Prudential plc, the parent company of Jackson Financial, today announced that the Prudential board has decided to pursue the separation of Jackson in the second quarter of 2021 through a demerger, whereby shares in Jackson would be distributed to Prudential shareholders.
The demerger, also known as a spin-off in the U.S., is subject to shareholder and regulatory approval and would lead to a significantly earlier separation of Jackson than would have been possible through a minority IPO and future sell-downs, the company said in a news release.
At the time of the spin-off, Prudential intends to retain a 19.9 percent interest in Jackson that it will fully divest over time. The insurer announced plans for a Jackson National IPO in August.
A Jackson spokesman said the insurer would have no further details at this time.
According to the Secure Retirement Institute U.S. annuity sales rankings, Jackson was the top seller of total annuities in 2019. Jackson retook the lead position after losing it to AIG in 2018.
Nevertheless, in the first half of 2020, Jackson’s profit fell by 19%.
Prudential also announced the appointment of Steven A. Kandarian as non-executive chair of Jackson’s Board of Directors. Mr. Kandarian, the former Chief Executive Officer of MetLife, will assume his new role on February 1, 2021, and brings substantial and relevant experience to the governance and leadership of an independent Jackson. Additional appointments of independent directors for Jackson will be announced in due course.
“As we move closer to the demerger, Jackson continues its core focus on providing industry leading products and services to our clients, managing risk and generating capital returns for shareholders,” said Michael Falcon, chief executive officer of Jackson. “Steve brings significant insurance sector experience to Jackson that will serve our firm and stakeholders well. We are excited to have him on board and look forward to benefiting from his insights and guidance in years to come.”
Jackson continues to progress with key stakeholders and, following the proposed separation, expects to list on the New York Stock Exchange using the ticker “JXN.”
“I am honored to lead Jackson’s board as non-executive chair at this pivotal time,” Kandarian said. “Jackson is a market leader in helping U.S. investors meet their retirement income needs and I look forward to supporting Jackson’s growth and success as an independently listed company.”
Jackson is revising its hedge modeling for U.S. statutory standards for calculating reserves and capital from December 31, 2020, which is estimated to reduce Jackson’s Risk Based Capital (RBC) ratio² by around 80 percentage points
Allowing for this change and other second half 2020 items, Jackson’s RBC ratio as of December 31, 2020 is estimated to be around 340 to 355 percent. At the point of proposed separation, Jackson expects to have an RBC ratio in the range of 425 to 450 percent and total financial leverage³ in the range of 25 to 30 percent, subject to market conditions.
Jackson expects to achieve this level of RBC at the point of separation by contributing proceeds of its debt and hybrid capital raising to its regulated insurance subsidiaries.
“Our priorities as a Group remain, first, to ensure our investors fully benefit from the opportunities of Asia and, second, to pursue, at pace, a fully independent Jackson,” said Mike Wells, Group chief executive of Prudential plc. “The demerger we are announcing today will significantly accelerate Prudential’s transformation into a business purely focused on profitable growth in Asia. I am delighted that Steve has agreed to join as Jackson chairman. He brings an unrivaled track-record in the U.S. life insurance sector, and I am more confident than ever that Jackson will flourish as a separate business.”
Jackson expects to announce its full-year 2020 financial results on March 3, 2021.