Jackson National was purchased by the British insurance company Prudential plc in 1986. Prudential plc is not to be confused with the American insurance company Prudential Financial.
Jackson National is one of the top annuity providers in the United States in terms of sales volume, and the company continues to grow rapidly. The company's products include annuities, mutual funds and life insurance. Their annuity offerings include variable annuities, fixed annuities and fixed index annuities.
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Product Review of Perspective L Series
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Lansing, MI 48909-4068
Information & Articles about Jackson National
- Why does something that “should” happen once every 7,000 years happen every 4 years (Bloomberg)
- Obamacare implementation exposes vulnerable retirees to gaps in the system (Bloomberg)
- Machines continue to hollow-out certain sectors of the economy (Bloomberg)
- Meanwhile, people are choosing to monetize what they can (Bloomberg)
- Private equity bids on the Hartford’s Japan assets (Reuters)
- Challenger is riding the wave in Australia (Fool)
- A perfect case and point in support of John Bogle’s Relentless Rules of Humble Arithmetic (Bloomberg)
In yet another sign of variable annuity capacity constraints, Jackson National recently announced that they are approaching the upper range for 2012 sales of variable annuities with guaranteed living benefits.
Jackson’s November 8 press release indicates the company has roughly $1 billion worth of remaining 2012 capacity.
Jackson indicated that this remaining capacity will be used for new product sales and that they will no longer accept new 1035 exchange business or qualified transfers of of assets for variable annuities with GLBs as of November 13 2012.
The 1035 exchange restrictions are temporary and will be revisited on December 15 in light of remaining capacity at that point in time.
In addition, the 1035 exchange restrictions will not affect Jackson’s Elite Access product which has alternative investment features that “are not conducive” to GLB features.
Jackson’s stated objective is to continue to manage variable annuity sales in light of prudent growth and management of the company’s balance sheet.
Source: Business Wire
The variable annuity industry in the U.S. is highly concentrated. Ten insurance companies generate roughly 80 percent of industry revenue, and the top 20 companies generate over 90 percent of total sales.
A meaningful signal is sent when five of the top 20 variable annuity companies announce that they are either exiting the business entirely or paring-back existing product lines.
This is exactly what has taken place over the past several months with the following companies dialing down their variable annuity exposure or pulling-out entirely:
Equity market volatility and low interest rates are the common themes running through the most or all of the retrenching decisions. There are a few way in which high volatility and low interest rates can hurt the companies that provide variable annuities:
MetLife’s recent investor conference call sheds some light on the return on equity issue. During the call, MetLife categorizes its product lines based by level of ROE. There are three ROE categories: 1) greater than 15 percent; 2) 10 - 15 percent, and; 3) less than 10 percent.
Retail annuities (including variable annuities) are in the less than 10 percent ROE bucket. Included in this less than 10 percent bucket are other capital intensive business lines that require “margin improvement.”
MetLife also alludes to capital intensity and the level of economic capital required in the variable annuity business. Economic capital refers to the amount of capital that needs to be set aside to deal with the risks in a particular line of business. Perceived risk is high in the capital markets right now, so economic capital requirements are high as well.
The capital intensity theme was a major factor for The Hartford as well. The argument in favor of leaving the VA business was based on the notion that capital could be allocated to more flexible and less intensive areas such as property and casualty lines.
A point to consider, though, is that all of these value assessments require the assumption that capital market conditions will continue to be as extreme as they have been over the past several years.
MetLife sheds some light on the glass half full perspective when they talk about the potential leverage in their variable annuity business. Some points to consider:
It seems that recent market volatility and ultra low interest rates could be distorting the perspectives of variable annuity issuers and the perspectives of certain shareholders of these companies.
Maybe the world has entered a permanent state of high volatility and low interest rates. Then again, maybe it has not. In any event, there is at least a possibility that current perspectives on the variable annuity business are distorted by an overemphasis on recent experience.
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