Jackson Financial Just Entered the Top 100 Stocks to Buy. Here’s Why.

It’s Tuesday, and nine new entrants are on Barchart’s Top 100 Stocks to Buy. One of them is Jackson Financial (JXN), a Michigan-based provider of retirement services and annuities. 

The company was a subsidiary of Prudential plc (PUK) until it was spun off in September 2021. Although Prudential initially retained a 19.7% stake in Jackson, it has since sold out its position.

Jackson’s main operating business is Jackson National Life Insurance Company, which is licensed to sell insurance in all 50 states and the District of Columbia. The company’s top product is variable annuities. As one of the leading providers of annuities in the U.S. retirement market, it generated $1.07 billion in operating income in 2023 from $13.90 billion in sales. 

Since September 2021, its shares have gained over 141%, while its former parent has lost more than half its value. 

Jackson’s weighted alpha is 118.20, while its 52-week gain is nearly 93%, suggesting that its stock still has some gas in the tank.

Here’s why it could stay in and move up in the top 100.

Annuity Sales Continue to Grow

In Q4 2023, the company’s total annuity sales were $3.3 billion, up from $3.2 billion a year earlier. More importantly, sales without lifetime benefit riders rose by 10 percentage points in the quarter to 53%. That reduces how much it will pay out to annuity holders in the years ahead, improving its profitability. 

The company's Registered Index-Linked Annuities (RILA) are a big winner. In 2023, only its second full year selling the product, it sold $2.9 billion in RILAs, up 60% from 2022. In Q4 2023, RILA sales were over $1 billion, accounting for nearly one-third of its total annuity sales and $4 billion on an annual run rate. 

“For Jackson, RILA’s value proposition goes beyond sales diversification and positive net flows. RILA also contributes to hedging efficiency, which in turn positively impacts capital,” stated CEO Laura Prieskorn during the company's Q4 2023 conference call in February. 

“We have a long history of product innovation, strong distribution partnerships and industry-leading service. These strengths, combined with the enhancements made to our RILA’s suite earlier this year positioned Jackson well for continued RILA sales momentum.”

As its Q4 2024 presentation points out, the growth of its in-force business across all of its products points to higher earnings in the future. 

The company’s total retail annuities account value in 2023 was $235.47 billion, up 12% from $209.97 billion a year earlier. While RILAs only account for 2.2% of its total, up 178% from 2022, they’re quickly becoming an important part of the company's business. 

Returning Capital to Shareholders Always Welcome

As Prieskorn pointed out in the Q4 2023 conference call, the company has reduced its share count by 21% since it was separated from Prudential. As Warren Buffett would say, even if you didn’t buy another share after Jackson went public, your piece of the buy is slightly larger without lifting a finger. 

That’s always a good deal. 

Since going public in September 2021, it has repurchased approximately $750 million of its stock and paid out $450 million in dividends. As part of its fourth-quarter earnings release, it raised its quarterly dividend by 13% to $0.70. The annual rate of $2.80 yields a high 4.1% despite significant share price appreciation over the past 31 months. 

As for share repurchases, it has now repurchased stock in nine consecutive quarters. It’s only been a public company for four months more than that, suggesting it’s very shareholder-friendly.

How successful have its share repurchases been in 2023? 

It paid $39.27 a share for the 6.5 million shares it repurchased last year. Based on its current share price, that’s a 74% return on investment. Even in 2024, between Jan. 1 and Feb. 20, it paid an average of just $50.70 per share. That’s a 35% ROI  in just four months. 

It targets returning $450 million to $550 million annually for share repurchases and dividends. 

Analysts Don’t Care for It 

Only five analysts cover its stock, according to Barchart’s analyst data. Of those, only one has a Buy rating (3.20 out of 5) with a mean target of $61.80, below where it’s currently trading. 

However, the analyst estimate for 2024 earnings per share is $15.95. In 2025, its EPS is $17.68. It currently trades at 3.9 times its 2025 estimate. Its former parent’s ADR trades for 8.5 times the 2025 EPS estimate of $2.09. 

It seems to me that the big thing holding Jackson back from moving higher is the lack of analyst coverage for its stock. With a $5.3 billion market capitalization, this SMID-cap flies well under the radar. 

However, now that it’s entered the top 100 stocks to buy, that could change in the weeks ahead. I’ll continue to monitor its new business, Brooke Life Reinsurance Company, its captive reinsurance company established in January.   

“The transaction allows us to mitigate the impact of the cash surrender value floor on Jackson’s total adjusted capital, statutory required capital, and risk-based capital ratio, as well as to allow for more efficient economic hedging of the underlying risks of Jackson’s business,” states page 46 of its 2023 10-K.

The move should produce more predictable financial results for the company, attracting more analysts to its stock.

I’m no insurance expert, but Jackson appears to be, at the very least, a stock to put on your watch list. 

 

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On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.