$70.00
$323.00
bear $70.00
base $208.00
bull $323.00
margin of safety $95.00
market price* $130.58
THE BUSINESS. Jackson Financial is one of the largest US sellers of annuities. It manages about $269 billion of retirement savings for its customers (year-end 2025), of which about $242 billion sits in variable annuities, about $20 billion in registered index-linked annuities (RILAs, sold since 2021) and about $5 billion in fixed and fixed-index annuities. Most of its profit comes from the fees charged on variable annuity balances, so earnings rise and fall with the stock and bond markets. The guarantees attached to many of those contracts are held in a captive reinsurer, Brooke Re, created in early 2024 and run with a hedging program. The money the company makes sits inside regulated Michigan insurance companies, and shareholders only receive what the regulator lets those companies pay up to the holding company. For 2026 every one of those payments is classed as "extraordinary," which means the Michigan regulator has to approve each one. HOW WE MEASURE EARNINGS. Reported profit is not a usable guide here. Hedge gains and losses swing it from large profits to losses: net income to common shareholders was $(17) million in 2025 and $(435) million in the first quarter of 2026, while the business kept paying cash to its owners. The consolidated operating cash flow statement (about $5.8 billion a year) doesn't work either. It counts fee income in full but books hedge payments elsewhere, so it overstates what owners can take out many times over. We instead use the cash the insurance companies actually paid up to the holding company, after holding-company costs, interest on its debt and preferred dividends. The company reports this as "free cash flow" at the parent: $581 million in 2022, $498 million in 2023, $767 million in 2024 and $838 million in 2025. The 2025 figure is after a one-time $150 million used to set up a second captive, Hickory Re. Excluding that, 2025 would have been $988 million. Per diluted share, that is $6.55, $5.96, $9.99 and $11.77. We treat 2024 onward as the current business, because the Brooke Re restructuring changed how much capital the insurance company has to hold and how much it can release. The middle of those two years is about $10.90 a share. The 2021 spin-off year, when the holding company received no dividends, is left out. RECENT RESULTS. The first two quarters of 2026 each produced about $287-288 million of parent free cash flow, $575 million in total. Statutory capital at Jackson National rose to $5.8 billion, with a risk-based capital ratio of 538% at June 30, 2026. Management's target for 2026 is to return $900 million-$1.1 billion to shareholders. In the first quarter TPG bought $500 million of newly issued common stock as part of a partnership to source higher-yielding assets for the fixed annuity business. Those new shares are included in the share count we use (about 70.3 million diluted). The variable annuity book is shrinking. Customers withdrew about $19 billion more than they deposited in each of 2024 and 2025, as large sales years from the past come out of their surrender-charge periods. RILA and fixed annuity deposits only partly offset that ($6.5 billion and $1.6 billion of net deposits in 2025). DEBT. Because this is an insurer, the cash figures above are already after interest on the holding company's debt and after preferred dividends. We therefore don't subtract the debt a second time. The company owed $2.77 billion of long-term debt at June 30, 2026, and has $533 million of preferred stock. That debt includes $750 million raised in the second quarter to repay $400 million of senior notes and $250 million of 8.2% surplus notes, both due in 2027. Those maturities are already funded, and the holding company held about $1.4 billion of cash and liquid securities against a $325 million minimum. The next senior maturity is not until 2031, when the 3.125% notes are due. In the base and bull cases we add about $400 million (about $5.70 a share) of holding-company cash above that minimum and the 2027 repayments. In the bear case that cash is used to keep paying interest and preferred dividends while the subsidiaries pay nothing. GROWTH. We credit no growth from new sales, market share, the TPG partnership or margin gains, because none of it is secured. RILA sales have only a five-year record, and that record has not been through a downturn. BASE CASE - about $208 a share. Distributions of about $13.50 a share (about $950 million) in 2026. That is $575 million already received plus a smaller second half, and it is below 2025's growth rate per share (+15% against +18% actual). It also fits management's capital-return range. The figure holds roughly flat in dollars after that. Growth in the existing RILA and fixed books, and capital freed as old guarantees run off, are assumed to roughly offset the shrinking variable annuity book. We include one weaker year (about $9.50 a share around 2029) for a 2022-style market setback. In 2022-2023 parent cash fell to about $500-580 million. After year ten, the case rests on a franchise that has sold variable annuities through independent brokers, banks and advisers for three decades. We let the stream shrink 1% a year in dollars, because new sales have not kept up with withdrawals. Value: about $202 from the cash stream plus about $6 of surplus holding-company cash. BEAR CASE - about $70 a share. This case includes one full equity-market collapse of the 2008-2009 kind, when the S&P 500 fell about 57% from peak to trough and did not regain its prior high until 2013. In that episode the large variable annuity writers cut dividends and raised outside capital. Jackson itself needed outside help in the much shorter 2020 shock: it reinsured a large block of fixed annuities to Athene in June 2020. In this case the second half of 2026 produces nothing, leaving about $8.20 a share for the year. The regulator approves no payments in 2027-2028, and the holding company covers its roughly $230 million a year of interest, preferred dividends and costs from its cash. To restore capital, the company sells about $750 million of new shares near the bottom (about 15 million shares), which cuts existing owners' share of later cash by about 18%. Payments restart at about $4 a share and settle at about $8 a share before that dilution. That is roughly the 2022-2023 level, because the variable annuity book comes out of the crash permanently smaller. After year ten, the stream shrinks 4% a year. The holding company can carry its debt through this case on its existing cash, so shareholders keep a positive value, but a much smaller one. BULL CASE - about $323 a share. Distributions run at about $15.50 a share in 2026, which is the first half's pace continuing and the top of the capital-return range. They then grow 4% a year through 2030 as the RILA and fixed books, funded by Hickory Re and the TPG partnership, add to cash generation and old guarantees release capital. Growth slows to 2% a year through 2035 and the stream stays flat in dollars after that. Plus the surplus holding-company cash. WHAT COULD MAKE THIS WRONG. The two things we are most likely to be wrong about are the normal level of cash and how long the franchise lasts. If the normal level is about $800 million (the 2024-2025 average) rather than about $950 million, the base falls to about $176. If the variable annuity business shrinks 4% a year after year ten rather than 1%, it falls to about $174. Both together give about $147. Beyond any case: hedges failing in a sudden market or interest-rate shock, policyholders behaving differently than the hedges assume, or a regulator or rating agency demanding more capital could each stop payments for longer than the bear case allows. All payments now depend on case-by-case approval from the Michigan regulator. MARGIN-OF-SAFETY PRICE - $95. We are moderately sure of the earnings level. There are only two full years under the current structure, but the first half of 2026 confirmed and exceeded them, and statutory capital rose at the same time. The worst plausible event is a deep, long market crash. Jackson has no meaningful customer concentration and its debt maturities are funded. However, its earnings depend on market levels, its hedging working, and a regulator's permission to pay, and it has needed outside capital in a short crisis before. At $95, dividends of about $3.60 a share a year are paid over the holding period, and the company could retire roughly a tenth of its shares each year with the rest of its cash. Even if we are wrong on both of the main points above, the shares would be worth about $147, which still implies about a 20% annual return over three years with dividends. In the bear case the value falls about a quarter below that price and dividends stop for a while. That outcome is roughly one in ten and the business survives it. A higher price would rest too heavily on markets staying calm. Previous figures for this company were prepared on a different basis and are not comparable.