Jackson Financial Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations FORWARD-LOOKING STATEMENTS – CAUTIONARY LANGUAGE The information in this Quarterly Report on Form 10-Q (this “report”) contains forward-looking statements about future events and circumstances and their effects upon revenues, expenses and business opportunities. Generally speaking, any statement in this report not based upon historical fact is a forward-looking statement. Forward-looking statements can also be identified by the use of forward-looking or conditional words, such as “could,” “should,” “can,” “continue,” “estimate,” “forecast,” “intend,” “look,” “may,” “will,” “expect,” “believe,” “anticipate,” “plan,” “predict,” “remain,” “future,” “confident,” and “commit” or similar expressions. In particular, statements regarding plans, strategies, prospects, targets and expectations regarding the business and industry are forward-looking statements. They reflect expectations, are not guarantees of performance and speak only as of the dates the statements are made. We caution investors that these forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from those projected, expressed, or implied. Factors that could cause actual results to differ materially from those in the forward-looking statements include those reflected in Part I, Item 1A. Risk Factors and Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the U.S. Securities and Exchange Commission (the "SEC") on February 26, 2025, (the "2024 Annual Report"), and elsewhere in Jackson Financial Inc.’s reports filed with the SEC. Except as required by law, Jackson Financial Inc. does not undertake to update such forward-looking statements. You should not rely unduly on forward-looking statements. Certain financial data included in this release consists of non-GAAP (Generally Accepted Accounting Principles) financial measures. These non-GAAP financial measures may not be comparable to similarly titled measures presented by other entities, nor should they be construed as an alternative to other financial measures determined in accordance with U.S. GAAP. Although the Company believes these non-GAAP financial measures provide useful information to investors in measuring the financial performance and condition of its business, investors are cautioned not to place undue reliance on any non-GAAP financial measures and ratios included in this release. A reconciliation of the non-GAAP financial measures to the most directly comparable U.S. GAAP financial measure can be found in the “Non-GAAP Financial Measures” in this report. Certain financial data included in this release consists of statutory accounting principles (“statutory”) financial measures. These statutory financial measures are included in or derived from the Jackson National Life Insurance Company annual and/or quarterly statements filed with the Michigan Department of Insurance and Financial Services and available in the investor relations section of the Company’s website at investors.jackson.com/financials/statutory-filings. We routinely use our investor relations website, at investors.jackson.com, as a primary channel for disclosing key information to our investors. We may use our website as a means of disclosing material, non-public information and for complying with our disclosure obligations. Accordingly, investors should monitor our investor relations website, in addition to following our press releases, filings with the SEC, public conference calls, presentations, and webcasts. We and certain of our senior executives 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, our social media channels, or our executives' social media channels, is not incorporated by reference into and is not part of this report. 78 Item 2 | Management’s Discussion and Analysis | Available Information & Principal Definitions Available Information We make available free of charge, through our website, investors.jackson.com , our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, our proxy and information statements, and any amendments to those reports or statements as soon as reasonably practicable after these materials are electronically filed with, or furnished to, the SEC. The SEC’s website, www.sec.gov, contains financial reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. We use the investor relations page of our website, investors.jackson.com, as a primary channel for dissemination of important information, including news releases, analyst presentations, financial information, insider beneficial owner reports, and corporate governance information. We may use our website as a means of disclosing material, non-public information and for complying with our disclosure obligations. Accordingly, investors should monitor our investor relations website, in addition to following our press releases, filings with the SEC, public conference calls, presentations, and webcasts. We and certain of our senior executives 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. None of the content of Jackson’s website, jackson.com, the content of our social media channels or the content of our executives’ social media channels is incorporated by reference into this report or in any other report or document filed with the SEC, and any references to Jackson’s website are intended to be inactive textual references only. Principal Definitions, Abbreviations, and Acronyms Used in the Text and Notes of this Report we, us, our and the Company Jackson Financial Inc. and its consolidated subsidiaries, unless the context refers only to Jackson Financial Inc. as a corporate entity (which we refer to as "JFI" or "Jackson Financial") Jackson Jackson National Life Insurance Company, our primary operating subsidiary Brooke Life Brooke Life Insurance Company, our subsidiary and the direct parent company of Jackson and Brooke Re Brooke Re Brooke Life Reinsurance Company, a direct subsidiary of Brooke Life, and a Michigan-based captive reinsurer Jackson Finance Jackson Finance, LLC, our subsidiary PPMH PPM Holdings, Inc., our subsidiary PPM PPM America, Inc., a subsidiary of PPMH ACL Allowance for credit loss Account value ("AV") or account balance The amount of money in a customer’s account. 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. and its affiliates, including Athene Co-Invest Reinsurance Affiliate 1A Ltd. 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 our subsidiaries and includes: (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 those owned by 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. CMBS Commercial mortgage-backed securities 79 Item 2 | Management’s Discussion and Analysis | Available Information & Principal Definitions 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 these costs has been deferred, and the deferred amounts are shown on the balance sheet as an asset, which is amortized over the estimated lives of those policies and contracts. Deferred tax asset or Deferred tax liability Asset or liability that is recorded for the difference between financial reporting, or book basis, and tax basis of an asset or a liability Fixed Annuity An annuity that guarantees a set annual rate of return with interest at rates we determine, subject to specified minimums. Credited interest rates are guaranteed not to change for certain limited periods of time, 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 General account assets The assets held in the general accounts of our insurance companies GIC Guaranteed investment contract 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 a 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. GMDB ("Guaranteed minimum death benefit") An add-on benefit (enhanced benefits available for an additional cost) that guarantees an owner’s beneficiaries are entitled to a minimum payment based on the benefit base, which could be greater than the underlying account value, upon the death of the owner GMIB ("Guaranteed minimum income benefit") An add-on benefit (available for an additional cost) where an owner is entitled to annuitize the policy and receive a minimum payment stream based on the benefit base, which could be greater than the payment stream resulting from current annuitization of the underlying account value GMWB ("Guaranteed minimum withdrawal benefit") An add-on benefit (available for an additional cost) where an owner is entitled to withdraw a maximum amount of their benefit base each year, for which cumulative payments to the owner could be greater than the underlying account value GMWB for Life ("Guaranteed minimum withdrawal benefit for life") An add-on benefit (available for an additional cost) where an owner is entitled to withdraw the guaranteed annual withdrawal amount each year for the duration of the policyholder’s life, regardless of account performance. NAIC National Association of Insurance Commissioners NAV Net asset value Net flows Net flows represent the net change in customer account balances during a period, 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. RBC ("Risk-based capital") Statutory minimum level of capital that is required by regulators for an insurer to support its operations RBC ratio The ratio of statutory total adjusted capital to company action level required capital. A formal calculation is made annually during the fourth quarter of each year. In other periods, the ratio is estimated. 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 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 80 Item 2 | Management’s Discussion and Analysis | Overview & Executive Summary Overview of Management's Discussion and Analysis of Financial Condition and Results of Operations 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. Jackson Financial, domiciled in the state of Delaware, United States (“U.S.”). 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. We help Americans secure their financial futures. We believe that we are uniquely positioned in our markets because of our differentiated products, well-known brand and disciplined risk management. 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. 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, including the Condensed Consolidated Financial Statements and related notes contained in Part I, Item 1 of this report, and our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on February 26, 2025, (the "2024 Annual Report"), in their entirety for a more detailed description of events, trends, uncertainties, risks and critical accounting estimates affecting us. 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, manage our portfolio of investments effectively, and 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 because we do not directly use hedging to offset the movement in our U.S. 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 equity market and interest rate movements, while our macro hedging program seeks to provide additional liquidity and statutory capital protection as needed. 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. GAAP measures. We manage our business through three reportable segments: Retail Annuities, Institutional Products, and Closed Life and Annuity Blocks. We report in Corporate and Other activities and items that are not included in those three segments, including the results of PPM Holdings, Inc., the parent holding company of PPM America Inc. ("PPM"), that 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. See “Key Operating Measures” below. Finally, we are affected by various economic, industry and regulatory trends , which are described below under “Macroeconomic, Industry and Regulatory Trends.” 81 Item 2 | Management’s Discussion and Analysis | Executive Summary The table below presents selected financial and operating measures: Three Months Ended March 31, 2025 2024 (in millions) Net income (loss) attributable to Jackson Financial Inc. common shareholders $ (35) $ 784 Adjusted Operating Earnings (1) 376 334 Amount of shares repurchased under share repurchase program 172 116 Dividends on common shares 59 56 Return on Equity ("ROE") Attributable to Common Shareholders (1.5) % 32.5 % Adjusted Operating ROE Attributable to Common Shareholders on average equity (1) 13.6 % 12.0 % (1) Non-GAAP financial measure. See "Non-GAAP Financial Measures” below for information regarding our non-GAAP financial measures and reconciliations to the most comparable U.S. GAAP measures. Recent Events of Note • Capital Returned to Common Shareholders: Since January 1, 2025 through March 31, 2025, we have returned $231 million to our common shareholders consisting of $59 million in dividends and $172 million in common share repurchases. Our capital return target for common shareholders for 2025 is $700-$800 million. Share repurchases, net of issuances for our share-based compensation, have reduced our outstanding shares of common stock from 73,380,643 at December 31, 2024 to 71,878,542 at March 31, 2025. See Note 19 of the Notes to Condensed Consolidated Financial Statements for further information on our share repurchases. • Free Capital Generation and Free Cash Flow: ◦ Our free capital generation during the three months ended March 31, 2025 exceeded $400 million. Free capital generation represents Jackson’s aggregate statutory basis after-tax income from operations, realized gains (losses), unrealized gains (losses), and other surplus adjustments, adjusted for the change in estimated Company Action Level required capital ("CAL") for Jackson calibrated to a 425% RBC ratio. We expect free capital generation in 2025 to exceed $1 billion, under normal market conditions. As explained below under “Liquidity and Capital Resources – Holding Company Liquidity” and “- Distributions from Our Insurance Subsidiaries,” the payment of dividends or distributions from our capital generation is limited by applicable laws and regulations. ◦ The free cash flow at Jackson Financial (parent company only) during the three months ended March 31, 2025 was $213 million compared to $20 million during the three months ended March 31, 2024. Free cash flow is a non-GAAP financial measure calculated as the difference between cash received by Jackson Financial from its subsidiaries less holding company expenses and other, net. See “Non-GAAP Financial Measures” below for information regarding our non-GAAP financial measures and reconciliation to the most comparable U.S. GAAP measure. • 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 variable annuity contracts and similar products of Jackson (“market risk benefits”), both in-force on the transaction effective date 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 recorded 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. 82 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. 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 U.S. GAAP approach for regulatory reporting purposes primarily related to market risk benefits, with the intent to increase alignment between assets and liabilities in response to changes in economic factors. The modifications include a fixed long-term volatility assumption and adjustments to discount rates, guarantee fees and administrative expenses. The transaction and related modified U.S. GAAP approach enable us to largely moderate the impact of the cash surrender value floor on Jackson’s total adjusted capital, statutory required capital, and risk-based capital ("RBC") ratio and enable 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, which management believes provide useful information about our businesses and the operational factors underlying our financial performance. Sales Sales of annuities and institutional products include all money deposited by customers into new and existing contracts. We believe sales statistics are useful to gaining an understanding of, among other things, the attractiveness of our products, how we can best meet our customers’ needs, evolving industry product trends and the performance of our business from period to period. Three Months Ended March 31, 2025 2024 (in millions) Sales Variable annuities (1) $ 2,662 $ 2,436 RILA 1,195 1,155 Fixed Index Annuities 35 40 Fixed Annuities (2) 139 60 Total Retail Annuity Sales 4,031 3,691 Total Institutional Product Sales 1,599 100 Total Sales $ 5,630 $ 3,791 (1) Excludes certain internal exchanges. (2) Includes payout annuities. Higher retail annuity sales for the three months ended March 31, 2025 were primarily due to increased variable annuity sales. In addition, sales of our institutional products were higher for the three months ended March 31, 2025, reflecting our opportunistic approach to this business, which depends on both the risk-adjusted return on investment opportunities available and the prevailing cost of funding required by purchasers. 83 Item 2 | Management’s Discussion and Analysis | Key Operating Measures Account Value Account value ("AV") generally refers to 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 equity 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 and spread income generation, potential benefit obligations and risk management priorities. March 31, 2025 December 31, 2024 (in millions) Account Value GMWB For Life $ 162,448 $ 171,745 GMWB 5,810 6,165 GMIB 1,141 1,218 GMAB 113 35 No Living Benefits 54,797 56,894 Total Variable Annuity Account Value 224,309 236,057 RILA 12,432 11,685 Fixed Index Annuity (1) 845 816 Fixed Annuity (1) 2,629 2,515 Total Fixed & Fixed Index Annuity Account Value (1) 3,474 3,331 Payout Annuity (1) 591 592 Total Retail Annuities Account Value (1) $ 240,806 $ 251,665 Total Institutional Products Account Value $ 9,262 $ 8,384 Total Closed Life and Annuity Blocks Account Value (1) $ 7,611 $ 7,692 (1) Net of reinsurance. 84 Item 2 | Management’s Discussion and Analysis | Key Operating Measures Net Flows Net flows represent the net change in customer account balances during a period, reflecting gross premiums received and surrenders, withdrawals and benefits payments. Net flows exclude investment performance, interest credited to customer accounts, transfers between fixed and variable benefits for variable annuities and policy charges. We believe net flows is a useful metric in providing an understanding of, among other things, sales, ongoing premiums and deposits, the changes in account value from period to period, sources of potential fee and spread income and policyholder behavior. Three Months Ended March 31, 2025 2024 (in millions) Net Flows: Variable Annuity $ (4,782) $ (3,939) RILA 1,130 1,119 Fixed Index Annuity (1) 25 31 Fixed Annuity (1) 108 9 Payout Annuity (1) (5) (19) Total Retail Annuities Net Flows (1) (3,524) (2,799) Net flows ceded (808) (866) Total Retail Annuities net flows, gross of reinsurance $ (4,332) $ (3,665) Total Institutional Products Net Flows $ 736 $ (596) Total Closed Life and Annuity Blocks Net Flows (1) $ (69) $ (90) (1) Net of reinsurance. Net flows, net of reinsurance, improved for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, driven by increased institutional and variable annuity sales, partially offset by increased variable annuity surrenders and withdrawals. Increased variable annuity surrenders and withdrawals were driven by some mature policies from higher sales years coming out of their surrender charge period, along with higher surrenders as guaranteed benefits are less in the money during times of strong equity market performance. The more recent environment of higher interest rates and attractive annuity alternatives, such as RILA, combined with Jackson’s seasoned “out-of-the-money” book heightens exchange activity for us and the industry. 85 Item 2 | Management’s Discussion and Analysis | Key Operating Measures Benefit Base Benefit base refers to a notional amount that represents the value of a customer’s guaranteed benefit and, therefore, may be a different value from the invested assets in a customer’s account value. The benefit base may be used to calculate the fees for a customer’s guaranteed benefits within an annuity contract. The guaranteed death benefit and guaranteed living benefit within the same contract may not have the same benefit base. We believe benefit base is a useful metric for our variable annuity policies in providing an understanding of, among other things, fee income generation, potential optional guarantee benefit obligations and risk management priorities. The following table shows variable annuity account value and benefit base as of March 31, 2025 and December 31, 2024: March 31, 2025 December 31, 2024 Account Value Benefit Base Account Value Benefit Base (in millions) No Living Benefits $ 54,797 N/A $ 56,894 N/A By Guaranteed Living Benefits: GMWB for Life 162,448 180,071 171,745 181,379 GMWB 5,810 4,995 6,165 5,076 GMIB (1) 1,141 1,520 1,218 1,561 GMAB 113 118 35 35 Total $ 224,309 $ 186,704 $ 236,057 $ 188,051 By Guaranteed Death Benefit: Return of AV (No GMDB) $ 28,725 N/A $ 29,519 N/A Return of Premium 171,648 131,241 181,132 132,612 Highest Anniversary Value ("HAV") 12,436 12,636 13,233 12,857 Rollup 3,044 4,024 3,234 4,108 Combination HAV/Rollup 8,456 9,544 8,939 9,682 Total $ 224,309 $ 157,445 $ 236,057 $ 159,259 (1) Substantially all of our GMIB benefits are reinsured. Assets Under Management 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. March 31, December 31, 2025 2024 (in millions) Jackson Invested Assets $ 49,624 $ 46,143 Third Party Invested Assets (including CLOs) 30,593 28,278 Total PPM AUM 80,217 74,421 Total JNAM AUM 237,814 250,297 Total AUM $ 318,031 $ 324,718 86 Item 2 | Management’s Discussion and Analysis | Macroeconomic, Industry and Regulatory Trends Macroeconomic, Industry and Regulatory Trends We discuss a number of trends and uncertainties below that we believe could materially affect our future business performance, including our results of operations, investments, cash flows, and capital and liquidity position. Macroeconomic and Financial Market Conditions Our business and results of operations are affected by macroeconomic factors. The level of interest rates and shape of the yield curve, credit and equity market performance and equity volatility, regulation, tax policy, the level of U.S. employment, inflation and the overall U.S. 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- and medium-term. Government actions, including tariffs, sanctions or other barriers to international trade, restructuring of government services, responses to future pandemics, civil unrest, and geographic conflicts, 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, economic activity or on financial markets. In the short- to medium-term, 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, or revenues decline due to reduced sales and increased outflows. Equity Market Environment Our financial performance is impacted by equity market performance. On our variable annuities, the fees we earn that are not associated with guaranteed benefits are mainly based on the account value, which changes with equity market levels. In addition, our hedges could be less effective in periods of large directional movements, or we could experience more frequent or more costly rebalancing in periods of high volatility, which would lead to adverse performance versus our hedge targets and increased hedging costs. Further, we also are exposed to basis risk, which results from our inability to purchase or sell hedge assets whose performance strongly correlates to the performance of the funds into which customers allocate their assets. We make available to customers funds where we believe we can transact in sufficiently correlated hedge assets, yet we anticipate some variance in the performance of our hedge assets and customer funds. This variance may result in our hedge assets outperforming or underperforming the customer assets they are intended to match. This variance may be exacerbated during periods of high volatility, leading to a mismatch in our hedge results relative to our hedge targets, and an adverse effect on our U.S. GAAP results. With the execution of the Brooke Re transaction in the first quarter of 2024, we are now 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 equity markets due to minimum required reserving levels ( i.e. , the cash surrender value floor) when reserve releases are limited and unable to offset equity 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”). 87 Item 2 | Management’s Discussion and Analysis | Macroeconomic, Industry and Regulatory Trends Interest Rate Environment The interest rate environment has affected, and will continue to affect, our business and financial performance for the following reasons: • Periods of rising interest rates impact investment-related activity, including investment income returns, net investment spread results, new money rates, mortgage loan prepayments, and bond redemptions. Rising interest rates also impact the hedging results of our variable annuity business as the market values 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. Further, we expect near-term hedging losses from rising rates may be more than offset by changes in the fair value of the related guaranteed benefit liabilities, which are reduced with an increase in interest rates. • Interest rate increases also expose us to disintermediation risk, where higher rates make currently sold fixed annuity products more attractive while simultaneously reducing the market value of assets backing our liabilities. This creates an incentive for our customers to lapse their products in an environment where selling assets causes us to realize losses. • Additionally, rising interest rates decrease the value of bond funds held by variable annuity clients. This in turn decreases the volume of fees we collect based on the account value and increases the value of any guaranteed benefits. • With the execution of the Brooke Re transaction in the first quarter of 2024, we are now able to largely moderate the impact of the cash surrender value floor going forward. In the past, our statutory TAC may have been negatively impacted by rising interest rates due to minimum required reserving levels ( i.e. , the cash surrender value floor) when reserve releases are limited and unable to offset interest rate hedging losses. The RBC ratio increased or decreased depending on the interaction between movements in TAC and movements in 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 regulatory reserves that our insurance subsidiaries are required to hold for optional guaranteed benefits, decreasing regulatory surplus, which would adversely affect our insurance subsidiaries' ability to pay dividends. 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. • Some of our annuities have guaranteed minimum interest crediting rates (“GMICRs”) that limit our ability to reduce crediting rates. If earnings on our investment portfolio decline, those GMICRs may result in net investment spread compression that negatively impacts earnings. Many of our annuities have GMICRs that reset at contractually specified times after issue, subject to a contractually specified minimum GMICR. 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. When policies have comparatively high GMICRs, in a subsequent low interest rate environment more customers are expected to hold on to their policies, which may result in lower lapses than previously expected. • Our hedges could be less effective in periods of large directional interest rate movements, or we could experience more frequent or more costly rebalancing in periods of high interest rate volatility, which would lead to adverse performance versus our hedge targets and increased hedging costs. 88 Item 2 | Management’s Discussion and Analysis | Macroeconomic, Industry and Regulatory Trends Credit Market Environment Conditions in fixed income markets impact our financial performance. As credit spreads widen, the fair value of our existing investment portfolio generally decreases, although we generally expect the widening spreads to increase the yield on new fixed income investments. 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 accumulated other comprehensive income, or AOCI. The revaluation will impact net income in the case of realized gains or losses from the sale of securities, changes in fair value of trading securities or securities carried at fair value under the fair value election, or potential changes in the allowance for credit loss ("ACL"). In addition, if credit conditions deteriorate due to a recession or other negative credit events in capital markets, we could experience an increase in defaults and other-than-temporary-impairments (“OTTI”). OTTI in our underlying investments would reduce our insurance company subsidiaries' regulatory capital. Also, shifts in the credit quality or credit rating downgrades of our investments as a result of stressed credit conditions may impact the level of regulatory required capital for our insurance company subsidiaries. As such, significant credit rating downgrades along with elevated defaults and OTTI losses would negatively impact our RBC ratio, which could impact available dividends from our insurance subsidiaries. Additionally, widening credit spreads decrease the value of bond funds held by variable annuity clients. This in turn decreases the volume of fees we collect based on the account value and increases the value of any guaranteed benefits. Consumer Behavior We believe that many retirees look to tax-efficient savings products as a tool for addressing their unmet need for retirement planning. We believe our products are well-positioned to meet this increasing consumer demand. However, consumer behavior may be impacted by increased economic uncertainty, unemployment rates, declining equity markets, significant changes in interest rates and increased volatility of financial markets. In recent years, we have introduced new products to better address changes in consumer demand and targeted distribution channels that meet changes in consumer preferences. Demographics We expect demographic trends in the U.S. population, in particular the increase in the number of retirement age individuals, to generate significant demand for our products. In addition, the potential risk to government social safety net programs and shifting of responsibility for retirement planning and financial security from employers and other institutions to employees, highlight the need for individuals to plan for their long-term financial security and will create additional opportunities to generate sustained demand for our products. We believe we are well-positioned to capture the increased demand generated by these demographic trends. 89 Item 2 | Management’s Discussion and Analysis | Macroeconomic, Industry and Regulatory Trends Regulatory Policy We operate in a highly regulated industry. Our insurance company subsidiaries are regulated primarily at the state level, with some policies and products also subject to federal regulation. New federal and state regulations could impact our business model, including regulatory reserve and capital requirements. Our ability to respond to changes in regulation and other legislative activity is critical to our long-term financial performance. T he following regulations could materially impact our business: Department of Labor Fiduciary Advice Rule In April 2024, the Department of Labor ( the "DOL") revised the definition of “fiduciary” and related Prohibited Transaction Exemptions ("PTE") (the “2024 Fiduciary Advice Rule”), redefining what constitutes fiduciary “investment advice” to Employee Retirement Income Security Act ("ERISA") plans and individual retirement accounts ("IRAs"). See Part I, Business – Regulation – “Federal Initiatives Impacting Insurance Companies – Department of Labor’s Fiduciary Advice Rule” in our 2024 Annual Report for more information regarding the 2024 Fiduciary Advice Rule.” The 2024 Fiduciary Advice Rule is currently being challenged in two separate litigation matters and the DOL has been stayed from enforcing the rule. Depending on the outcome of the litigation, we may need to take certain additional actions to comply with, or assist our distributors in their compliance with, the 2024 Fiduciary Advice Rule. The 2024 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 2024 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. 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. Legislative Reforms 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. 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. Tax Laws Our annuities offer investors the opportunity to benefit from tax deferrals. If U.S. 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. 90 Item 2 | Management’s Discussion and Analysis | Non-GAAP Financial Measures Non-GAAP Financial Measures In addition to presenting our results of operations and financial condition in accordance with U.S. GAAP, we use and report selected non-GAAP financial measures. Management believes that the use of these non-GAAP financial measures, together with relevant U.S. GAAP financial measures, provides a better understanding of our results of operations, financial condition and the underlying performance drivers of our business. These non-GAAP financial measures should be considered supplementary to our results of operations and financial condition that are presented in accordance with U.S. GAAP and should not be viewed as a substitute for the U.S. GAAP financial measures. Other companies may use similarly titled non-GAAP financial measures that are calculated differently from the way we calculate such measures. Consequently, our non-GAAP financial measures may not be comparable to similar measures used by other companies. These non-GAAP financial measures should not be viewed as substitutes for the most directly comparable financial measures calculated in accordance with U.S. GAAP. Adjusted Operating Earnings Adjusted Operating Earnings is an after-tax non-GAAP financial measure, which we believe should be used to evaluate our financial performance on a consolidated basis by excluding certain items that may be highly variable from period to period due to accounting treatment under U.S. GAAP or that are non-recurring in nature, as well as certain other revenues and expenses that we do not view as driving our underlying performance. Adjusted Operating Earnings should not be used as a substitute for net income as calculated in accordance with U.S. GAAP. However, we believe the adjustments to net income are useful for gaining an understanding of our overall results of operations. 91 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. These items are excluded as they may vary significantly from period to period due to near-term market conditions or are otherwise not directly comparable or reflective of the underlying performance of our business. We believe these exclusions provide investors a better picture of the drivers of our underlying performance. 1. Net Hedging Results : Comprised of: (i) fees attributed to guaranteed benefits; (ii) net gains (losses) on hedging instruments which includes: (a) changes in the fair value of freestanding derivatives, and related commissions and expenses, 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; and (b) investment income and change in fair value of certain non-derivative assets used to manage the risk associated with market risk benefits and other guaranteed benefit features; and (iii) the movements in reserves, market risk benefits, guaranteed benefit features accounted for as embedded derivative instruments, and related claims and benefit payments (excluding impacts of actuarial assumption updates and model enhancements). We believe excluding these items removes the impact to both revenue and related expenses associated with Net Hedging Results. 2. Amortization of DAC associated with non-operating items at date of transition to LDTI: Amortization of the balance of unamortized deferred acquisition costs, at January 1, 2021, the date of transition to current Long Duration Targeted Improvements ("LDTI") accounting guidance, associated with items excluded from pretax adjusted operating earnings prior to transition. 3. Actuarial Assumption Updates and Model Enhancements: The impact on the valuation of MRBs and embedded derivatives arising from our annual actuarial assumption updates and model enhancements review. 4. Net Realized Investment Gains and Losses: Comprised of: (i) realized investment gains and losses associated with the periodic sales or disposals of securities, excluding those held within our trading portfolio, and (ii) impairments of securities, after adjustment for the non-credit component of the impairment charges. 5. Change in Value of Funds Withheld Embedded Derivative and Net investment income on funds withheld assets: Composed of: (i) the change in fair value of funds withheld embedded derivatives, and (ii) net investment income on funds withheld assets related to funds withheld reinsurance transactions. 6. Other items : Comprised of: (i) the impact of investments that are consolidated in our financial statements due to U.S. GAAP accounting requirements, such as our investments in collateralized loan obligations (CLOs), but for which the consolidation effects are not consistent with our economic interest or exposure to those entities, (ii) impacts from derivatives not included in Net Hedging Results (see 1. above), excluding earned income from periodic settlements and changes in settlement accruals on cross-currency swaps, and (iii) one-time or other non-recurring items. Operating income taxes are calculated using the prevailing corporate federal income tax rate of 21% while taking into account any items recognized differently in our financial statements and federal income tax returns, including the dividends received deduction and other tax credits. For interim reporting periods, the Company uses an estimated annual effective tax rate (“ETR”) in computing its tax provision including consideration of discrete items. 92 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, 2025 2024 (in millions) Net income (loss) attributable to Jackson Financial Inc common shareholders $ (35) $ 784 Add: dividends on preferred stock 11 11 Add: income tax expense (benefit) 1 101 Pretax income (loss) attributable to Jackson Financial Inc (23) 896 Non-operating adjustments (income) loss: Guaranteed benefits and hedging results: Fees attributable to guarantee benefit reserves (768) (788) Net gains (losses) on hedging instruments (1,011) 2,576 Market risk benefits (gains) losses, net 2,246 (2,718) Net reserve and embedded derivative movements (333) 364 Total net hedging results 134 (566) Amortization of DAC associated with non-operating items at date of transition to LDTI 128 139 Net realized investment (gains) losses 66 7 Net realized investment (gains) losses on funds withheld assets 388 201 Net investment income on funds withheld assets (227) (270) Other items (24) (18) Total non-operating adjustments 465 (507) Pretax adjusted operating earnings 442 389 Less: operating income tax expense (benefit) 55 44 Adjusted operating earnings before dividends on preferred stock 387 345 Less: dividends on preferred stock 11 11 Adjusted operating earnings $ 376 $ 334 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 that: (i) excludes items that vary from period to period due to accounting treatment under U.S. GAAP or that are non-recurring in nature, as such items may distort the underlying performance of our business; and (ii) is calculated by dividing our Adjusted Operating Earnings by average Adjusted Book Value Attributable to Common Shareholders. Adjusted Book Value Attributable to Common Shareholders excludes Preferred Stock and AOCI attributable to Jackson Financial, which does not include AOCI arising from investments held within the funds withheld account related to the Athene Reinsurance Transaction. We exclude AOCI attributable to Jackson Financial from Adjusted Book Value Attributable to Common Shareholders because our invested assets are generally invested to closely match the duration of our liabilities, which are longer duration in nature, and therefore we believe period-to-period fair market value fluctuations in AOCI to be inconsistent with this objective. We believe excluding AOCI attributable to Jackson Financial is more useful to investors in analyzing trends in our business. 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. Adjusted Book Value Attributable to Common Shareholders and Adjusted Operating ROE Attributable to Common Shareholders should not be used as substitutes for total shareholders’ equity and ROE as calculated using annualized net income and average equity in accordance with U.S. GAAP. However, we believe the adjustments to equity and earnings are useful to gaining an understanding of our overall results of operations. 93 Item 2 | Management’s Discussion and Analysis | Non-GAAP Financial Measures The following is a reconciliation of Adjusted Book Value Attributable to Common Shareholders to total shareholders’ equity and a comparison of Adjusted Operating ROE Attributable to Common Shareholders to ROE Attributable to Common Shareholders, the most comparable U.S. GAAP measure: Three Months Ended March 31, 2025 2024 (in millions) Net income (loss) attributable to Jackson Financial Inc. common shareholders $ (35) $ 784 Adjusted Operating Earnings 376 334 Total shareholders' equity $ 10,301 $ 10,169 Less: Preferred stock 533 533 Total common shareholders' equity 9,768 9,636 Adjustments to total common shareholders’ equity: Exclude AOCI attributable to Jackson Financial Inc. (1) 1,256 1,762 Adjusted Book Value Attributable to Common Shareholders $ 11,024 $ 11,398 ROE Attributable to Common Shareholders (1.5) % 32.5 % Adjusted Operating ROE Attributable to Common Shareholders on average equity 13.6 % 12.0 % (1) Excludes $(1,463) million and $(1,661) million related to the investments held within the funds withheld account related to the Athene Reinsurance Transaction as of March 31, 2025 and 2024, 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. Free Cash Flow Free cash flow is Jackson Financial Inc. (Parent Company only) net cash provided by (used in) operating activities less preferred stock dividends and capital contributions to PPM or other subsidiaries, plus the return of capital from subsidiaries. Free cash flow should not be used as a substitute for Jackson Financial’s net cash provided by (used in) operating activities in accordance with U.S. GAAP. However, we believe these adjustments are useful to gaining an understanding of our overall available cash flow at Jackson Financial for return of capital to common shareholders and other corporate initiatives. Three Months Ended March 31, 2025 2024 (in millions) Dividends and distributions to parent (1) $ 240 $ 45 Jackson Financial expenses and other, net (27) (25) Free Cash Flow $ 213 $ 20 (1) Cash distributed to Jackson Financial includes cash dividends and distributions of $195 million and interest payments on surplus notes of $45 million to Jackson Financial from its subsidiaries for the three months ended March 31, 2025 and includes cash dividends and distributions of nil and interest payments on surplus notes of $45 million to JFI from its subsidiaries for the three months ended March 31, 2024. 94 Item 2 | Management’s Discussion and Analysis | Non-GAAP Financial Measures The following is a reconciliation of Jackson Financial net cash provided by operating activities (Parent Company only), the most comparable U.S. GAAP measure, to Free Cash Flow: Three Months Ended March 31, 2025 2024 (in millions) Jackson Financial, Inc. Net cash provided by operating activities (Parent Company Only) $ 29 $ 31 Adjustments from net cash provided by operating activities to free cash flow: Capital distributions from subsidiaries 195 — Dividends on preferred stock (11) (11) Total adjustments 184 (11) Free cash flow $ 213 $ 20 Free Cash Flow Comprised of: Capital distributions from subsidiaries $ 195 $ — Interest on surplus note from subsidiary 45 45 Cash distributed to Jackson Financial 240 45 Parent company expenses (28) (26) Net investment income and other income 8 4 Other, net (7) (3) Jackson Financial expenses and other, net (27) (25) Free cash flow $ 213 $ 20 95 Item 2 | Management’s Discussion and Analysis | Consolidated Results of Operations Consolidated Results of Operations The following table sets forth, for the periods presented, certain data from our Condensed Consolidated Income Statements. The information contained in the table below should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes elsewhere in this report: Three Months Ended March 31, 2025 2024 (in millions) Revenues Fee income $ 1,986 $ 1,998 Premiums 40 38 Net investment income: Net investment income excluding funds withheld assets 528 464 Net investment income on funds withheld assets 227 270 Total net investment income 755 734 Net gains (losses) on derivatives and investments: Net gains (losses) on derivatives and investments 1,343 (2,892) Net gains (losses) on funds withheld reinsurance treaties (388) (201) Total net gains (losses) on derivatives and investments 955 (3,093) Other income 14 1 Total revenues 3,750 (322) Benefits and Expenses Death, other policy benefits and change in policy reserves, net of deferrals 244 221 (Gain) loss from updating future policy benefits cash flow assumptions, net 12 11 Market risk benefits (gains) losses, net 2,246 (2,718) Interest credited on other contract holder funds, net of deferrals and amortization 288 273 Interest expense 25 25 Operating costs and other expenses, net of deferrals 677 685 Amortization of deferred acquisition costs 275 278 Total benefits and expenses 3,767 (1,225) Pretax income (loss) (17) 903 Income tax expense (benefit) 1 101 Net income (loss) (18) 802 Less: Net income (loss) attributable to noncontrolling interests 6 7 Net income (loss) attributable to Jackson Financial Inc. (24) 795 Less: Dividends on preferred stock 11 11 Net income (loss) attributable to Jackson Financial Inc. common shareholders $ (35) $ 784 96 Item 2 | Management’s Discussion and Analysis | Consolidated Results of Operations Three Months Ended March 31, 2025 compared to Three Months Ended March 31, 2024 Pretax Income (Loss) Our pretax income (loss) decreased by $920 million to $(17) million for the three months ended March 31, 2025, from $903 million for the three months ended March 31, 2024, primarily due to: • $4,964 million unfavorable movements in market risk benefits (gains) losses, largely due to unfavorable movements in interest rates and fund performance as well as unfavorable volatility movements during the three months ended March 31, 2025, compared to the prior year; • $24 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 changes in mortality; and • $12 million decrease in fee income primarily due to decreases in benefit-based guarantee fee income, partially offset by increases in variable fee income due to higher average separate account values compared to the prior year. These movements were partially offset by: • $4,048 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, 2025 2024 Variance (in millions) Net gains (losses) excluding derivatives and funds withheld assets $ (66) $ (7) $ (59) Net gains (losses) on freestanding derivatives 1,013 (2,584) 3,597 Net gains (losses) on embedded derivatives (excluding funds withheld reinsurance) 396 (301) 697 Net gains (losses) on derivative instruments 1,409 (2,885) 4,294 Net gains (losses) on funds withheld reinsurance (388) (201) (187) Total net gains (losses) on derivatives and investments $ 955 $ (3,093) $ 4,048 ◦ Volumes of freestanding derivatives can vary significantly period over period and movements in those derivatives are subject to interest rate or market movements. The movements in interest rate hedges during the three months ended March 31, 2025 were largely driven by an increase in interest rates whereas the movements in interest rate hedges during the three months ended March 31, 2024 were primarily driven by a decrease in interest rates. The movements in equity hedges during the three months ended March 31, 2025 were primarily driven by a decrease in equity markets whereas the movement in equity hedges during the three months ended March 31, 2024 were primarily driven by an increase in equity markets. ◦ Embedded derivative movements were favorable largely due to market decrease impacts on our growing RILA block during the three months ended March 31, 2025, compared to the prior year; and • $21 million increase in net investment income as a result of higher income on bonds and lower expenses related to consolidated entities, partially offset by lower income on funds withheld assets compared to prior year; and • $8 million decrease in operating costs and other expenses, net of deferrals, primarily due to a decrease in deferred compensation expenses during the three months ended March 31, 2025. Income Taxes Income tax expense decreased $100 million to an expense of $1 million for the three months ended March 31, 2025, from an expense of $101 million for the three months ended March 31, 2024. The provision for income tax in the current period led to an effective income tax rate ("ETR") of (6)% for the three months ended March 31, 2025, compared to the ETR of 11% for the three months ended March 31, 2024. The change in the ETR during the three months ended March 31, 2025, compared to the three months ended March 31, 2024, was due to the relationship of the taxable income to the consolidated 97 Item 2 | Management’s Discussion and Analysis | Consolidated Results of Operations pre-tax income (loss) and the valuation allowance. The ETR differs from the statutory rate of 21% primarily due to the dividends received deduction, utilization of foreign tax credits, and the valuation allowance. See Note 15 - Income Taxes of the Notes to Consolidated Financial Statements in our 2024 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 We manage our business through three reportable segments: Retail Annuities, Institutional Products, and Closed Life and Annuity Blocks. We report certain activities and items that are not included in these segments, including the results of PPM Holdings, Inc., the holding company of PPM, within Corporate and Other. The following tables and discussion represent an overall view of our results of operations for each segment. Pretax Adjusted Operating Earnings by Segment The following table summarizes pretax adjusted operating earnings (non-GAAP) from the Company's business segment operations and also provides a reconciliation of the segment measure to net income on a consolidated U.S. GAAP basis. As part of the Company’s asset liability management program, management monitors the allocation of invested assets supporting the Company’s contractual liabilities. During the first quarter of 2025, that monitoring resulted in the reallocation of certain invested assets across reportable segments and Corporate and Other. The results of this reallocation are reflected in the net investment income reported for the first quarter of 2025. The impact of the reallocation was not material to the prior period financial results and prior period financial figures were not recast to reflect the reallocated basis. 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, 2025 2024 (in millions) Pretax Adjusted Operating Earnings by Segment: Retail Annuities $ 420 $ 419 Institutional Products 18 31 Closed Life and Annuity Blocks 28 19 Corporate and Other (24) (80) Pretax Adjusted Operating Earnings 442 389 Pre-tax reconciling items from adjusted operating income to net income (loss) attributable to Jackson Financial Inc.: Guaranteed benefits and hedging results: Fees attributable to guarantee benefit reserves 768 788 Net gains (losses) on hedging instruments 1,011 (2,576) Market risk benefits gains (losses), net (2,246) 2,718 Net reserve and embedded derivative movements 333 (364) Total net hedging results (134) 566 Amortization of DAC associated with non-operating items at date of transition to LDTI (128) (139) Net realized investment gains (losses) (66) (7) Net realized investment gains (losses) on funds withheld assets (388) (201) Net investment income on funds withheld assets 227 270 Other items 24 18 Total pre-tax reconciling items (465) 507 Pretax income (loss) attributable to Jackson Financial Inc. (23) 896 Income tax expense (benefit) 1 101 Net income (loss) attributable to Jackson Financial Inc. (24) 795 Less: Dividends on preferred stock 11 11 Net income (loss) attributable to Jackson Financial Inc. common shareholders $ (35) $ 784 98 Item 2 | Management’s Discussion and Analysis | Segment Results of Operations Retail Annuities The following table sets forth, for the periods presented, certain data underlying the pretax adjusted operating earnings results for our Retail Annuities segment. The information contained in the table below should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes appearing elsewhere in this report: Three Months Ended March 31, 2025 2024 (in millions) Retail Annuities: Operating Revenues Fee income $ 1,095 $ 1,083 Premiums 14 10 Net investment income 187 152 Other income 7 8 Total Operating Revenues 1,303 1,253 Operating Benefits and Expenses Death, other policy benefits and change in policy reserves 29 16 (Gain) loss from updating future policy benefits cash flow assumptions, net (3) 1 Interest credited on other contract holder funds, net of deferrals and amortization 94 88 Interest expense 6 6 Asset-based commission expenses 284 279 Other commission expenses 206 194 Sub-advisor expenses 80 82 General and administrative expenses 200 180 Deferral of acquisition costs (158) (149) Amortization of deferred acquisition costs 145 137 Total Operating Benefits and Expenses 883 834 Pretax Adjusted Operating Earnings $ 420 $ 419 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, 2025 2024 (in millions) Retail Annuities Account Value: Balance as of beginning of period $ 251,665 $ 235,465 Premiums and deposits (1) 4,088 3,724 Surrenders, withdrawals, and benefits (1) (7,612) (6,523) Net flows (3,524) (2,799) Investment performance (6,315) 15,288 Change in value of equity option (395) 300 Interest credited 94 88 Policy charges and other (719) (731) Balance as of end of period, net of ceded reinsurance 240,806 247,611 Ceded reinsurance 14,315 17,627 Balance as of end of period, gross of reinsurance $ 255,121 $ 265,238 (1) Excludes certain internal exchanges. 99 Item 2 | Management’s Discussion and Analysis | Segment Results of Operations Three Months Ended March 31, 2025 compared to Three Months Ended March 31, 2024 Pretax Adjusted Operating Earnings Pretax adjusted operating earnings increased $1 million to $420 million for the three months ended March 31, 2025, from $419 million for the three months ended March 31, 2024, primarily due to: • $12 million increase in fee income attributable to higher average separate account values compared to the prior year; and • $29 million increase in spread income due to $35 million higher investment income, partially offset by $6 million higher interest credited on contract holder funds compared to the prior year. Investment income was driven by higher invested asset balances. These increases were partially offset by: • $26 million increase in commissions and general expenses, net of deferrals, reflecting higher general and administrative expenses of $20 million during the three months ended March 31, 2025; and • $9 million increase in death, other policy benefits, and change in policy reserves, net of (gain) loss from updating future policy benefits cash flow assumptions, attributable to higher other policyholder benefits during the three months ended March 31, 2025. Account Value Retail annuities account value, net of reinsurance, decreased $6.8 billion between periods primarily due to negative variable annuity separate account returns driven by unfavorable market performance in 2025. Institutional Products The following table sets forth, for the periods presented, certain data underlying the pretax adjusted operating earnings results for our Institutional Products segment. The information contained in the table below should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes appearing elsewhere in this report: Three Months Ended March 31, 2025 2024 (in millions) Institutional Products: Operating Revenues Net investment income $ 116 $ 113 Total Operating Revenues 116 113 Operating Benefits and Expenses Interest credited on other contract holder funds, net of deferrals and amortization 97 81 General and administrative expenses 1 1 Total Operating Benefits and Expenses 98 82 Pretax Adjusted Operating Earnings $ 18 $ 31 100 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, 2025 2024 (in millions) Institutional Products: Balance as of beginning of period $ 8,384 $ 8,406 Premiums and deposits 1,599 100 Surrenders, withdrawals, and benefits (863) (696) Net flows 736 (596) Interest credited 97 81 Policy Charges and other 45 (66) Balance as of end of period $ 9,262 $ 7,825 Three Months Ended March 31, 2025 compared to Three Months Ended March 31, 2024 Pretax Adjusted Operating Earnings Pretax adjusted operating earnings decreased $13 million to $18 million for the three months ended March 31, 2025, from $31 million for the three months ended March 31, 2024, reflecting a $13 million decrease in spread income primarily due to a $16 million increase in interest credited on contract holder funds, partially offset by a $3 million increase in investment income. Account Value Institutional product account value increased from $7,825 million at March 31, 2024 to $9,262 million at March 31, 2025, primarily driven by increased sales in 2025. 101 Item 2 | Management’s Discussion and Analysis | Segment Results of Operations Closed Life and Annuity Blocks The following table sets forth, for the periods presented, certain data underlying the pretax adjusted operating earnings results for our Closed Life and Annuity Blocks segment. The information contained in the table below should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes appearing elsewhere in this report: Three Months Ended March 31, 2025 2024 (in millions) Closed Life and Annuity Blocks: Operating Revenues Fee income $ 108 $ 112 Premiums 29 30 Net investment income 187 163 Other income 6 7 Total Operating Revenues 330 312 Operating Benefits and Expenses Death, other policy benefits and change in policy reserves, net of deferrals 154 144 (Gain) loss from updating future policy benefits cash flow assumptions, net 14 8 Interest credited on other contract holder funds, net of deferrals and amortization 97 104 Other commission expenses 9 9 General and administrative expenses 27 25 Deferral of acquisition costs (1) 1 Amortization of deferred acquisition costs 2 2 Total Operating Benefits and Expenses 302 293 Pretax Adjusted Operating Earnings $ 28 $ 19 Three Months Ended March 31, 2025 compared to Three Months Ended March 31, 2024 Pretax Adjusted Operating Earnings Pretax adjusted operating earnings increased $9 million to $28 million for the three months ended March 31, 2025, from $19 million for the three months ended March 31, 2024, attributable to a $24 million increase in net investment income, partially offset by a $16 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 changes in mortality, partially offset by lower other policyholder benefits. 102 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 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 March 31, 2025 2024 (in millions) Corporate and Other: Operating Revenues Fee income $ 12 $ 12 Net investment income 11 4 Other income 1 (14) Total Operating Revenues 24 2 Operating Benefits and Expenses Interest expense 19 19 Sub-advisor expenses (2) (2) General and administrative expenses 31 65 Total Operating Benefits and Expenses 48 82 Pretax Adjusted Operating Earnings $ (24) $ (80) Three Months Ended March 31, 2025 compared to Three Months Ended March 31, 2024 Pretax Adjusted Operating Earnings Pretax adjusted operating earnings increased $56 million to $(24) million for the three months ended March 31, 2025, from $(80) million for the three months ended March 31, 2024, primarily driven by a $34 million decrease in general and administrative expenses, due to decreased deferred compensation expenses during the three months ended March 31, 2025, a $15 million increase in other income reflecting a one-time reinsurance related adjustment in 2024, and a $7 million increase in net investment income. 103 Item 2 | Management’s Discussion and Analysis | Investments Investments 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. The fair value of these and our other invested assets fluctuates depending on market and other general economic conditions and the interest rate environment and is affected by other economic factors. Investment Strategy Our overall investment strategy 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. 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. 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 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 March 31, 2025, Apollo managed $13.0 billion of cash and investments and other third-party investment managers managed approximately $281 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 seconding preceding paragraph. The fixed income portion of the SAA is assessed relative to a customized index of public corporate bonds that represents a close approximation of the maturity profile of our liabilities and a credit quality mix that is consistent with our risk tolerance. PPM’s objective is to outperform this index on a number of measures including portfolio yield, total return and capital loss due to downgrades and defaults. While PPM has access to a broad universe of potential investments, we believe grounding the investment program with a customized public corporate index that can be easily tracked and monitored helps guide PPM in meeting the risk and return expectations and assists with performance evaluation. Recognizing the trade-offs between the level of risk, required capital, liquidity and investment return, the largest allocation within our investment portfolio is to investment grade fixed income securities. As previously mentioned, our investment manager accesses a broad universe of potential investments to construct the investment portfolio and considers the benefits of diversification across various sectors, collateral types and asset classes. To this end, our SAA and investment portfolio includes allocations to public and private corporate bonds (both investment grade and high yield), mortgage loans, structured securities, private equity and U.S. Treasury securities. These U.S. Treasury securities, while lower yielding than other alternatives, provide a higher level of liquidity and play a role in managing our interest rate exposure. 104 Item 2 | Management’s Discussion and Analysis | Investments Portfolio Composition The following table summarizes the carrying values of our investments: March 31, 2025 December 31, 2024 Investments excluding Funds Withheld Funds Withheld Total Investments excluding Funds Withheld Funds Withheld Total (in millions) Debt Securities, available-for-sale, net of allowance for credit losses $ 33,656 $ 8,587 $ 42,243 $ 31,231 $ 9,058 $ 40,289 Debt Securities, at fair value under fair value option 3,318 112 3,430 2,930 116 3,046 Equity securities, at fair value 71 120 191 72 125 197 Mortgage loans, net of allowance for credit losses 7,003 2,572 9,575 6,851 2,611 9,462 Mortgage loans, at fair value under fair value option — 451 451 — 449 449 Policy loans 902 3,505 4,407 902 3,501 4,403 Freestanding derivative instruments 563 24 587 252 45 297 Other invested assets 2,133 711 2,844 2,087 777 2,864 Total investments $ 47,646 $ 16,082 $ 63,728 $ 44,325 $ 16,682 $ 61,007 Available-for-sale debt securities increased to $42,243 million at March 31, 2025, from $40,289 million at December 31, 2024. The amortized cost of available-for-sale debt securities increased to $49,742 million as of March 31, 2025, from $44,976 million as of December 31, 2024. Further, net unrealized losses, after adjusting for allowance for credit loss, were $4,029 million as of March 31, 2025, compared to $4,679 million as of December 31, 2024. Other Invested Assets Other invested assets decreased to $2,844 million at March 31, 2025 from $2,864 million at December 31, 2024 . 105 Item 2 | Management’s Discussion and Analysis | Investments Debt Securities At March 31, 2025 and December 31, 2024, 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, 2025 Amortized Cost Allowance for Credit Loss Gross Unrealized Gains Gross Unrealized Losses Fair Value U.S. government securities $ 4,127 $ — $ 2 $ 869 $ 3,260 Other government securities 1,287 — 1 221 1,067 Corporate securities Utilities 5,892 — 41 537 5,396 Energy 3,176 — 23 261 2,938 Banking 3,071 — 32 131 2,972 Healthcare 3,541 — 16 353 3,204 Finance/Insurance 4,970 8 41 356 4,647 Technology/Telecom 2,412 — 9 196 2,225 Consumer goods 2,570 — 19 295 2,294 Industrial 1,801 — 11 100 1,712 Capital goods 1,965 — 13 117 1,861 Real estate 1,601 — 9 114 1,496 Media 1,014 — 4 112 906 Transportation 1,451 — 8 148 1,311 Retail 1,397 — 7 133 1,271 Other (1) 2,600 — 17 97 2,520 Total Corporate Securities 37,461 8 250 2,950 34,753 Residential mortgage-backed 350 6 28 29 343 Commercial mortgage-backed 1,698 — 4 79 1,623 Other asset-backed securities 4,819 26 15 181 4,627 Total Debt Securities $ 49,742 $ 40 $ 300 $ 4,329 $ 45,673 (1) No single remaining industry exceeds 3% of the portfolio. 106 Item 2 | Management’s Discussion and Analysis | Investments December 31, 2024 Amortized Cost Allowance for Credit Loss Gross Unrealized Gains Gross Unrealized Losses Fair Value U.S. government securities $ 4,120 $ — $ 1 $ 962 $ 3,159 Other government securities 1,345 — 1 252 1,094 Corporate securities Utilities 5,716 — 29 589 5,156 Energy 3,119 — 16 291 2,844 Banking 2,612 — 19 137 2,494 Healthcare 3,428 — 10 393 3,045 Finance/Insurance 5,069 8 29 418 4,672 Technology/Telecom 2,313 — 5 220 2,098 Consumer goods 2,414 — 13 327 2,100 Industrial 1,733 — 10 114 1,629 Capital goods 1,922 — 8 137 1,793 Real estate 1,634 — 6 132 1,508 Media 1,005 — 3 121 887 Transportation 1,522 — 4 178 1,348 Retail 1,357 — 4 147 1,214 Other (1) 2,453 — 10 117 2,346 Total Corporate Securities 36,297 8 166 3,321 33,134 Residential mortgage-backed 374 6 14 44 338 Commercial mortgage-backed 1,674 — 3 100 1,577 Other asset-backed securities 4,243 25 11 196 4,033 Total Debt Securities $ 48,053 $ 39 $ 196 $ 4,875 $ 43,335 (1) No single remaining industry exceeds 3% of the portfolio. Evaluation of Available-For-Sale Debt Securities 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. Mutual fund investments typically represent investments made in our own mutual funds to seed those structures for external issuance at a later date. The following table summarizes our holdings: March 31, December 31, 2025 2024 (in millions) Common Stock $ 18 $ 18 Preferred Stock 146 151 Mutual Funds 27 28 Total $ 191 $ 197 Mortgage Loans At March 31, 2025, 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. 107 Item 2 | Management’s Discussion and Analysis | Investments The table below presents the carrying value, net of allowance of credit loss, of our mortgage loans by property type: March 31, December 31, 2025 2024 (in millions) Commercial: Apartment $ 2,510 $ 2,450 Hotel 828 835 Office 1,267 1,317 Retail 1,778 1,685 Warehouse 2,150 2,134 Other 554 521 Total Commercial 9,087 8,942 Residential 1,069 1,090 Total 10,156 10,032 ACL (1) (130) (121) Total with ACL $ 10,026 $ 9,911 (1) At March 31, 2025 and December 31, 2024 a llowance for credit losses included $116 million and $116 million, respectively, for commercial loans and $14 million and $5 million, respectively, for residential loans. The table below presents the carrying value, net of allowance for credit loss, of our mortgage loans by region: March 31, December 31, 2025 2024 (in millions) United States: East North Central $ 1,025 $ 1,015 East South Central 327 347 Middle Atlantic 1,412 1,408 Mountain 578 474 New England 276 275 Pacific 2,222 2,260 South Atlantic 2,097 2,131 West North Central 648 617 West South Central 1,076 1,035 Total United States 9,661 9,562 Foreign 365 349 Total $ 10,026 $ 9,911 108 Item 2 | Management’s Discussion and Analysis | Investments The following table provides information about the credit quality of our mortgage loans: March 31, December 31, 2025 2024 (in millions) Commercial mortgage loans Loan to value ratios: Less than 70% $ 7,365 $ 7,304 70% - 80% 1,106 1,074 80% - 100% 429 338 Greater than 100% 71 110 Total 8,971 8,826 Residential mortgage loans Performing 958 987 Nonperforming (1) 97 98 Total 1,055 1,085 Total mortgage loans $ 10,026 $ 9,911 (1) At March 31, 2025 and December 31, 2024, includes $24 million and $24 million, respectively, of loans 30-89 days past due and $20 million and $24 million, respectively, of loans 90 days or greater past due and supported with insurance or other guarantees provided by various governmental programs. The following table provides a summary of the allowance for credit losses related to our mortgage loans: March 31, 2025 2024 (in millions) Balance at beginning of year $ 121 $ 165 Charge offs, net of recoveries (6) — Provision (release) (1) 15 (3) Balance at end of period $ 130 $ 162 The Company’s mortgage loans that are current and in good standing are accruing interest. Interest is not accrued on loans greater than 90 days delinquent or in process of foreclosure, when deemed uncollectible. Delinquency status is determined from the date of the first missed contractual payment. Accrued interest amounting to nil and nil were written off as of March 31, 2025 and 2024, 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, 2025 December 31, 2024 Recorded investment (1) $ 33 $ 29 Unpaid principal balance 37 33 Related loan allowance 1 1 Average recorded investment 32 30 Investment income recognized — 1 (1) At March 31, 2025 and December 31, 2024, includes $3 million and $2 million, respectively, of loans in process of foreclosure, all of which are loans supported with insurance or other guarantees provided by various governmental programs. 109 Item 2 | Management’s Discussion and Analysis | Investments 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, 2025 and December 31, 2024. Evaluation of Invested Assets We perform regular evaluations of our invested assets. On a monthly basis, management identifies those investments that may require additional monitoring and carefully reviews the carrying value of such investments to determine whether specific investments should be placed on a non-accrual status and if an allowance for credit loss is required. In making these reviews, management principally considers the adequacy of any collateral, compliance with contractual covenants, the borrower’s recent financial performance, news reports and other externally generated information concerning the borrower’s affairs. In the case of publicly traded bonds, management also considers market value quotations, where available. For mortgage loans, management generally considers information concerning the mortgaged property, including factors impacting the current and expected payment status of the loan and, if available, the current fair value of the underlying collateral. For investments in partnerships, management reviews the financial statements and other information provided by the general partners. To determine an allowance for credit loss, we consider a security’s forecasted cash flows as well as the severity of depressed fair values. Investment income is not accrued on securities in default and otherwise where the collection is uncertain. Subsequent receipts of interest on such securities are generally used to reduce the cost basis of the securities. The provisions for impairment on mortgage loans are based on losses expected by management to be realized on transfers of mortgage loans to real estate, on the disposition and settlement of mortgage loans and on mortgage loans that management believes may not be collectible in full. Accrual of interest on mortgage loans is generally suspended when principal or interest payments on mortgage loans are past due more than 90 days. Interest is then accounted for on a cash basis. Policy and Contract Liabilities We establish, and carry as liabilities, actuarially determined amounts that are estimated as necessary 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 U.S. 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 2024 Annual Report. 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, 2025, 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. 110 Item 2 | Management’s Discussion and Analysis | Policy and Contract Liabilities The table below represents a breakdown of our policy and contract liabilities: March 31, 2025 Separate Accounts Reserves for future policy benefits Other contract holder funds Market Risk Benefits Total (in millions) Variable Annuities $ 217,291 $ — $ 7,018 $ (3,266) $ 221,043 RILA (1) — — 12,432 12 12,444 Fixed Index Annuities (2) — — 8,097 45 8,142 Fixed Annuities — — 9,441 1 9,442 Payout Annuities — 1,124 842 — 1,966 Other Annuities 200 — — — 200 Total Retail Annuities 217,491 1,124 37,830 (3,208) 253,237 Total Institutional Products — — 9,262 — 9,262 Total Closed Life and Annuity Blocks 81 8,546 11,775 7 20,409 Total Policy and Contract Liabilities 217,572 9,670 58,867 (3,201) 282,908 Claims payable and other — 1,356 161 — 1,517 Total $ 217,572 $ 11,026 $ 59,028 $ (3,201) $ 284,425 December 31, 2024 Separate Accounts Reserves for future policy benefits Other contract holder funds Market Risk Benefits Total (in millions) Variable Annuities $ 228,851 $ — $ 7,206 $ (5,176) $ 230,881 RILA (1) — — 11,685 6 11,691 Fixed Index Annuities (2) — — 8,515 37 8,552 Fixed Annuities — — 9,615 1 9,616 Payout Annuities — 1,095 844 — 1,939 Other Annuities 208 — — — 208 Total Retail Annuities 229,059 1,095 37,865 (5,132) 262,887 Total Institutional Products — — 8,384 — 8,384 Total Closed Life and Annuity Blocks 84 8,599 11,899 7 20,589 Total Policy and Contract Liabilities 229,143 9,694 58,148 (5,125) 291,860 Claims payable and other — 1,378 164 — 1,542 Total $ 229,143 $ 11,072 $ 58,312 $ (5,125) $ 293,402 (1) Includes the embedded derivative liabilities in other contract holder funds related to RILA of $2,833 million and $3,065 million at March 31, 2025 and December 31, 2024, respectively. (2) Includes the embedded derivative liabilities related to fixed index annuity in other contract holder funds of $817 million and $877 million at March 31, 2025 and December 31, 2024, respectively. 111 Item 2 | Management’s Discussion and Analysis | Policy and Contract Liabilities As of March 31, 2025: • $218 billion or 77% of our policy and contract liabilities were backed by separate account assets. These separate account assets backed reserves primarily related to our variable annuities. Separate account liabilities are fully funded by cash flows from the customer’s corresponding separate account assets and are set equal to the fair value of such invested assets. • $50.8 billion of our policy and contract liabilities were backed by our investment portfolio. • $14.5 billion of our policy and contract liabilities were reinsured by Athene and backed by funds withheld assets. As of March 31, 2025, 93% of fixed annuity, fixed-index 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. 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 Liquidity is our ability to generate sufficient cash flows to meet the cash requirements of operating, investing and financing activities. Capital refers to our long-term financial resources available to support the business operations and contribute to future growth. Our ability to generate and maintain sufficient liquidity and capital depends on the profitability of the businesses, timing of cash flows on investments and products, general economic conditions and access to the capital markets and alternate sources of liquidity and capital described herein. The discussion below describes our liquidity and capital resources for the three months ended March 31, 2025 . Cash Flows The following table presents a summary of our cash flow activity for the periods set forth below: Three Months Ended March 31, 2025 2024 (in millions) Net cash provided by (used in) operating activities $ 1,594 $ 1,426 Net cash provided by (used in) investing activities (953) (2,006) Net cash provided by (used in) financing activities (521) 433 Net increase (decrease) in cash, cash equivalents, and restricted cash 120 (147) Cash, cash equivalents, and restricted cash at beginning of period 3,767 2,691 Total cash, cash equivalents, and restricted cash at end of period $ 3,887 $ 2,544 Cash flows from Operating Activities The principal operating cash inflows from our insurance activities come from insurance premiums, fees charged on our products and net investment income. The principal operating cash outflows are the result of 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 increased $168 million to $1,594 million for the three months ended March 31, 2025, from $1,426 million for the three months ended March 31, 2024. This was primarily due to the timing of settlements of receivables and payables. 112 Item 2 | Management’s Discussion and Analysis | Liquidity and Capital Resources Cash flows from Investing Activities The principal cash inflows from our investment activities come from repayments of principal, proceeds from maturities and sales of investments, as well as settlements of freestanding derivatives. The principal cash outflows relate to purchases of investments and settlements of freestanding derivatives. It is not unusual to have a net cash outflow from investing activities because cash inflows from insurance operations are typically reinvested to fund insurance liabilities. We closely monitor and manage these risks through our comprehensive investment risk management process. The primary liquidity concerns with respect to these cash flows are the risk of default by debtors or market disruptions that might impact the timing of investment related cash flows as well as derivative collateral needs, which could result in material liquidity needs for our insurance subsidiaries. Cash flows provided by (used in) investing activities increased $1,053 million to $(953) million during the three months ended March 31, 2025, from $(2,006) million during the three months ended March 31, 2024. This increase was primarily driven by inflows related to our hedging program for derivative settlements and collateral as compared to outflows in the prior year, partially offset by increased purchases of debt securities, primarily driven by increased institutional sales in 2025. Cash flows from Financing Activities The principal cash inflows from our financing activities come from deposits of funds associated with policyholder account balances, issuance of securities and lending of securities. The principal cash outflows come from withdrawals associated with policyholder account balances, repayment of debt, and the return of securities on loan. The primary liquidity concerns with respect to these cash flows are market disruption and the risk of early policyholder withdrawal. Cash flows provided by (used in) financing activities decreased $954 million to $(521) million during the three months ended March 31, 2025, from $433 million during the three months ended March 31, 2024. This decrease was primarily due to payments on repurchase agreements and federal home loan bank notes in 2025, partially offset by higher deposits from increased institutional sales during the three months ended March 31, 2025. Statutory Capital Our insurance company subsidiaries have statutory surplus above the level needed to meet current regulatory requirements. RBC requirements are used as minimum capital requirements by the NAIC and the state insurance departments to identify companies that merit regulatory action. RBC is based on a formula that incorporates both factor-based components (applied to various asset, premium, and statutory reserve items) and model-based components. The formula takes into account the risk characteristics of the insurer, including asset risk, insurance risk, interest rate risk, market risk and business risk, and is calculated on an annual basis. The formula is used as an early warning regulatory tool to identify possible inadequately capitalized insurers for purposes of initiating regulatory action, and not to rank insurers generally. As of March 31, 2025, 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. 113 Item 2 | Management’s Discussion and Analysis | Liquidity and Capital Resources Holding Company Liquidity As a holding company with no business operations of its own, Jackson Financial primarily derives cash flows from dividends and interest payments from its insurance subsidiaries. These principal sources of liquidity are expected to be supplemented by cash and short-term investments held by Jackson Financial, and access to bank lines of credit and the capital markets. We intend to maintain a minimum amount of cash and highly liquid securities at Jackson Financial adequate to fund two years of holding company fixed net expenses, which 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. Our principal sources of liquidity and our anticipated capital position are described in the following paragraphs. Any declaration of cash dividends or stock repurchases are at the discretion of JFI’s Board of Directors and will depend on our financial condition, earnings, liquidity and capital requirements, regulatory constraints, level of indebtedness, preferred stock and other contractual restrictions with respect to paying cash dividends or repurchasing stock, restrictions imposed by Delaware law, general business conditions and any other factors that JFI’s Board of Directors deems relevant in making any such determination. Therefore, there can be no assurance that we will pay any cash dividends to holders of our stock or approve any further increase in the existing, or any new, common stock repurchase program, or any assurance as to the amount of any such cash dividends or stock repurchases. 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. All of our business operations are conducted through our subsidiaries. Any dividends we pay, or stock repurchases we make, will depend upon the funds legally available for distribution, including dividends or distributions from our subsidiaries to us. The states in which our insurance subsidiaries are domiciled impose certain restrictions on our insurance subsidiaries’ ability to pay dividends to their parent companies. See “Distributions from our Insurance Company Subsidiaries” below for a discussion of those restrictions . 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” in our 2024 Annual Report. During the first quarter of 2025, we paid a cash dividend of $0.50 per depositary share and $0.80 per common share on JFI's preferred and common stock totaling $11 million and $59 million, respectively. On May 2, 2025, our Board of Directors approved a second quarter cash dividend on JFI's common stock of $0.80 per share, payable on June 26, 2025, to common shareholders of record on June 12, 2025. 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 June 30, 2025, to depositary shareholders of record at the close of business on June 12, 2025. 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 1,966,909 shares of common stock for an aggregate purchase price of $172 million in the three months ended March 31, 2025, which were funded with cash on hand. As of May 1, 2025, the Company had remaining authorization to purchase $431 million of its common shares. 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 . 114 Item 2 | Management’s Discussion and Analysis | Liquidity and Capital Resources Distributions from our Insurance Company Subsidiaries The ability of our insurance company subsidiaries to pay dividends is limited by applicable laws and regulations of the jurisdictions where such subsidiaries are domiciled as well as agreements entered into with regulators. These laws and regulations require, among other things, our insurance company subsidiaries to maintain minimum solvency requirements and limit the amount of dividends these subsidiaries can pay. Subject to these limitations, our insurance company subsidiaries are permitted to pay ordinary dividends based on calculations specified under insurance laws of the relevant state of domicile, subject to prior notification to the appropriate regulatory agency. Any distributions above the amount permitted by statute in any twelve-month period are considered extraordinary dividends, and the approval of the appropriate regulator is required prior to payment. In Michigan, the Director of the Michigan Department of Insurance and Financial Services (the Michigan Director of Insurance) may limit, or not permit, the payment of dividends from either Jackson or Brooke Life, Jackson's direct parent company, if it determines that the surplus of either of these subsidiaries is not reasonable in relation to their outstanding liabilities and is not adequate to meet their financial needs, as required by the Michigan Insurance Code of 1956. Unless otherwise approved by the Michigan Director of Insurance, dividends may only be paid from earned surplus. Also, surplus note arrangements and interest payments must be approved by the Michigan Director of Insurance and such interest payments to related parties reduce the otherwise calculated ordinary dividend capacity for that period. In New York, all dividends require approval from the New York State Department of Financial Services. For 2025, ordinary dividend capacity for Jackson and Brooke Life is based on the greater of 10% of 2024 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 March 31, 2025 , 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. Further, state insurance laws and regulations require that the statutory surplus of our insurance subsidiaries following any dividend or distribution must be reasonable in relation to their outstanding liabilities and adequate for the insurance subsidiaries’ financial needs. Along with solvency regulations, another primary consideration in determining the amount of capital used for dividends is the level of capital needed to maintain desired financial strength ratings from rating agencies, including A.M. Best, S&P, Moody’s and Fitch. Both regulators and rating agencies could become more conservative in their methodology and criteria, including increasing capital requirements for insurance company subsidiaries. We believe our insurance company subsidiaries have sufficient statutory capital and surplus to maintain their desired financial strength ratings. Insurance Company Subsidiaries’ Liquidity The liquidity requirements for our insurance company subsidiaries primarily relate to the liabilities associated with their insurance and reinsurance activities, operating expenses and income taxes. Liabilities arising from insurance and reinsurance activities include the payment of policyholder benefits when due, cash payments in connection with policy surrenders and withdrawals and policy loans. 115 Item 2 | Management’s Discussion and Analysis | Liquidity and Capital Resources 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, 2025, Jackson’s outstanding surplus notes and bank debt included $48 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. Significant increases in interest rates or equity markets may also result in higher margin and collateral requirements on our derivative portfolio. The derivative contracts are an integral part of our risk management program, especially for the management of our variable annuities program, and are managed in accordance with our hedging and risk management program. Our cash flows associated with collateral received from counterparties and posted with counterparties fluctuates with changes in the market value of the underlying derivative contract and/or the market value of the collateral. The net collateral position depends on changes in interest rates and equity markets related to the amount of the exposures hedged. Collateral posting requirements can result in material liquidity needs for our insurance subsidiaries. As of March 31, 2025, we were in a net collateral payable position of $340 million, which is larger than the $150 million as of December 31, 2024. 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, 2025, 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. Further, approximately half of Jackson’s general account reserves are not surrenderable, included surrender charges greater than 5%, or included market value adjustments to discourage early withdrawal of policy and contract funds as of March 31, 2025. The liquidity sources for our insurance company subsidiaries include their cash, short-term investments, sales of publicly-traded bonds, insurance premiums, fees charged on their products, sales of annuities and institutional products, investment income, commercial repurchase agreements and utilization of a short-term borrowing facility with the FHLBI. Jackson uses a variety of asset liability management techniques to provide for the orderly provision of cash flow from investments and other sources as policies and contracts mature in accordance with their normal terms. Jackson’s principal sources of liquidity to meet unexpected cash outflows associated with sudden and severe increases in surrenders and withdrawals or benefit payments are its portfolio of liquid assets and its net operating cash flows. As of March 31, 2025, the portfolio of cash, short-term investments and privately and publicly traded securities and equities that are unencumbered and unrestricted to sale, amounted to $29.3 billion. 116 Item 2 | Management’s Discussion and Analysis | Liquidity and Capital Resources Our Indebtedness Senior Notes 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 matured on November 22, 2023, and were paid with cash on hand at maturity. Revolving Credit and Short-Term Borrowing Facilities On February 24, 2023, the Company entered into a revolving credit facility (the "2023 Revolving Credit Facility") with a syndicate of banks and Bank of America, N.A., as Administrative Agent. The 2023 Revolving Credit Facility replaced an existing revolving credit facility that was due to expire in February 2024. The 2023 Revolving Credit Facility provides for borrowings for working capital and other general corporate purposes under aggregate commitments of $1.0 billion, with a sub-limit of $500 million available for letters of credit. The 2023 Revolving Credit Facility further provides for the ability to request, subject to customary terms and conditions, an increase in commitments thereunder by up to an additional $500 million. Commitments under the 2023 Revolving Credit Facility terminate on February 24, 2028. Interest on borrowings may be based on a “Base Rate” (as defined in the 2023 Revolving Credit Facility) plus an adder ranging from 0.125% to 0.875%, or a “Term SOFR Rate” (as defined in the 2023 Revolving Credit Facility) plus an adder ranging from 1.125% to 1.875%. The applicable adder is based upon the ratings assigned to the Company’s senior, unsecured, non-credit enhanced debt. The credit agreement governing the 2023 Revolving Credit Facility contains a number of customary representations and warranties, affirmative and negative covenants and events of default (including a change of control provision). See Note 13 – Long-Term Debt of Notes to Condensed Consolidated Financial Statements for information regarding financial maintenance covenants contained in the credit agreement. We were in compliance with these covenants at March 31, 2025. Jackson is a party to an Uncommitted Money Market Line Credit Agreement dated April 6, 2023, among Jackson, Jackson Financial, and Société Générale. This agreement is an uncommitted short-term cash advance facility that provides an additional form of liquidity to Jackson and to Jackson Financial. The aggregate borrowing capacity under the agreement is $500 million and each cash advance request must be at least $100 thousand. The interest rate is set by the lender at the time of the borrowing and is fixed for the duration of the advance. Jackson and Jackson Financial are jointly and severally liable to repay any advance under the agreement, which must be repaid prior to the last day of the quarter in which the advance was drawn. Surplus Notes On March 15, 1997, our subsidiary, Jackson, issued 8.2% surplus notes in the principal amount of $250 million due March 15, 2027. These surplus notes are unsecured and subordinated to all present and future indebtedness, policy claims and other creditor claims and may not be redeemed at the option of the Company or any holder prior to maturity. Interest is payable semi-annually on March 15th and September 15th of each year. Interest expense on the notes was $5 million and $5 million for the three months ended March 31, 2025 and 2024, respectively. Under Michigan insurance law, for statutory reporting purposes, the surplus notes are not part of the legal liabilities of Jackson and are considered surplus funds. Payments of interest or principal may only be made with the prior approval of the Michigan Director of Insurance and only out of surplus earnings that the Director determines to be available for such payments under Michigan insurance law. 117 Item 2 | Management’s Discussion and Analysis | Liquidity and Capital Resources Federal Home Loan Bank Jackson is a member of the regional FHLBI primarily for the purpose of participating in its collateralized loan advance program with funding facilities. Membership requires us to purchase and hold a minimum amount of FHLBI capital stock, plus additional stock based on outstanding advances. Advances are in the form of either notes or funding agreements issued to FHLBI. As of March 31, 2025 and December 31, 2024, Jackson held a bank loan with an outstanding balance of $48 million and $52 million, respectively. Collateral Upgrade Transactions During the first quarter of 2024, Jackson executed certain paired repurchase and reverse repurchase transactions totaling approximately $1.5 billion pursuant to master repurchase agreements with participating bank counterparties. Under these transactions, the Company lends securities ( e.g. , corporate debt securities) to bank counterparties in exchange for U.S. Treasury securities. The paired repurchase and reverse repurchase transactions are settled on a net basis. As a result, there was no cash exchanged at initiation of these transactions. The paired transactions are reported net within the Consolidated Balance Sheets. These transactions are evergreened and require at least 150-days' notice prior to termination. See “Collateral Upgrade Transactions” under Note 4 – Investments of the Notes to Condensed Consolidated Financial Statements for additional information . Financial Strength Ratings Our access to funding and our related cost of borrowing, the attractiveness of certain of our subsidiaries’ products to customers, our attractiveness as a reinsurer to potential ceding companies and requirements for derivatives collateral posting are affected by our credit ratings and financial strength ratings, which are periodically reviewed by the rating agencies. Financial strength ratings and credit ratings are important factors affecting consumer confidence in an insurer and its competitive position in marketing products as well as critical factors considered by ceding companies in selecting a reinsurer. Our principal insurance company subsidiaries are rated by A.M. Best, S&P, Moody’s and Fitch. Financial strength ratings represent the opinions of rating agencies regarding the financial ability of an insurer or reinsurer to meet its obligations under an insurance policy or reinsurance arrangement and generally involve quantitative and qualitative evaluations by rating agencies of a company’s financial condition and operating performance. Generally, rating agencies base their financial strength ratings upon information furnished to them by the company and upon their own investigations, studies and assumptions. Financial strength ratings are based upon factors of concern to customers, distribution partners and ceding companies and are not directed toward the protection of investors. Financial strength ratings are not recommendations to buy, sell or hold securities and may be revised or revoked at any time at the sole discretion of the rating organization. As of May 1, 2025, the financial strength ratings of our principal insurance subsidiaries were as follows : Company A.M. Best Fitch Moody’s S&P Jackson National Life Insurance Company Rating A A A3 A Outlook stable stable stable stable Jackson National Life Insurance Company of New York Rating A A A3 A Outlook stable stable stable stable Brooke Life Insurance Company Rating A Outlook stable 118 Item 2 | Management’s Discussion and Analysis | Liquidity and Capital Resources In evaluating our Company’s financial strength, the rating agencies evaluate a variety of factors including our strategy, market positioning and record, mix of business, profitability, leverage and liquidity, the adequacy and soundness of our reinsurance, the quality and estimated market value of our assets, the adequacy of our surplus, our capital structure, and the experience and competence of our management. In addition to the financial strength ratings, rating agencies use an outlook statement to indicate a short- or medium-term trend which, if continued, may lead to a rating change. A positive outlook indicates a rating may be raised and a negative outlook indicates a rating may be lowered. A stable outlook is assigned when ratings are not likely to be changed. Outlooks should not be confused with expected stability of the issuer’s financial or economic performance. A stable outlook does not preclude a rating agency from changing a rating at any time without notice. A.M. Best, S&P, Moody’s and Fitch review their ratings of insurance companies from time to time. There can be no assurance that any particular rating will continue for any given period of time or that it will not be changed or withdrawn entirely if, in their judgment, circumstances so warrant. While the degree to which ratings adjustments will affect sales of our annuities and institutional products, and persistency is unknown, if our ratings are negatively adjusted for any reason, we believe we could experience a material decline in the sales in our individual channel, origination in our institutional channel, and the persistency of our existing business. 119 Item 2 | Management’s Discussion and Analysis | Impact of Recent Accounting Pronouncements Impact of Recent Accounting Pronouncements 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 The preparation of financial statements in conformity with U.S. GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in our Condensed Consolidated Financial Statements included elsewhere in this report. The most critical estimates are presented below. The below critical accounting estimates are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates” and Notes 1 and 2 of the Notes to the Consolidated Financial Statements included in our 2024 Annual Report: • reserves for future policy benefits and claims payable • market risk benefits • reinsurance • income taxes and the ability to realize certain deferred tax benefits • valuation and impairment of investments, including estimates related to expectations of credit losses on certain financial assets • valuation of freestanding derivative instruments • valuation of embedded derivatives • net investment income • contingent liabilities • consolidation of variable interest entities Off–Balance Sheet Arrangements See Note 13 - Long-term Debt regarding lender commitment under the Company's revolving credit facility and Note 16 - Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements regarding unfunded investment commitments to limited partnerships and limited liability companies. 120 Item 3 | Quantitative and Qualitative Disclosures about Market Risk