What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-07 compared with 2024-05-08 · 217 added, 135 removed, 982 unchanged (26% of the section changed)

9 unchanged sentences

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, 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.

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 U.S.

Securities and Exchange Commission (the "SEC") on February 28, 2024, (the "2023 Annual Report"), and elsewhere in Jackson Financial Inc.’s filings with the SEC.

Except as required by law, Jackson Financial Inc.

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You should not rely unduly on forward-looking statements.

We routinely use our investor relations website, at investors.jackson.com, as a primary channel for disclosing key information to our investors, some of which may contain material and previously non-public information.

We may also use social media channels to communicate with our investors and the public about our Company and other matters, and those communications could be deemed to be material information.

The information contained on, or that may be accessed through, our website or social media channels is not incorporated by reference into and is not part of this report.

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

16 unchanged sentences

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.

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

Athene Athene Life Re Ltd.

74 unchanged sentences

The table below presents selected financial and operating measures:

Three Months Ended March 31,

(in millions)

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

2024 2023 2024 2023

(in millions) (in millions)

Net income (loss) attributable to Jackson Financial Inc.

1 unchanged sentence

Adjusted Operating Earnings (1)

410 283 744 554

Amount of shares repurchased under share repurchase program 90 47 206 117

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• Capital Returned to Common Shareholders:

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.

Since January 1, 2024 through June 30, 2024, we have returned $316 million to our common shareholders consisting of $110 million in dividends and $206 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 78,660,221 at December 31, 2023 to 76,621,374 at March 31, 2024.

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 75,700,457 at June 30, 2024.

See Note 19 of the Notes to Condensed Consolidated Financial Statements for further information on our share repurchases.

8 unchanged sentences

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

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

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.

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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.

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

Three Months Ended March 31,

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

2024 2023 2024 2023

(in millions)

3 unchanged sentences

Fixed Annuities (1)

46 39 106 110

Total Retail Annuity Sales 4,229 3,104 7,920 6,244

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(1) Includes payout annuities

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.

Higher retail sales for the three and six months ended June 30, 2024 were primarily due to increased RILA and variable annuity sales.

In addition, sales of our institutional products were higher for the three months ended June 30, 2024 but lower for the six months ended June 30, 2024, 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

3 unchanged sentences

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

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(in millions)

19 unchanged sentences

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

Three Months Ended March 31,

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

2024 2023 2024 2023

(in millions)

3 unchanged sentences

Fixed Annuity (1)

6 (10) 15 (21)

Payout Annuity (1)

(9) (11) (28) (37)

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 six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, driven by increased variable annuity surrenders and withdrawals, 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 March 31, 2024 and December 31, 2023:

March 31, 2024 December 31, 2023

The following table shows variable annuity account value and benefit base as of June 30, 2024 and December 31, 2023:

June 30, 2024 December 31, 2023

Account Value Benefit Base Account Value Benefit Base

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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.

March 31, December 31,

June 30, December 31,

(in millions)

39 unchanged sentences

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”).

• Pricing actions we take in response to decreasing interest rates may reduce the attractiveness of crediting rates, guaranteed benefits, and other product features.

This in turn may lead to reduced sales volumes.

• 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.

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Department of Labor 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.

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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.

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 (the "NAIC") Suitability in Annuity Transactions Model Regulation, as well as new compliance policies and procedures.

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

However, the final rule is facing significant litigation challenges;

and, on July 25, 2024, a federal district court in Texas issued an order that the effective date of the final rule is stayed until further order of the Court.

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.

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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.

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

Legislative Reforms

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These changes are intended to expand and increase Americans’ retirement savings.

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

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.

Changes to individual income tax rates and other elements of tax policy can make the tax deferral aspects of our products more or less attractive to consumers, affecting demand for our products.

Non-GAAP Financial Measures

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

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

Net Hedging Results :

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(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 (LDTI) 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 January 1, 2021, the date of transition to current accounting guidance (LDTI), 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.

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(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 :

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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 March 31,

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

2024 2023 2024 2023

(in millions)

Net income (loss) attributable to Jackson Financial Inc common shareholders $ 784 $ (1,497)

Net income (loss) attributable to Jackson Financial Inc.

common shareholders $ 264 $ 1,204 $ 1,048 $ (293)

dividends on preferred stock 11 13 22 13

1 unchanged sentence

Pretax income (loss) attributable to Jackson Financial Inc.

311 1,462 1,207 (593)

Non-operating adjustments (income) loss:

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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.

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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 March 31,

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

2024 2023 2024 2023

(in millions)

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Exclude AOCI attributable to Jackson Financial Inc.

1,914 1,435 1,914 1,435

Adjusted Book Value Attributable to Common Shareholders $ 11,465 $ 9,554 $ 11,465 $ 9,554

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Adjusted Operating ROE Attributable to Common Shareholders on average equity 14.3 % 12.5 % 13.2 % 11.8 %

(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.

(1) Excludes $(1,712) million and $(1,930) million related to the investments held within the funds withheld account related to the Athene Reinsurance Transaction as of June 30, 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.

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

Three Months Ended March 31,

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

2024 2023 2024 2023

(in millions)

25 unchanged sentences

Net income (loss) attributable to Jackson Financial Inc.

275 1,217 1,070 (280)

Dividends on preferred stock 11 13 22 13

2 unchanged sentences

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

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

Three Months Ended June 30, 2024 compared to Three Months Ended June 30, 2023

Pretax Income (Loss)

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;

Our pretax income (loss) decreased by $1,147 million to $318 million for the three months ended June 30, 2024, from $1,465 million for the three months ended June 30, 2023, primarily due to:

• $2,054 million unfavorable movements in market risk benefits (gains) losses, primarily due to less favorable fund performance and interest rate movements during the three months ended June 30, 2024, compared to the prior year quarter;

• $58 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 June 30, 2024, and an increase in incentive compensation expenses, partially offset by decreased deferred compensation expenses during the three months ended June 30, 2024.

These movements were partially offset by:

• $690 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,

Three Months Ended June 30,

2024 2023 Variance

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Total net gains (losses) on derivatives and investments $ (1,556) $ (2,246) $ 690

◦ 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;

◦ Freestanding derivative movements were primarily driven by lower losses recognized on our equity derivatives resulting from lower market increases during the three months ended June 30, 2024, compared to the prior year;

◦ Higher losses recognized on funds withheld reinsurance were driven by a slight increase in interest rates during the three months ended June 30, 2024, compared to larger increases in interest rates during the three months ended June 30, 2023;

• $106 million increase in net investment income as a result of higher income on limited partnership investments, which are recorded on a one quarter lag, higher income on bonds driven primarily by higher yields in 2024, and higher income on funds withheld assets compared to prior year, partially offset by higher investment expenses;

• $95 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.

• $60 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 lower other policyholder benefits.

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

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.

Income tax expense decreased $209 million to an expense of $36 million for the three months ended June 30, 2024, from an expense of $245 million for the three months ended June 30, 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 June 30, 2024, compared to the June 30, 2023 ETR of 17%.

The change in the ETR during the three months ended June 30, 2024, compared to the three months ended June 30, 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, utilization of foreign tax credits, and valuation allowance.

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.

Six Months Ended June 30, 2024 compared to Six Months Ended June 30, 2023

Pretax Income (Loss)

Our pretax income (loss) increased by $1,810 million to $1,221 million for the six months ended June 30, 2024, from $(589) million for the six months ended June 30, 2023, primarily due to:

• $996 million increase in total net gains (losses) on derivatives and investments as shown in the table below and driven by:

Six Months Ended June 30,

2024 2023 Variance

(in millions)

Net gains (losses) excluding derivatives and funds withheld assets $ (37) $ (108) $ 71

Net gains (losses) on freestanding derivatives (3,674) (4,501) 827

Net gains (losses) on embedded derivatives (excluding funds withheld reinsurance) (523) (229) (294)

Net gains (losses) on derivative instruments (4,197) (4,730) 533

Net gains (losses) on funds withheld reinsurance (415) (807) 392

Total net gains (losses) on derivatives and investments $ (4,649) $ (5,645) $ 996

◦ Freestanding derivative movements were primarily driven by lower losses recognized on our equity derivatives resulting from lower market increases in 2024, compared to the prior year, partially offset by increased losses within our interest rate related hedge instruments resulting from increases in interest rates in 2024, compared to the prior year;

◦ Lower losses recognized on funds withheld reinsurance were driven by the increase in interest rates during 2024, compared to a slight decrease in interest rates in 2023;

• $490 million favorable movements in market risk benefits (gains) losses, net, primarily due to increases in interest rates, which were partially offset by less favorable fund performance and movements in volatility in 2024 compared to the prior year;

• $205 million increase in fee income primarily due to higher average separate account values compared to prior year;

• $133 million increase in net investment income as a result of higher income on limited partnership investments, which are recorded on a one quarter lag, and higher income on bonds, driven primarily by higher yields in 2024, compared to prior year, partially offset by higher investment expenses;

• $70 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 lower other policyholder benefits;

• $34 million decrease in interest credited on contract holder funds, net of deferrals, primarily due to lower average general account balances in 2024, compared to the prior year.

These movements were partially offset by:

• $127 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 2024, compared to the prior year, and an increase in incentive compensation expenses during the six months ended June 30, 2024.

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

Income tax expense increased $450 million to an expense of $137 million for the six months ended June 30, 2024, from a benefit of $313 million for the six months ended June 30, 2023.

The provision for income tax in the current period led to an ETR of 11% for the six months ended June 30, 2024 compared to the June 30, 2023 ETR of 53%.

The change in the ETR during the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was due to the relationship of the taxable income to the consolidated pre-tax income.

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

Segment Results of Operations

6 unchanged sentences

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,

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

2024 2023 2024 2023

(in millions)

19 unchanged sentences

Pretax income (loss) attributable to Jackson Financial Inc.

311 1,462 1,207 (593)

Income tax expense (benefit) 36 245 137 (313)

Net income (loss) attributable to Jackson Financial Inc.

275 1,217 1,070 (280)

Dividends on preferred stock 11 13 22 13

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 March 31,

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

2024 2023 2024 2023

(in millions)

16 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 March 31,

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

2024 2023 2024 2023

(in millions)

12 unchanged sentences

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

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

Three Months Ended June 30, 2024 compared to Three Months Ended June 30, 2023

Pretax Adjusted Operating Earnings

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:

Pretax adjusted operating earnings increased $137 million to $465 million for the three months ended June 30, 2024, from $328 million for the three months ended June 30, 2023, primarily due to:

• $100 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.

• $86 million increase in spread income primarily due to $74 million higher investment income driven by higher income on bonds due to higher asset balances earning higher yields in 2024, compared to the prior year quarter, partially offset by higher investment expenses related to repurchase agreements, and $12 million lower interest credited on contract holder funds 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;

• $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.

• $72 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 June 30, 2024, compared to the prior year, and an increase in incentive compensation expenses during the three months ended June 30, 2024.

Six Months Ended June 30, 2024 compared to Six Months Ended June 30, 2023

Pretax Adjusted Operating Earnings

Pretax adjusted operating earnings increased $200 million to $884 million for the six months ended June 30, 2024, from $684 million for the six months ended June 30, 2023, primarily due to:

• $208 million increase in fee income primarily due to higher average separate account values compared to prior year;

• $133 million increase in spread income primarily due to $111 million higher investment income driven by higher income on bonds driven by higher asset balances earning higher yields in 2024, compared to the prior year, partially offset by higher investment expenses related to repurchase agreements, and $22 million lower interest credited on contract holder funds compared to prior year.

These increases were partially offset by:

• $136 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 2024, and an increase in incentive compensation expenses during the six months ended June 30, 2024.

Account Value

Retail annuities account value, net of reinsurance, increased $19.9 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 March 31,

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

2024 2023 2024 2023

(in millions)

8 unchanged sentences

Pretax Adjusted Operating Earnings $ 29 $ 17 $ 60 $ 26

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

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

Three Months Ended March 31,

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

2024 2023 2024 2023

(in millions)

7 unchanged sentences

Balance as of end of period $ 7,299 $ 8,887 $ 7,299 $ 8,887

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

Three Months Ended June 30, 2024 compared to Three Months Ended June 30, 2023

Pretax Adjusted Operating Earnings

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 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.

Pretax adjusted operating earnings increased $12 million to $29 million for the three months ended June 30, 2024, from $17 million for the three months ended June 30, 2023, primarily due to an $12 million increase in spread income primarily due to $16 million higher investment income, partially offset by $4 million higher interest credited on contract holder funds.

Six Months Ended June 30, 2024 compared to Six Months Ended June 30, 2023

Pretax Adjusted Operating Earnings

Pretax adjusted operating earnings increased $34 million to $60 million for the six months ended June 30, 2024, from $26 million for the six months ended June 30, 2023, primarily due to a $34 million increase in spread income primarily due to $43 million higher investment income, partially offset by $9 million higher interest credited on contract holder funds.

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

Account Value

Institutional product account value decreased from $8,887 million at June 30, 2023, to $7,299 million at June 30, 2024.

The decrease in account value was driven by continued maturities of the existing contracts and funding agreements in addition to decreased issuances in 2024.

Closed Life and Annuity Blocks

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

Three Months Ended March 31,

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

2024 2023 2024 2023

(in millions)

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Pretax Adjusted Operating Earnings $ 35 $ 7 $ 54 $ (13)

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

Three Months Ended June 30, 2024 compared to Three Months Ended June 30, 2023

Pretax Adjusted Operating Earnings

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.

Pretax adjusted operating earnings increased $28 million to $35 million for the three months ended June 30, 2024, from $7 million for the three months ended June 30, 2023, primarily due to:

• $23 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 lower other policyholder benefits;

• $14 million decrease in interest credited on contract holder funds related to persistency bonuses in 2023.

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

Six Months Ended June 30, 2024 compared to Six Months Ended June 30, 2023

Pretax Adjusted Operating Earnings

Pretax adjusted operating earnings increased $67 million to $54 million for the six months ended June 30, 2024, from $(13) million for the six months ended June 30, 2023, primarily due to:

• $50 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 lower other policyholder benefits;

• $21 million decrease in interest credited on contract holder funds related to persistency bonuses in 2023.

Corporate and Other

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

Three Months Ended March 31,

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

2024 2023 2024 2023

(in millions)

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Pretax Adjusted Operating Earnings $ (56) $ (47) $ (136) $ (90)

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

Three Months Ended June 30, 2024 compared to Three Months Ended June 30, 2023

Pretax Adjusted Operating Earnings

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.

Pretax adjusted operating earnings decreased $9 million to $(56) million for the three months ended June 30, 2024, from $(47) million for the three months ended June 30, 2023, primarily due to a $9 million decrease in other income and an $8 million decrease in net investment income partially offset by a $7 million decrease in operating costs and other expenses, net of deferrals, primarily due to decreased deferred compensation expenses during the three months ended June 30, 2024.

Six Months Ended June 30, 2024 compared to Six Months Ended June 30, 2023

Pretax Adjusted Operating Earnings

Pretax adjusted operating earnings decreased $46 million to $(136) million for the six months ended June 30, 2024, from $(90) million for the six months ended June 30, 2023, primarily due to a $25 million decrease in other income primarily due to a one-time reinsurance related adjustment and a $22 million decrease in net investment income.

Item 2 | Management’s Discussion and Analysis | Investments

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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.

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

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

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

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

As of March 31, 2024, Apollo managed $15.9 billion of cash and investments and other third-party investment managers managed approximately $215 million of investments.

As of June 30, 2024, Apollo managed $15.1 billion of cash and investments and other third-party investment managers managed approximately $225 million of investments.

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

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The following table summarizes the carrying values of our investments:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

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

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Total investments $ 42,263 $ 18,407 $ 60,670 $ 41,319 $ 19,536 $ 60,855

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.

Available-for-sale debt securities decreased to $40,352 million at June 30, 2024, from $40,422 million at December 31, 2023.

The amortized cost of available-for-sale debt securities increased to $45,301 million as of June 30, 2024, from $44,843 million as of December 31, 2023.

Further, net unrealized losses, after adjusting for allowance for credit loss, were $4,921 million as of June 30, 2024, compared to $4,401 million as of December 31, 2023.

Other Invested Assets

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

Other invested assets increased to $2,673 million at June 30, 2024 from $2,466 million at December 31, 2023 .

Item 2 | Management’s Discussion and Analysis | Investments

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

At June 30, 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):

June 30, 2024 Amortized

Cost Allowance for Credit Loss Gross

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The following table summarizes our holdings:

March 31, December 31,

June 30, December 31,

(in millions)

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Mortgage Loans

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

At June 30, 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:

March 31, December 31,

June 30, December 31,

(in millions)

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Warehouse 1,966 2,016

Other 679 695

Total Commercial (1)

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Total $ 10,129 $ 10,563

(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.

(1) N et of an allowance for credit losses of $155 million and $160 million at June 30, 2024 and December 31, 2023, respectively.

(2) Net of an allowance for credit losses of $5 million and $5 million at June 30, 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:

March 31, December 31,

June 30, December 31,

(in millions)

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

March 31, December 31,

June 30, December 31,

(in millions)

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Total mortgage loans $ 10,129 $ 10,563

(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.

(1) As of June 30, 2024 and December 31, 2023, includes $20 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:

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

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.

Accrued interest amounting to $1 million and $2 million were written off as of June 30, 2024 and 2023, respectively, 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

June 30, 2024 December 31, 2023

Recorded investment $ 35 $ 24

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Derivative Instruments

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

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

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.

As of June 30, 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

June 30, 2024 Separate Accounts Reserves for future policy benefits Other contract holder funds Market Risk Benefits Total

(in millions)

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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 $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:

(1) Includes the embedded derivative liabilities in other contract holder funds related to RILA of $2,124 million and $1,224 million at June 30, 2024 and December 31, 2023, respectively.

(2) Includes the embedded derivative liabilities related to fixed index annuity in other contract holder funds of $858 million and $866 million at June 30, 2024 and December 31, 2023, respectively.

As of June 30, 2024:

• $229.1 billion or 79% of our policy and contract liabilities were backed by separate account assets.

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• $17.0 billion of our policy and contract liabilities were reinsured by Athene and backed by funds withheld assets.

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.

As of June 30, 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 June 30, 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.

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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 three months ended March 31, 2024, and 2023 .

The discussion below describes our liquidity and capital resources for the three months ended June 30, 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:

Three Months Ended March 31,

Six Months Ended June 30,

(in millions)

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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 provided by (used in) operating activities increased $357 million during the six months ended June 30, 2024, to $2,904 million for the six months ended June 30, 2024, from $2,547 million for the six months ended June 30, 2023.

This was primarily due to the timing of settlements of receivables and payables.

Cash flows from Investing Activities

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

Cash flows provided by (used in) investing activities 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 provided by (used in) investing activities decreased $1,116 million to $(3,920) million during the six months ended June 30, 2024, from $(2,804) million during the six months ended June 30, 2023.

This decrease was primarily driven by increased purchases of debt securities, primarily driven by increased RILA issuances in 2024, partially offset by lower outflows related to our hedging program for derivative settlements and collateral.

Cash flows from Financing Activities

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

Cash flows provided by (used in) financing activities increased $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.

Cash flows provided by (used in) financing activities increased $2,005 million to $64 million during the six months ended June 30, 2024, from $(1,941) million during the six months ended June 30, 2023.

This increase was primarily due to higher deposits from increased RILA sales in 2024 in addition 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

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

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

As of June 30, 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.

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Therefore, there can be no assurance that we will pay any cash dividends to holders of our stock or approve any further increase in the existing, or any new, common stock repurchase program, or as to the amount of any such cash dividends or stock repurchases.

Delaware law requires that dividends be paid, and stock repurchases made only out of “surplus,” which is defined as the fair market value of our net assets, minus our stated capital;

or out of the current or the immediately preceding year’s earnings.

Under Delaware law, dividends may be paid or stock may be repurchased out of “surplus,” or out of the current or the immediately preceding year's earnings.

Surplus is defined as the fair market value of net assets minus stated capital.

JFI is a holding company and has no direct operations.

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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.

During the second 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 $54 million, respectively.

On August 1, 2024, our Board of Directors approved a third quarter cash dividend on JFI's common stock, $0.70 per share, payable on September 19, 2024, to common shareholders of record on September 5, 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.

The dividend will be payable on September 30, 2024, to preferred shareholders of record at the close of business on September 5, 2024.

On August 1, 2024, our Board of Directors authorized an increase of $750 million in our existing authorization to repurchase shares of our outstanding common stock as part of the Company's share repurchase program.

We repurchased a total of 1,294,473 shares and 3,451,845 shares of common stock for an aggregate purchase price of $90 million and $206 million in the three and six months ended June 30, 2024, respectively, 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.

As of June 30, 2024, Jackson Financial has recorded an estimated liability balance of $ 94 million 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 $ 94 million of credit carryover that could be used to offset future tax liabilities.

At the JFI Consolidated level an estimated liability of $ 273 million was recorded with a deferred tax asset for $428 million of credit carryover.

Distributions from our Insurance Company Subsidiaries

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Also, surplus note arrangements and interest payments must be approved by the Michigan Director of Insurance and such interest payments to related parties reduce the otherwise calculated ordinary dividend capacity for that period.

In New York, all dividends require approval from the NYSDFS.

For 2024, Jackson and Brooke Life have total ordinary dividend capacity, based on 2023 statutory capital and surplus and statutory net gain from operations, subject to the availability of earned surplus, of $464 million and $371 million, respectively.

Brooke Life, as the sole owner of our other insurance company subsidiaries, including Jackson and Jackson National Life NY, is the direct recipient of any dividend payments from those subsidiaries and must make dividend payments to its ultimate parent company, Jackson Financial, in order for any funds from our insurance company subsidiaries to reach Jackson Financial.

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

In New York, all dividends require approval from the New York State Department of Financial Services.

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.

For 2024, ordinary dividend capacity for Jackson and Brooke Life is based on the greater of 10% of 2023 reported statutory capital and surplus or statutory net gain from operations.

This capacity is then reduced by cumulative dividends and other capital distributions in the preceding 12 months, subject to the availability of earned surplus.

As a result of cumulative dividends and other capital distributions occurring in the preceding 12 months as of June 30, 2024, including the January 2024 distributions to establish Brooke Re, future dividends from both Jackson and Brooke Life are expected to be classified as extraordinary.

There is a process within the Michigan Insurance Code to request extraordinary dividends that the companies have utilized previously.

Brooke Life, as the sole owner of Jackson and Brooke Re, is the direct recipient of any dividend payments from those subsidiaries and must make dividend payments to its ultimate parent company, Jackson Financial, in order for any funds from our insurance company subsidiaries to reach Jackson Financial.

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.

In connection with the formation of Brook Re, Jackson remitted a $1,920 million return of capital to its parent company, Brooke Life in the first quarter of 2024.

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

On June 20, 2024, Jackson paid a $250 million extraordinary dividend to its parent company, Brooke Life.

Brooke Life subsequently remitted a $250 million return of capital to its ultimate parent, Jackson Financial.

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 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.

As of June 30, 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.

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

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

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

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.

As of June 30, 2024, we were in a net collateral payable position of $116 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 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

As of June 30, 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 include 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.

Jackson uses a variety of asset liability management techniques to provide for the orderly provision of cash flow from investments and other sources as policies and contracts mature in accordance with their normal terms.

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

As of March 31, 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.

As of June 30, 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 $21.2 billion.

Our Indebtedness

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The applicable adder is based upon the ratings assigned to the Company’s senior, unsecured, non-credit enhanced debt.

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

The credit agreement governing the 2023 Revolving Credit Facility contains a number of customary representations and warranties, affirmative and negative covenants and events of default (including a change of control provision).

The credit agreement contains financial maintenance covenants, including a minimum adjusted consolidated net worth test of no less than 70% of our adjusted consolidated net worth as of September 30, 2022 (plus (to the extent positive) or minus (to the extent negative) 70% of the impact on such adjusted consolidated net worth resulting from the application of a one-time transition adjustment for the LDTI accounting change for insurance contracts, and plus 50% of the aggregate amount of any increase in adjusted consolidated net worth resulting from equity issuances by the Company and its consolidated subsidiaries after September 30, 2022) and a maximum consolidated indebtedness to total capitalization ratio test not to exceed 35%.

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

We were in compliance with these covenants at June 30, 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 $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

Interest expense on the notes was $5 million and $10 million for the three and six months ended June 30, 2024, respectively and interest expense on the notes was $7 million and $12 million for the three and six months ended June 30, 2023, respectively.

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

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

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.

As of June 30, 2024 and December 31, 2023, Jackson held a bank loan with an outstanding balance of $53 million and $57 million, respectively.

Collateral Upgrade Transactions

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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.

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

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

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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.

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

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

Financial Strength Ratings

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

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 :

As of August 1, 2024, the financial strength ratings of our principal insurance subsidiaries were as follows :

Best Fitch Moody’s S&P

38 unchanged sentences

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What changed 10-Q

Item 2. Management’s Discussion and Analysis