Jackson Financial Inc.

star followed by one on your telephone keypad. I would now like to hand the conference over to Liz Werner, Jackson Head of Investor Relations. Thank you. Please go ahead.

Good morning, everyone, and welcome to Jackson's third quarter 2024 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 should 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 .jaxon.com. Joining us today are our CEO Laura Prescorn, our CFO Don Cummings, the President of Jackson National Life Distributors Scott Romine, and our Chief Actuary Steve Bignores, and the President and Chief Investment Officer of PPM Craig Smith. At this time, I'll turn the call over to our CEO Laura Prescorn.

Good morning, everyone. Today we will discuss Jackson's third quarter results and progress through the first nine months of the year. Our results reflect diversified and growing annuity sales, recent product and distribution initiatives, and sustainable capital generation. With three operating quarters completed with our captive, Brooke Rhee, we're realizing the benefits of greater capital stability, which are evident in our third quarter results. Beginning with slide three, net income was a loss for the third quarter and positive over the full nine months. Importantly, we've experienced less volatility than prior periods with the formation of Brooke Rhee and achieved greater alignment between adjusted operating earnings, gap net income, and statutory capital generation. Adjusted operating earnings were up in the third quarter compared to the same period last year and are also up comparatively on a -to-date basis. Increased fee income combined with greater investment spread income once again supported strong earnings growth in our retail annuity segment. Favorable equity markets and increasing sales resulted in a 9% growth in assets under management through the first nine months to more than $250 billion. The combination of product innovation, risk management, -in-class service, scale, and strong distribution partnerships continue to provide a solid foundation for sustainable growth. Total retail annuity sales exceeded $5 billion for the third quarter, up 59% from the third quarter of 2023 and up 25% from the second quarter of 2024, marking our highest and most diversified quarter of sales since becoming an independent company in September of 2021. Our RILA segment hit record sales with more than $1.6 billion in the third quarter of 2024, bringing us to more than $4 billion over the first nine months of the year. Jackson MarketLink Pro continues to grow as a RILA product of choice, and after three years of offering this product, we are a top five RILA provider according to Limer's second quarter 2024 sales rankings. Over the past six months, we have seen additional sales from our new RILA offering in New York and our RILA with living benefit launched in April of this year. We continue to expand our distribution network, announcing earlier this week that Jackson MarketLink Pro 2 is now available to approximately 5,000 financial professionals with JPMorgan Wealth Management. We look forward to providing this important partner and its clients access to Jackson's unique product and industry leading service as consumer demand for RILA continues to grow. Our traditional variable annuity sales were $2.6 billion for the third quarter and continue to benefit from a favorable equity market with sales up 6% over the first nine months of the year. Jackson continues to meet the demands of a dynamic market delivering flexible protection and income oriented solutions to Americans planning for retirement. Most recently, we introduced Principal Guard, the guaranteed minimum accumulation benefit or GMAB to our elite access variable annuity suite. This benefit provides policyholders the option to add valuable principal protection while maintaining investment flexibility. Our user-friendly digital capabilities also allow advisors and their clients to analyze how our Principal Guard benefit meets the client's needs under a range of individual planning scenarios. We have a long history with fixed and fixed indexed annuities and have consistently offered a full range of competitive products that provide choice, flexibility, and strong consumer value across the annuity spectrum. Our continued monitoring of interest rates supported by our broad retail distribution network and increased capital generation stability with Brook Re in place enabled us to reengage in this market with targeted distribution partners delivering $1 billion in spread sales in the third quarter of 2024. These spread sales further diversify our sales mix, contribute to growth in our business, improve our ratings profile, bring new advisors to Jackson, and bring new money to the annuity space. We expect to remain active in the spread business while maintaining our disciplined and balanced approach to capital management. In addition to growth in earnings and sales, we delivered increases in capital generation, holding company cash, and capital return to shareholders. After capital generation grew to $462 million for the third quarter of 2024 and more than $1 billion for the first nine months of the year. Holding company cash approached $650 million including a $300 million distribution during the quarter from Jackson National Life. Our practice of periodic operating company dividends continues to contribute to our more stable RBC while positioning us to meet our financial objectives. Third quarter capital return rose to $167 million and we are on track to deliver at the upper half of our $550 million to $650 million target for the year. Yesterday we announced our board's approval of a common stock dividend of 70 cents per share for the fourth quarter of 2024 and repurchased an additional $48 million of common shares between the end of the third quarter and Friday, November 1st leaving us with an outstanding share repurchase authorization of approximately $684 million. This provides flexibility and visibility into our 2025 opportunities for capital return. As you can see on slide four, we have consistently returned capital to our shareholders through both common shareholder dividends and share repurchases. The pace accelerated in 2024 with -to-date per share capital return up 52% from the same period in 2023. On a cumulative basis since separation in 2021, we've returned nearly $1.7 billion to shareholders. We've consistently delivered on our capital return commitments while maintaining our financial strength and investing in our business. Our third quarter 2024 sales growth and capital generation were a result of our balanced approach to capital management. Turning to slide five, we are on track to meet our annual financial targets for the fourth year in a row. Our estimated RBC ratio was up slightly from the second quarter and in range of 550 to 570 percent, well above our minimum of 425 percent and at a level to support continued growth. We ended the quarter with over $4.8 billion in statutory capital and believe our financial strength and continued capital generation position us well for future growth and capital return. At this time, I'd like to turn the call over to our CFO, Don Cummings.

Thank you, Laura. I'll begin on slide six with our third quarter 2024 consolidated financial results. Adjusted operating earnings of $350 million were up 11% over the third quarter of last year. This significant growth in earnings was primarily due to higher fee income from growth in our variable annuity assets under management and higher earnings on spread products. We had a challenging comparable on a sequential basis with the non-recurring payout annuity reserve release benefiting second quarter earnings by $24 million after tax or 31 cents per share and the impact of higher market-related operating expenses in the third quarter. These market-related costs were particularly impactful in the third quarter of this year with Jackson's common share price up nearly 24% and the S&P 500 up over 5% driving an increase in general and administrative expenses. Spread earnings benefited from gains in net investment income primarily driven by the growth of our RILA block as well as higher portfolio 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 loan portfolio which is less than 2% of the investment portfolio. It also includes our exposure to below investment grade securities which represents only 1% of the portfolio on a statutory basis. Before turning to notable items in the quarter, I want to highlight the growth in book values since year end. Our adjusted book value attributable to common shareholders ended the third quarter $11.2 billion or $149.29 per diluted share, an increase of approximately 10% from year end driven by our operating performance and common share repurchase activity. Adjusted operating return on equity was 13% for the nine months of this year up from .6% in the comparable period of last year. Slide 7 outlines the notable items included in adjusted operating earnings. Reported adjusted operating earnings per share were $4.60 for the current quarter, adjusting for $0.28 of notable items and the difference in tax rates from our 15% guidance. Earnings per share were $4.86 for the current quarter compared to $3.77 in the prior year's third quarter. This strong earnings improvement was primarily due to the growth in assets under management and spread income benefits noted earlier as well as a reduction in diluted share count from the common share repurchase activity. The only notable item for the current quarter was a $0.28 negative impact from limited partnership results coming in below our 10% long-term assumption. As a reminder, the same item was a small benefit in both the first and second quarter of this year. Turning to slide 8, we've included a waterfall comparison of our third quarter pretax adjusted operating earnings of $411 million to the gap pretax loss attributable to Jackson Financial of $582 million. Before covering the results of our hedging program, I want to note that non-operating results include $515 million in losses from business reinsured to third parties. This resulted from losses on a legacy funds withheld reinsurance treaty due to change in the associated embedded derivative net of the related investment income. Non-operating items related to this reinsurance treaty can be volatile from period to period and have a minimal net impact on our adjusted book value. Furthermore, these items do not impact Jackson's statutory capital generation or free cash flow. Excluding the impact of this reinsurance treaty, we continue to see less volatility in gap income following the establishment of Book Re at the beginning of this year. Now turning to our hedging program, the net hedge result before DAC amortization was a loss of $295 million in the third quarter and a net hedge gain of $206 million for the first nine months of the year. As I discussed last quarter, the DAC amortization item is not an element of our hedging program. We will evaluate the results of our hedging before this item. Our hedging results include a robust stream of guaranteed benefit fees that are derived from the benefit base rather than the account value, which provides stability to the guarantee fees even in periods when markets decline as we experienced in 2022. During the third quarter, the net hedge result included a net gain hedging instruments of about $600 million, primarily due to gains on interest rate hedges in a quarter where interest rates were down across the yield curve. The gain on interest rate hedges was partially offset by losses on equity hedges in a rising equity market environment. Changes in net market risk benefits or net MRB were driven in part by the same interest rate and equity market impacts, leading to a nearly $1.2 billion negative offset to the hedging instruments gain. It is important to note that in addition to market and interest rate impacts, there will be an MRB increase in each period as time passes due to the collection of fees. Additionally, the MRB change was negatively impacted by higher levels of market implied volatility during the third quarter, which does not apply to Brook-Ree as the modified gap approach uses a fixed long-term volatility assumption. The reserve and embedded derivative loss of $493 million during the third quarter primarily reflects increases in RILA reserves resulting from higher equity markets. The RILA business continues to provide a natural equity risk offset to our guaranteed variable annuity business, which results in hedging efficiencies that increase as the RILA block grows. In summary, the change in the net MRB fees collected during a period, as well as the reserve and embedded derivative movements, should be viewed collectively when comparing to hedging instrument gains or losses that come through in our results. We believe this quarter's result demonstrates that our hedging program continues to be effective in improving the stability of results and is working as expected with the establishment of Brook-Ree. Our segment results begin on slide nine and focus on the healthy new business profile of our retail annuity segment, illustrated by growth of 59% from the third quarter of last year and 25% from the second quarter of this year. Our RILA product continues to gain momentum with third quarter sales reaching a level of $1.6 billion, supporting further diversification in our top line growth. As Laura mentioned, we expect continued growth in our RILA business to be supported by our recent launch of a living benefit, the recent availability of one of Jackson's base RILA products in New York, and our expanded distribution opportunities through financial professionals at JPMorgan Wealth Management. Sales of variable annuities remain strong, growing from the third quarter of last year and broadly flat compared to the second quarter of this year. We continue to believe there is a long-term underlying demand for lifetime income products. VAs with guarantees are well positioned for the millions of Americans who retire each year and need additional asset growth and income certainty. During the third quarter, we successfully leveraged our broad retail annuity distribution platform to drive growth and fixed annuity sales and delivered $1 billion of fixed and fixed index annuity sales in the quarter. This was a strong quarter in the fixed annuity market, both for Jackson and the industry, as consumers looked to lock in crediting rates during a quarter with declining interest rates. While we expect our distribution efforts to continue to deliver higher levels of fixed annuity sales relative to the last few years, we expect near-term volumes will be below third quarter levels. The sales we generated in RILA and other spread products translated to $2.5 billion of non-variable annuity net flows in the third quarter, which has grown materially over time. These net flows provide valuable economic diversification and hedging efficiency benefits. Importantly, our overall sales mix remains capital efficient and the stability in capital following the formation of Brook Re provides us the opportunity to allocate some capital to spread products in support of further diversification of our business going forward. We remain focused on our consistent balanced approach to capital return while maintaining our financial strength and investing in our business. Looking at pre-tax adjusted operating earnings for our segments on slide 10, higher equity markets in a continued positive environment for spread products have driven solid growth in our retail annuity segment compared to the third quarter of last year. Excluding the impact of a non-recurring gain from previously disclosed payout annuity reserve releases in the second quarter, earnings for retail annuities were up about 5% on a sequential basis. Jackson's earnings power is supported by the growing level of assets under management. As healthy separate account returns combined with growing non-variable annuity net flows have built our total retail annuity AUM up to $256 billion, an increase of 18% from the third quarter of last year. Importantly, the positive separate account performance has offset our retail annuity net outflows by over $21 billion in the first nine months of this year, including the impact of elevated surrenders of variable annuities coming out of their surrender charge period. For our institutional segment, pre-tax adjusted operating earnings were down from the third quarter of last year, primarily due to reductions in average AUM from $2.2 billion of maturities year to date. We have experienced increased new business activity this year with over $1.5 billion in year to date sales, and what we believe to be a strong start to the fourth quarter. Our closed life and annuity block segment reported pre-tax adjusted operating earnings that were broadly unchanged from the third quarter of last year and down from the second quarter of this year due to comparatively stronger results from updating future policy cash flow assumptions in the second quarter. Slide 11 summarizes our strong capital and liquidity position. The profitability of our enforced business, including the variable annuity base contract and a one-time benefit from the corporate alternative minimum tax, provided substantial capital generation of $462 million during the third quarter. Consistent with our prior guidance for smaller periodic distributions from Jackson National Life, $300 million was distributed during the third quarter. After accounting for the impact of this distribution and the related reduction in deferred tax asset admissibility, Jackson's total adjusted capital, or TAC, increased and ended the quarter at $4.8 billion. Our statutory capital generation of $1.1 billion through the first nine months of this year has exceeded our original guidance when measured on after-tax basis before dividends and distributions. We believe this after-tax measure of capital generation provides the most insight into the underlying strength of our business and provides the foundation for making capital allocation decisions about future organic growth, pursuit of strategic opportunities, and return of capital to shareholders. That said, we understand the value of reflecting the change in company action level required capital, or CAL, when measuring free capital generation. Reflecting the change in CAL, our free capital generation was over $850 million through the first nine months of this year, which we believe puts us on a pace to exceed a billion dollars for the full year on this measure as well. Regardless of the way you measure capital generation, we have thus far outperformed our guidance provided earlier this year, and we believe we remain well positioned for continuing our balanced approach to capital management heading into 2025. CAL has continued to remain stable following the formation of Brook Re as was apparent in our third quarter results, with estimated CAL slightly higher, reflecting growth in fixed annuity sales, partially offset by overall investment portfolio activity. Our estimated RBC ratio was up slightly from the second quarter and in the range of 550 to 570 percent, and remains well above our minimum of 425 percent. We are also pleased with Brook Re's third quarter performance, which is operating as expected and remains capitalized well above our minimum operating capital level. Our holding company cash and highly liquid asset position at the end of the quarter grew to nearly $650 million, which continues to be above our minimum buffer. The extraordinary dividend from Jackson National Life this quarter is consistent with the goal of stabilizing RBC compared to our past practice of a sizable annual dividend. We believe our robust capital position provides a strong financial base for future operating company dividends. We returned $167 million to common shareholders during the quarter through share repurchases and dividends. In year to date, we have returned $483 million or $6.24 per share, a strong pace relative to our 2024 target of 550 to 650 million. Our strong capital generation and growing holding company liquidity position should allow us to finish 2024 in the upper half of our targeted capital return range. Overall, I'm very pleased with our third quarter results, which demonstrate positive momentum in sales, earnings, capital generation, holding company liquidity and capital return. I'll now turn the call back to Laura.

Thank you, Don. Our third quarter results and cumulative progress through the first nine months demonstrate Jackson's business strength, market leadership, and sustainable capital generation. As we look forward to completing another year as an independent company, our focus on execution and capital discipline is strong. We remain committed to profitable growth, serving all stakeholders, and enhancing shareholder value over the long term, including our commitment to capital return. As always, I'd like to acknowledge our talented Jackson team. Their dedication to our purpose of helping Americans achieve financial freedom for life is our greatest strength. The opportunity to work alongside our associates is ever rewarding as we continue to deliver against our strategic and operational goals while supporting our clients, our distribution partners, our communities, and each other. At this time, I'll turn it over to the operator for questions.

Thank you. If you would like to ask a question, please dial star followed by one on your telephone keypad now. If you change your mind and would like to exit the queue, please dial star followed by two. And finally, when preparing to ask your question, please ensure that your phone is unmuted locally. Our first question today will be from the line of Alex Scott with Barclays. Please go ahead. Your line is now open.

Hi, good morning. The first question I wanted to ask is just on the strong stat story earnings this quarter. And I think there was part of it that was not reoccurring. And you all have been pretty clear about the expectation there. But I wanted to understand how much of an offset do you expect from growing the business, just acknowledging the strength and rally sales and so forth? How much sort of net uplift or RBC that is more readily available to send to the holding company do you expect to have annually?

Hey, Alex, it's Don. Good morning. Yeah, I'll take your question. So, you know, in terms of capital usage for new business, we feel really comfortable with our current capital mix. We do believe that's relatively capital efficient. And, you know, that could change, obviously, as we see, you know, opportunities going forward to diversify our mix. But we're pretty comfortable. And I think one example of the flexibility that we have there is the increased level of fixed annuity sales that we saw in the quarter. We were able to do that. And there obviously was a little bit of a capital impact related to that, you know, on the required side. But that was kind of largely offset with some normal portfolio activity. In terms of, you know, rile strain, I think there's, you know, kind of a minimal impact coming through TAC in the current quarter. But, you know, as we bring on more assets, there is, obviously, there's a capital that you have to put up to support those growing level of assets. But in general, we're pretty comfortable with our product mix and feel that it's quite manageable going forward.

Okay, great. Thanks. Second one I have is on Brook Reed. I know there's a little bit of noise around the hedging this quarter. But, you know, as we think through that structure, I think over time, you guys have said there is positive margin, you know, between the fees and the costs of hedging there on these riders. At what point would you have the confidence to actually take a common dividend and have that, you know, help the overall cash flow of the company? You know, I'm interested in the more medium to long term there.

Yeah, so in terms of Brook Reed, as you pointed out, we've got three quarters now of experience operating with Brook Reed in place. And we do expect that over time, it will be capital generative. And if you look at just the results through the, you know, first nine months, we have seen some growth in the equity there. We don't have any expectations here in the near term to take any capital out of Brook Reed. We think we've got sufficient capital generation occurring at J&L and continue to see that, you know, growing a bit and think that that will be sufficient to fund our near term capital return targets.

Great, thank you. Our next question will be from the line of Sunit Kamath with Jefferies. Please go ahead. Your line is now open.

Great, thanks. I just wanted to talk about the capital generation, you know, your comment that you're running over a billion year to date. But if we look at the hold code dividends, they're about half that level. And I know 2024 is a little bit of a odd year because of the whole setup of Brook Reed. But is your expectation that, you know, in a normal year over a 12 month period, you would send a billion dollars to the holding company?

Yeah, thanks for that Sunit. So yeah, obviously 2024, as you highlighted, is a little unique. We really have a distribution up to the holding company in the first quarter because, you know, we use some of that capital to fund the establishment of Brook Reed. And in terms of future capital generation, you know, it'll continue to depend on the performance of our business. So we would fully expect to continue with our approach of periodic distribution of capital. And as I said, it's going to depend on, you know, the level of performance that we have in terms of generating capital. So I don't want to give you a guide at this point. As you know, we typically publish our capital return targets in connection with our fourth quarter results. So as part of that, we'll be sharing, you know, what our plan is. If you look back at our track since we've been, you know, in a public company, I think you'll see a sort of consistent balanced approach in terms of growing the level of capital return that we have. I'm anticipating if the business continues to perform as expected, that we will see some increase in the level of our capital return for 2025.

Okay, got it. And then I guess my other question was, and I think you hit this in your prepared remarks, but when you price and hold capital for RYLA, are you holding capital sort of on a standalone basis or are you embedding that diversification benefit that you get with the traditional VA business?

Thanks. Yeah, no, when we're pricing, it's done on a standalone basis. So we don't take into account, you know, the offset that we get with the VA business. That does come through, as we talked about on prior calls in our hedging results, to the extent it allows us to do less, lower levels of external hedging, we do get a benefit from that. But in terms of pricing, we don't take that into account. It's really done on a standalone basis.

Got it. And if I could just sneak one more in. One of your competitors earlier this year has talked about pretty sizable basis risk, year to date, I guess, just given how skewed the S&T's performance has been from a handful of stocks. Are you seeing any of that in your results?

Yeah, so basis risk for the quarter was fairly muted for us. And, you know, the first two quarters of the year, we did see a little bit of basis risk. It was kind of positive in one quarter, offset by negative result in the second, I believe. But on a year to date basis, it's been fairly modest. We do have a very rigorous approach in terms of managing the funds that are available on our platform. And I think that's one of the things that we use to, you know, to help manage that. We also use a number of different indices in our hedging approach. So based on all of that, we haven't seen a significant impact from basis risk year to date.

Got it. Thanks, Dan. As a reminder, for any further questions, please dial star followed by one now. And our next question is from the line of Ryan Krueger with Keefe, Breit and Woods. Please go ahead. Your line's open.

Hey, thanks. Good morning. First one was on brookery. Can you provide us a little more color on or at least quantification on how the capital has moved at brookery on a year to date basis at this point?

Yeah, so, you know, we obviously are not currently disclosing, you know, the exact financials of brookery, I think, consistent with, you know, other companies that have captive arrangements. As I mentioned, you know, we have seen some growth there. It's not a huge amount, but don't really want to quantify it at this point. I would say that, you know, just as a reminder, we did put $700 million in terms of the initial capitalization brookery. And, you know, the other kind of component of equity that exists there is the asset related to the MRB or the variable annuity guarantees. And the combined results of both of those have, you know, grown in the first nine months.

Okay, got it. Thanks. And then when I look at the market risk benefits roll forward, it looks like there's been a fairly consistent amount of negative impact from actual policyholder behavior versus your expectation. It's, you know, $514 million year to date. Can you give some additional info on what is driving that and how to think about that as we go forward?

Sure, Ryan. So what ends up in the sort of the unexpected component of the MRB roll forward is essentially related to lapse activity and withdrawals. And, you know, our lapse rate assumptions are set on a kind of a long-term view of what we expect to happen. And from quarter to on a short-term basis, you can see some variability in that. But, you know, really our assumptions are set more on a long-term basis. And as you know, Jackson goes through a process of updating its actuarial assumptions in the fourth quarter. And I don't want to get ahead of that, but we will be doing that. We're actually going through the final phases of that now and we'll be reporting that out along with our fourth quarter results.

Thanks. Just one quick follow-up to that. Is this what's happening currently mostly lower than expected lapse rates? Is that in the short-term deviation?

No, it's actually the other way around. You know, as we've talked about when equity markets are really strong like we've seen this year, we do tend to see a higher level of lapse rates or of policyholders withdrawing their money. So, you know, it's higher lapses.

Okay, great. Thank you.

Our next question will be from the line of Tom Gallagher with Ethcore ISI. Please go ahead. Your line is now open.

Morning. A few questions. First, just on the hedging, I guess excluding the equity vol, which gets excluded for purposes of brokery capital. It looks like you had about $130 million of hedging losses in the quarter. Just curious what caused the hedging losses, you know, which factors. And how big of a loss when we think about hedging and brokery, how big of a loss or how much of breakage would you need to see before there would be some capital implications? It sounds like you have a pretty big buffer there, but just want to get a broad sense for what that would look like.

Yeah, so just in terms of the level of hedging losses and the math you did there with subtracting out the volatility, it sounds like you're on the right track. You know, we don't view volatility as kind of a core risk embedded within our guarantees. And so, rather than developing a, you know, fairly costly hedging approach to cover off volatility, that's what led us to setting the fixed volatility assumption within our modified gap approach at and we do accept that that's going to create a little bit of variability in the gap results that show up in our non-operating results. So that's the point on volatility. And in terms of the level of losses that we, you know, would be able to sustain at brokery prior to putting in any capital, if you go back to our original disclosures around the establishment of brokery, we set it up intentionally to be sort of self-sustaining. And so, we do feel like we have a pretty strong buffer there and well above the minimum operating capital that's required for a regulatory basis. We also have internal risk levels that we monitor quite regularly and we feel good about that and really feel like we're in a strong position in terms of brokery. It would take a very significant market event to cause a capital issue. I think as we've disclosed on prior calls, that would typically be very high levels of volatility combined with really significant equity stresses or equity and interest rate stresses combined. So think of events like the global financial crisis in the 07-08 period or potentially similar to the COVID shock in 2020 would be the scenario where, you know, we could potentially need some additional capital at brokery.

Gotcha. That's helpful, Don. So, you know, as a bright line test with the $700 million of hard assets that you funded with initially, if you went through that, would that be one way to think about it? Because I know you have other equity, but the rest of the equity that's been created there, which is essentially an embedded gain from the embedded derivatives, doesn't really feel like equity. I mean, I don't know if the regulator views it that way, but just curious like how you, you know, is that a reasonable initial level to think about if you depleted that $700 million, which obviously you're way away from that because you have -to-date gains, but just trying to understand like a bright line level.

Yeah, we don't have a bright line just related to the $700 million. Recall that that was our initial capital or hard assets, if you will, that we put into the company. Each quarter, we settle up on the results of the business with brokery. And so the hard assets have actually grown as well over the first nine months of the year.

Gotcha. Thanks. And then, you know, I just...

Sorry, Tom, just to close that out, we don't really have a bright line. We do have metrics that we monitor, which are kind of scenario-based and we look at it very, very closely, but there's no bright line dollar amount that would, you know, guide you to.

Gotcha. And then I just... My follow-up is just on sales. The big ramp up and fixed in FIA sales in Q3. I heard your comments about, I think you said, probably not going to stay at that level, but I guess my question is, that's probably the most competitive part of the life insurance market. That's where all the alternative managers are operating. How do you think about standalone ROEs? Like I heard everything you said about diversification. That all makes sense, but I can't imagine these are particularly high returning sales like RYLA, in my view, probably a much better quality sale for you. So why enter into that market in such a big way if that's in fact where most of the competition is intense and pricing? I don't know. That's a bit of a rambling question, but what kind of returns do you think you're actually getting on those product sales?

Good morning, Tom, and thank you for that question. Yeah, I'll have Scott address the drivers for the sales and then Don can address the return question. But year to date, we've seen very constructive characteristics for annuity sales overall across all different annuity types. And we've seen very rational behavior out of our peers as well. So across the entire industry, we're seeing growth in markets for each annuity type. And Scott can share our view on what's driving those increased sales.

Yeah, thanks, Lauren. Thanks for the question, Tom. I mean, there's several drives. It starts with demand. I mean, you've heard virtually every firm in our industry talk about favorable demographics. And the reason why is because that opportunity is real. It's not just the number of Americans turning 65 that have the need, but the number of Americans that now are responsible for funding their own retirement and the need for protection, for growth, for lifetime income is stronger than ever. It's also another driver is the number of solutions that are available. As Laura pointed out, it really highlights the importance of having product solutions that are available that have strong consumer value across the entire risk spectrum, whether it's the growth potential of VA, the protected growth of RYLA or the principal guarantee of spread. That's important overall to Jackson sales and diversification. Another driver is really the number of advisors that are now using annuity solutions as part of their client diversification and part of their overall financial planning. I mean, we've spent a lot of effort over the years to ensure that our products are integrated in the wealth management platforms and in the financial planning tools that advisors use to run their business and to serve their clients. And it's really helped advisors illustrate the positive impact our solutions can have on a client's portfolio and really helps demonstrate how we can drive potentially better outcomes. From a spread specific standpoint, we talked about some of the drivers, active repricing, the capital stability of Brook Re, our ability to tap into the strength of distribution and reengage with key distribution partners. But for Jackson, a key reason to be in a spread business is it helps us attract new advisors to our overall suite of products. Much like RYLA did, what we've seen with the spread sales, it's brought advisors back to Jackson that hadn't done business with us in a while. So we're very pleased with the results we've seen with our diversified sales.

Yes, I'm going to add a couple. I'll just add a couple things to that and then address your question on return. So as you know, Jackson's had a pretty long history of being in the spread business. So as Scott was mentioning now that we have more stability with Brook Re in place in terms of our capital position, we made the decision to support the distribution effort. In terms of returns, we're very comfortable with the profitability of all the products that we're currently selling, including the fixed annuities. And the range of returns really varies by product. So as you pointed out, our VA's are some of our highest return products. Fixed annuities are going to be at the lower end of the range and RYLA falls somewhere in the middle there. We don't disclose specific IRR targets, but we're comfortable with the returns we're seeing on that

business. Gotcha. Thanks guys. With no further questions on the line, I will now hand the call back over to Jackson's CEO, Laura Prescott, for any closing remarks.

Thank you all for joining us this morning and we look forward to providing you our next update on our full year results in the new year. Take care.

This will conclude the Jackson Financial, Inc. 3Q24 Earnings Call. Thank you to everyone who was able to join us. You may now disconnect your lines.