Jackson Posts 80% Growth in RILA Sales

Jackson Financial increased sales of its 2-year-old registered index-linked annuity product 80% between the fourth quarter of 2022 and the fourth quarter of 2023, to $1 billion.

Laura Prieskorn, the Lansing, Michigan-based annuity issuer's CEO, told securities analysts Thursday during a conference call that the new RILA products do more than help diversify the company's sales and attract cash.

"RILAs also contribute to hedging efficiency," Prieskorn said.

Improvements in hedging, or efforts to manage the market risk that comes with offering annuity guarantees, make Jackson's capital levels look better, Prieskorn said.

In addition, Jackson is starting Brooke Re, a Michigan-based captive reinsurer that will serve as a financial storage closet for hedging-related ups and downs that might make the parent company's results look negative.

What it means: You may feel confused when insurers report huge net losses after quarters when business was good. Companies like Jackson are trying to get themselves off the current hedging-related earnings rollercoaster.

The earnings: Jackson held the conference call to go over earnings for the fourth quarter of 2023.

The company is reporting $203 million in pretax adjusted operating earnings for the quarter on $1.5 billion in operating revenue, compared with $320 million in pretax adjusted operating earnings on $1.5 billion in operating revenue for the fourth quarter of 2022.

But, based on U.S. generally accepted accounting principles, or the rules that public companies use when reporting results to shareholders, the company reported a $1.6 billion net loss on $892 million in revenue for the latest quarter, compared with a $1.2 billion net loss on revenue with a value of negative $2 billion due to adjustments in derivatives values.

Meanwhile, a key indicator of the company's financial health, its risk-based capital ratio, was 624%, which is far above the typical strong annuity issuer's RBC ratio of about 450%.

Brooke Re: Jackson executives said they will stop the earnings rollercoaster by setting up Brooke Re, to reduce the need for hedging aimed purely at making GAAP capital levels and earnings look better.

"This non-economic hedging made our hedging strategy complex and consumed resources that could have been put to better results," according to Marcia Wadsten, Jackson's chief financial officer.

Sales: RILAs accounted for about one-third of Jackson's $3.3 billion in retail annuity sales in the fourth quarter.

Sales of other types of variable annuities fell to $2.2 billion, from $2.5 billion.

Sales of non-variable annuities fell to $79 million, from $134 million.

Laura Prieskorn. Credit: Jackson