Jackson Boosts Reserves To Make Up For Falling Interest Rates

By Cyril Tuohy
InsuranceNewsNet

Jackson National Life, the top seller of variable annuities in the U.S., reported net income of $379.2 million in 2014. This was a 48 percent drop from $730.2 million in 2013 as the company was forced to boost reserves to make up for falling interest rates.

Jackson also reported record pretax operating income of $2.3 billion in 2014, an increase of 17 percent over the previous year. The company attributed this to fee income from higher asset values in the company’s separate accounts.

The company also reported sales and deposits of $28.3 billion last year, a 3 percent increase over 2013. Sales and deposits from Jackson National Life Insurance Co. of New York and Curian Capital are included in the $28.3 billion figure.

Asset values grew last year as the equity market notched solid gains: the Standard & Poor's 500 index posted an 11.4 percent gain in 2014.

Mike Wells, Jackson president and CEO, said in a statement that the company’s higher operating income also was due to the company’s product mix and to the success of its popular Elite Access family of variable annuity products.

Elite Access, launched several years ago, has been a gold mine for the company, which remitted $680 million in dividends last year to its parent corporation.

Jackson, a subsidiary of U.K.-based Prudential PLC, reports earnings according to International Financial Reporting Standards (IFRS).

On the basis of U.S. Generally Accepted Accounting Principles (GAAP), the company reported net income of $350.8 million in 2014, a 53 percent drop from $755.2 million in 2013.

The company also reported total IFRS assets of $212.2 billion in 2014, an increase from $191.5 billion at the end of 2013.

In 2014, Jackson recorded $23 billion worth of U.S. individual variable annuity sales. This was nearly $10 billion more than the No. 2 seller Lincoln Financial Group, according to LIMRA Secure Retirement Institute’s U.S. Individual Annuities Sales Survey.

Last year, Jackson sold $24.5 billion worth of annuities, with only $1.4 billion of that coming from fixed annuity sales, the company said.

Analysts say that on the whole, life insurers have fared fairly well in the fourth quarter even if falling interest rates have wreaked havoc on hedging strategies employed by some of the nation’s largest life and annuity carriers.

The difference between the amount in benefits paid out to annuity and life insurance contract holders and the amount earned from fixed-income investments, a measure known as the spread, narrows when interest rates drop.

That forces insurance managers to bolster reserves to meet regulatory requirements.

National Plan Holdings Inc., Prudential PLC’s U.S. broker-dealer holding subsidiary, reported revenue of $1 billion in 2014. This was an increase of 4.1 percent from 2013.

National Plan Holdings maintains a network of 3,480 advisors through independent broker/dealers INVEST Financial Corp., Investment Centers of America, National Planning Corp. and SII Investments.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at cyril.tuohy@innfeedback.com.