Great recap. With regard to JXN, I asked Stevie to run their 'insane' numbers. He flagged the big difference between gaap and non-gaap numbers in 2025 with a collapse in gaap earnings. I understand the concept of broker commissions etc, but wondering why things might have changed so much in 2025? Do you have a read on this?
🏦 JACKSON FINANCIAL INC. (JXN) — COMPREHENSIVE ANALYSIS
📊 KEY METRICS:
| Metric | Value | Context |
|--------|-------|---------|
| Current Price | $103.70 | End-of-day close |
| 52-Week Range | $64.70 - $123.61 | Trading near mid-range |
| Market Cap | $7.3B | Mid-cap financial services |
| "Other Expenses" | $248M | $5,826M | The Problem |
| Total OpEx | $1,368M | $5,826M | |
What are "Other Expenses"? Based on the earnings call and balance sheet, these primarily include:
1. Insurance commissions ($3.0B+) — paid to brokers and advisors for selling annuities
2. Mortality and benefits expenses — payouts on insurance contracts
3. Interest expenses — the $100M in interest expense on debt
4. Costs of insurance — directly tied to running an insurance business
---
WHY THIS HAPPENED — Deceptive Accounting:
Here's what management is saying in the earnings call:
> "Don Cummings, CFO: Let me walk through our financial results for the fourth quarter. We delivered adjusted operating earnings of $455 million, driven by continued strength across our spread-based products."
Translation: JXN is using NON-GAAP "adjusted operating earnings" instead of GAAP net income because their GAAP numbers look terrible.
- "Adjusted Operating EPS": $6.61 (excluding all the "bad stuff")
---
MY CONCERN — Should You Worry?
The SHORT answer: Maybe.
The insurance industry typically works this way:
- Commissions upfront are high
- Profits come later from investment spreads + fees over decades
- GAAP accounting makes them look bad early, then good later
But there ARE red flags:
1. Their GAAP operating margin collapsed from +33% to -1.7% — That's not just accounting; that's real
2. They're heavily dependent on NON-GAAP metrics — When companies abandon GAAP, it's a warning sign
3. They're heavy distributors — Commissions eating profits means lower margins than peers
The POSITIVE:
- They generated $1.4B in free capital (a better metric than GAAP earnings)
- Their spread business is actually profitable
- TPG partnership helps with capital efficiency
---
BOTTOM LINE:
JXN's "increased operating expenses" aren't a problem with cost control — they're structural to the insurance annuity business model. The issue is whether those commissions generate enough long-term profit to justify the upfront costs.
Watch for:
- Do RILA and FIA sales convert to profitable flows 5-10 years out?
- Can TPG partnership improve asset yields?
- Are they taking too much commission risk upfront?
Would you like me to dig deeper into whether these OpEx levels are normal for the industry or if JXN is an outlier?
This is the problem with Jackson... the hedge and derivative accounting is super messy, and I don't pretend to understand it. You have to look at the adjusted earnings and free cash flow tables. The adjusted earnings grow, the sales grow, the dividends grow and solvency ratios remain the same. I'm always afraid a super messy quarter is going to come out and it is going to crash, which is why I've only added to it once (besides dividend reinvestment). The other constant fear is that there is something in their investment portfolio which blows them up. Basically, it's fear of the unknown. All the long term liability hedging is too complicated so the market gives it a massive discount. The only thing JXN can do to offset this is buy back shares, which they do all the time. So I close my eyes and own it. But just wondering if I should add a little more here. But again, it can be a bucking bronco. https://s202.q4cdn.com/231638402/files/doc_financials/2025/q4/Jackson-4QFY-2025-Earnings-Press-Release_FINAL.pdf.
Santander in US sure, but look at NU —much more potential for stock appreciation. Anyone under 25 has never been and will never go to a bank. Good luck all !
It's logic that shadow banking and investment in the us is hitting problems following insane levels of cagr since 2009. Their scale is clear systemic now.
And I don't care who is right or wrong. I just don't want you to get talked out of taking risk based on people scaring you when maybe the problem isn't as big as they say.
Nobody wants to be the analyst who didn't see the next 2008 GFC coming... but I am really struggling with the view that the problems in private credit are going to be a systemic event. My problem for the last 17 years has been that banks around the world have not been lending enough. This is just now starting to change. We could be in the early stages of a traditional bank lending boom. The tradfi banks are underlevered and have been highly restricted in their ability to take risk. It's why I have a hard time seeing a GFC again. I understand the private credit as the next GFC view is alluring, but (if you care) maybe go over the system level loan growth data since the GFC, loans to GDP, consumer leverage ratios, consumer asset levels, etc.... I think you will see that actually the lending has been really modest. It just doesn't seem like the set up for a big credit event.
Please take a look at NU if you get a chance. My understanding is that they are the “Capital One” of Latin America. They are using technology and aiming at the younger generation which will grow in affluence over time.
Surprise bring it on... Happy Easter
Great recap. With regard to JXN, I asked Stevie to run their 'insane' numbers. He flagged the big difference between gaap and non-gaap numbers in 2025 with a collapse in gaap earnings. I understand the concept of broker commissions etc, but wondering why things might have changed so much in 2025? Do you have a read on this?
🏦 JACKSON FINANCIAL INC. (JXN) — COMPREHENSIVE ANALYSIS
📊 KEY METRICS:
| Metric | Value | Context |
|--------|-------|---------|
| Current Price | $103.70 | End-of-day close |
| 52-Week Range | $64.70 - $123.61 | Trading near mid-range |
| Market Cap | $7.3B | Mid-cap financial services |
| YTD Return | ~+47% | Strong performer |
| Beta | 1.47 | More volatile than market |
| Dividend Yield | 2.98% | Quarterly dividend ($3.30/share annually) |
---
📈 YWR RANKINGS SCORES:
| Metric | Score | Percentile | Interpretation |
|--------|-------|-----------|-----------------|
| Factor Score (Total) | 69.4 | Above Average | Decent composite opportunity |
| Estimate Score | 62.0 | 62nd percentile | Modest earnings estimate momentum |
| Value Score | 94.8 | 94th percentile | Attractive valuation! |
| Price Score | 50.0 | Median | No momentum premium |
| QARV Score | 61.4 | Moderate | Mixed quality/value |
| Quality Subscore | 38.2 | Below average | Quality concerns |
| Value Subscore | 13.9 | Low | Value-focused, not quality-driven |
---
💰 VALUATION METRICS (2024):
| Metric | Value | Benchmark | Status |
|--------|-------|-----------|--------|
| P/E Ratio | 6.85x | Fin services ~12x | ✅ CHEAP |
| Price/Book | 0.66x | Below book value | ✅ DEEP DISCOUNT |
| Price/Sales | 2.10x | Reasonable | Fair |
| Operating Margin | 33.1% | Excellent | ✅ HIGH |
| Net Margin | 30.6% | Industry-leading | ✅ EXCELLENT |
| ROE | 9.7% | Moderate | Decent return on equity |
---
📊 FINANCIAL PERFORMANCE:
Revenue & Profitability Trend:
| Year | Revenue | Net Income | Net Margin | EPS |
|------|---------|-----------|-----------|-----|
| 2021 | $5.50B | $3.42B | 62.1% | $35.89 |
| 2022 | $9.72B | $6.19B | 63.6% | $72.34 |
| 2023 | $3.17B | $934M | 29.5% | $10.99 |
| 2024 | $3.09B | $946M | 30.6% | $11.86 |
| 2025 | $6.68B | $27M | 0.4% | -$0.24 ❌ |
⚠️ RED FLAG: 2025 earnings collapsed — only $27M net income on $6.7B revenue. This is a major deterioration.
---
🎯 THE BULL CASE:
1. ✅ Extremely Cheap Valuation
- P/E of 6.85x = ~60% discount to market average
- P/B of 0.66x = Trading 34% below book value
- Value score of 94.8 = Tops 95% of stocks globally
2. ✅ Market Leader in Annuities
- Jackson is #1 provider of fixed index annuities in the US
- Huge addressable market: aging population (Baby Boomers)
- Distribution through 3,000+ broker-dealers nationwide
3. ✅ Operating Leverage
- Gross margins of 77% (2024)
- Operating margins of 33%
- Low cost structure = high incremental profitability
4. ✅ Dividend Income
- 2.98% yield with growing payout
- Returned capital despite earnings collapse
---
⚠️ THE BEAR CASE (Why It's So Cheap):
1. ❌ 2025 Earnings DISASTER
- Net income crashed to just $27M (was $934M in 2023, $946M in 2024)
- Net margin collapsed to 0.4% (was 30%)
- EPS turned negative at -$0.24
2. ❌ What Went Wrong?
- The financial statements show a dramatic operating income collapse in 2025
- Operating income fell from $1.022B (2024) to -$114M (2025)
- This isn't a revenue problem — revenues are UP 116% YoY
- This is an operating expense explosion — likely due to:
- Massive fair value losses on investments/insurance liabilities
- Changes in accounting estimates for annuity reserves
- Potential impairments
3. ❌ Insurance Liability Risk
- Annuity business = long-tailed liability exposure
- If interest rates continue to fall (or volatility spikes), reserve requirements balloon
- Negative duration gap: rate-sensitive liabilities vs. assets
4. ❌ Interest Rate Sensitivity
- Higher rates = GOOD (wider spreads, lower option costs)
- Lower rates = BAD (squeezed margins, higher option costs)
- If Fed cuts rates aggressively in 2026, JXN gets hammered
5. ❌ Asset Quality Concerns
- Balance sheet shows $305B in other liabilities (2025)
- This is likely insurance reserves and policyholder obligations
- Hard to model and opaque to investors
---
🔍 INVESTMENT THESIS:
Jackson is a VALUE TRAP masquerading as a bargain.
The 6.85x P/E and 0.66x P/B look absurdly cheap — but they're priced there for a reason:
- The market is pricing in permanently impaired earnings
- 2025's collapse suggests a structural problem, not a one-time issue
- The 2024 "earnings" may have been temporarily elevated due to favorable assumptions
The real question: Is 2025 the new normal, or is 2024/2023 repeating?
🚨 JXN OPERATING EXPENSE PROBLEM — THE DETAILS:
THE NUMBERS:
| Metric | 2024 | 2025 | Change |
|--------|------|------|--------|
| Revenue | $3,092M | $6,683M | +116% ✅ |
| Operating Expenses | $1,368M | $5,826M | +326% ⚠️ |
| Operating Income | $1,022M | $(114)M | Turned negative! |
| Operating Margin | 33.1% | -1.7% | Collapsed |
| Net Income | $946M | $27M | -97% ❌ |
---
THE ROOT CAUSE — "Other Expenses" Explosion:
This is the key issue:
| Category | 2024 | 2025 | Driver |
|----------|------|------|--------|
| G&A Expenses | $1,120M | $0M | Reclassified |
| "Other Expenses" | $248M | $5,826M | The Problem |
| Total OpEx | $1,368M | $5,826M | |
What are "Other Expenses"? Based on the earnings call and balance sheet, these primarily include:
1. Insurance commissions ($3.0B+) — paid to brokers and advisors for selling annuities
2. Mortality and benefits expenses — payouts on insurance contracts
3. Interest expenses — the $100M in interest expense on debt
4. Costs of insurance — directly tied to running an insurance business
---
WHY THIS HAPPENED — Deceptive Accounting:
Here's what management is saying in the earnings call:
> "Don Cummings, CFO: Let me walk through our financial results for the fourth quarter. We delivered adjusted operating earnings of $455 million, driven by continued strength across our spread-based products."
Translation: JXN is using NON-GAAP "adjusted operating earnings" instead of GAAP net income because their GAAP numbers look terrible.
---
THE REAL STORY:
✅ Revenue DOUBLED — Great! They're selling $20B in annuities annually.
❌ But operating expenses went UP 3x — Why? Because:
- They're an insurance company — commissions and insurance payouts are "operating expenses" under GAAP
- Insurance business is commission-heavy — 20-30% of premiums go to brokers/advisors
- New business growth = higher near-term costs
⚠️ They're showing GAAP losses while claiming "strong adjusted operating earnings"
- GAAP Net Income: $27M (vs $946M in 2024)
- "Adjusted Operating EPS": $6.61 (excluding all the "bad stuff")
---
MY CONCERN — Should You Worry?
The SHORT answer: Maybe.
The insurance industry typically works this way:
- Commissions upfront are high
- Profits come later from investment spreads + fees over decades
- GAAP accounting makes them look bad early, then good later
But there ARE red flags:
1. Their GAAP operating margin collapsed from +33% to -1.7% — That's not just accounting; that's real
2. They're heavily dependent on NON-GAAP metrics — When companies abandon GAAP, it's a warning sign
3. They're heavy distributors — Commissions eating profits means lower margins than peers
The POSITIVE:
- They generated $1.4B in free capital (a better metric than GAAP earnings)
- Their spread business is actually profitable
- TPG partnership helps with capital efficiency
---
BOTTOM LINE:
JXN's "increased operating expenses" aren't a problem with cost control — they're structural to the insurance annuity business model. The issue is whether those commissions generate enough long-term profit to justify the upfront costs.
Watch for:
- Do RILA and FIA sales convert to profitable flows 5-10 years out?
- Can TPG partnership improve asset yields?
- Are they taking too much commission risk upfront?
Would you like me to dig deeper into whether these OpEx levels are normal for the industry or if JXN is an outlier?
This is the problem with Jackson... the hedge and derivative accounting is super messy, and I don't pretend to understand it. You have to look at the adjusted earnings and free cash flow tables. The adjusted earnings grow, the sales grow, the dividends grow and solvency ratios remain the same. I'm always afraid a super messy quarter is going to come out and it is going to crash, which is why I've only added to it once (besides dividend reinvestment). The other constant fear is that there is something in their investment portfolio which blows them up. Basically, it's fear of the unknown. All the long term liability hedging is too complicated so the market gives it a massive discount. The only thing JXN can do to offset this is buy back shares, which they do all the time. So I close my eyes and own it. But just wondering if I should add a little more here. But again, it can be a bucking bronco. https://s202.q4cdn.com/231638402/files/doc_financials/2025/q4/Jackson-4QFY-2025-Earnings-Press-Release_FINAL.pdf.
Santander in US sure, but look at NU —much more potential for stock appreciation. Anyone under 25 has never been and will never go to a bank. Good luck all !
Yes, I've heard I should take a look at NU.
Worth spending a bit of time investigating cashflow vs earnings ?
Also, how come we see default rate across the consumer complex rip and private credit fall apart if the us is booming?
Thank you Hanwil Holdings. Are default rates ripping across the consumer complex? What are you seeing? I am looking at the big US financial earnings results (Capital One, Wells Fargo, JP Morgan, Barclays US credit card business) and there is absolutely nothing going on. NPL's are super low and flat as a pancake. It's good to review actual source data. Here are the Q4 links (https://www.jpmorganchase.com/content/dam/jpmc/jpmorgan-chase-and-co/investor-relations/documents/quarterly-earnings/2025/4th-quarter/ff69a4a4-ab52-4a38-b82a-f153ba695e41.pdf, https://www.wellsfargo.com/assets/pdf/about/investor-relations/earnings/fourth-quarter-2025-earnings-supplement.pdf, https://investor.capitalone.com/static-files/cb6c51ba-7c9a-422d-a2e3-3020fab70ee4, https://home.barclays/content/dam/home-barclays/documents/investor-relations/ResultAnnouncements/FullYear2025Results/FY25-BPLC-Results-RA.pdf). And on private credit... do we have actual default data? Or is what we are seeing more a lot of investors running for the doors in anticipation of problems which haven't happened yet? I want to see the real data, because before private credit loans go into default there is a Private Equity led company which has to default and a PE firm which lets their equity investment go to zero and not put in any more money. I want to see if the PE firms are actually doing that. Because Private Credit is senior to Private Equity the problem will first be a problem for private equity.
https://www.bloomberg.com/news/newsletters/2026-02-10/us-delinquencies-at-their-highest-since-2017-evening-briefing-americas
Just doesn't seem an obvious place to be a contrarian bull ?
https://www.ft.com/content/286bf3e2-ff8a-41ca-a594-67deed955d76?shareType=nongiftEverything you always wanted to know about credit (but were afraid to ask)
It's logic that shadow banking and investment in the us is hitting problems following insane levels of cagr since 2009. Their scale is clear systemic now.
And I don't care who is right or wrong. I just don't want you to get talked out of taking risk based on people scaring you when maybe the problem isn't as big as they say.
Fair enough. There are many ways to skin a cat. Best of luck
Nobody wants to be the analyst who didn't see the next 2008 GFC coming... but I am really struggling with the view that the problems in private credit are going to be a systemic event. My problem for the last 17 years has been that banks around the world have not been lending enough. This is just now starting to change. We could be in the early stages of a traditional bank lending boom. The tradfi banks are underlevered and have been highly restricted in their ability to take risk. It's why I have a hard time seeing a GFC again. I understand the private credit as the next GFC view is alluring, but (if you care) maybe go over the system level loan growth data since the GFC, loans to GDP, consumer leverage ratios, consumer asset levels, etc.... I think you will see that actually the lending has been really modest. It just doesn't seem like the set up for a big credit event.
https://x.com/truthgundlach/status/2040263429773242389?s=48
Please take a look at NU if you get a chance. My understanding is that they are the “Capital One” of Latin America. They are using technology and aiming at the younger generation which will grow in affluence over time.