A.M. Best Affirms Ratings of Jackson National Life Insurance Company and Its Affiliates

  A.M. Best Affirms Ratings of Jackson National Life Insurance Company and Its
  Affiliates

Business Wire

OLDWICK, N.J. -- June 17, 2014

A.M. Best has affirmed the financial strength rating of A+ (Superior) and the
issuer credit ratings of “aa-” of Jackson National Life Insurance Company, 
its wholly owned subsidiary, Jackson National Life Insurance Company of New
York (together known as JNL) and its direct parent, Brooke Life Insurance
Company. Additionally, A.M. Best has affirmed the debt ratings of “aa-”on the
notes issued under JNL’s funding agreement-backed securities programs and the
debt rating of “a” on JNL’s existing $250 million 8.15% surplus notes. The
outlook for all ratings is stable. All companies above are headquartered in
Lansing, MI. (Please see below for a detailed listing of the debt ratings.)

The ratings reflect JNL’s status as the U.S. operating arm of Prudential plc
(Prudential) (NYSE:PUK). Prudential is incorporated in England and Wales and,
through its subsidiaries and affiliates, offers insurance and financial
services throughout the world. A.M. Best believes that JNL remains
strategically important to Prudential, adding diversification benefits to its
overall business profile and contributing significantly to consolidated
earnings. In recent years, JNL has delivered double-digit sales growth along
with strong statutory and GAAP earnings, which have allowed the company to
organically fund its growth and maintain sound risk-adjusted capitalization,
as well as contribute meaningful dividends to its parent.

JNL continues to increase its leading share of the U.S. variable annuity (VA)
market through the expansion of multiple distribution outlets and product
innovation. In addition to increasing VA sales, the group ranks number one in
net flows and had approximately $109 billion of separate account assets as of
year-end 2013. JNL continues to benefit from rising equity markets and reduced
competition as many of its peers have either ceased or scaled back marketing
VA products while, at the same time, altering their product design and/or
benefit features. A.M. Best believes the risk profile of JNL’s VA block is
somewhat less compared to its peers as the vast majority of its annuities were
issued in the years following the financial crisis. Moreover, JNL’s variable
annuity account balances in aggregate are currently above the guaranteed
amount for both its GMDB and GMWB riders.

Net operating results on both an IFRS and GAAP basis have been favorable in
recent periods primarily due to increasing variable annuity fee income and
positive earnings in the ordinary life segment. While A.M. Best notes that
JNL’s hedge program has been effective and efficient, its primary goal is to
hedge on an economic basis with accounting as a secondary consideration. As a
result, statutory results have been somewhat volatile in recent periods,
primarily due to fluctuating VA reserve requirements.

Partially offsetting these positive rating factors is JNL’s high concentration
of annuity business – mainly VAs — which represent over 65% of total reserves.
As a result, earnings are highly correlated to the performance of the equity
markets and could be pressured during an extended bear market. However, A.M.
Best notes that an increasing percentage of variable annuity sales are without
guarantees, including Elite Access, Jackson’s investment-only variable
annuity. The company’s interest spreads may experience pressure in the near to
medium term if rates remain at current levels. Furthermore, the company
maintains a relatively high exposure to real estate related assets in its
general account investment portfolio as commercial mortgage loans (CML),
commercial mortgage-backed securities and residential mortgage-backed
securities (RMBS) represent over three times its capital and surplus. However,
A.M. Best notes that many of the structured securities within JNL’s portfolio
are either government agency backed or highly rated, and that the percentage
of these riskier assets has been declining in recent periods. JNL has also
recently reduced its exposure to below investment grade bonds and alternative
investments as a percentage of capital and surplus.

A.M. Best believes positive rating actions for JNL are unlikely in the
foreseeable future. Negative rating actions may occur should JNL experience a
material decline in risk-adjusted capitalization and/or a change in A.M.
Best’s view of the strategic importance of JNL to Prudential.

The following debt ratings have been affirmed:

Jackson National Life Insurance Company—
- “a” on $250 million 8.15% surplus notes, due 2027

Jackson National Life Funding, LLC —“aa-” program rating
- “aa-” on all outstanding notes issued under the program

Jackson National Life Global Funding—“aa-” program rating
- “aa-” on all outstanding notes issued under the program

The methodology used in determining these ratings is Best’s Credit Rating
Methodology, which provides a comprehensive explanation of A.M. Best’s rating
process and contains the different rating criteria employed in the rating
process. Best’s Credit Rating Methodology can be found at
www.ambest.com/ratings/methodology.

A.M. Best Company is the world's oldest and most authoritative insurance
rating and information source. For more information, visit www.ambest.com.

       Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contact:

A.M. Best Company
Michael Adams, FLMI, 908-439-2200, ext. 5133
Senior Financial Analyst
michael.adams@ambest.com
or
Andrew Edelsberg, CPA, FLMI, 908-439-2200, ext. 5182
Vice President
andrew.edelsberg@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com
 
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