Fitch Affirms Jefferson National Life's 'BBB' IFS; Revises Outlook to Negative.Business Editors NEW YORK--(BUSINESS WIRE)--June 10, 2004 Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. the 'BBB' insurer financial strength (IFS) rating of Jefferson National Life Insurance Company (JNL JNL Journal JNL Jackson National Life (insurance company; Lansing, MI; also seen as JNLIC) JNL JTIDS (Joint Tactical Information Distribution Systems) Network Library ). The Rating Outlook has been revised to Negative from Stable. The affirmation is based on JNL's good capitalization and improved asset quality, as well as the improved capital structure of JNL's parent, Inviva Inc. (Inviva). Weighed against these positives are financial results at JNL and consolidated Inviva that were outside of Fitch's expectations and included excess expenses related to the conversion of JNL's variable annuity Variable Annuity An insurance contract in which, at the end of the accumulation stage, the insurance company guarantees a minimum payment. The remaining income payments can vary depending on the performance of the managed portfolio. block of business onto Inviva's proprietary technology platform. The Negative Outlook reflects Fitch's expectations that Inviva may have continued difficulty controlling expenses while growing its business over the near term. The ability to grow organically and through block acquisitions without a commensurate com·men·su·rate adj. 1. Of the same size, extent, or duration as another. 2. Corresponding in size or degree; proportionate: a salary commensurate with my performance. 3. increase in fixed expenses is at the heart of the Inviva business model. The strategy is to leverage the group's proprietary technology platform to issue new business and administer organic and acquired inforce blocks of business more efficiently than other insurers can do using their legacy systems. Conversion of JNL's inforce block of fixed and variable annuities Variable annuities Investment contracts whose issuer pays a periodic amount linked to the investment performance of an underlying portfolio. from the Conseco platform to Inviva's platform in 2003 was the first test of the business model. While Inviva was successful in converting over 70,000 policies to its platform in six months and reducing unit costs, a number of one-time charges related primarily to accelerating the conversion drove up GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). and statutory expenses well above expectations, keeping the company from meeting its profitability targets. If financial results stabilize and the company can demonstrate success in executing its business model, the Outlook could be revised back to Stable. The rating could be downgraded one notch to 'BBB-' if these results are not achieved. JNL's risk-based capital position was at 284% of Company Action Level at year-end (YE) 2003 and is expected to remain in the range of 275% at YE 2004. Investment risk has also been reduced, with below-investment grade bonds as a percentage of total capital down to 84% in 2003 from 102% in 2002. This level remains higher than industry averages. Inviva Inc. (Inviva) acquired JNL, formerly Conseco Variable Insurance Company, from Conseco in October of 2002. Inviva is a privately-held, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of based holding company for JNL and the American Life Insurance Company of New York. JNL, with $1.7 billion in total admitted statutory assets at YE 2003, accounts for the bulk of Inviva's $2.2 billion in GAAP assets. In 2003 and early 2004, Inviva paid down high coupon debt obligations via the issuance of trust preferred securities and lower cost debt. Entity/Issue/Type Action Rating/Outlook Jefferson National Life Insurance Company -- Insurer financial strength Affirm To ratify, establish, or reassert. To make a solemn and formal declaration, as a substitute for an oath, that the statements contained in an Affidavit are true or that a witness will tell the truth. 'BBB'/Negative |
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