Jackson Financial Inc.

Good morning, everyone. Before we start, we remind you that today's presentation may include forward-looking statements, which are not guarantees of future performance or outcomes. A number of important factors, including the risks, uncertainties, and assumptions discussed in risk factors, management's discussion and analysis of financial condition and results of operations, and business financial goals in the company's registration statement on Form 10, and management's discussion and analysis of financial condition and results of operations in the company's most recent second quarter 10Q, could cause actual results and outcomes to differ materially from those reflected in the forward-looking statements. In this presentation, management will refer to certain non-GAAP measures, which management believes provide useful information in measuring the financial performance of the business. A reconciliation of non-GAAP financial measures to the most comparable GAAP measures is contained in the appendix to the presentation. With us today are Jackson CEO, Laura Preeskorn, our CFO, Marsha Wadston, and our Vice Chair, Chad Myers. At this time, I'll turn it over to Laura.

Good morning, everyone, and welcome to our third quarter earnings call. We look forward to this call as the first of many opportunities to discuss Jackson's quarterly results in progress towards our financial targets. As a clear annuity market leader, Jackson is focused on meeting the growing demand for retirement income and savings solutions. Before we review financial results, I'd like to reflect on the company's accomplishments to position Jackson as an independent public company. In September, we reached the end of a complicated and time-consuming 18-month process that culminated in an independent Jackson. While we have historically run as a standalone operation, there were a number of functions that we needed to build out to support a public company. This required recruiting many highly talented individuals during a time of change for the company and in the midst of a global pandemic. We were able to exit the prudential umbrella with no legacy service agreements or other operational ties, simplifying our go-forward strategy. Throughout this process, we continued our steady focus on business execution, delivering new product to the market alongside our best-in-class operational and distribution support to customers and partners. We expanded our distribution footprint and built the foundation for our launch into new annuity products. Since the separation announcement six quarters ago, our retail annuity sales have remained steady and in total exceeded $27 billion. Prior to our September separation, we held our first standalone analyst day and discussed our new business objectives and financial targets with the investment community. We accessed debt facilities, establishing our go-forward capital structure, and our new board of directors was appointed at separation and has been actively engaged since. I'm immensely grateful for all the hard work and long hours put in by the team to make this a reality. Their extraordinary efforts have led to extraordinary results and will continue to power our future success. Turning to our financial targets on slide four, We're well positioned to execute on our 12-month post-emerger target of a $325 to $425 million cash return to shareholders. We announced our board's approval of a quarterly dividend program, which in the fourth quarter of 2021 will be 50 cents per common share, or roughly $50 million in the quarter. This annualizes to approximately $200 million. We also obtained board authorization for share repurchase of $300 million. We believe these capital management actions are consistent with our outlook for sustainable capital generation and a long-term commitment to shareholders. Combination of dividends and share repurchase was deliberate and thoughtfully incorporates our views on Jackson today and into the future. Dividends represent a highly consistent source of capital return to shareholders. Our dividend is well supported by the distributable cash projections that we've provided in existing disclosures, giving room for potential future growth. Given our current share valuation and the accretion associated with share buyback at these levels, we expect benefits from share repurchase to emerge as we execute on our authorization. Between the dividend and share repurchase, we anticipate reaching our $325 to $425 million capital return target in the first 12 months following the merger. We ended the quarter with over $800 million in cash and liquid assets, well above our minimum holding company cash target. Our estimated risk-based capital, or RBC, ratio at the operating company level, which does not take into account the holding company liquidity position, exceeded our targeted 500% to 525% range, and total financial leverage is within our target range. As we look beyond 2021, we expect to grow our business and allocate capital as discussed in the Form 10 and at our Analyst Day presentation. We continue to balance financial strength, leverage, profitable growth, and capital return to shareholders for the long-term success of the company. Now let's look at the financial and operating highlights for the quarter on slide five. For the third quarter, adjusted operating earnings of $5.16 per share reflect the strong fee income from our growing variable annuity account balances. Retail annuity fee income increased 24% compared to last year's third quarter. With over $240 billion in annuity assets, we benefit from a level of profitability and scale that supports our business growth plans and capital return targets. Third quarter adjusted operating earnings reflected the natural market sensitivity and deferred acquisition costs, or DAC, amortization. As a reminder, market-related DAC volatility is expected to change with the adoption of the new GAAP accounting standard, referred to as LDTI, which will be effective in the first quarter of 2023. At that time, DAC will no longer be expensed as a percentage of profits, and we would expect less volatility due to the market changes. Marsha will speak to DAC and our financials in more detail later in this presentation. Jackson's return on equity continues to exceed 20% due to the quality of our in-force book. We expect our retail annuity segment to drive further profitability and growth as we benefit from an increasingly diverse set of products and features, as well as our focus on expanding distribution. During the third quarter, we completed our term loan draw as planned and contributed over $1.5 billion to our operating companies. putting us within our target leverage range and above our target RBC ratio range. We believe our strong balance sheet and free cash flow position provide us with valuable capital flexibility. As I mentioned, our business did not skip a beat as we successfully executed our demerger. For the third quarter, annuity sales were $4.8 billion, and in October, we introduced the Jackson MarketLink Pro product suite. our new registered index-linked annuity, or RILA product. We've received positive feedback from our advisors regarding this competitive, differentiated product, as well as the enhanced digital experience provided with this product launch. Jackson MarketLink Pro meets policyholders' demands and market participation, subject to a cap with protection on the downside. Our fee-based annuity business continues to grow. with third quarter 2021 sales of $330 million, up 18% from the prior year. Sales of Elite Access Advisory II, our fee-based investment only variable annuity, were the key driver of the growth. The RIA channel represents $5.7 trillion in assets with an expanding presence in the annuity market. We continue to focus on expanding distribution through independent RIAs. We also recently entered the defined contribution market as a provider within the lifetime income strategy offered by Alliance Bernstein. Jackson is one of several insurance providers selected to offer a lifetime income solution for participants at the time of retirement. The defined contribution market represents significant opportunity and we look forward to partnering with retirement plan sponsors looking to address both income protection and longevity risk for their plan participants. The Alliance Bernstein relationship is part of our focus strategy to expand our commercial opportunities and meet market demand for protected retirement solutions. The total industry annuity sales for the first nine months of 2021 were the strongest year-to-date period since 2008, with every single annuity category up from the prior year. This provides a very strong backdrop for further growth in our retail annuity business going forward. And now I'll turn it over to Marcia to provide more details on our third quarter financial results.

Thank you, Laura. Looking at our results on slide six, we continue to generate significant levels of adjusted operating earnings. As Laura just mentioned, our fee-focused business mix benefited from higher average separate account balances driving higher fee incomes. However, this was more than offset by higher DAC amortization in the current quarter, resulting largely from lower separate account returns compared to the prior year. As a reminder, we believe that Jackson has taken a conservative approach to the treatment of guaranteed fees within our definition of adjusted operating earnings, as all of the fees are moved below the line with no assumed profit on guaranteed benefits included in adjusted operating earnings. On a year-to-date basis, strong adjusted operating earnings combined with positive non-operating income resulted in a growing book value. Slide 7 outlines the notable items included in adjusted operating earnings for the third quarter, starting with the acceleration and or deceleration of DAC. To provide a little more background, the amortization of DAC is a key item for our results given our annuity-focused balance sheet, and operating DAC amortization has several components. For clarity, our financial supplement reports DAC amortization split between core amortization, which is driven primarily by our pre-DAC gross profits for the period, as well as any market-related acceleration or deceleration of DAC, which results from the pattern of separate account returns over time. Additionally, we will break out the DAC impact from our annual assumption review, which will be provided in Q4. In the third quarter of 2021, there was an acceleration of DAC amortization resulting in 63 million of additional DAC expense in the quarter. This was primarily due to slightly negative separate account returns in that period, which fell short of the assumed return. In the third quarter of 2020, there was a deceleration of DAC amortization resulting in a pre-tax $125 million reduction in DAC expense, primarily due to a 7% separate account return in that period which significantly exceeded the assumed return. As a result, the market-driven DAC effect was a net drag of $188 million on a pre-tax basis when comparing third quarter this year to prior year third quarter. In terms of future DAC acceleration or deceleration for modeling purposes, we have provided additional details on the mechanics of the DAC amortization calculation within the appendix of this presentation, which aligns with our financial supplement. As Laura noted, this is expected to change with the adoption in the first quarter of 2023 of LDTI under GAAP accounting. We expect to be providing more information regarding LDTI impacts in the middle of next year. Additionally, we would note that both third quarters included strong limited partnership income, which is reported on a lag and can vary significantly from quarter to quarter. Limited partnership income in excess of long-term expectations with $98 million in the current quarter compared to $63 million in prior year's quarter, creating a comparative pre-tax benefit of $35 million. We continue to see positive momentum in limited partnership performance, but do not expect Q4 to be as robust as Q3. Additionally, with respect to Q4, as we stand today, we expect our operating effective tax rate to be similar or slightly higher than the third quarter's 15%. Another important item to consider for the fourth quarter is the conversion of existing Prudential PLC share-based awards over to JXN share-based awards. In Q4, share-based awards will increase our diluted share count by 7.2 million shares and will be partially offset by any shares that we repurchase over the fourth quarter. Slide 8 illustrates the reconciliation of third quarter 2021 pre-tax adjusted operating earnings of $571 million, to pre-tax income attributable to Jackson Financial of $190 million. As shown in the table, the total guaranteed benefits and hedging result, or net hedge result, was negative $593 million in the third quarter. As we've noted, net income includes some changes in liability values under GAAP accounting that we consider to be non-economic and therefore will not align with our hedging assets. We focus our hedging on the economics of the business as well as statutory capital position and choose to accept the resulting gap below the line volatility. I would also note that while this was a loss in the current quarter, it was a small gain of $73 million for the year-to-date period. Starting from the left side of the waterfall chart, you see a robust guarantee fee stream of $728 million in the third quarter providing significant resources to support the hedging of our guarantees. These fees are calculated based on the benefit base rather than the account value, which provides stability to the guarantee fee stream and protects our hedging budget when markets decline. As previously noted, all guarantee fees are presented in non-operating income to align with the hedging and liability movement. Net reserves and embedded derivative liabilities for guaranteed benefits are defined by both SOPO 3-1, which calculates the insurance contract liabilities using longer-term assumptions, and by FAS 157, which calculates the embedded derivative liabilities using current market input. This quarter's loss is primarily the result of FAS 157 accounting for the increase in implied volatility over the third quarter. This implied volatility impact is an example of where our hedging approach and the GAAP treatment of liabilities are not aligned, as we do not explicitly hedge implied volatility, but rather focus on realized volatility under market shocks. We included a slide in the appendix which shows the key macroeconomic drivers of the GAAP net hedging result and how changes in these macro items may lead to non-economic gains or losses due to the lack of alignment between our hedging approach and GAAP accounting. Now let's switch gears and look at our segments, starting with retail annuities on slide 9, where we see our healthy sales trends. We continue to have strong levels of retail sales driven this quarter by growth in variable annuities without lifetime living benefits. Sales of Elite Access, our investment-only variable annuity, increased 71% from the prior year's quarter, and sales of other variable annuities without lifetime benefit guarantees were up 33%. While sales without lifetime benefits increased from 23% in third quarter of last year to 33% in the third quarter of this year, we expect this percentage may vary through time based on market conditions and customer demand. Our total annuity market share highlights our consistent presence in the market, our strong distribution relationship, and disciplined approach to pricing and product design. We expect these attributes to be supportive of the recent launch of our RILA product We view this as an important product launch, capturing the economic diversification benefit between a RILA and a traditional living benefit variable annuity, as well as capital efficiency through RILA account value growth alongside our large, healthy, enforced traditional variable annuity block. Looking at pre-tax adjusted operating earnings on slide 10, we are down from the prior year third quarter due to the market-driven DAC impacts I detailed earlier. Importantly, earnings were up from the prior year quarter outside of that impact. This was the result of higher separate account assets, as the third quarter 2021 variable annuity ending account value was up over 20% from the third quarter 2020 ending account value, primarily due to strong returns. As a reminder, we have investment freedom on our variable annuity products, allowing both policyholders and Jackson to more fully capture the benefits of rising equity markets. While fixed annuity and fixed indexed annuity account values are minimal after accounting for the business reinsured to a theme, they did grow during the period as well. Sales remain low, but the block has low surrender activity given the business was recently issued, meaning sales largely contribute directly to positive net flows. We will have a similar dynamic on RILA sales going forward as we are starting from scratch following our October launch. This gives us multiple levers to grow and diversify our book going forward. Our other operating segments are shown on slide 11. We suspended institutional business for new sales starting in early 2020 as we began the separation process, and this has largely continued through the third quarter of 2021. This led to significant outflows as existing business has run off throughout the year with account values declining from $12.3 billion a year ago to $8.8 billion as of the end of the third quarter. Now that we have completed our separation, we expect to return to the market with new issuances on an opportunistic basis. Our pre-tax adjusted operating earnings for the institutional segment of $21 million during the third quarter of 2021 was down from $26 million in the third quarter last year due to the declining account value of the segment and lower reinvestment yields over time. Going forward, the earnings should largely track the account values. Lastly, our closed life and annuity block segment reported a slight increase in pre-tax adjusted operating earnings. This reflected lower levels of benefits paid partially offset by lower premium income. Absent future M&A activity, the earnings should trend downward as the business runs off over time. Slide 12 summarizes our robust capital position as of the end of the third quarter 2021. This strong position has given us the confidence to provide detail on the form and timing of our capital return. Given our strong cash generation, we are pleased that the Board authorized a dividend program, which shows our confidence in the level of cash return going forward. The fourth quarter cash dividend of 50 cents per share corresponds to a cash outlay of roughly $50 million for the quarter at our current share count, a healthy level of cash to shareholders. We also announced a $300 million share repurchase authorization, which we believe will allow us sufficient capacity in combination with the dividend to deliver our $325 to $425 million cash return in the first 12 months after the demerger. The share repurchase authorization has the benefit of allowing us to be opportunistic in cash return given our current valuation. The number of shares to be repurchased and the timing of such transactions will depend upon a variety of factors, including market conditions. During the quarter, we completed the term loan draw and contributed the majority of the proceeds into our statutory operating company. The remainder was retained at the holding company, providing us with over $800 million of cash, well above our minimum liquidity target. It is also important to note that following the draw, our total gap leverage was at 23.5% within our 20 to 25% target range. We expect to refinance the two-term loan facilities by the end of the year. Following the capital contribution, Jackson National Life Insurance Company grew its total adjusted capital position to $6.8 billion, up from $4.4 billion as of the end of the prior quarter. Not only did the capital position benefit from the capital contribution, but also from meaningful in-force capital generation, continuing the trend from the second quarter. The estimated RBC at Jackson National Life as of this quarter was above 525%, up from the 500% to 525% pro forma RBC that we reported as of the prior quarter, continuing the growing RBC trend we've seen throughout 2021. This means that we are above our 500 to 525% adjusted RBC target, looking solely at the operating company and without taking any credit for the current level of excess capital at the holding company. So, in summary, it was a very successful quarter. We completed our term loan draw, provided further clarity on our current and future capital return programs, and have ample holding company liquidity. With our robust capital levels at the operating company, we are well-positioned for the future. And with that, I will turn it back to Laura for closing remarks.