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On Thursday, Evercore ISI reiterated its Underperform rating on Jackson Financial Inc. (NYSE:JXN) with a steady price target of $98.00. The company, currently trading at $85.45 with a market cap of $7.1 billion, has seen its stock surge nearly 90% over the past year. According to InvestingPro data, analyst price targets range from $95 to $118, with a consensus recommendation of 3.2 on a scale of 1-5. The firm’s stance comes after a review of the company’s recent call, where management discussed financial projections and the status of its subsidiary, Brooke Re. Despite Jackson Financial’s positive free cash flow (FCF) guidance for 2025 and a "GOOD" overall financial health score according to InvestingPro, Evercore ISI points to concerns around Brooke Re’s complex risk profile and capital clarity. The company maintains a solid current ratio of 1.45 and has been consistently raising its dividend for four consecutive years, currently yielding 3%.
The analyst noted that while Brooke Re appears well-capitalized with strong generation at its main operating subsidiary, JNL, the majority of Jackson Financial’s tail risk is concentrated in Brooke Re, complicating the overall view of the company’s capital situation. A significant $419 million actuarial charge at Brooke Re was attributed to refined assumptions about customer behavior, particularly regarding guaranteed minimum withdrawal benefit (GMWB) utilization rates as customer accounts mature.
This charge was unexpected, given the limited "in-the-money" status of the legacy variable annuity block and current high lapse rates. With lapses at about 13% this quarter, exceeding the long-term expectations of 8-9%, there is concern over the potential for further impairment to Brooke Re’s minimum required buffer (MRB) net assets, especially if lapse rates do not decline in the coming years.
The analyst also raised questions about the potential impact of the National Association of Insurance Commissioners (NAIC) implementing scenario generator changes to variable annuity statutory accounting in 2026. Although Brooke Re benefits from permitted practices that provide some measurement flexibility, it must still meet certain statutory and risk-based capital (RBC) standards. While modified GAAP accounting and hedging have led to more stable quarterly results, Evercore ISI suggests that additional transparency regarding Brooke Re’s risk management could help improve investor confidence and the valuation of Jackson Financial’s free cash flow. For deeper insights into JXN’s risk metrics and comprehensive analysis, investors can access the detailed Pro Research Report available on InvestingPro, which covers over 1,400 US stocks with expert analysis and actionable intelligence.
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