Fitch Ratings has affirmed the Insurer Financial Strength (IFS) ratings of Jackson National Life Insurance Company and Jackson National Life Insurance Company of
At the same time Fitch has also affirmed the 'BBB+' Issuer Default Rating (IDR) assigned to
The affirmation of Jackson's ratings reflects the company's very strong but volatile financial performance, concentrated focus in the variable annuity (VA) market, strong capital position and the uncertain macroeconomic environment.
Key Rating Drivers
Moderate Company Profile: Fitch views
Strong Capitalization: Fitch views Jackson's capitalization as strong, driven an improvement in the company's Prism capital model score into the 'Strong' category as of YE 2021 as a result of the company's recapitalization following its separation from
Financial Leverage: Financial leverage increased as a result of the company's 2021 separation from
Very Strong Financial Performance: Jackson's financial performance remains very strong on both a GAAP and statutory accounting basis, although the company's earnings profile remains susceptible to pressures associated with equity market volatility and the potential for a prolonged or severe downturn. Jackson's reported GAAP net income is expected to continue to exhibit volatility as a result of the asymmetrical accounting treatment of
Uncertain Macroeconomic Environment: The current rising rate environment is expected to be a positive for underlying investment performance, but may lead to adverse policyholder behavior if rates continue to rise. Product guarantees may help mitigate surrender activity. Continued stress in the equity markets will likely modestly pressure financial performance as account values decline, although capital should remain strong as a result of Jackson's effective hedging program, although a prolonged or severe recession could have a moderate impact.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Significant diversification of Jackson's liability profile;
Improved capital metrics including a Prism capital model score consistently above 'Strong'.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
An increase in the degree of reported financial performance volatility relative to the broader macroeconomic environment;
A decline in Jackson's Prism capital model score such that it is consistently below 'Strong', along with declines in the reported risk-based capital ratio;
Financial leverage above 25%;
Fixed-charge coverage consistently below 7x;
Unexpected economic or operational disruptions as a result of Jackson's transition to a standalone company.
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
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