Jackson Financial: Solid Results Are Increasingly Reflected In Valuation (Rating Downgrade)

seekingalpha11-09

Jackson Financial shares surged 175% in the past year, driven by strong sales and a favorable market environment, but are now above my $102 price target.Q3 results showed mixed performance with $4.60 ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2482139904?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1972341389/image_1972341389.jpg","is_english":true,"pubTime":"2024-11-09 14:10","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2482139904","market":"us","top_or_hot":-1,"title":"Jackson Financial: Solid Results Are Increasingly Reflected In Valuation (Rating Downgrade)","media":"seekingalpha","content":"<div>\n<p>Jackson Financial shares surged 175% in the past year, driven by strong sales and a favorable market environment, but are now above my $102 price target.Q3 results showed mixed performance with $4.60 ...</p>\n\n<a href=\"https://seekingalpha.com/article/4735305-jackson-financial-jxn-stock-solid-results-are-increasingly-reflected-in-valuation\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Jackson Financial: Solid Results Are Increasingly Reflected In Valuation (Rating Downgrade)</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nJackson Financial: Solid Results Are Increasingly Reflected In Valuation (Rating Downgrade)\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-09 14:10 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4735305-jackson-financial-jxn-stock-solid-results-are-increasingly-reflected-in-valuation><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Jackson Financial shares surged 175% in the past year, driven by strong sales and a favorable market environment, but are now above my $102 price target.Q3 results showed mixed performance with $4.60 ...</p>\n\n<a href=\"https://seekingalpha.com/article/4735305-jackson-financial-jxn-stock-solid-results-are-increasingly-reflected-in-valuation\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"JXN","symbol_name":"Jackson Financial Inc","start_time":0,"source_url":"https://seekingalpha.com/article/4735305-jackson-financial-jxn-stock-solid-results-are-increasingly-reflected-in-valuation","article_id":"2482139904","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1972341389/image_1972341389.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2482139904","pubTimestamp":1731132600,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Jackson Financial shares surged 175% in the past year, driven by strong sales and a favorable market environment, but are now above my $102 price target.Q3 results showed mixed performance with $4.60 ","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":["rate"],"viewcount":null,"language":"en","relate_stocks":{"JXN":"Jackson Financial Inc"},"translate_title":"Jackson Financial：稳健的业绩越来越多地反映在估值上（评级下调）","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"JXN":0.9},"content_text":"Jackson Financial shares surged 175% in the past year, driven by strong sales and a favorable market environment, but are now above my $102 price target.Q3 results showed mixed performance with $4.60 EPS, missing estimates by $0.07 due to underperforming alternative investments, but operating earnings rose 11% to $350 million.Retail annuity sales jumped 59%, and Jackson is diversifying into lower-risk products, improving earnings stability and capital efficiency with a high-quality investment portfolio.Despite strong capital generation and significant returns, shares are no longer undervalued enough to be a \"strong buy,\" but can still generate a 10-15% return.   Richard Drury  Shares of Jackson Financial (NYSE:JXN) have been a tremendous performer over the past year, gaining over 175%, making them one of the top-performing stocks in the market. After rallying post-election, shares have retraced some of the gains after reporting mixed Q3 results relative to elevated expectations. I have been consistently bullish on Jackson, most recently reiterating it as a “strong buy” in September. Since then, the stock has surged over 26%. With shares now above my $102 price target, now is a good time to revisit JXN.   Seeking Alpha In the company’s third quarter, Jackson earned $4.60 in adjusted EPS, missing estimates by $0.07. Its alternative investments underperformed long-term expectations by $24 million, reducing earnings by $0.28, which drove the miss. This was still up substantially from $3.80 last year, as it benefited from strong sales and a declining share count. Operating earnings rose by 11% to $350 million as increased AUM boosted fee revenue. The favorable market environment has also lifted spread income. Across units, there was 4% growth in fee income to $2 billion and core net investment income was flat at $457 million. The rise in markets continues to boost AUM, which in turn drives more fee revenue. Indeed, assets under management rose 18% to $256 billion. With the stock market continuing to rally and billing cycles typically lagging by about one quarter, fee revenue should see further momentum. The big story remains how much more demand there is for Jackson’s annuity products as retail investors seek to lock in elevated interest rates. Indeed, retail annuity sales jumped 59% to $5.3 billion from last year. Momentum is not slowing either as annuity sales rose 25% sequentially. Beyond the growth in sales, Jackson is successfully using this period of strong demand to diversify its business and increase sales of lower risk products. Historically, Jackson sold variable annuities, which are more complex and difficult to hedge, but it is moving away from VAs. VA annuities sales of $2.6 billion were under half of total sales   Jackson Financial While VA sales are still substantial, the growth is focused on other, easier to hedge products. Registered index-linked annuity (RILA) sales doubled from last year to a new record. Jackson also did $1 billion of fixed and fixed indexed annuity sales. This was the most diversified business mix we have seen, and it should contribute to improved stability of earnings and capital efficiency. Non-VA net flows surged to $2.5 billion from $822 million last year and $1.4 billion last quarter. With faster flows in these products, Jackson’s overall portfolio mix continues to shift favorably. Thanks to this strong demand, retail pre-tax earnings rose to $458 million from $354 million last year. Given rising sales and AUM, fee income continues to rise, while the favorable macro environment is supportive of attractive spread income. With Jackson focused on meeting demand in the retail channel where economics are better, institutional account values are down 10% from last year at $7.9 billion. As a consequence, institutional earnings declined from $21 million to $17 million, while its closed block was essentially flat at $7 million. Its closed block continues to run a bit better than breakeven and will continue to wind down over multiple years. As it continues to shrink, JXN can redeploy capital to support its higher earning retail offerings while also reducing the complexity of its business. Jackson maintains a $45 billion investment portfolio, across high quality fixed income products. On a statutory basis, just 1% of the portfolio is below investment grade, limiting potential credit losses. It is primarily focused on US corporate debt, with a 15% allocation to mortgages and then some securitized exposure. 100% of securitized assets are investment grade, with 95% of its commercial mortgages the highest two ratings. In fact, of its $1.2 billion of CLOs, nearly half are “AAA” rated.   Jackson Financial This is a high-quality portfolio with limited potential credit losses, that said, commercial real estate (CRE) does remain the focus. Here, Jackson has been a conservative underwriter. No commercial mortgage loans are delinquent. The average debt service coverage ratio is 2.2x. Just 2.5% have coverage below 1x, and a mere 0.8% also have an over 80% loan-to-value ratio. This greatly reduces potential losses. The portfolio is also diverse, with just $700 million of total office exposure. Any losses should be manageable.   Jackson Financial With these strong results, Jackson remains very capital generative, which is facilitating significant capital returns. It generated $462 million of capital in the quarter, $1.1 billion this year. As a consequence, it has made $550 million of distributions from the operating company to the Holdco. These distributions are essential as it is the holding company that does buybacks and pays its dividend. Jackson did $167 million in capital returns in Q3 and $483 million in capital returns this year, well on track to surpass $600 million. As such, its share count is down 8% from last year. Jackson continues to have strong capital. Statutory capital sits between a 550% and 570% risk-based capital (RBC) ratio. This provides the company with $1 billion of excess capital relative to its 425% target. There is also $650 million of holding company liquidity, which is $400 million above minimum levels, meaning buybacks can continue even if intra-company payments slowed. Notably, management expects to increase capital returns in 2025, though formal guidance will come in January. Capital returns have lagged its $1 billion in capital generation because it put $700 million to form Brooke Re this year. Brooke’s capital has increased this year, though I do not expect JXN to take any dividends from its captive entity, given how much Jackson Life is generating. Back in September, I saw JXN as a $700 million free cash flow business with $500 million of benefits from its RILA-VA hedging. I still view this as about right, though strong fixed annuity growth may push free cash flow closer to $725 million, and remaining hedging benefits are likely closer to $450 million, given strong sales. I do expect at least $700 million in capital returns next year, given free cash flow and its excess capital. Assuming even 5% share count reduction due to buybacks, JXN has about $10/share in forward run-rate free cash flow. Including remaining one-time hedging benefits, shares are essentially right at a 10% free cash flow yield. This has been my measure of fair value, given my 10% required return and market caution around its closed book VA exposure. For shares to rise substantially more, it would require ongoing multiple expansion, which I am hesitant to make my base case. Still, at this level, JXN can generate a long-term 10% return, given free cash flow and ongoing capital returns. Plus, it carries nearly $20 in excess capital and Holdco liquidity, which can lead to more capital returns beyond buybacks over time. As such, I still view shares as a “buy.” However, with shares up 180% since I began JXN as a \"strong buy\" last year, keeping it at a “strong buy” feels greedy with my target multiple achieved.  JXN can continue to outperform the market, generating a 10-15% return for investors, given its valuation and improving business mix, but shares are no longer so undervalued as to be a “strong buy.”","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2482139904"}