Fitch Ratings has assigned a rating of 'BB+' to Jackson Financial Inc.'s (Jackson) issuance of Series A non-cumulative perpetual preferred stock.

The ratings previously assigned to Jackson and its insurance operating subsidiaries are unaffected by today's rating action.

Key Rating Drivers

The new issue is rated two notches below Jackson's IDR based on 'Poor' recovery expectations, with one additional notch for 'minimal' non-performance risk. Fitch's approach for notching reflects the regulatory environment of the U.S., which we assess as 'Effective' and classify as following a ring-fencing approach.

Based on Fitch's insurance rating criteria, the Series A non-cumulative perpetual preferred stock has been assigned 100% equity credit in evaluating financial leverage.

The Series A preferred stock has no maturity, dividends are noncumulative, and the company has the option to defer them at their discretion. Proceeds from the Series A issuance will be used towards repayment of the outstanding 1.125% senior notes due Nov. 22, 2023. As such, Fitch expects Jackson's calculated financial leverage to decline as a result of the issuance.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive rating action/upgrade:

Significant diversification of Jackson's liability profile;

Improved capital metrics including a Prism capital model score consistently above 'Strong'.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

An increase in the degree of reported financial performance volatility relative to the broader macroeconomic environment;

A decline in Jackson's Prism capital model score such that it is consistently below 'Strong', along with declines in the reported risk-based capital ratio;

Financial leverage above 25%;

Fixed-charge coverage consistently below 7x;

Unexpected economic or operational disruptions as a result of Jackson's transition to a standalone company.

Best/Worst Case Rating Scenario

International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg

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