S&P Announces: Research Update: Jackson National Life Insurance Co. Ratings Affirmed; Outlook Negative.

NEW YORK -- On Nov. 18, 2004, Standard & Poor's Ratings Services affirmed its 'AA' counterparty credit and financial strength ratings on Jackson National Life Insurance Co. and Jackson National Life Insurance Co. of New York (collectively referred to as JNL).

The outlook on JNL is negative.

The affirmation on JNL is concurrent with rating actions taken on Prudential PLC (Pru PLC), the U.K.-based multinational life insurance holding company and its operating companies (collectively, Prudential). JNL is a wholly owned core subsidiary of Pru PLC.

The ratings on JNL are based on the support of its parent company, strong competitive position, diversified distribution channels, improving product diversification, strong and improving capitalization, and strong expense discipline. The ratings are constrained by JNL's past earning's volatility from its concentration in the spread and variable annuity businesses, adequate liquidity, and higher than industry average exposure to corporate credit risk.

JNL benefits from positive local management and improvements in its financial strength, although the negative outlook is driven by Standard & Poor's view on Prudential's operating group as a whole and the support that the group confers on JNL.

Outlook

The JNL is expected to finish 2004 with a strong and improved capitalization as measured by its Standard & Poor's risk-based capital of more than 135%, excluding capital obtained from the sale of the Jackson Federal Bank. . In 2005, the ratio is expected to be more than 150% supported by stronger statutory earnings and the recently announced acquisition of Life Insurance Co. of Georgia. JNL's liquidity ratio will remain adequate for the rating. In addition, the company is expected to maintain GAAP earnings ratio on Standard & Poor's model of at least 250%. The product profile will become more diverse in 2005 as the company increases its life insurance sales and institutional investment products continue to be sold on an opportunistic basis.

Major Rating Factors

--In 2003, JNL was sixth among U.S. life insurance companies in the sale of individual fixed annuities, fourteenth in the sale of variable annuities, and the eighth-largest seller of annuities through banks. These individual products are supplemented on an opportunistic basis by the sale of group fixed-term products such as guaranteed income contracts.

--The company has evolved from being product focused to becoming customer focused with management principles being 1) a value added discipline, 2) market flexibility, and 3) excellence in execution. The strong expense discipline has been a major contributing factor to JNL's profitability over time, with after-tax returns averaging better than 15% in the late 1990's. Although GAAP net income was actually negative in 2002, reflecting investment losses of more than $400 million, pre-tax GAAP operating earnings (excluding FAS 133 and realized gains/losses) recovered in 2003 to $391 million, and $288 million for the first six months of 2004.

--Over the past several years, JNL has diversified its sources of business with approximately equal proportions now coming from its traditional independent agents relationships, from financial planners and broker dealers, and from banks and other types of financial institutions.

--JNL's liquidity ratio of 172% based on Standard & Poor's model, although better than previous years, remains only adequate, and below that of most comparably rated companies. Contributing to JNL's relatively low liquidity ratio is the large percentage of annuity liabilities that can be withdrawn without any or low surrender charges plus utilization of less liquid assets such as private placements.

Ratings List
Jackson National Life Insurance Co.
    Counterparty credit rating                      AA/Negative/A-1+
    Financial strength rating                       AA/Negative
    Subordinated debt                               A+
Jackson National Life Insurance Co. of New York
    Counterparty credit rating                      AA/Negative/--
    Financial strength rating                       AA/Negative

Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar, select Find a Rating, then Credit Ratings Search.