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Jackson — the Annuity Giant — Separates From Parent

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What You Need to Know

  • The deal has been in the works since March 2020.
  • Prudential P.L.C. says it wants to focus on opportunities in Asia and Africa.
  • Jackson has borrowed $2.35 billion to push up the capital level at Jackson National Life.

Jackson Financial Inc. — a leader in the U.S. individual variable annuity market — announced today that it has completed the process of separating from its former parent, Prudential PLC of London, through a demerger.

The U.K. Prudential, which has no connection with the U.S. Prudential Financial, announced in March 2020 that it intended to separate from Jackson in an effort to focus on insurance and annuity opportunities in Asia and Africa.

Many publicly traded financial services companies in Europe and North America have been selling or spinning off life and annuity businesses because of concerns about the effects of new accounting rules on the businesses’ appeal to investors.

Jackson said today, in the separation completion announcement, that it is “a leading U.S. retirement services provider” and that it intends to deliver “consistent profitable growth, enabling strategic reinvestment in the business and returning capital to shareholders.”

Laura Prieskorn, the Jackson’s CEO, said the company’s mission is to help people achieve financial freedom for life.

“As a leader in the U.S. retail annuity market, we are entering this new chapter on solid financial footing, with a focused strategy to drive growth and create value for our customers, associates and shareholders as a public company.”

Jackson Financial Inc.

Jackson is the Lansing, Michigan-based parent of Jackson National Life Insurance Company.

Jackson ranked first in terms of U.S. traditional individual variable annuity sales in the first quarter, with about $4.6 billion in new variable annuity sales, according to the Secure Retirement Institute.

The second-ranked issuer of traditional individual variable annuities reported just $2 billion in new traditional variable annuity sales.

Jackson ended the first quarter with a total of about $355 billion in assets and $8.8 billion in book value, according to a recent company presentation.

The company told securities analysts that it has a healthy book of annuity business, with no buyout offers intended to induce lapses or increased benefit fees on the in-force block.

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Prudential has cut its stake in Jackson to 19.9% of the total, by passing a large majority of its Jackson stock on to its own shareholders.

Jackson also told analysts that it has a large, productive wholesaling force, with about 600 distribution partners and relationships with about 140,000 agents and advisors, and that its ratio of operating expenses to assets is about half the average level at its variable annuity peers.

Jackson said some of the opportunities for profitable growth include:

  • Increasing sales of registered index-linked annuities.
  • Launching a simple, low-cost, fee-based variable annuity.
  • Adding new retail broker-dealer relationships and institutional partnerships and platforms.
  • Accelerating sales of fee-based annuities by RIAs and affiliated investment advisors.
  • Working to integrate annuities into wealth management too.

The Demerger

The U.K. Prudential still holds a 19.9% stake in Jackson but plans to sell its shares within a year. It separated from Jackson by distributing the rest of its Jackson stock to its own shareholders, through a distribution that Prudential shareholders voted to approve Aug. 27.

Prudential shareholders of record at the close of business Sept. 2 received one share of Jackson’s Class A common stock for every 40 shares of Prudential ordinary stock they held.

The first shares distributed began appearing on the New York Stock Exchange, under the ticker symbol JXN, Sept. 1. The current share price, of about $27 per share, implies that the company as a whole has a market capitalization level, or total stock value, of $2.6 billion.

Shares will begin trading in an ordinary fashion, in the “regular way,” Sept. 20, according to Jackson.

Jackson and Prudential said when they announced the separation that they would seek to increase Jackson National Life’s capital to a high level.

Jackson has implemented the capital increase efforts by arranging for $2.35 billion in financing from a group of lenders led by an arm of Citigroup.

The capital contribution made in connection with the financing will have the effect of increasing Jackson National Life’s risk-based capital ratio, or financial strength indicator, to about 500% to 525%

The life insurer ended 2020 with an RBC ratio of about 340% to 355%. The RBC ratio was down from about 400%, as of June 30,2020, because of a change in the approach the company took to “hedge modeling,” or efforts to predict how well investment risk control efforts might work.

Laura Prieskorn, CEO of Jackson Financial