Jackson National Boosts 2009 Net Income on Variable Annuity Hedging, Sales

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March 9, 2010 Tuesday 04:26 PM EST

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Jackson National Boosts 2009 Net Income on Variable Annuity Hedging, Sales

Ronald J Panko

LANSING, Mich.

Jackson National Life Insurance Co. posted net income of $670 million in 2009, up from a net loss of $1 billion in 2008, mainly on variable-annuity hedging and interest-rate derivatives. The company also reported record sales and deposits of $15.2 billion, some 8% higher than in 2008.

The variable-annuity hedges protected statutory capital, while the interest-rate derivatives increased in value, said Andy Hopping, executive vice president and chief financial officer, in a statement.

As an indirect wholly owned subsidiary of the United Kingdom's Prudential plc, Jackson uses International Financial Reporting Standards.

Clifford Jack, executive vice president and chief distribution officer, said Jackson's flexible product design, in which the adviser chooses features useful to a client and avoids others, contributed to sales growth. "We made the decision to offer our products on a cafeteria-style approach," he told BestWire. "There is a view that in order for VAs to get more traction with a larger number of advisers, the industry has to simplify products. We don't believe that's accurate. We believe that the products must be very sophisticated, but the delivery mechanism -- marketing materials and the story, as you will -- needs to be simple." The company offers guaranteed living benefits with its VAs.

Jackson sold $10 billion in variable annuities, up from $6.5 billion in 2008. Fixed index annuities accounted for $2.2 billion in sales, up from $928 million in 2008. However, the company constrained its fixed annuity sales to help preserve capital; sales were $1.6 billion as compared with $3.2 billion in 2008.

Company sales consisted entirely of retail products. No wholesale institutional products, such as medium-term notes, funding agreements or guaranteed investment contracts, were sold. Jackson participates in the institutional market on an opportunistic basis, and it chose to direct available capital to support higher-margin annuity sales in 2009, the company said. Sales of life insurance products declined in 2009 to $53 million from $58 million in 2008.

As for why Jackson's life sales are low compared with annuities, Jack said the company has demonstrated success in originating life insurance and in purchasing closed blocks. "There are times one wants to be aggressive in one of these strategies," he said. "In order to be a more significant provider of life insurance, we would have to go through MGAs and aggregators, which is not a business we're interested in at this point."

Curian Capital, Jackson's separately managed accounts subsidiary, accumulated more than $1.2 billion in deposits, up from nearly $1.1 billion in 2008. For 2009, Curian's assets under management rose to $3.6 billion, compared with $2.6 billion at year-end 2008. The company said the growth in assets were driven by platform enhancements, new distribution agreements, and recovering equity markets. Deposits hit a record high of $464 million in the fourth quarter.

Jackson's affiliate, National Planning Holdings, a network of four independent broker-dealers, generated revenue of $611 million and net income of $3 million, compared with $608 million and $9 million, respectively, in 2008.

Jackson Life Insurance Co. has a Best's Financial Strength Rating of A+ (Superior).

(By Ron Panko, senior associate editor, Best's Review: [email protected])

March 10, 2010

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