LANSING, Mich. .. August 12, 2013 .. Jackson National Life Insurance Company® (Jackson®) generated $924.6 million in IFRS pretax operating income during the first half of 2013, an increase of 29.8 percent over the first half of 2012, due primarily to higher fee income and higher life insurance profits due to the earnings contribution of REALIC, which was acquired by Jackson in the third quarter of 2012. First-half sales and deposits totaled $13.7 billion, up 9.4 percent year over year.
Jackson, an indirect wholly owned subsidiary of the United Kingdom’s Prudential plc (NYSE: PUK), recorded
IFRS net income of $145.7 million during the first half of 2013, compared to $389.7 million during the first half of 2012. This decline was due primarily to less favorable net hedge results during the period due to the combination of a rapid rise in equity markets with accounting requirements that do not fully reflect economic movements.
“In the first half of 2013, we continued to expand the Jackson franchise through profitable sales growth while maintaining pricing discipline and a strong capital position. Our sales results benefited significantly from Elite Access®, and we remain pleased with the profits gained through the REALIC acquisition. This excellent first-half performance allowed Jackson to remit a $470.0 million dividend to our parent company,” said Mike Wells, Jackson president and chief executive officer.
During the first half of 2013, all four primary rating agencies—A.M. Best, Standard & Poor’s, Fitch Ratings and Moody’s Investors Service, Inc.—affirmed Jackson’s financial strength ratings. Jackson has maintained the same financial strength ratings for more than 10 years. As of August 9, 2013, Jackson had the following ratings:
.. A+ (superior) —A.M. Best financial strength rating, the second-highest of 16 rating categories;
.. AA (very strong) —Standard & Poor's insurer financial strength rating, the third-highest of 21 rating categories;
.. AA (very strong) —Fitch Ratings insurer financial strength rating, the third-highest of 19 rating categories;
.. A1 (good) —Moody's Investors Service, Inc. insurance financial strength rating, the fifth-highest of 21 rating categories.
Jackson generated $13.7 billion in total sales and deposits during the first half of 2013, compared to $12.6 billion in the same period of 2012. The company maintained healthy variable annuity (VA) volumes of $10.3 billion, with a rapidly growing contribution from Elite Access, a VA launched in March 2012 that gives individual investors the ability to access alternative investments. Elite Access sales were nearly $2.0 billion, up from $218.2 million in the first half of 2012 and $1.1 billion in the second half of 2012.
“Jackson has achieved tremendous success with Elite Access because the product fulfills a demand in the market for a retail investment vehicle that effectively combines traditional and alternative asset classes,” said Clifford Jack, executive vice president and head of retail for Jackson. “Elite Access is a great complement to Perspective II®, Jackson’s more traditional variable annuity, as both products allow advisors to customize an investment strategy to help meet the unique financial needs of their clients.”
Jackson’s fixed index annuity sales totaled $957.1 million during the first half of 2013, up from $793.5 million during the first half of 2012, due to an increase in consumer demand for products that offer principal protection along with the potential to benefit from equity market gains. Fixed annuity sales totaled $457.2 million, compared to $492.6 million in the same period of 2012.
Jackson participates in the institutional market (guaranteed investment contracts, medium-term notes and funding agreements) on an opportunistic basis. Jackson issued $597.1 million of institutional products, up from $293.3 million in first half of 2012.
Subsidiary and Affiliate Performance
Curian Capital® LLC (Curian), Jackson’s asset management subsidiary that provides customized investment management products and services to financial representatives and institutional clients, continued to generate positive net flows during 2013. Deposits were nearly $1.5 billion during the first half of 2013, up from $1.3 billion during the same period of 2012. Assets under management in Curian’s core business increased to $9.8 billion as of June 30, 2013, up from $8.9 billion at year-end 2012. Curian contributed $21.9 million to Jackson’s total IFRS pretax income during the first half of 2013, up from $11.2 million during the first half of 2012.
Jackson’s affiliate, National Planning Holdings®, Inc. (NPH®), a network of four independent broker-dealers, reported gross product sales of $10.4 billion during the first half of 2013, compared to $8.2 billion in the same period of 2012, yielding IFRS1 revenue of $470.1 million and $411.5 million in the first six months of 2013 and 2012, respectively. NPH also generated $11.0 million in IFRS net income, compared to $8.1 million during the first half of 2012.
Jackson’s growth during the first half of 2013 facilitated the recruitment of more than 200 new employees, increasing total headcount to more than 4,500 people. Employee growth was delivered in all of Jackson’s regional centers including Lansing, Nashville and Denver. In April, Jackson announced the expansion of its Lansing campus to accommodate its growing workforce. In addition, Jackson established satellite offices at Michigan State University and Michigan Technological University, providing employment opportunities for students and community members, and giving Jackson access to a broader pool of talent for workforce recruitment.
International Financial Reporting Standards (IFRS) is a principles-based set of international accounting standards for reporting financial information. IFRS is issued by the International Accounting Standards Board in an effort to increase global comparability of financial statements and results. IFRS is used by Jackson's parent, Prudential plc, to report the Group's financial results.
IFRS pretax operating income is based on longer-term investment returns. It excludes short-term fluctuations in investment returns, hedge results, and change in value of derivatives. A reconciliation to net income based on US generally accepted accounting principles (US GAAP) is as follows (amounts in millions):
$ 924.6 IFRS basis pretax income from operations
(842.8) Net hedge results and change in value of derivatives, net of DAC amortization
54.8 Net realized investment gains, net of DAC amortization and non-controlling interest
57.6 Normalization of longer-term investment returns, net of DAC amortization
(48.5) Income tax expense
145.7 IFRS net income
29.6 IFRS to US GAAP adjustments, net of tax
$ 175.3 US GAAP basis net income
Sales and deposits from Jackson’s subsidiaries, Jackson National Life Insurance Company of New York® and Curian, have been included in Jackson’s total sales and deposits figure.