Hello, everyone, and welcome to the Jackson Financial Inc. 2024 Q4 earnings call. My name is Charlie, and I'll be coordinating the call today. You will have the opportunity to ask your questions at the end of the presentation. I would now like to hand the call over to our host, Elizabeth Werner, Head of Investor Relations, to begin. Please go ahead.

Good morning, everyone, and welcome to Jackson's 2024 fourth quarter and full year earnings call. Today's remarks may contain forward-looking statements, which are subject to risks and uncertainties. These statements are not guarantees of future performance or events and are based upon management's current expectations. Jackson's filings with the SEC provide details on important factors that may cause actual results or events to differ materially. Except as required by law, Jackson is under no obligation to update any forward-looking statements if circumstances or management's estimates or opinions change. Today's remarks also refer to certain non-GAAP financial measures. The reconciliation of those measures to the most comparable U.S. GAAP figures is included in our earnings release, financial supplement, and earnings presentation, all of which are available on the Investor Relations page of our website at investors.jackson.com. Joining us today are our CEO, Laura Prieskorn, our CFO, Don Cummings, the President of Jackson National Life Distributors, Scott Romine, our Chief Actuary, Steve Binioris, and the President and Chief Investment Officer of PPM, Craig Smith. At this time, I'll turn the call over to our CEO, Laura Prieskorn.

Thank you, Elizabeth. Good morning, everyone, and welcome to our fourth quarter and full year 2024 earnings call. I'll begin by reviewing our full year results and the success we had in delivering on our 2024 key financial targets. In addition to reviewing our results, I will highlight the great progress we have made since becoming an independent public company. I will also share our outlook for 2025, including new financial targets for the year, and then I'll turn it over to our CFO, Don Cummings, to discuss our performance in the fourth quarter and past year in more detail. 2024 was a pivotal year for Jackson, marked by significant operational and financial accomplishments. We completed a full year of operating with a more economic hedging approach, realizing the benefits of greater capital stability. We increased transparency in the capital generation at Jackson National. The strong results at Jackson National Life resulted in 2024 distributions to our holding company of $875 million, the highest annual level in the company's history. Moving to our full year results on slide three, net income exceeded $900 million, and adjusted operating earnings were $1.4 billion, largely due to the significant growth in earnings of our retail annuity segment. Retail annuity sales of $18 billion increased 39% year over year, with strong sales across our annuity product. In 2024, we benefited from more diversified product sales and growing distribution. Our profitability and healthy capital position were evident throughout the year, and Jackson National Life made periodic distributions to our holding company during 2024. At the same time, our RBC ratio was relatively stable during 2024, and we ended the year at an estimated 572%. This was comfortably above our target, providing us with significant capital to return to shareholders and support new business. The combination…

Thank you, Laura. I'll begin on slide eight with our fourth quarter 2024 consolidated financial results. Adjusted operating earnings of $349 million were up 71% over the fourth quarter of last year. This significant growth in our earnings was primarily due to higher fee income from growth in variable annuity assets under management and higher earnings on spread products. The sequential comparable was impacted by our annual assumptions review, which reduced fourth quarter earnings by $23 million after tax, or $0.31 per share. Outside of the assumptions review, we continue to see positive sequential earnings trends develop for fee and spread income during the fourth quarter. Spread earnings benefited from gains in net investment income, primarily driven by the growth of our RILA and fixed annuity blocks, as well as higher yields on our bond portfolio. The investment portfolio supporting our spread products has continued to perform well. The appendix of our earnings presentation provides information on our high-quality diversified investment portfolio. This information includes insights into our commercial office loans, which represent less than 2% of the overall investment portfolio. It also includes our exposure to below-investment-grade securities, which represents only 1% of the portfolio. Before turning to notable items in the quarter, I want to highlight the growth of our book value in 2024. Our adjusted book value attributable to common shareholders at the end of the fourth quarter was $11.2 billion, or $150.11 per diluted share, an increase of 10% from last year driven by our strong operating performance and common share repurchase activity. Adjusted operating return on equity increased 230 basis points to 12.9% for full year 2024, up from 10.6% last year. Slide nine outlines the notable items included in adjusted operating earnings. Reported adjusted operating earnings per share were $4.65 for the current quarter.…

Thank you, Don. 2024 was a year of significant progress for Jackson and an important one for demonstrating the consistency of our commitment to all stakeholders. We remain dedicated to serving financial professionals and their clients with the goal of helping Americans grow and protect their retirement savings and income. As always, I'd like to recognize the efforts of all our associates whose talent and dedication remain our greatest strength. Our award-winning culture was recently recognized with Jackson National Asset Management and PPM America named best places to work in money management by Pensions and Investments. This further showcases our strong workplace environment, employee engagement, and dedication to supporting each other, our business partners, and the community. At this time, I'll turn it over to the operator for questions.

Thank you. If you'd like to ask a question, please ensure you are muted locally. As a reminder, press star followed by one on your telephone keypads now. Our first question comes from Ryan Krueger of KBW. Ryan, your line is open. Go ahead.

Hey. Thanks. Good morning. First question was, could you provide a little bit more color on the moving pieces within Brook Re in 2024 that ultimately produced the $200 million increase in capital?

Hey, Ryan. It's Don. Good morning. Happy to take you through the components of that. So first of all, I would just maybe remind folks that we've indicated that the consolidated hedging results are, you know, a decent direction indicator, but they're not sort of a direct read across for Brook Re results given that, you know, we follow a modified GAAP. The other thing that I would highlight is that on a consolidated basis, $285 million of net hedge gain for the full year includes both the results of our variable annuity hedging as well as our RILA. And under the structure that we set up with Brook Re, we are not reinsuring the RILA business to Brook Re, nor are we reinsuring the variable annuity business in our New York subsidiary. So that's one sort of, you know, scope difference that needs to keep in mind. The second thing is I would just reiterate what we previously disclosed. We have some disclosures around our modified GAAP approach. In our 2023 earnings materials, you can look at slide nineteen. There are essentially four modifications to the GAAP results that we implemented in connection with Brook Re. The first step was really to kind of promote stability in Brook Re's balance sheet and included, you know, having sort of a fixed long-term volatility assumption, and we have discussed that element on prior calls. Volatility actually for the full year was fairly muted. And then the other sort of balance sheet stability item was just the way that we handle the nonperformance risk spread at Brook Re. It's more of a fixed approach compared to GAAP. And then there are two final modifications, both of which are, you know, part of our goal of having Brook Re be a self-sustaining organization going forward. And that was we apply a haircut to the guarantee fee stream, and we also apply an expense provision for administrative costs. So when you factor in, you know, sort of the difference in the blocks of business that sit at Brook Re versus in our consolidated results, which is primarily RILA, and then consider these modifications that I just mentioned, those are the items that sort of, you know, make up the difference between consolidated results and results at Brook Re on a standalone basis.

Great. Thanks. And then a question on the assumption review. Sounds like the main impact was around utilization. I think you've also had actual to expect adverse actual to expected results over the last year or two around higher lapses. I know you also mentioned, you know, you're seeing more exchange activity in the current environment. So just curious, did you, you know, if you considered changing the long-term lapse assumption and ultimately what led to keeping the existing lapse assumption?

Yeah. And so before I kind of get into the specifics of your questions there, maybe just helpful just to kind of step back and put the overall impact of the assumption updates in context. So when you combine both the piece of our assumption updates that impacted our operating earnings, that was about $26 million, you know, unfavorable, and that's primarily due to mortality as we described. It kind of impacts closed block in a negative way because that's related to some life business where we increased reserves. There's a favorable impact within retail annuities related to a block of payout annuity products, so that sort of offset the item that we saw on closed block. So $26 million operating earnings primarily related to mortality. For the non-operating earnings impact, which was the $419 million, as we mentioned in our prepared remarks, it's primarily related to refining our projections on withdrawal behavior. And so we do look at, you know, all of our various assumptions when we go through our unlocking every year. And this year, kind of taking a look at, you know, refining the projections around withdrawal behavior for policies that do have GMWBs, we took a look at all the data we have, which is quite substantial given the size of our VA block, and essentially, we updated the granularity of models so that we could better more precisely capture elected withdrawal frequencies. So turning to kind of the unexpected policyholder behavior, which you mentioned, which is included in our MRB roll forward, I did want to highlight that that unexpected behavior consists of both surrenders and withdrawals. So the item that we changed the assumption for in the fourth quarter, as well as death and annuitization. So it's really all three of those combined. And…

Great. Thank you.

Thank you. Our next question comes from Suneet Kamath of Jefferies. Suneet, your line is open. Please go ahead.

Great. Thanks. I just have a follow-up to Ryan's question on Brook Re. You know, one of the questions that we get most often from investors is, you know, how do you get comfort that Brook Re is well capitalized? And I take your comments on the call, but is there something that you guys could sort of provide us on a more regular basis that we can sort of anchor to? There seems to be some reluctance in terms of providing additional disclosure on Brook Re. And since it's such an important part of your strategy, I'm wondering if there's something that you guys could give us on a more regular basis that we can use to track the performance there.

Thanks for that, Suneet. So we take a look at our disclosures on Brook Re every quarter. And as I mentioned, you know, in response to Ryan's question, we did provide quite a bit of disclosure around Brook Re last year. I think we had about a dozen pages in our earnings call materials. And, you know, we're essentially one year in with Brook Re. Those liabilities are quite long-term, probably, you know, twenty years on average. So we're going to continue to manage Brook Re on a long-term self-sustaining basis. As we go forward, you know, to the extent we have any need for additional capital in Brook Re, we would obviously share that. We'll also share when we take capital out of Brook Re. And then as we've done this year-end, we'll kind of give a little bit of, you know, additional disclosure at the end of the year in terms of, you know, how we saw the results play out during the course of the year.

Okay. And then second on capital, I mean, I appreciate the increase in the capital return guide for 2025. But if we just sort of think about how much excess capital you have between the RBC level being above your target and then the HoldCo cash also being above your target, you know, it's a pretty big number. So I guess what is keeping you from, you know, bringing down some of that excess capital even more? And, again, I appreciate the increase in capital return, but it still seems like there's a sizable amount of excess on the balance sheet.

Sure. So let me share with you some of our thinking, Suneet. So, you know, as we kind of laid out with our new disclosures, we are sort of continuing to stay focused on this concept of earning the capital, paying it up to the holding company, and then returning it to shareholders. At the operating company, you know, we were obviously operating with a significant buffer above our 425 minimum. Some of that reflects the fact that there is a bit of market sensitivity on the base contract that remains at Jackson National. And so, we want to be able to have a sustainable level of capital return coming out of the company. And so you likely see that level of RBC come down over time as opposed to sort of one, you know, kind of major transaction. I would also highlight that, you know, all of those distributions continue to be subject to discussions with our regulators. But we feel pretty good that, you know, if you look at the capital generation that we had for 2024, on a reported basis, it's up about or represents about 66% of the, or we sent up to the holding company about 66% of what we generated. If you factor in that we had kind of a one-time item benefiting the capital generation related to the CAMT, we're more like 80%. So we feel good about that. And, you know, we believe cash that we have at the holding company provides us with, you know, additional flexibility as we look at continuing to grow going forward, including, you know, organic growth at the operating company as well as any strategic opportunities that might come up.

Okay. Thanks for your answers.

Thank you. Our next question comes from Alex Scott of Barclays. Alex, your line is open. Please proceed.

Hey. Thanks for taking the question. First one is actually on PPM. I know it's a, you know, relevant business from an earnings standpoint for you all. But I would be interested in, you know, where you see PPM going over the long term. Is that something that may become a bigger piece of the strategy over time?

Good morning, Alex. Thanks for the question. We do see PPM as a core part of our business at Jackson. They, you know, support us with management of our general account and in other ways with our corporate strategy. From an overall performance perspective, as you can see in our disclosures, they do well for us. I think as we continue to move forward, if there is an opportunity for PPM to be viewed as a larger part of our strategy, we, you know, would look for that opportunity to come into play. We'll continue to have them operate as is and manage, you know, the general account. I'll invite Craig Smith, who's here with us, to share any additional remarks that you may want to in terms of PPM's specific initiatives.

Sure. Thank you, Laura, and thanks, Alex, for the question. You know, on our business at PPM, as Laura mentioned, about half, just under half of the assets under management are associated with the Jackson General account. We also have a third-party business. We operate our business across five verticals: public fixed income, private fixed income, CLO management, commercial mortgage debt, and private equity. And in all of those verticals, we are not only providing those services to Jackson but also to third parties. And we have a robust effort to increase distribution to institutional investors across the globe. Recently, you probably read, Alex, of our hiring of an experienced emerging market debt team from Western Asset Management just three or four weeks ago. And that is an illustration of Jackson's commitment to PPM's business, the growth of our business, and the increasing capabilities at our investment management firm.

Got it. That's helpful. And that Western Asset Management hire did catch my eye. That was one of the reasons I was interested in asking about that. Alright. I guess, for my follow-up, I wanted to ask about the free capital generation. The guide's unchanged in terms of, you know, exceeding $1 billion. I'd say 2024 being, you know, $1.7 billion before funding sort of business growth, $1.3 billion after, as you laid out in your deck. That seemed pretty darn strong to me. And I guess I just wanted to ask, you know, how much is that, excuse me, number benefiting from strong equity markets, higher interest rates, etcetera? I mean, is that something where maybe we shouldn't think about it being quite that strong in 2025 because there were, like, you know, sort of one-time market benefits in the market being strong, or do you view that as a pretty good run rate at this point?

Yeah. So thanks for that, Alex. It's Don. So the first thing I would just highlight in terms of the billion-dollar-plus for 2025, as I mentioned earlier, we did have sort of a one-time tax benefit in 2024 that will not repeat going forward. So, you know, you back that out, you're essentially kind of at $1.1 billion for 2024 on a more normalized basis. And in terms of going forward, you know, there is some equity market sensitivity, as I mentioned, but we have a fairly, you know, what we believe is a reasonable level of equity market return built into our plan for 2025, and we feel very comfortable with that billion-dollar guidance.

Got it. Thank you.

Thank you. As another reminder, if you'd like to ask a question, please press star followed by one on your telephone keypad. Our next question comes from Tom Gallagher of ISI. Tom, your line is open. Please go ahead.

Morning. First, I wanted to come back to the actuarial review. So was the charge taken because more customers are utilizing the GMWB features than you had modeled? I guess, I've sort of looked at your guarantees and thought the vast majority of them are probably out of the money at this point. But I guess there are cohorts that are in the money. And is that, Don, is that what you're making the adjustment change as you've looked at different cohorts? If you can unpack that a little bit. Thanks.

Sure. Good morning, Tom. So, yeah, let me try and unpack that for you and make it a bit more clear. So the adjustment that we made as part of our assumption review was not directly related to utilization. It was more related to kind of making sure that we've got captured in our projections, you know, more precise information around the frequency of withdrawals as opposed to being able to utilize those benefits. And, you know, even though the overall book is largely out of the money, you know, we still have people who are using these products as they were designed. They're taking withdrawals on a regular basis, and that's really what the focus of our assumption update was in the quarter.

Gotcha. And then just a couple of other quick ones. Did you say your ultimate lapse rate assumption for total annuities was around 7%? I'm just looking at this quarter. It was around 13%. Just want to make sure I'm looking at apples to apples.

Yeah. No. The 7% that I mentioned was the surrender rate that we experienced in 2022. My point in having you look back at that is that was the last down market experience that we had. And so because we do tend to see changes in our surrenders in, you know, equity markets that tend to result in more surrenders, we have the opposite impact that occurs when we have a down market. And so that's what the 7% relates to.

Okay. And what is your terminal lapse rate assumption? I just want to at least level set where we are now and if lapses remain elevated, whether you might have to make some adjustments.

Yeah. It's probably closer to the 8% to 9% range would be a more typical in-the-money lapse rate. Or I'm sorry. At-the-money lapse rate.

Gotcha. And then just one final one if I could. This is a little more of, like, a structural question. So I know you have the permitted practice with Brook Re. Is there, within that permitted practice, are there guardrails around you still being beholden somehow to RBC on a statutory basis? The reason I ask is when I see, like, there's proposed changes to the scenario generator in 2026, I wonder how is that even going to affect you if you're using modified GAAP. But, anyway, is there any guardrail that's still where there's still a relevance to statutory, or is that not even relevant anymore in terms of the deal you have with the regulator?

Yeah. It's a good question, Tom. Thanks for that. So it is largely the GOES impact is largely not applicable to the book of business that we've reinsured to Brook Re. And in terms of guardrails, the primary guardrail that we have there is our minimum operating capital, which we had outlined in our disclosures, you know, year-end last year. In terms of the framework that we use there. So we do have a minimum level of capital that we've committed to Michigan to maintain in Brook Re, and we're well above that given where we ended 2024.

Okay. Thank you.

Thank you. At this time, we have no further questions registered on today's call. So I'll hand back over to Laura Prieskorn, CEO, for any closing remarks.

Thank you. As you've heard this morning, 2024 was a great year of progress for Jackson. We look forward to continuing the discussions and sharing our progress toward our 2025 targets after the first quarter. Thank you all for your continued interest in Jackson.

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.