impact on the valuation of Guaranteed Benefits and Net Hedging Results arising from changes in underlying actuarial assumptions.

5 unchanged sentences

(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.

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

Other items :

4 unchanged sentences

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

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

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

GAAP measure.

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

2023 2022 2023 2022

Three Months Ended March 31,

(in millions)

15 unchanged sentences

Net investment income on funds withheld assets (270) (307)

Loss on funds withheld reinsurance transaction — — — —

Other items (18) 23

6 unchanged sentences

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 which:

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

(i) excludes items that vary from period to period due to accounting treatment under U.S.

2 unchanged sentences

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.

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

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.

1 unchanged sentence

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.

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

Adjusted Book Value Attributable to Common Shareholders and Adjusted Operating ROE Attributable to Common Shareholders should not be used as substitutes for total shareholders’ equity and ROE as calculated using annualized net income and average equity in accordance with U.S.

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GAAP measure:

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

2023 2022 2023 2022

Three Months Ended March 31,

(in millions)

7 unchanged sentences

Exclude AOCI attributable to Jackson Financial Inc.

2,926 716 2,926 716

Adjusted Book Value Attributable to Common Shareholders $ 11,398 $ 8,581

1 unchanged sentence

Adjusted Operating ROE Attributable to Common Shareholders on average equity 12.0 % 11.7 %

(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.

(1) Excludes $(1,661) million and $(1,832) million related to the investments held within the funds withheld account related to the Athene Reinsurance Transaction as of March 31, 2024 and 2023, respectively, which 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 September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

(in millions)

25 unchanged sentences

Net income (loss) attributable to Jackson Financial Inc.

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

Dividends on preferred stock 11 —

2 unchanged sentences

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

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

Pretax Income (Loss)

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 September 30,

2023 2022 Variance

(in millions)

Net gains (losses) excluding derivatives and funds withheld assets $ (127) $ (6) $ (121)

Net gains (losses) on freestanding derivatives (310) (248) (62)

Net gains (losses) on embedded derivatives (excluding funds withheld reinsurance) 102 58 44

Net gains (losses) on derivative instruments (208) (190) (18)

Net gains (losses) on funds withheld reinsurance 159 555 (396)

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

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

◦ 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, where rates did not experience the same increase;

• $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;

• $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

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.

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.

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

Three Months Ended March 31, 2024 compared to Three Months Ended March 31, 2023

Pretax Income (Loss)

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:

Nine Months Ended September 30,

Our pretax income (loss) increased by $2,957 million to $903 million for the three months ended March 31, 2024, from $(2,054) million for the three months ended March 31, 2023 primarily due to:

• $2,544 million favorable movements in market risk benefits (gains) losses, due primarily to favorable changes in interest rates during the three months ended March 31, 2024, partially offset by unfavorable changes in equity index volatility compared to the prior year;

• $306 million increase in total net gains (losses) on derivatives and investments as shown in the table below and driven by:

Three Months Ended March 31,

2024 2023 Variance

6 unchanged sentences

Total net gains (losses) on derivatives and investments $ (3,093) $ (3,399) $ 306

◦ 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;

• $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:

• $3,484 million favorable movements in market risk benefits (gains) losses, net, primarily driven by positive separate account returns as compared to negative separate account returns in the prior year.

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

◦ Lower losses excluding derivatives and funds withheld assets were driven by lower credit loss expense on mortgage loans and higher foreign currency exchange gains, partially offset by increased losses on disposals of debt securities during the three months ended March 31, 2024;

◦ Lower losses recognized on funds withheld reinsurance were driven by the increase in interest rates during 2024 compared to a decrease in interest rates in 2023 which resulted in expense reported for the movement in the embedded derivative in the prior year;

• $110 million increase in fee income primarily due to higher average separate account values compared to the prior year;

• $27 million increase in net investment income as a result of higher income on bonds, driven by higher yields in 2024 compared to the prior year, higher income on equity securities, and lower investment expenses, partially offset by lower income on funds withheld under reinsurance treaties;

• $10 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 improved mortality and a greater decrease in reserves as the closed block of life business continues to run off, partially offset by higher other policyholder benefits.

These improvements were partially offset by:

• $69 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 March 31, 2024, compared to the prior year, and an increase in incentive and deferred compensation expenses during the three months ended March 31, 2024.

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.

Income tax expense increased $659 million to an expense of $101 million for the three months ended March 31, 2024, from a benefit of $558 million for the three months ended March 31, 2023.

The provision for income tax in the current period led to an effective income tax rate ("ETR") of 11% for the three months ended March 31, 2024 compared to the March 31, 2023 ETR of 27%.

The change in the ETR during the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was due to the relationship of the taxable income to the consolidated pre-tax income.

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

See Note 15 - Income Taxes of the Notes to Consolidated Financial Statements in our 2023 Annual Report and Note 15 - Income Taxes of the Notes to Condensed Consolidated Financial Statements in this report for more information.

Segment Results of Operations

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Pretax Adjusted Operating Earnings by Segment

The following table summarizes pretax adjusted operating earnings (non-GAAP) from the Company's business segment operations and also provides a reconciliation of the segment measure to net income on a consolidated GAAP basis.

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

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

Also, s ee Note 3 - Segment Information of the Notes to Condensed Consolidated Financial Statements for further information regarding the calculation of pretax adjusted operating earnings:

Three Months Ended March 31,

(in millions)

5 unchanged sentences

Pretax Adjusted Operating Earnings 389 302

Non-operating adjustments income (loss):

Pre-tax reconciling items from adjusted operating income to net income (loss) attributable to Jackson Financial Inc.:

Guaranteed benefits and hedging results:

4 unchanged sentences

Amortization of DAC associated with non-operating items at date of transition to LDTI (139) (153)

Total guaranteed benefits and hedging results 2,786 1,262 1,983 4,506

Total guaranteed benefits and net hedging results 427 (1,900)

Net realized investment gains (losses) (7) (68)

4 unchanged sentences

Pretax income (loss) attributable to Jackson Financial Inc.

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

Income tax expense (benefit) 101 (558)

Net income (loss) attributable to Jackson Financial Inc.

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

Dividends on preferred stock 11 —

5 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 September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

(in millions)

4 unchanged sentences

Net investment income 152 115

Income (loss) on operating derivatives (12) 2 (34) 20

Other income 8 9

1 unchanged sentence

Operating Benefits and Expenses

Death, other policy benefits and change in policy reserves, net of deferrals 24 2 21 50

Death, other policy benefits and change in policy reserves 16 (15)

(Gain) loss from updating future policy benefits cash flow assumptions, net 1 (2)

6 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 September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

(in millions)

12 unchanged sentences

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

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

Three Months Ended March 31, 2024 compared to Three Months Ended March 31, 2023

Pretax Adjusted Operating Earnings

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.

Pretax adjusted operating earnings increased $63 million to $419 million for the three months ended March 31, 2024 from $356 million for the three months ended March 31, 2023 primarily due to:

• $108 million increase in fee income primarily due to higher average separate account values compared to the prior year;

• $47 million increase in spread income primarily due to $37 million higher investment income driven by higher yields in 2024, partially offset by higher investment expenses related to repurchase agreements compared to the prior year, and $10 million lower interest credited compared to prior year.

These increases were partially offset by:

• $34 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 2024;

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

• $14 million increase in operating costs and other expenses, net of deferrals, primarily due to higher 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 $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;

• $54 million decrease in income on operating derivatives primarily due to the increase in floating rates during 2023;

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

These decreases were partially offset by:

• $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.

• $64 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 March 31, 2024, compared to the prior year, and an increase in incentive compensation expenses during the three months ended March 31, 2024.

Account Value

Retail annuities account value, net of reinsurance, increased $28.8 billion between periods primarily due to positive variable annuity separate account returns driven by favorable market performance in 2024, as well as positive RILA net flows over the period.

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

Institutional Products

1 unchanged sentence

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 September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

(in millions)

2 unchanged sentences

Net investment income $ 113 $ 86

Income (loss) on operating derivatives (13) (8) (38) (13)

Total Operating Revenues 113 86

1 unchanged sentence

Interest credited on other contract holder funds, net of deferrals and amortization 81 76

Interest expense 8 — 16 —

Operating costs and other expenses, net of deferrals 1 1

1 unchanged sentence

Pretax Adjusted Operating Earnings $ 31 $ 9

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

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

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

2023 2022 2023 2022

Three Months Ended March 31,

(in millions)

4 unchanged sentences

Net flows (596) (391)

Credited Interest 87 51 247 137

Interest credited 81 76

Policy Charges and other (66) (13)

Balance as of end of period $ 7,825 $ 8,691

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

Pretax Adjusted Operating Earnings

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

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

Three Months Ended March 31, 2024 compared to Three Months Ended March 31, 2023

Pretax Adjusted Operating Earnings

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.

Pretax adjusted operating earnings increased $22 million to $31 million for the three months ended March 31, 2024 from $9 million for the three months ended March 31, 2023 primarily due to a $22 million increase in spread income primarily due to $27 million higher investment income, partially offset by $5 million higher interest credited on contract holder funds.

Account Value

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.

Institutional product account value decreased from $8,691 million at March 31, 2023 to $7,825 million at March 31, 2024.

The decrease in account value was primarily driven by decreased issuances, partially offset by decreased maturities of the existing contracts and funding agreements.

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

Closed Life and Annuity Blocks

1 unchanged sentence

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 September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

(in millions)

4 unchanged sentences

Net investment income 163 167

Income (loss) on operating derivatives (11) 7 (35) 35

Other income 7 4

8 unchanged sentences

Pretax Adjusted Operating Earnings $ 19 $ (20)

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

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

Pretax Adjusted Operating Earnings

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;

• $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

Three Months Ended March 31, 2024 compared to Three Months Ended March 31, 2023

Pretax Adjusted Operating Earnings

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;

• $48 million increase in operating costs and other expenses, net of deferrals, primarily due to an increase in deferred compensation expenses in 2023;

• $30 million increase in interest credited related to persistency bonuses in 2023.

These decreases were partially offset by:

• $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.

Pretax adjusted operating earnings increased $39 million to $19 million for the three months ended March 31, 2024 from $(20) million for the three months ended March 31, 2023 primarily due to a:

• $27 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 a greater decrease in reserves as the closed block of life business continues to run off.

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

Corporate and Other

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

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

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

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

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

2023 2022 2023 2022

Three Months Ended March 31,

(in millions)

3 unchanged sentences

Net investment income 4 18

Income (loss) on operating derivatives (2) 2 (10) 20

Other income (14) 2

5 unchanged sentences

Pretax Adjusted Operating Earnings $ (80) $ (43)

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

Pretax Adjusted Operating Earnings

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.

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

Three Months Ended March 31, 2024 compared to Three Months Ended March 31, 2023

Pretax Adjusted Operating Earnings

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;

Pretax adjusted operating earnings decreased $37 million to $(80) million for the three months ended March 31, 2024 from $(43) million for the three months ended March 31, 2023 primarily due to the following:

• $16 million decrease in other income primarily due to a one-time reinsurance related adjustment;

• $14 million decrease in net investment income;

• $9 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 March 31, 2024.

Item 2 | Management’s Discussion and Analysis | Investments

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

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

Asset-backed securities include mortgage-backed and other structured securities.

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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.

We utilize repurchase and reverse repurchase transactions as a part of our overall portfolio management program to assist with collateral requirements associated with our hedging program and other liquidity needs of our insurance subsidiaries.

The investments within our investment portfolio are primarily managed by PPM, our wholly-owned registered investment advisor.

Our investment strategy benefits from PPM’s ability to originate investments directly, as well as participate in transactions originated by banks, investment banks, commercial finance companies and other intermediaries.

Certain investments held in funds withheld accounts for reinsurance transactions are managed by Apollo Insurance Solutions Group LP ("Apollo"), an Athene affiliate, see Note 8 - Reinsurance of Notes to Condensed Consolidated Financial Statements for further details.

Certain investments held in funds withheld accounts for reinsurance transactions are managed by Apollo Insurance Solutions Group LP ("Apollo"), an Athene affiliate.

See Note 8 - Reinsurance of the Notes to Condensed Consolidated Financial Statements for further details .

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

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

As of March 31, 2024, Apollo managed $15.9 billion of cash and investments and other third-party investment managers managed approximately $215 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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The following table summarizes the carrying values of our investments:

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

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

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Total investments $ 41,267 $ 18,904 $ 60,171 $ 41,319 $ 19,536 $ 60,855

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.

Available-for-sale debt securities decreased to $40,090 million at March 31, 2024 from $40,422 million at December 31, 2023, primarily due to dispositions, partially offset by declines in net unrealized losses primarily in the funds withheld portfolio.

The amortized cost of available-for-sale debt securities decreased from $44,843 million as of December 31, 2023 to $44,796 million as of March 31, 2024.

Further, net unrealized losses, after adjusting for allowance for credit loss, were $4,401 million as of December 31, 2023 compared to $4,686 million as of March 31, 2024.

Other Invested Assets

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

Debt Securities

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):

Other invested assets increased to $2,580 million at March 31, 2024 from $2,466 million at December 31, 2023 .

Item 2 | Management’s Discussion and Analysis | Investments

September 30, 2023 Amortized

Debt Securities

At March 31, 2024 and December 31, 2023, 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):

March 31, 2024 Amortized

Cost Allowance for Credit Loss Gross

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(1) No single remaining industry exceeds 3% of the portfolio.

Item 2 | Management’s Discussion and Analysis | Investments

December 31, 2023 Amortized

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(1) No single remaining industry exceeds 3% of the portfolio.

Item 2 | Management’s Discussion and Analysis | Investments

Evaluation of Available-For-Sale Debt Securities

See Note 4 - Investments of Notes to Condensed Consolidated Financial Statements for information about how we evaluate our available-for-sale debt securities for credit loss.

See Note 4 - Investments of the Notes to Condensed Consolidated Financial Statements for information about how we evaluate our available-for-sale debt securities for credit loss.

Equity Securities

Equity securities consist of investments in common and preferred stock holdings and mutual fund investments.

Common and preferred stock investments generally arise out of previous private equity investments or other settlements rather than as direct investments.

Common and preferred stock investments generally arise out of previous private equity investments or other settlements rather than direct investments.

Mutual fund investments typically represent investments made in our own mutual funds to seed those structures for external issuance at a later date.

The following table summarizes our holdings:

September 30, December 31,

March 31, December 31,

(in millions)

3 unchanged sentences

Total $ 222 $ 394

Item 2 | Management’s Discussion and Analysis | Investments

Mortgage Loans

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

At March 31, 2024, commercial mortgage loans were collateralized by properties located in 36 states, the District of Columbia, and Europe.

Residential mortgage loans were collateralized by properties located in 49 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:

September 30, December 31,

March 31, December 31,

(in millions)

8 unchanged sentences

Total $ 10,354 $ 10,563

(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

(1) N et of an allowance for credit losses of $158 million and $160 million at March 31, 2024 and December 31, 2023, respectively.

(2) Net of an allowance for credit losses of $4 million and $5 million at March 31, 2024 and December 31, 2023, respectively.

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

September 30, December 31,

March 31, December 31,

(in millions)

12 unchanged sentences

Total $ 10,354 $ 10,563

Item 2 | Management’s Discussion and Analysis | Investments

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

September 30, December 31,

March 31, December 31,

(in millions)

11 unchanged sentences

Total mortgage loans $ 10,354 $ 10,563

(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.

(1) As of March 31, 2024 and December 31, 2023, includes $23 million and $22 million of loans purchased when the loans were greater than 90 days delinquent and $4 million and $5 million of loans in process of foreclosure, respectively, and are supported with insurance or other guarantees provided by various governmental programs.

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

September 30,

(in millions)

Balance at beginning of year $ 165 $ 95

Provision (release), net (1)

Provision (release) (3) 51

Balance at end of period $ 162 $ 146

(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

The Company’s mortgage loans that are current and in good standing are accruing interest.

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

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.

No accrued interest was written off as of March 31, 2024 and 2023, relating to loans that were greater than 90 days delinquent or in the process of foreclosure.

The following table provides information about our impaired residential mortgage loans (in millions):

March 31, 2024 December 31, 2023

Recorded investment $ 23 $ 24

Unpaid principal balance 26 27

Related loan allowance 1 1

Average recorded investment 21 19

Investment income recognized — 1

Derivative Instruments

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.

Note 5 – Derivative Instruments of the 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 March 31, 2024 and December 31, 2023.

Item 2 | Management’s Discussion and Analysis | Investments

Evaluation of Invested Assets

11 unchanged sentences

Interest is then accounted for on a cash basis.

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

Policy and Contract Liabilities

We establish, and carry as liabilities, actuarially determined amounts that are calculated to meet policy obligations or to provide for future annuity payments.

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

For more details on Policyholder Liabilities, see "Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates” included in our 2022 Annual Report, as recast to reflect the adoption of LDTI in our Current Report on Form 8-K filed May 10, 2023.

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

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:

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

As of March 31, 2024, 90% of our policy and contract liabilities were in our Retail Annuities segment, 3% were in our Institutional Products segment and 7% were in our Closed Life and Annuity Blocks segment.

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

March 31, 2024 Separate Accounts Reserves for future policy benefits Other contract holder funds Market Risk Benefits Total

(in millions)

12 unchanged sentences

Total $ 230,773 $ 11,585 $ 54,897 $ (4,182) $ 293,073

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

December 31, 2023 Separate Accounts Reserves for future policy benefits Other contract holder funds Market Risk Benefits Total

13 unchanged sentences

Total $ 219,656 $ 11,898 $ 55,319 $ (1,952) $ 284,921

(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 September 30, 2023:

(1) Includes the embedded derivative liabilities in other contract holder funds related to RILA of $1,703 million and $1,224 million at March 31, 2024 and December 31, 2023 , respectively.

(2) Includes the embedded derivative liabilities related to fixed index annuity in other contract holder funds of $865 million and $866 million at March 31, 2024 and December 31, 2023 , respectively.

As of March 31, 2024:

• $230.8 billion or 79% of our policy and contract liabilities were backed by separate account assets.

3 unchanged sentences

• $17.8 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.

As of March 31, 2024, 100% of our RILA policy and contract liabilities were subject to surrender charges of at least 5% or at market value in the event of discretionary withdrawal by customers.

As of March 31, 2024, 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.

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 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.

See Note 9 - Reserves for Future Policy Benefits and Claims Payable, Note 10 - Other Contract Holder Funds, Note 11 - Separate Account Assets and Liabilities, and Note 12 - Market Risk Benefits of the Notes to Condensed Consolidated Financial Statements for additional discussion on accounting policies around Reserves for future policy benefits and claims payable, Other contract holder funds, Separate account assets and liabilities and MRBs.

Liquidity and Capital Resources

2 unchanged sentences

Our ability to generate and maintain sufficient liquidity and capital depends on the profitability of the businesses, timing of cash flows on investments and products, general economic conditions and access to the capital markets and 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 discussion below describes our liquidity and capital resources for the three months ended March 31, 2024, and 2023 .

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

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

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions)

7 unchanged sentences

The principal operating cash inflows from our insurance activities come from insurance premiums, fees charged on our products and net investment income.

The principal operating cash outflows are the result of annuity and life insurance benefits, interest credited on other contract holder funds, operating expenses and income tax, as well as interest expense.

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

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

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.

The principal operating cash outflows are the result of the payment of annuity and life insurance benefits, operating expenses and income tax , as well as interest expense.

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

Cash flows provided by (used in) operating activities were in line with prior year with $1,426 million for the three months ended March 31, 2024 from $1,461 million for the three months ended March 31, 2023.

Cash flows from Investing Activities

4 unchanged sentences

The primary liquidity concerns with respect to these cash flows are the risk of default by debtors or market disruptions that might impact the timing of investment related cash flows as well as derivative collateral needs, which could result in material liquidity needs for our insurance subsidiaries.

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.

Cash flows provided by (used in) investing activities increased $876 million to $(2,006) million during the three months ended March 31, 2024 from $(2,882) million during the three months ended March 31, 2023.

This increase was driven by lower outflows related to our hedging program for derivative settlements and collateral.

Cash flows from Financing Activities

2 unchanged sentences

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

Cash flows provided by (used in) financing activities 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.

Cash flows provided by (used in) financing activities increased $1,532 million to $433 million during the three months ended March 31, 2024 from $(1,099) million during the three months ended March 31, 2023.

This increase was primarily due to higher proceeds from repurchase agreements in 2024 partially offset by the proceeds we received in the prior year from the issuance of our preferred stock.

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

Statutory Capital

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RBC requirements are used as minimum capital requirements by the NAIC and the state insurance departments to identify companies that merit regulatory action.

RBC is based on a formula that incorporates both factor-based components (applied to various asset, premium, claim, expense and statutory reserve items) and model-based components.

RBC is based on a formula that incorporates both factor-based components (applied to various asset, premium, and statutory reserve items) and model-based components.

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

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

As of 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.

Our statutory TAC may be negatively impacted by minimum required reserving levels (i.e., cash surrender value floor) when reserve releases are limited and unable to offset losses from our hedging program.

The RBC ratio may increase or decrease depending on the interaction between movements in TAC and movements in statutory CAL, which could impact available dividends from our insurance subsidiaries.

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

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.

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

As of March 31, 2024, our insurance companies were well in excess of the minimum required capital levels.

With the execution of the Brooke Re transaction in the first quarter of 2024, we are able to largely moderate the impact of the cash surrender value floor going forward.

In the past, our statutory TAC (total adjusted capital) may have been negatively impacted by minimum required reserving levels (i.e., cash surrender value floor) when reserve releases were limited and unable to offset losses from our hedging program.

Holding Company Liquidity

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These principal sources of liquidity are expected to be supplemented by cash and short-term investments held by Jackson Financial, and access to bank lines of credit and the capital markets.

We intend to maintain a minimum amount of cash and highly liquid securities at Jackson Financial adequate to fund two years of holding company fixed net expenses, which may change over time as we refinance existing debt or make changes to our debt and capital structure, and is currently targeted at $250 million.

We intend to maintain a minimum amount of cash and highly liquid securities at Jackson Financial adequate to fund two years of holding company fixed net expenses, which is currently targeted at $250 million but may change over time as we refinance existing debt or make changes to our debt and capital structure.

The main uses of liquidity for Jackson Financial are interest payments and debt repayment, holding company operating expenses, payment of dividends and other distributions to shareholders, which may include stock repurchases, and capital contributions, if needed, to our insurance company subsidiaries.

10 unchanged sentences

Such restrictions, or any future restrictions adopted by the states in which our insurance subsidiaries are domiciled, could have the effect, under certain circumstances, of significantly reducing dividends or other amounts payable by our subsidiaries without affirmative approval of state regulatory authorities.

See “Risk Factors—Risks relating to Financing and Liquidity - As a holding company, Jackson Financial depends on the ability of its subsidiaries to pay dividends and make other distributions to meet its obligations and liquidity needs, including servicing debt, dividend payments and stock repurchases.”

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

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 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.

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.

See Note 19 - Equity of the Notes to Condensed Consolidated Financial Statements for more information.

During the first quarter of 2024, we paid a cash dividend of $0.50 per depositary share and $0.70 per share on JFI's preferred and common stock totaling $11 million and $56 million, respectively.

On May 2, 2024, our Board of Directors approved a second quarter cash dividend on JFI's common stock, $0.70 per share, payable on June 20, 2024, to shareholders of record on June 6, 2024.

The Company also announced the declaration of a cash dividend of $0.50 per depositary share, each representing a 1/1,000th interest in a share of Fixed-Rate Reset Noncumulative Perpetual Preferred Stock, Series A.

The dividend will be payable on July 1, 2024, to shareholders of record at the close of business on June 6, 2024.

We repurchased a total of 2,157,372 shares of common stock for an aggregate purchase price of $116 million in the three months ended March 31, 2024, which were funded with cash on hand.

See Note 19 - Equity of the Notes to Condensed Consolidated Financial Statements in this report for further information on dividends to shareholders and share repurchases .

As of March 31, 2024, Jackson Financial has recorded an estimated liability balance of $ 74 million ($ 374 million at a consolidated level) for the provision of the Federal corporate alternative minimum tax ("CAMT") based on the Company’s interpretation of available guidance with an offsetting deferred tax asset for the credit carryover.

Distributions from our Insurance Company Subsidiaries

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As such, Jackson Financial’s ability to receive dividend payments from our insurance company subsidiaries is effectively limited by Brooke Life’s ability to make dividend payments to Jackson Financial.

On March 1, 2023, Jackson paid a $450 million ordinary dividend and remitted a $150 million return of capital to its parent company, Brooke Life.

Brooke Life subsequently paid a $360 million ordinary dividend and remitted a $150 million return of capital to its ultimate parent, Jackson Financial.

In addition, for the 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.

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

In the first quarter of 2024, Jackson remitted a $1,920 million return of capital to its parent company, Brooke Life.

Brooke Life subsequently made a $1,870 million capital contribution to its subsidiary, Brooke Re.

In addition, for the three months ended March 31, 2024, Brooke Life paid $45 million of interest associated with the $2 billion surplus note between Brooke Life and Jackson Finance, LLC ("Jackson Finance"), a subsidiary of Jackson Financial.

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

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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 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.

As of March 31, 2024, Jackson’s outstanding surplus notes and bank debt included $53 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 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.

As of March 31, 2024, we were in a net collateral payable position of $92 million, which is down from $780 million as of December 31, 2023.

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 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.

As of March 31, 2024, 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 our 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 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.

As of March 31, 2024, the portfolio of cash, short-term investments and privately and publicly traded securities and equities that are unencumbered and unrestricted to sale, amounted to $20.2 billion.

Our Indebtedness

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.

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 Sheets.

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

$600 million of these notes matured on November 22, 2023, and were paid with cash on hand at maturity.

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 September 30, 2023.

We were in compliance with these covenants at March 31, 2024.

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

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.

Interest expense on the notes was $5 million and $5 million for the three months ended March 31, 2024 and 2023.

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

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.

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

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

As of March 31, 2024 and December 31, 2023, Jackson held a bank loan with an outstanding balance of $53 million and $57 million, respectively.

Collateral Upgrade Transactions

During the three months ended March 31, 2024, Jackson executed certain paired repurchase and reverse repurchase transactions (“collateral upgrade” transactions) totaling $1.5 billion pursuant to master repurchase agreements with participating bank counterparties.

Under these collateral upgrade transactions, the Company lends securities (e.g., corporate debt securities or other securities agreed upon between the parties) to bank counterparties in exchange for U.S.

Treasury securities to that the Company then uses provide as collateral.

The paired repurchase and reverse repurchase transactions are settled on a net basis in accordance with master netting agreements.

As a result, there was no cash exchanged at initiation of these agreements.

The paired transactions are reported net within the Condensed Consolidated Balance Sheets.

These transactions do not have a stated maturity and require at least 150-days' notice prior to termination of the transaction.

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

Best Fitch Moody’s (1)

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

As of May 2, 2024, the financial strength ratings of our principal insurance subsidiaries were as follows :

Best Fitch Moody’s S&P

Jackson National Life Insurance Company

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Outlook stable

(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.

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Impact of Recent Accounting Pronouncements

For a complete discussion of new accounting pronouncements affecting us, s ee Note 2 of Notes to Condensed Consolidated Financial Statements.

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

Based upon the elected transition methods, the adoption of LDTI resulted in a decrease in total equity of $3.0 billion as of the transition date of January 1, 2021, comprised of a reduction in accumulated other comprehensive income ("AOCI") of $0.4 billion and a reduction in retained earnings of $2.6 billion.

The adoption of the standard resulted in increases in net income attributable to Jackson Financial Inc.

of $489 million and $234 million for the years ended December 31, 2022 and 2021, respectively, and also resulted in an increase in total equity of $223 million and a decrease of $2.8 billion for the years ended December 31, 2022 and 2021, respectively, from the amounts reported prior to the adoption of LDTI.

The change in the equity impact from the transition date was primarily due to higher interest rates and is comprised of a reduction in retained earnings that is more than offset by an increase in AOCI.

See further discussion in Note 2- New Accounting Standards of the Notes to Condensed Consolidated Financial Statements for the significant changes associated with this change in accounting principle.

For a complete discussion of new accounting pronouncements affecting us, s ee Note 2 of the Notes to Condensed Consolidated Financial Statements.

Summary of Critical Accounting Estimates

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The most critical estimates are presented below.

The below critical accounting estimates are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates” and Notes 1 and 2 of the Notes to the Consolidated Financial Statements included in our 2022 Annual Report, as recast to reflect the adoption of LDTI in our Current Report on Form 8-K filed May 10, 2023 .

• reserves for future policy benefits and claims payable

• market risk benefits

• reinsurance

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

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• consolidation of variable interest entities

The below critical accounting estimates are updated from our 2022 Annual Report for the adoption of LDTI.

Reserves for Future Policy Benefits and Claims Payable

We establish reserves for future policy benefits to, or on behalf of, customers in the same period in which the policy is issued or acquired, using methodologies prescribed by U.S.

Reserves for Future Policy Benefits

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.

The NPR measurement model accrues for future policy benefits in proportion to the premium revenue recognized.

The reserve for future policy benefits is derived from the Company's best estimate of future net premium and future benefits and expenses, which is based on best estimate assumptions, including mortality, persistency, claims expense, and discount rate.

On an annual basis, or as circumstances warrant, we conduct a comprehensive review of our current best estimate assumptions based on our experience, industry benchmarking, and other factors, as applicable.

Expense assumptions are updated based on estimates of expected non-level costs, such as termination or settlement costs, and costs after the premium-paying period, and exclude acquisition costs or any costs that are required to be charged to expenses as incurred.

Updates to assumptions are applied on a retrospective basis, and each reporting period the reserve for future policy benefits is updated to reflect actual experience to date.

The Company establishes cohorts, which are product groupings used to measure reserves for future policy benefits.

In determining cohorts, the Company considered both qualitative and quantitative factors, including the issue year, type of product, product features, and legal entity.

The discount rate used to estimate reserves for future policy benefits is consistent with an upper-medium grade (low-credit risk) fixed-income corporate instrument yield, which has been interpreted to represent a single-A corporate instrument yield.

This discount rate curve is determined by fitting a parametric function to yields to maturity and related times to maturity of market observable single-A rated corporate instruments.

The discount rate used to recognize interest accretion on the reserves for future policy benefits is locked at the initial measurement of the cohort.

Each reporting period, the reserve for future policy benefits is remeasured using the current discount rate.

The difference between the reserve calculated using the current discount rate and the reserve calculated using the locked-in discount rate is recorded in other comprehensive income.

Additional Liabilities - Universal Life-type

The Company issues universal life plans with secondary guarantees and interest-sensitive life plans.

The primary reserves for these policies are the contract holder account balances reported within the other contract holder funds line of the balance sheet.

Where these contracts provide additional benefits beyond the account balance or base insurance coverage that are not market risk benefits or embedded derivatives, liabilities in addition to the policyholder’s account value are recognized.

These additional liabilities for annuitization, death and other insurance benefits are reported within reserves for future policy benefits and claims payable.

The methodology uses a benefit ratio defined as a constant percentage of the assessment base.

This ratio is multiplied by current period assessments to determine the reserve accrual for the period.

The assumptions used in the measurement of the additional liabilities for annuitization, death and other insurance benefits are based on best estimate assumptions including mortality, persistency, investment returns, and discount rates.

These assumptions are similarly subject to the annual review process discussed above.

Other Future Policy Benefits and Claims Payable

In conjunction with a prior acquisition, we recorded a fair value adjustment related to certain annuity and interest-sensitive life blocks of business to reflect the cost of the interest guarantees within the in-force liabilities, based on the difference between the guaranteed interest rate and an assumed new money guaranteed interest rate.

This adjustment is recorded in reserves for future policy benefits and claims payable.

This component of the acquired reserves is reassessed at the end of each period, taking into account changes in the in-force block.

Any resulting change in the reserve is recorded as a change in policy reserve through the Consolidated Income Statements.

In addition, life and annuity claims liabilities in course of settlement are included in other future policy benefits and claims payable.

See Note 9 - Reserve for Future Policy Benefits and Claims Payable 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 market risk benefits, or MRBs.

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

MRBs are measured at fair value at the contract level and can be in either an asset or liability position.

For contracts that contain multiple MRB features, the MRBs are valued together as a single compound MRB.

The use of models and assumptions used to determine fair value of MRBs requires a significant amount of judgement.

The significant assumptions used in the MRB fair value calculations are:

• Mortality rates - These vary by attained age, tax qualification status, guaranteed benefit election, and duration.

The range used reflects ages from the minimum issue age for the benefit through age 95, which corresponds to the typical maturity age.

A mortality improvement assumption is also applied.

• Base lapse rates - These vary by contract-level factors, such as product type, surrender charge schedule and optional benefits election.

Lapse rates are further adjusted based on the degree to which a guaranteed benefit is in-the-money, with lower lapse applying when benefits are more in-the-money.

Lapse rates are also adjusted to reflect lower lapse expectations when guaranteed benefits are utilized.

• Utilization rates - These represents the expected percentage of contracts that will utilize the benefit through annuitization (GMIB) or commencement of withdrawals (GMWB).

Utilization may vary by benefit type, attained age, duration, tax qualification status, benefit provision, and degree to which the guaranteed benefit is in-the-money.

• Withdrawal rates - These represent the percentage of annual withdrawal assumed relative to the maximum allowable withdrawal amount under the free partial withdrawal provision or the GMWB, as applicable.

Free partial withdrawal rates vary based on the product type and duration.

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

• Non-performance risk adjustment - This is applied as a spread over the risk-free rate to determine the rate used to discount the related cash flows and varies by projection year.

• Long-term equity volatility - This represents the equity volatility beyond the period for which observable equity volatilities are available.

See Note 6 - Fair Value Measurements of the Notes to Condensed Consolidated Financial Statements for additional information.

Variable Annuities

We issue variable contracts through our separate accounts for which investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contract holder.

Certain of these contracts include contract provisions by which we contractually guarantee to the contract holder either a) return of no less than total deposits made to the account adjusted for any partial withdrawals, b) total deposits made to the account adjusted for any partial withdrawals plus a minimum return, or c) the highest account value on a specified anniversary date adjusted for any withdrawals following the contract anniversary.

These guarantees include benefits that are payable upon the depletion of funds (GMWB), in the event of death (GMDB), at annuitization (GMIB), or at the end of a specified period (GMAB).

Substantially all of our GMIB benefits are reinsured.

GMIB benefits and GMAB benefits were discontinued in 2009 and 2011, respectively.

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

Under the attributed fee method, fair value is measured as the difference between the present value of projected future liabilities and the present value of projected attributed fees.

At the inception of the contract, the Company attributes to the MRB a portion of total fees expected to be assessed against the contract holder to offset the projected claims over the lifetime of the contract.

The attributed fee is expressed as a percentage of total projected future fees at inception of the contract.

This percentage of total projected fees is considered a fixed term of the MRB feature and is held static over the life of the contract.

This percentage may not exceed 100% of the total projected contract fees as of contract inception.

As the Company may issue contracts that have projected future liabilities greater than the projected future guaranteed benefit fees at issue, the Company may also attribute mortality and expense charges when performing this calculation.

In subsequent valuations, both the present value of future projected liabilities and the present value of projected attributed fees are remeasured based on current market conditions and policyholder behavior assumptions.

Fixed Index Annuities

The longevity riders issued on fixed index annuities are classified as MRBs and measured at fair value.

Similar to the variable annuity guaranteed benefits features, these contracts have explicit fees and are measured using the attributed fee method.

The Company attributes a percentage of total projected future fees expected to be assessed against the policyholder to offset the projected future claims over the lifetime of the contract.

If the fees attributed are insufficient to offset the claims at issue, the shortfall is borrowed from the host contract rather than recognizing a loss at inception.

RILA guaranteed benefit features are classified as MRBs and measured at fair value.

Unlike variable or fixed index annuities, RILA products do not have explicit fees and are measured using an option-based method.

The fair value measurement represents the present value of future claims payable by the MRB feature.

At inception, the value of the MRB is deducted from the value of the contract resulting in no gain or loss.

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

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 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.

Assets held under funds withheld agreements are included on our balance sheets and subject to triggers embedded within the relevant reinsurance agreements.

Additionally, for each of our reinsurance agreements, we determine whether the agreement provides indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards.

We review all contractual features, including those that may limit the amount of insurance risk to which the reinsurer is subject or features that delay the timely reimbursement of claims.

For reinsurance contracts, reinsurance recoverable balances are generally calculated using methodologies and assumptions that are consistent with those used to calculate the direct liabilities.

For non-participating traditional life insurance contracts and limited pay life-contingent contracts, there may be reinsurance contracts executed subsequent to the direct contract issue dates, and market interest rates may have changed between the date that the underlying insurance contracts were issued and the date the reinsurance contract is recognized in the financial statements, resulting in the underlying discount rate differing between the direct and reinsured business.

Our guaranteed minimum income benefits (GMIBs) are reinsured with an unrelated party.

For contracts that only ceded the GMIB feature of our annuity products, the reinsurance contract in its entirety is classified as a reinsured market risk benefit 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

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What changed 10-Q

Item 2. Management’s Discussion and Analysis