Strategic Diversification and Capital Strength
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Performance was driven by a meaningful shift in sales mix toward spread-based products, which now account for nearly 60% of retail annuity sales, creating a more durable earnings profile.
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Record retail annuity sales exceeding $6.5 billion were supported by the RILA franchise, which reached nearly $29 billion in assets and benefited from new product launches linked to the Dow Jones Industrial Average.
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Operating earnings growth of 20% year-to-date reflects the successful integration of spread income to complement robust fee income from the in-force variable annuity block.
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Strategic partnerships with TPG Inc. and PPM America have enhanced new money yields by expanding access to attractive investment opportunities in select higher-yielding asset classes.
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Distribution reach expanded through the reactivation of over 3,500 advisors and the addition of 2,500 new advisors, driven by a broader product suite including new fixed index annuity offerings.
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The company maintained a disciplined capital position with total adjusted capital of $5.9 billion, allowing for significant investment in new business while returning $838 million to shareholders year-to-date.
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Management attributes improving net flow trends to healthy inflows across RILA and fixed annuities, which helped offset higher variable annuity surrenders triggered by strong equity markets.
Growth Initiatives and Capital Targets
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Management reaffirmed its full-year free capital generation target of $1.2 billion and expects shareholder returns to be at or above the midpoint of the $900 million to $1.1 billion range.
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The AARP Annuity Program is scheduled for an initial 10-state launch in late 2026, with a target for national availability in the first half of 2027 to capture the direct-to-consumer market.
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Future earnings are expected to benefit from the launch of new accumulation-focused fixed index annuities and the continued expansion of the TPG investment partnership.
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Management plans to provide enhanced transparency and additional disclosures regarding the Brooke Re captive reinsurer's performance alongside year-end 2026 results.
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The company intends to maintain its 'earn it, then pay it' capital philosophy, balancing the funding of profitable new business growth with sustainable common dividend increases.
Operational Adjustments and Risk Factors
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Limited partnership results had an unfavorable $0.24 per share impact as returns fell below the long-term 10% assumption due to quarterly valuation variances.
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The Brooke Re captive structure was highlighted as a tool to align reserves with economic reality, specifically mitigating the statutory 'cash surrender value floor' mismatch during rising markets.
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A $750 million senior debt issuance in the second quarter effectively pre-funded $650 million of 2027 maturities, providing $100 million in incremental liquidity.
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RBC levels faced a temporary headwind from trailing 12-month fixed annuity sales volume, though management expects this impact to moderate as production levels stabilize.
Q&A Session Insights
Q4 assumption review and emerging lapse rate trends
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Management noted that while the formal review is ongoing, they have observed a modest increase in lapse rates over the last several years due to higher equity markets.
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Previous adjustments in 2025 improved the accuracy of policyholder behavior modeling, resulting in lower 'unexpected' behavior during 2026 despite higher overall lapses.
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Managing liquidity and settlement timing at Brooke Re
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The three-year settlement period for reinsurance balances is designed to smooth hedge cash flow volatility against long-duration liabilities and a stable fee stream.
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A significant portion of Brooke Re's hedge losses are offset internally by RILA equity exposures at the Jackson National Life level, reducing external liquidity pressure.
Strategic rationale and rollout of AARP partnership
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The program serves as an exclusive direct-to-consumer channel targeting affluent households that prefer to invest without a traditional financial advisor.
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Initial offerings will focus on fixed and spread-based products, with the potential to expand the product suite as the digital platform scales nationally.
Regulatory environment for captive reinsurance structures
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Management expressed confidence in the stability of their Michigan-based captives, noting they were established under specific state laws rather than discretionary 'permitted practices.'
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The company expects a business-as-usual relationship with the incoming state administration, citing a 65-year history of regulatory compliance in Michigan.
Capacity for growth within the Hickory Re captive
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Strong sales of fixed index annuities with guaranteed benefits have begun to utilize the initial $650 million capital contribution.
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Management confirmed that significant capacity remains to support the current sales outlook for spread-based products over the coming years.
