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Jackson National still keen on sales diversity despite Athene transaction

Jackson National Life Insurance Co. will continue to seek diversity in business sales even after passing its back book of fixed annuity and fixed-index annuity business to Athene Holding Ltd.

Prudential PLC-owned Jackson has reinsured $27.6 billion of liabilities with Athene, which represent "substantially all" of Jackson's fixed and fixed-index annuity portfolio. Athene has also taken an 11.1% stake in Jackson for $500 million. The two related transactions boosted Jackson's risk-based capital cover ratio by roughly 80 percentage points.

Jackson has been diversifying its predominantly variable annuity portfolio by writing more fixed annuity and fixed-index annuity business of late. The lines saw sales of $1.2 billion and $3.8 billion, respectively, in 2019, up from about $500 million and $300 million, respectively, in 2018.

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Offsetting effects

But while the Athene deal will strip the fixed annuity and fixed-index annuity business from Jackson's in-force book, Michael Falcon, Jackson's chairman and CEO, said it would fuel the insurer's pursuit of diversity in business sales rather than hamper it.

"The sale of the back book is capital accretive and generative and it is providing us capability on the commercial diversification," Falcon said during a conference call. "It is not one or the other."

Falcon emphasized that the transaction "relates only to the back book of business that Jackson has written in the past" and that diversification of product and distribution channel "remains important and essential" to the company.

He added there was "absolutely no change at all" in Jackson's go-to-market strategy. "In fact, we see this as quite enabling in terms of our pursuit of that strategy with our distribution partners," Falcon said.

The Jackson CEO acknowledged that the reinsurance deal did remove some diversification benefits from a capital standpoint, but added that this was "more than offset by the increase in capital, both through the accretive effects of the reinsurance transaction itself, as well as the equity investment."

In response to an analyst's question about why Prudential had not simply injected capital, Prudential's group CEO Mike Wells said shareholders were not looking for such a move. He added that the size of the capital uplift in return for a "de minimis" loss of earnings from the transaction meant the deal was "a very efficient way to generate capital relative to other options we had as a group."

He also said that there were "no quality issues at all with the back book" and that Athene had done "extensive due diligence."

No big deals

Prudential has been "very clear" that it would not be able to diversify its U.S. business through organic means alone, according to Wells. But he said this did not mean the company had a big acquisition on the horizon.

"We are not suggesting today that we're out looking to do a major transaction," he said.

And while noting Jackson's record of being able to integrate smaller acquisitions, Wells said the company was not "highlighting a bolt-on strategy here today."