Jackson Financial (JXN) Q2 FY26 earnings call: guidance and Q&A

Inquired about the sustainability of the quarter's normalized earnings of $540 million (analyst's figure, not company's) and the drivers of the 30% sequential increase, given it was higher than expected.

Don Cummings attributed the strong earnings to significant fee-based results from strong equity markets (S&P 500 up 15%, separate account returns up 13%) and substantial contribution from the spread business, with AUM up 14% sequentially and 50% year-over-year. He noted NII increase due to higher average AUM, improved total portfolio yield from new money invested at higher rates, and favorable LP marks. He indicated that higher equities and interest rates are beneficial, and the strategy to shift to spread products is working, suggesting continued strong earnings, though with some seasonality in expenses.

“Higher equities, higher interest rates are good for our businesses. And while we're not providing full year financial guidance, there are a couple of indicators that I think bode well for us having drawn results going forward.”

asked by Suneet Kamath · answered by Don Cummings

Asked if there have been any differences in policyholder behavior relative to updated assumptions since the Q3 review, specifically regarding charges related to policyholder behavior.

Don Cummings stated that assumption updates are made in Q4. He noted that policyholder behavior has been more modest than expected over the last year, which is encouraging, though it can be influenced by equity markets.

“But just in terms of policyholder behavior, I think if you look at our financial supplement, you can see that that's been a bit more modest than it had been over the course of the last year in terms of actual versus expected. And -- but obviously, that can be influenced by equity markets, but I think the trends that we've seen recently are encouraging.”

asked by Suneet Kamath · answered by Don Cummings

Inquired how higher equity markets affect statutory capital generation and holding company free cash flow and flexibility, and if there's upside to full-year guidance based on market performance.

Don Cummings confirmed that the drivers for earnings (higher equity markets, spread business growth) generally carry over to capital generation. He noted that while there are nuances in the statutory required capital framework that can offset some benefits, the overall impact on after-tax statutory capital generation from higher equity markets and spread business growth is beneficial.

“But in terms of our just after-tax statutory capital generation, we would expect the benefits that we see from higher equity markets and continuing to grow our spread business would be beneficial to our capital generation.”

asked by Alex Scott · answered by Don Cummings

Asked about the progress of the TPG partnership, its role in fueling RILA growth, and how Jackson maintains discipline in a competitive private credit and structured assets market.

Don Cummings stated that Jackson remains disciplined in market competitiveness, noting that while RILA and FIA sales are strong, MYGA sales are lighter due to maintaining return discipline. Chris Raub added that they are happy with the deal flow and quality from TPG, as well as the collaboration, seeing productive discussions beyond direct lending and ABF. Don confirmed they expect capital deployment under the TPG arrangement to play out over time, aligning with laid-out targets.

“Alex, we're really happy with both the deal flow, which is progressing as expected. The types of deals and quality of deals we're seeing from TPG as well as the level of collaboration and connectivity between our firms.”

asked by Alex Scott · answered by Christopher Raub

Asked for clarification on the hedging results, noting a $200 million GAAP gain for RILA/FIA but an economic breakeven, and a $200 million GAAP loss for VA (ex-volatility), and whether the offsetting nature was coincidental or a natural hedge.

Brian Walta explained that for RILA/FIA, Jackson hedges to an economic framework (similar to statutory), not GAAP, and the $200 million GAAP gain was due to outsized equity movement, but economically it was matched well. For VA, hedging is to Brooke Re, which was essentially flat economically despite the GAAP loss. He clarified that the offsetting GAAP results were somewhat coincidental, as each product line is managed independently with no diversification benefit taken for external hedging. Don Cummings added that GAAP differences for VA also stem from scope (e.g., NY business not seeded to Brooke Re) and accounting modifications.

“I would say that the overall net impact of them offsetting is somewhat coincidental. I think there may be a little bit of reason why they should offset, but not necessarily to that degree. And I would just stress again that we manage each of them independently.”

asked by Tom Gallagher · answered by Brian Walta

Asked if there's a continued tailwind for investment spreads due to general account growth and wider spreads, or if stability is expected, and what asset classes are driving this.

Don Cummings confirmed that growing spread-based AUM will boost earnings. He noted positive results from NII, as new money is invested at rates above the overall portfolio yield. He stated that in the quarter, new money yield was roughly 100 basis points ahead of the overall portfolio yield, which will continue to be helpful.

“If you look at just the quarter and not sure that you could use this for all periods going forward, but just for the quarter of the money that we put to work, the new money yield was roughly about 100 basis points ahead of our overall portfolio yield.”

asked by Tom Gallagher · answered by Don Cummings

Asked for an estimate of required capital growth in a more typical quarter or year, assuming normal equity market growth, given it was outsized in Q2 due to equity market impacts.

Don Cummings suggested looking at prior results over the last 1.5 years for a more consistent trend. He explained that Q2's outsized growth was due to equity markets and a seasonality factor in required capital for spread-based products (primarily RILA, with FIA to Hickory Re but still impacting RBC business risk component based on trailing 12-month premium volume), expecting it to moderate before year-end.

“But under the RBC formula, we still have to put up kind of the business risk component of required capital. So that does have a little bit of a impact and it's based on a kind of a trailing 12-month premium volume. So we would expect that to moderate some before the end of the year.”

asked by Ryan Krueger · answered by Don Cummings

Inquired about updated thoughts on inorganic growth, including block transactions or strategic M&A, and what types of opportunities Jackson might be interested in.

Don Cummings stated that any inorganic opportunities would be weighed against returning capital to shareholders. He emphasized a desire to continue diversifying the business and would pursue opportunities that fit this strategy. He specifically mentioned that while Jackson doesn't originate new life insurance liabilities, they would strongly consider an inorganic opportunity in that area if it arose.

“Jackson has its roots in the life insurance business, and we don't currently originate new life insurance liabilities, but if there were an opportunity to do that through an inorganic opportunity, we would certainly look very strongly at that.”

asked by Ryan Krueger · answered by Don Cummings