Retail annuity sales growth caused huge amounts of cash to flow into Jackson Financial in 2024, and the company now has to find a way to spend it.
Establishing reserves for new annuities ate up some capital at the Lansing, Michigan-based company reduced the main life insurance company subsidiary's risk-based capital ratio, or financial health measure, to 572%, from 624% a year earlier, but the company recorded $1.7 billion in after-tax capital generation, based on state insurance regulators' accounting rules.
"This was comfortably above our target," Laura Prieskorn, the CEO, told securities analysts during a conference call.
The company has set an RBC minimum of 425%.
Possible uses for the excess capital could include buying back some of Jackson's own stock from shareholders, strengthening existing operations and "pursuing inorganic opportunities," Prieskorn said.
But any acquisition target could turn out to be relatively small compared with Jackson's excess capital total.
Although the RBC level will drop, Jackson wants to maintain a high level of support for older products, and the RBC level will likely "come down over time, as opposed through one major transaction," according to Don Cummings, the chief financial officer.
What it means: Some company that you and your clients do business with — possibly even your own company — could become part of Jackson.
The shopping list: Prieskorn did not say what kinds of companies Jackson might like to buy, but Craig Smith, president of the company's PPM America business, a registered investment advisor, noted that PPM recently hired an emerging market debt team away from Western Asset Management.
"It's just an illustration of Jackson's commitment to PPM's business and the growth of our business," Smith said.
The analysts did not ask Jackson if it's interested in the speculation that Brighthouse Financial might be up for sale.
Results: Jackson held the conference call to go over earnings for the fourth quarter of 2024. The company reported $345 million in net income for the quarter on $2.1 billion in premiums and fee income, compared with a $1.6 billion net loss on $2 billion in premiums and fee income for the fourth quarter of 2023.
Adjusted operating earnings, which reflect the effects of fluctuations in the market value of investments and benefits promises, increased to $349 million, from $204 million.
Total annuity sales increased to $4.7 billion, from $3.3 billion, with sales of variable annuities rising to $2.8 billion, from $2.2 billion, and sales of registered index-linked annuities rising to $2.9 billion, from $1 billion.
Advisors: Jackson made $1 billion of the new annuity sales through advisors, and J.P. Morgan Chase recently started offering Jackson's RILA contract through its advisors.
In the advisory market, "as more Americans plan for retirement, we see increasing interest in solutions that offer investment protection and guaranteed lifetime income," Prieskorn said.
Prieskorn praised the PPM America business. "We do see PPM as a core part of our business," she said. "They do well for us."
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