Jackson Financial Inc. Q3 FY2024 Earnings Call

Hello, and welcome to the Jackson Financial Inc. 3Q '24 Earnings Call. My name is Harry, and I'll be your operator today. 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 investors.jackson.com. Joining us today are our CEO, Laura Prieskorn, our CFO, Don Cummings; the President of Jackson National Life Distributors, Scott Romine; and our Chief Actuary, Steve Binioris, and the President and Chief Investment Officer of PPM, Craig Smith. At this time, I'll turn the call over to our CEO, Laura Prieskorn.

Good morning, everyone. Today, we will discuss Jackson's third quarter results and progress through the first 9 months of the year. Our results reflect diversified and growing annuity sales, recent product and distribution initiatives, and sustainable capital generation. With 3 operating quarters completed with our captive Brooke Re, we're realizing the benefits of greater capital stability, which are evident in our third quarter results. Beginning with Slide 3, net income was a loss for the third quarter and positive over the full 9 months. Importantly, we've experienced less volatility than prior periods with the formation of Brooke Re and achieved greater alignment between adjusted operating earnings, GAAP 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 year-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 9 months to more than $250 billion. The combination of product innovation, risk management, best-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 9 months of the year. Jackson Market Link Pro continues to grow as a RILA product of choice. After 3 years of offering this product, we are a top 5 RILA provider according to LIMRA's Second Quarter 2024 sales ranking. Over the past 6 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 Market Link Pro II 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 9 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 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 capability also allows advisers and their clients to analyze how our Principal Guard benefit meets the clients' 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, enables 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, and bring new advisers to Jackson, and 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-tax capital generation grew to $462 million for the third quarter of 2024, and more than $1 billion for the first 9 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 $0.70 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 1, 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 4, we have consistently returned capital to our shareholders through both common shareholder dividends and share repurchases. The pace accelerated in 2024, with year-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 5, 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 the range of 550% to 570%, well above our minimum of 425% 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 6 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 nonrecurring payout annuity reserve release benefiting second quarter earnings by $24 million after tax or $0.31 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 value since year-end. Our adjusted book value attributable to common shareholders ended the third quarter at $11.2 billion or $149.29 per diluted share, an increase of approximately 10% from year-end driven by our strong operating performance and common share repurchase activity. Adjusted operating return on equity was 13% for the 9 months of this year, up from 11.6% 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 GAAP pretax loss attributable to Jackson Financial of $582 million. Before covering the results of our hedging program, I want to note that nonoperating results include $515 million in losses from business reinsurer to third parties. This resulted from losses on a legacy funds withheld reinsurance treaty due to the change in the associated embedded derivative, net of the related investment income. Nonoperating 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. Exceeding the impact of this reinsurance treaty, we continue to see less volatility in GAAP income following the establishment of Brooke 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 9 months of the year. As I discussed last quarter, the DAC amortization item is not an element of our hedging program or driven by current period activity. So we 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 on 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 Re as the modified GAAP 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 the 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 our results and is working as expected with the establishment of Brooke Re. Our segment results begin on Slide 9 and focus on the healthy new business profile of our Retail Annuities 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 record 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 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 remained 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. Variable annuities 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 in 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 look 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 Sprint 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 Brooke 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 pretax 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 nonrecurring 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 9 months of this year, including the impact of elevated surrenders of variable annuities coming out of their surrender charge period. For our institutional segment, pretax 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 Blocks segment reported pretax 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 in-force business, including the variable annuity-based 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 period 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 9 months of this year has exceeded our original guidance when measured on an 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 9 months of this year, which we believe puts us on pace to exceed $1 billion 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 Brooke 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% and remains well above our minimum of 425%. We are also pleased with Brooke 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, and year-to-date, we have returned $483 million or $6.24 per share. A strong pace relative to our 2024 target of $550 million to $650 million. Our strong capital generation and growing holding company and 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 9 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.

Our first question today will be from the line of Alex Scott with Barclays.

Hi, good morning. First question I wanted to ask is just on the strong statutory earnings this quarter, and I think there was part of it that was nonrecurring, and you all have been pretty clear about the expectation there. But I wanted to understand like how much of an offset do you expect from growing the business, just acknowledging the strength in RILA sales and so forth? Like how much sort of net uplift RBC that is more readily available to send to the holding company do you expect to have annually?

Alex, it's Don. Yes, I'll take your question. So 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 that could change obviously as we see opportunities going forward to diversify our mix, but we're pretty comfortable. One example of the flexibility that we have there is with the increased level of fixed annuity sales that we saw in the quarter; we were able to do that. There obviously was a little bit of a capital impact related to that on the required side, but that was largely offset with some normal portfolio activity. In terms of RILA's strength, I think there's a minimal impact coming through TAC in the current quarter. But as we bring on more assets, there is, obviously, some capital that has to be put up to support those growing levels of assets. But in general, we're pretty comfortable with our product mix and feel that it's quite manageable going forward.

Okay. Second one I have is on Brooke Re, and I know there's a little bit of noise just around the hedging this quarter, but as we think through that structure, I think over time, you guys have said there is a positive margin between the fees and the cost of hedging there on these riders. At what point would you have the confidence to actually take a common dividend and have that help the overall cash flow of the company? I appreciate you said it up recently, but I'm just sort of interested in the more medium and long term there.

Yes. In terms of Brooke Re, we've gained three quarters of experience operating with it. We do expect that it will generate capital over time. Looking at the results from the first nine months, we've seen some growth in equity. In the near term, we don't plan to withdraw any capital from Brooke Re. We believe that we have enough capital generation happening at JNL, and we expect that to continue growing slightly, which should be adequate to meet our near-term capital return targets.

Our next question will be from the line of Suneet Kamath with Jefferies.

I just wanted to talk about the capital generation. Your comment that you're running over $1 billion year-to-date. But if we look at the holdco dividends, they're about half that level. I know 2024 is a little bit of an odd year because of the whole setup of Brooke Re. But is your expectation that in a normal year over a 12-month period, you would send $1 billion to the holding company?

Yes. Thanks for that, Suneet. Obviously, 2024, as you highlighted, is a little unique. We didn't really have a distribution up to the holding company in the first quarter because we used some of that capital to fund the establishment of Brooke Re. In terms of future capital generation, it will continue to depend on the performance of our business. We would fully expect to continue with our approach of periodic distribution of capital. As I said, it's going to depend on 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. If you look back at our track record since we've been a public company, I think you'll see a 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 about how you price and hold capital for RILA. Are you holding capital on a standalone basis, or are you including the diversification benefit that comes with the traditional VA business?

Yes. No. When we're pricing, it's done on a stand-alone basis. So we don't take into account the offset that we get with the VA business. That does come through, as we've talked about on prior calls and our hedging results to the extent it allows us to do 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 stand-alone basis.

Got it. And if I could just sneak one more in. One of your competitors earlier this year 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?

Yes. So basis risk for the quarter was fairly muted for us. In the first 2 quarters of the year, we did see a little bit of basis risk. It was kind of positive in one quarter, offset by a 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 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.

And our next question is from the line of Ryan Krueger with Keefe, Bruyette, & Woods.

First one was on Brooke Re. Can you provide us a little more color on or at least quantification on how the capital has moved at Brooke Re on a year-to-date basis at this point?

Yes. So we obviously are not currently disclosing the exact financials of Brooke Re. I think, consistent with other companies that have captive arrangements. As I mentioned, we have seen some growth there. It's not a huge amount, but I don't really want to quantify it at this point. I would say that just as a reminder, we did put in $700 million in terms of the initial capitalization of Brooke Re. And the other kind of component of equity that exists there is the asset related to the MRB or the variable annuity guarantees. The combined results of both of those have grown in the first 9 months.

Okay. Got it. 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 at $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. Our lapse rate assumptions are set on a long-term view of what we expect to happen. From quarter to quarter on a short-term basis, you can see some variability in that. But really, assumptions are set more on a long-term basis. Jackson goes through a process of updating its actuarial assumptions in the fourth quarter. 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.

Just one quick follow-up to that. Is what’s happening currently mostly a lower-than-expected lapse rate? Has that been the short-term deviation?

No, it's actually the other way around. 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 policyholders withdrawing their money. So it's higher lapse.

Our next question will be from the line of Tom Gallagher with Evercore ISI.

I have a few questions. First, regarding the hedging. Excluding the equity volatility, which is not counted for Brooke Re capital purposes, it seems you had approximately $130 million in hedging losses for the quarter. I'm interested in what caused these hedging losses and which factors contributed to them. Additionally, when considering hedging in Brooke Re, how significant of a loss or how much breakage would be necessary before there are capital implications? It appears you have a substantial buffer, but I would like to understand what that situation would entail.

Yes. 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. We don't view volatility as kind of a core risk embedded within our guarantees. That led us to setting the fixed volatility assumption within our modified GAAP approach at Brooke Re. We do accept that that's going to create a little bit of variability in the GAAP results that show up in our non-operating results. In terms of the level of losses that we would be able to sustain at Brooke Re prior to putting in any capital, if you go back to our original disclosures around the establishment of Brooke Re, we set it up intentionally to be sort of self-sustaining. We feel like we have a pretty strong buffer there and well above the minimum operating capital that's required for regulatory purposes. We also have internal risk levels that we monitor regularly, and we feel good about that. We really believe we're in a strong position regarding Brooke Re. 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 we could potentially need some additional capital for Brooke Re.

That's helpful, Don. So as a straightforward way to assess the $700 million of hard assets you initially funded, would that be one approach to consider? I understand you have other equity, but the additional equity that has been generated essentially represents an embedded gain from the embedded derivatives, which doesn't really seem like genuine equity. I'm not sure if the regulator views it that way. I'm just curious if depleting that $700 million is a reasonable benchmark to think about, even though you're far from that since you have year-to-date gains. I'm just trying to grasp a clear level for consideration.

Yes. We don't have a bright line just related to the $700 million. Recall that that was our initial capital or hard assets that we put into the company. We settle up on the results of the business with Brooke Re. And so the hard assets have actually grown as well over the first 9 months of the year.

Got you. My follow-up is about sales. There was a significant increase in fixed and FIA sales in Q3. I heard your comments about it likely not staying at that level. My question is, since that's the most competitive part of the life insurance market where all the alternative managers are active, how do you view stand-alone ROEs? I understand your perspective on diversification, but I can't imagine these sales yield particularly high returns compared to RILA, which seems like a much better quality sale for you. Why then engage in that market so extensively if that's where competition is fierce in pricing? That's a bit of a rambling question, but what kind of returns do you think you're actually achieving on those product sales?

Good morning, Tom, and thank you for that question. Yes, 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. 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. Scott can share our view on what's driving those increased sales.

Yes. Thanks, Laura, and thanks for the question, Tom. I mean there's a similar drop; it starts with demand. You've heard virtually every firm in our industry talk about favorable demographics. The opportunity is real. It's not just about the number of Americans turning 65 to have the need but the number of Americans now responsible for funding their own retirement and the need for protection for growth, for lifetime income is stronger than ever. Another driver is the number of solutions that are available, which highlights the importance of having product solutions available that have strong consumer value across the entire risk spectrum, whether it's the growth potential of VA, the protected growth of RILA, or the principal guarantee of spread. That's important to overall Jackson sales and diversification. Another driver is really the number of advisers now using annuity solutions as part of their client diversification and overall financial planning. We've spent a lot of effort over the years to ensure our products are integrated into wealth management platforms and the financial planning tools that advisers use. It has really helped advisers illustrate the positive impact our solutions can have on a client's portfolio, demonstrating how we can drive potentially better outcomes. From a spread-specific standpoint, we talked about some of the drivers, active repricing, capital stability of Brooke Re, and our ability to tap into the strength of distribution and reengage with key distribution partners. A key reason to be in the spread business is it helps us attract new advisers to our overall suite of products. Much like RILA did, we've seen with the spread sales, it has brought advisers back to Jackson who 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, Tom, I'll add a couple of things to that and then address your question on returns. As you know, Jackson has a long history in the spread business. Now that we have more stability with Brooke Re in our capital position, we've decided to support the distribution effort. We're very comfortable with the profitability of all the products we're currently selling, including fixed annuities. The range of returns varies by product. Our VAs are among our highest return products, fixed annuities are on the lower end of the range, and RILA falls somewhere in the middle. While we don't disclose specific IRR targets, we are satisfied with the returns we're seeing from that business.

With no further questions on the line, I will now hand the call back over to Jackson's CEO, Laura Prieskorn, 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. 3Q '24 Earnings Call. Thank you to everyone who was able to join us. You may now disconnect your lines.