This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. Find out more about cookies

close

Our businesses and
their performance

United States: build
on strength

People riding bikes through a park

“Jackson’s strategy remains focused on
providing value to its customers and
driving shareholder value while operating
within a conservative risk-management
framework. This approach has enabled
us to successfully navigate the significant
macroeconomic and financial market
challenges of the last six years and
ensured a continuation of our strong
performance in 2014.”

Mike Wells
President and Chief Executive Officer
Jackson National Life Insurance Company

Mike Wells

Performance highlights:

  • Cash remittance increased by 41 per cent to a record level of £415 million
  • Continued strong returns on shareholder capital across all key financial metrics
  • Elite Access sales of £3,108 million in the second full year after launch, making Jackson the most successful player in the non-guarantee variable annuity market
  • Successfully managed sales of variable annuities with guarantees in line with risk appetite
  • Awarded ‘World Class Certification’ by Service Quality Measurement Group, Inc. and ‘Highest Customer Satisfaction by Industry’ award – the ninth consecutive year of recognition for customer service performance in these two categories

Visit the Jackson website

New business profit1 £m

2010 2011 2012 2013 2014
495 530 568 706 694

IFRS operating profit £m

2010 2011 2012 2013 2014
750 675 1003 1302 1443

Net cash remittances £m

  2010 2011 2012 2013 2014
80 200 249 294  
  122      
        415

*One-off release of excess surplus

Growth in statutory admitted assets US$bn

2010 2011 2012 2013 2014
97.5 107.6 142.8 170.9 190.0

Our strategy and operating principles

Our strategy and operating principles diagram: United States

Prudential’s strategy of ‘build on strength’ in the US is well established and continues to focus on:

  • Capitalising on the ‘baby boomer’ retirement opportunities;
  • Maintaining a balanced product suite throughout the economic cycle;
  • Streamlining operating platforms, driving further operational efficiencies; and
  • Conservative, economic-based approach to pricing and risk management.

Read more: Our strategy and operating principles

Market overview

Open all

‘Baby boomer’ retirement opportunities

The United States is the world’s largest retirement savings market with total assets in the annuity sector of over US$2.6 trillion2. Each year, many of the 77 million ‘baby boomers’ reach retirement age, which is triggering a shift from savings accumulation to retirement income generation of more than US$10 trillion3 of accumulated wealth over the next decade. This demographic transition constitutes a significant opportunity for those companies that are able to provide the ‘baby boomers’ with long-term retirement solutions.

US economic environment

In 2014, the US economy continued to show signs of improvements, with stronger GDP growth, declining unemployment rates, and evidence of a recovery in the housing market. The S&P 500 Index rose 11 per cent, following a 30 per cent jump in 2013. In late October, the Federal Reserve announced an end to its Quantitative Easing programme due to an improved US economy. As part of quantitative easing, the Federal Reserve purchased trillions of dollars of bonds in order to add more money to the US economy. Despite these signs of strength domestically, longer-dated treasury yields pulled back in 2014, but remained above the lows experienced in 2012.

Competitive landscape

The market share shift in the US annuity market has slowed down, and Jackson continues to hold the leading position in the industry while generating healthy margins. Variable annuity providers continue to modify their product offerings through reductions in fund availability and increased fees. Several insurers with challenging legacy blocks of variable annuity business continue to implement policy changes to help mitigate the risk of their back book of business, including fee increases on older benefits, changes to the availability of investment options, subsequent premium restrictions on in-force contracts and buyback offers to their existing policyholders. Despite positive demographic trends, these activities have the potential to lead to overall contraction in the industry, and likely further market share adjustments, as customers and distributors seek insurers that offer consistency, stability and financial strength.

Regulatory environment

The financial services industry continues to deal with a multitude of emerging regulatory initiatives in response to the financial crisis. Many of these broader financial services initiatives specifically impact the insurance industry. Within the insurance industry, we are seeing evolving supervisory structures, new global group supervision standards, focus on the reduction of systemic risk, and amplified focus on enterprise risk management, as well as initiatives in the area of financial reporting. While discussions continue across many initiatives, they are resulting in significant resources being expended across the industry. Finding the appropriate path through all of the regulatory changes clearly remains a challenge.

What we do and how we do it

Jackson’s long-term strategy consists of capitalising on the profitable growth opportunities created by the demands for retirement income and accumulation products due to the demographic transitions within the world’s largest retirement market. Jackson takes a disciplined approach to this opportunity by leveraging its distinctive distribution capabilities and asset liability management expertise to offer prudently priced annuity products aligned with our risk appetite. We continue to see strong consumer demand for our products and will continue to drive product innovation as a way of meeting the needs of customers and generating shareholder value. With a long-term focus on balancing the needs of multiple stakeholders, Jackson has forged a solid reputation among advisers for financial stability, innovative products and market-leading wholesale support. Our relentless pursuit of excellence has earned us a leading position within the industry.

Open all

Product suite

Jackson develops and distributes products that address the retirement needs of our customers through various market cycles. These include variable annuities, fixed annuities, fixed-index annuities, and separately managed accounts. As would be expected in the current historically low interest rate environment, variable annuities continue to outsell fixed-rate products. The main attraction of a variable annuity product is the optional lifetime guarantee where customers can access a stream of payments with downside protection while still being able to invest in a broad range of assets as well as the benefit of tax deferral on the investment growth within the product. The breadth of our product offering, strength of our distribution relationships, and our ability to maintain financial stability through the crisis and remain as a consistent presence within the market, has resulted in Jackson being the number one4 writer of variable annuities in the US.

Additionally, Jackson developed and launched Elite Access in March 2012. Elite Access is a variable annuity without guarantees, offering customers tax-deferred growth and access to a wide range of alternative investments. In less than three years after its launch, Elite Access is the fourth best-selling variable annuity product in the US. As of third quarter of 2014, Jackson offers three of the top 10 best-selling variable annuity products across the industry.

The success of Elite Access has helped increase the diversification of our product mix with 34 per cent (2013: 31 per cent) of our 2014 variable annuities sales not featuring living benefit guarantees.

While sales of fixed annuities and fixed index annuities have been lower, though relatively in line with the market, they still make up a significant portion of our balance sheet and earnings. Jackson stopped selling life insurance products in 2012; however, we continue to look for opportunistic ‘bolt-on’ acquisitions to diversify our earnings and balance sheet risks further. The purchase of Reassure America Life Insurance Company (REALIC) in 2012 has contributed significantly to shape Jackson’s earnings while helping to diversify Jackson’s overall risk profile. We continue to proactively balance value, volume, capital and balance sheet strength across our suite of product offerings which allows us to compete effectively throughout the economic cycle.

Variable annuity sales US$bn

Variable annuity sales graph. 2013: 14.5 With living benefit guarantees, 6.4 Without living benefit guarantees. 2014: 15.1 With living benefit guarantees, 8.0 Without living benefit guarantees.

Elite access sales US$bn

Elite access sales. 2013: 4.0, 2014: 5.1

Distribution capabilities

Our distribution teams set us apart from our competitors within the markets in which we compete. Jackson’s wholesaling force is the largest in the industry, supporting thousands of advisers across multiple channels and distribution outlets. Our wholesalers provide extensive training across a variety of topics to these advisers, and in 2014 continued to focus training efforts around its newest product, Elite Access, with a total of 374 Elite Access meetings and over 10,000 advisers in attendance.

National Planning Holdings, an affiliate of Jackson, is the sixth5 largest independent broker-dealer network in the country. Leveraging the collective strength of the four broker-dealers within the network, National Planning Holdings is able to meet the specific needs of three key distribution channels: independent representatives, financial institutions, and tax and accounting professionals. We offer registered representatives and investment advisers access to industry-leading mutual fund/asset management companies, insurance carriers, and to thousands of brokerage products. National Planning Holdings provides significant benefits for Jackson by being an outlet for Jackson products and providing market intelligence.

Curian is Jackson’s retail asset management arm, distributing investment solutions which include separate accounts, mutual funds, mutual fund wraps and exchange-traded funds through an online platform. Curian gives financial advisers efficient access to a broad range of investment solutions that are developed with institutional-level investment manager due diligence, portfolio construction and asset allocation resources.

Operational efficiencies

We support our industry-leading distribution teams with award-winning customer service. Jackson was awarded by Service Quality Measurement Group, Inc. ‘World Class Certification’ in customer satisfaction and received the ‘Highest Customer Satisfaction by Industry’ award, achieving the top rating for the financial industry, for the ninth consecutive year. High-quality information technology systems are critical for providing award-winning customer service. We leverage technology to minimise processing errors and reduce the time required to process new business and commissions. The flexibility of our information technology systems contributes to our ability to manufacture, distribute and service an unbundled product design and to distinguish us from others in the industry.

This focus on our operational platforms, and the efficiencies achieved as a result, have provided us with among the lowest general and administration expense-to-asset ratio relative to competitors.

Disciplined approach

Jackson operates within a well-defined risk framework aligned with the overall Prudential Group risk appetite. The type and number of products we sell remains balanced with the acceptance of risks we retain. Our conservative and disciplined economic approach to pricing is designed to achieve both adequate returns on our products and sufficient resources to support our hedging programme.

Our hedge philosophy has not changed in 2014. Jackson is able to aggregate financial risks across the Company, obtain a unified view of our risk positions, and actively manage net risks through economically-based hedging programmes. A key element of our core strategy is to protect the Company from severe economic scenarios while maintaining adequate regulatory capital. We benefit from the fact that the competitive environment continues to favour companies with good financial strength ratings and a strong track record of financial discipline, both key elements of our long-term strategy.


4m life customers


Elite Access: go beyond traditional investing

Elite Access diagram

US$10bn sales since inception

Jackson's Elite Access is a new style of variable annuity that enhances traditional investing through diverse investment options, access to portfolios previously unavailable to retail investors, and tax advantages which help customers seek opportunities and manage risk throughout the economic cycle.

Elite Access is a logical extension of Jackson’s variable annuity investment freedom philosophy, which provides customers with a large set of investment options and the ability to tailor the portfolio as they desire.

Elite Access helps customers prepare for any market conditions by offering:

  • A wide array of traditional equity and fixed-income investments that provide core market exposure;
  • Additional diversification from alternative assets and strategies that help customers modernise their portfolio;
  • Access to expertise previously available to only institutional and accredited investors, through ready-to-go Guidance PortfoliosSM managed and crafted to meet specific investment objectives using a complement of investments and strategies;
  • Tactical management strategies, designed to provide asset allocation flexibility, that adjust to all market cycles – positive or negative; and
  • Tax-deferred investment growth and legacy planning options through all phases of the economic cycle.

Visit the Elite Access website

Notes

  1. The 2014 EEV results of the Group are presented on a post-tax basis and, accordingly, prior years’ results are shown on a comparable basis.
  2. According to LIMRA, U.S. Individual Annuities Survey Participant’s Report (Q3 2014).
  3. Source: US Census Bureau.
  4. Based on total annuity sales, LIMRA, U.S. Individual Annuities Survey Participant’s Report (Q3 2014). Jackson is ranked first in total variable annuities sales out of 30 participating companies in LIMRA’s quarterly sales survey.
  5. Investment News Broker-Dealer Rankings – April 2014 (as reported at the 2014 Investor Conference).

2

Next page:

United Kingdom: focus

Reporting tools

Save pages of the report
to download, print or email

View your pages

Feedback

Your comments and ideas
help us to shape future reports
to suit your needs

Tell us your views