A.M. Best Affirms Credit Ratings of Jackson National Life Insurance Company and Its Affiliates
February 15, 2018 by Jackson National Life
OLDWICK, N.J.–(BUSINESS WIRE)–A.M. Best has affirmed Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” of Jackson National Life Insurance Company (JNL), its wholly owned subsidiary, Jackson National Life Insurance Company of New York, and its direct parent, Brooke Life Insurance Company (collectively referred to as the Jackson National Group (JNG). Additionally, A.M. Best has affirmed the Long-Term Issue Credit Ratings (Long-Term IR) of “aa-” on the notes issued under JNL’s funding agreement-backed securities programs and the Long-Term IR of “a” on JNL’s existing surplus notes. The outlook of these Credit Ratings (ratings) is stable. A.M. Best also has assigned a number of existing ratings to securities issued under an existing program. The outlook assigned to these ratings is stable. All companies above are headquartered in Lansing, MI. (Please see below for a detailed listing of the Long-Term IRs.)
The ratings reflect JNG’s balance sheet strength, which A.M. Best categorizes as adequate, as well as its strong operating performance, favorable business profile and very strong enterprise risk management (ERM).
JNG remains a market leader in the sales of individual variable annuities (VA) complemented by a sizable book of traditional fixed annuities, and generates a strong operating profit on an IFRS and Statutory accounting basis. In addition, the group’s ratings benefit from the financial strength, historical support and strategic importance to its ultimate parent, Prudential plc (Prudential)(NYSE:PUK). Prudential, through its subsidiaries and affiliates, is one of the largest insurers in the United Kingdom and among the global leading financial services organizations. JNG operates as the U.S. operating/marketing arm of Prudential, and in A.M. Best’s opinion, remains strategically important to the organization, adding diversification benefits to its overall business profile, and contributing significantly to consolidated revenues and earnings.
As a leading provider of individual VA sales, JNL has strong asset/liability management capabilities, with strong sales volumes, along with historically favorable earnings, enabling the company to organically fund its growth and maintain adequate risk-adjusted capitalization. In addition, earnings have supported significant shareholder dividends to its parent, totaling more than $3.0 billion over the past five years. In return, Prudential has provided support to JNL on an as-needed basis, which A.M. Best believes would continue if needed.
The group’s strong market position in the U.S. VA market is supported by the expansion of multiple distribution outlets and product innovation. Sales slowed in recent periods, reflecting a general industry trend of lower sales particularly in the qualified market space, due in part to the U.S. Department of Labor fiduciary rules. Despite lower sales, very strong equity market performance has resulted in strong growth in Separate Account assets and related fee income. At the end of third-quarter 2017, Separate Account assets exceeded $168 billion, representing a $34 billion increase since the close of 2015. As part of a continuing effort to stay competitive in the current environment, JNL has added two fee-based VA products to its platform, Perspective Advisory II and Elite Access Advisory. In addition to adding a fee-based platform, sales of VAs without living benefits has accounted for over a quarter of sales since 2012.
Under Best’s Credit Rating Methodology, JNG’s overall balance sheet is adequate. However, other positive rating factors include its well-developed ERM program underpinned by extensive stress testing and hedging, very strong risk management capabilities and favorable earnings.
A.M. Best notes that JNL’s hedge program has been efficient and effective; however, its primary goal is to hedge on an economic basis, with statutory results as a secondary consideration. As a result, statutory results can be volatile, but overall capital levels have been maintained despite shareholder dividends. In addition, JNL benefited from an internal reinsurance transaction in 2016.
JNL’s liability profile remains significantly less diversified than many of its similarly rated peers due to its heavy concentration in retail and institutional annuities with much larger exposure to equity and interest rate risks. While the JNG is maintaining spreads, spread compression remains a headwind. Additionally, JNG faces the potential for disintermediation risk in a rapidly rising interest rate environment.
Overall investment risk has declined as measured by A.M. Best’s high risk assets to capital in recent years, although JNG continues to maintain an elevated level of real estate assets on an absolute and percentage of capital basis, which could expose it to significant impairments during a real estate market downturn.
The following Long-Term IRs have been affirmed with a stable outlook:
Jackson National Life Insurance Company—
— “a” on $250 million 8.15% surplus notes, due 2027
Jackson National Life Funding, LLC— “aa-” program rating
— “aa-” on all outstanding notes issued under the program
Jackson National Life Global Funding— “aa-” program rating
— “aa-” on all outstanding notes issued under the program
The following Long-Term IRs have been assigned with a stable outlook:
Jackson National Life Global Funding—
–“aa-” on $350 million 1.924% floating senior secured debt, due 2018
–“aa-” on $150 million 1.792% floating senior secured debt, due 2019
— “aa-” on $400 million 2.20% fixed senior secured debt, due 2020
–“aa-” on $350 million 2.10% fixed senior secured debt, due 2021
–“aa-” on $350 million 2.50% fixed senior secured debt, due 2022
–“aa-” on $400 million 2.40% floating senior secured debt, due 2022
–“aa-” on $500 million 3.25% fixed senior secured debt, due 2024
–“aa-” on Swiss Franc 275 million .375% fixed senior secured debt, due 2025
–“aa-” on EUR 50 million .912% fixed senior secured debt, due 2026
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media – Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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