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Fitch downgrades Prudential’s Jackson off IPO pursuit

16th March 2020 - Author: Charlie Wood

Fitch Ratings has downgraded the Insurer Financial Strength ratings of Jackson National Life Insurance Co. and Jackson National Life Insurance Co. of New York to ‘A+’ from ‘AA-‘.

Fitch-RatingsAt the same time, Fitch downgraded its ratings on Jackson’s Long-Term Issuer Default Rating to ‘A’ from ‘A+’. The Rating Outlook is Negative.

This follows Prudential’s announcement that it will pursue a minority initial public offering (IPO) of its Jackson National’s U.S. operations.

Proceeds from the minority IPO would be redeployed as growth capital into the company’s operations, as it seeks to further accelerate on its growth and diversification strategy.

Fitch simultaneously affirmed Prudential Plc’s (Prudential) IDR at ‘A’. The Rating Outlook is Stable

Fitch says Jackson’s downgrade primarily reflects Prudential’s recent announcement and Fitch’s reassessment of the company’s strategic importance designation of the US operations within the broader Prudential group.

As part of our group ratings methodology assessment, Fitch no longer views Jackson as being a ‘Very Important’ but rather an ‘Important’ subsidiary within the broader group.

This affords Jackson’s IFS ratings one notch of parental support from its stand-alone credit profile (SACP) of ‘a’.

The revision in Jackson’s strategic importance level also reflects Fitch’s view that the minority IPO of Jackson reduces the degree to which Prudential is likely to provide Jackson financial support in future, increasing the probability that Prudential may ultimately further reduce its holding in Jackson.

The Negative Outlook represents Fitch’s assessment that the agency would align Jackson’s ratings to its stand-alone profile level in a scenario where Prudential may signal a further sell-down of its U.S. operations or if Jackson’s standalone capitalization metrics were to remain suppressed.

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