Jackson National Life Insurance Company Business Information, Profile, and History

History of Jackson National Life Insurance Company

Jackson National Life Insurance Company is one of the top life insurance companies in the United States, with 17 regional offices, 80,000 agents, and customers in 45 states and the District of Columbia. Jackson National began as a small, regional life insurance carrier in 1961. The company was founded by A. J. (Tony) Pasant, a Lansing, Michigan, insurance salesman and field manager with 16 years of experience. Pasant had a firm belief in keeping customers happy and overhead low. Named after his hero, President Andrew Jackson, the agency Pasant founded initially retained 12 employees and reported assets of $650,000 in its first year of business.

Pasant's insurance team originally consisted of conventional and independent agents. By 1971, however, Pasant had fired most of his sales force and had adopted the "piggybacking" system of selling insurance: he recruited independent agents to act as brokers, selling Jackson National insurance while maintaining positions at other major insurance companies. Pasant attracted agents through direct mailings and advertisements in trade journals. According to Forbes, for the relatively low cost of an ad, he was able to hire workers while avoiding training and recruiting expenses. Furthermore, Pasant was able to sell policies at competitive prices, pay his agents favorable commissions, and entice customers with high annuity rates.

Over the next decade Jackson National established a presence in several U.S. states outside of Michigan. In 1982 it created the subsidiary Jackson National Life Insurance Company of Texas. The following year it sold policies worth $7.6 billion. Although earnings grew only 25 percent in 1984 (down from 85 percent the year before), the decrease was attributed to slightly low annuity sales and expenses incurred from the construction of the company's new Lansing headquarters that year. By 1986 Jackson National was one of the country's fastest growing insurance companies with assets of $2.2 billion and 550 employees. Of the approximately 2,000 insurance companies in the United States at the time, Jackson National ranked 18th in new policies sold, 91st in assets, and 60th in premium income. Its success made it an attractive prospect for investors.

In one of the most significant events of the company's history, Jackson National was acquired by Prudential Corporation plc of London in 1986. Prudential--unrelated to the American insurance company of the same name--was founded in London in 1848. The United Kingdom's largest provider of individual and industrial life insurance policies, Prudential experienced steady growth and became known for its determination to meet the needs of its customers. The company's collection system, established in the 1920s, required each representative to be responsible for a specific territory and to personally visit policyholders at their homes. The "man from the Pru" became a national institution. Prudential rigidly adhered to the product and philosophies on which their strength was built until the 1970s when management observed that the company would have to change to respond to a changing market. In 1978 Prudential began to decentralize, reorganizing and becoming a holding company. The resulting success of this move prompted Prudential to establish a presence in the United States, and it began with the purchase of Jackson National for $608 million.

Prudential was provided with an opportunity to learn from Jackson National's technological advancements; the U.S. company's computerized records and efficient office procedures served as a model for its new parent. Prudential provided Jackson National with financial resources, experience in a wider variety of insurance products, and opportunities for growth for both the individual employee and the company. According to the agreement, Prudential purchased approximately 11.9 million shares of Jackson National stock for about $51 per share and retained an option to buy 2.5 million more shares. The company was merged with its wholly owned subsidiary, Jackson National Life Insurance Company of Texas, and its business was thereafter controlled by Prudential. Jackson National was allowed to keep its name and its management team. Tony Pasant, who remained in his position as president, commented at the 1986 annual meeting that "this merger is a compliment of the highest order to everyone who is or has been involved with Jackson National Life."

Seeking to expand its product line, in February of 1988 Jackson National became one of the first insurance companies in the United States to offer accelerated death benefits, or living benefits. For about an eight percent increase in annual fees, holders of these benefits were allowed to draw 25 percent of their benefits before their death to help cover costs related to heart attacks, cancer, strokes, heart bypass surgery, or kidney failure. A deduction of 25 percent was applied to the death benefit. The plan also allowed holders to use the money for equipment necessitated by any of the five conditions, such as wheelchair ramps. The option, marketed as Lifeline Ultimate, drew a mixed response. While many commented that the plan allowed people to collect money at a time when it was really needed, some found the benefits not worth the plan's cost.

Jackson National's premium income consisted of term life insurance, ultimate life insurance, life single premiums, and annuities. Term insurance, available in a variety of plans, provided basic and limited coverage subject to rate increases and convertible, upon request, to other Jackson National plans. Ultimate insurance and interest-sensitive whole life insurance were fixed premium policies that guaranteed the premium paid, a death benefit, and a minimum cash accumulation value. The company regarded ultimate and interest-sensitive plans as its most comprehensive coverage. Annuities provided a guaranteed monthly tax deferred income for the retired policyholder. Life single premiums, available as an individual policy or as a rider to an already existing policy, represented a combination life insurance policy and annuity program. Nearly all of Jackson National's assets were invested in investment-grade, publicly traded bonds, an option the company regarded as safe, yet productive. The company regarded real estate and mortgage investments as too risky.

Tony Pasant died in 1990, and his son, David A. Pasant, who had worked at Jackson National for 20 years, became president and chief executive officer. Since its acquisition by Prudential, Jackson National has annually received superior ratings by the industry's premier analysts, A. M. Best Co. Despite the difficult economic climate of the early 1990s, Jackson National continued to produce record revenues, assets, and profits, a fact the company attributes to its conservative investment policy and its philosophy of "doin' it right." According to David Pasant in the company's 1991 annual report, the catchphrase emphasizes the company's commitment to "providing the best service in the shortest possible time."

During 1992, the company formed Jackson National Life of Michigan as a wholly owned subsidiary, transferring all of its Michigan business to the new company. Also incorporated in 1992 was Jackson National Financial Services, Inc., a broker-dealer formed to distribute mutual funds and variable products.

In 1992 the company was ranked by Fortune magazine as the 23rd largest life insurance company, and assets were reported at $16.6 billion on earnings of $212 million. Furthermore, the company's individual life insurance and individual annuities statistics qualified it as the country's fifth largest insurance writer. Having received a $300 million surplus contribution from Prudential in 1991, the company's capital and surplus exceeded $1 billion in 1993, doubling from 1990 levels. As a representative of 50 percent of Prudential's foreign investments, Jackson National has helped its parent achieve assets in excess of $90 billion. Jackson National is regarded as well positioned for continued expansion and financial growth.

Principal Subsidiaries: Jackson National Life of Michigan.