Jackson Financial Stock: Generous returns for shareholders (JXN)

Without delving into the ins and outs of the daunting world of annuitiesthis year’s rise in interest rates has led to record demand for these types of retirement income insurance contracts in United States. Jackson Financial Inc. (New York stock market :NYSE:JXN), a holding company that offers different types of annuities to its clients, is one of the key players and looks extremely undervalued. Its revenue of $13.93 billion is well above its current market capitalization of $2.8 billion. It has an incredibly low price-to-earnings ratio of 0.53well below the industry average of 10.3, and on top of that, the company has $5.39 billion in cash. Valuation versus company performance gives us the idea that there is much more upside potential. Over the past year, the stock has reached a high of $46.74 and a low of $23.78. Currently, the price is affordable and below the annual target estimate of $36.20.

Although the company had terrible financial results in 2019 and 2020, we have seen an upward trend in revenue and net income performance since becoming a separate entity over the last four quarters. The stock has been volatile in the market, but the company’s fundamentals are strong and long-term demand for its highly reputable solutions is expected to grow with the aging of the population. For this reason, I think investors may want to take a bullish stance on this company.

Company presentation

JXN is a spin off of the British insurance company Prudential Plc (UKP). It was founded in 1961 in Jackson, Michigan, but was its separate entity since 2021. It offers different types of annuities, namely fixed, variable and fixed index solutions. It operates through three other segments:

1. In the retail annuities sector, these are retirement and savings offerings in many forms, including variable, fixed, fixed index, direct payout and indexed registered annuities through life income products .
2. The institutional products segment consists of traditional guaranteed investment contracts.
3. The closed block life and annuity segment offers various immediate life protection and annuity products.

JXN is recognized as a leader in the field with various recognized awards and transparency procedures supporting its performance and ensuring its financial soundness to its customers. As we see in the timeline below, it grew through product development and the expansion of its distribution network.

It aims to meet the retirement needs of a growing aging population in the United States with a differentiated product approach. The account value for the second quarter of 2022 is $226 billion. Variable annuities accounted for 91% of the total value. RILA is the most recent development. It launched in October 2021 and is expected to grow in the future.

The company understands many different branches. The primary operating subsidiary is Jackson National Life Insurance Company. A strong distribution network plays a vital role in the successful delivery of its products to a vast market. Distribution varies from independent brokers to large, full-service, multi-channel dealerships.

The company seeks to meet the demands of its wide range of stakeholders through an integrated risk management approach that includes a disciplined product approach emphasizing product differentiation rather than price, a thorough evaluation process by fund managers, a balanced approach to the hedging program and the use of reinsurance to Mitigate risk.

Finances and evaluation

A host of crazy money, Jim Cramer, recently recommended JXN, saying there is a lot of money to be made in the annuity industry. Annuity businesses generally do better when interest rates are higher. The last quarter saw the company achieve net income of $2.9 billion and revenue of $6.52 billion. Annuity sales declined, but premiums collected and revenues increased. Looking at the upward trend in revenue and operating profit by quarter since June 2021, we can see a steady and consecutive improvement in revenue and net profit performance.

If we examine the three different rent sectors of the Q2 2022 report on financial results, we can see that although volumes are high, except for the institutional product segment, the numbers are well below its Q2 2021 results. The reason is mainly due to the decline in the primary equity markets. On par with industry trends, there has been a reduction in demand for variable annuities. The indexed RILA business saw impressive growth, doubling sales from the first quarter of 2022 to $490 million in revenue.

On the positive side for investors, JXN has set a goal of returning between $425 million and $525 million to shareholders over the full year through share buybacks and dividends. This quarter, we saw the company return $116 million, including $50 million in dividends. For the third quarter of 2022, it announced a cash dividend of $0.55 per share. If we compare JXN to some of its peers in the annuity industry, we see an above average dividend yield of 6.6%. It also has very healthy cash and securities liquidity of $800 million, well above its set minimum buffer of $250 million.

If we take a closer look at a relative valuation between JXN and some of its peers, the company is undoubtedly undervalued across the board, from a price to earnings ratio of 0.53 to a price to cash flow ratio of 0.49.

Although the stock price has fluctuated wildly in recent months, it has risen over 17% in the past year. It has an A+ rating on SeekingAlpha’s Quantum System for Valuation, Growth, and Profitability. Momentum and Revisions are rated a low D, which is something to be wary of. However, the relative valuation of its industry and its overall financial performance are very promising.

Final Thoughts

Jackson Financials offers a broad and growing line of annuity products through a strong network of diverse distributors. With interest rates expected to rise over the long term, the company expects to see growing demand for its products. Additionally, the target market is likely to grow as the population ages in the United States. The fear of running out of money in the future is a big incentive for clients to get an idea of ​​the potential benefits of different annuity options. There are also laws that incentivize savings and benefit companies like JXN. This company is undervalued and very cheap compared to its peers. On top of that, it has a reputable offer and is one of the biggest providers in the United States. For this reason, I think investors may want to take a bullish stance on this company.