ANNUAL REPORT 2001 - Prudential plc

BUSINESS REVIEW
CONTINUED
UNITED STATES
OVER THE LAST FIVE YEARS, JACKSON NATIONAL LIFE
HAS MADE SIGNIFICANT PROGRESS IN WIDENING ITS
PRODUCT RANGE, ENABLING US TO SELL PROFITABLE
PRODUCTS IN ALMOST ANY ECONOMIC ENVIRONMENT.
The markets in the United States witnessed
a year of unprecedented uncertainty in 2001,
with equity markets suffering significant
declines and bond defaults reaching record
levels. No one in the US was immune from
these difficult market conditions and Jackson
National Life (JNL) was no exception.
However, long-term demographic trends
in the US are favourable and we have
continued to develop and enhance our
product range and distribution channels
to ensure that we are well placed to benefit
from the anticipated growth in the US
financial services market.
Our emphasis has been and will continue
to be on profitable growth. Historical results
demonstrate our ability to grow sales while
maintaining pricing discipline, and in the
last four years we have consistently earned
above-industry rates of return (as measured
by US GAAP operating return on capital).
This reflects our key strengths in distribution,
product design and cost. In addition, initiatives
to expand product lines and distribution
channels have resulted in more diversified,
higher quality earnings.
Against this background, JNL recorded total
sales of £4.6 billion during the year, down
only marginally on the record figure set
in 2000. Sales of fixed annuities reached
record levels, up 80 per cent to £1.9 billion.
Despite declining interest rates in 2001,
investors sought the safety of fixed annuities
resulting in record industry sales.
New business achieved profits fell to
£167 million from £221 million in 2000,
principally due to the adoption of revised
achieved profits assumptions and a five per
cent reduction in total sales. In force profits
were affected by £369 million (US$532
million) of net losses relating to JNL’s bond
holdings, resulting in a £74 million charge
against current year profits on a five-year
averaging basis. These losses equated to
1.4 per cent of JNL’s total invested assets and
default experience appears to be broadly in
line with that of our major competitors.
INCREASING PROPORTION OF THE
US POPULATION OVER 40 YEARS
US HOUSEHOLDS AND THE DISTRIBUTION OF INVESTABLE ASSETS
100%
1995 2000 2005 2010 2015
80%
60%
40%
20%
0%
Split of US population by age group
Low Assets
Under $25k
JNL GROWTH
Mid Assets
$25k-$100k
Upscale
$100k-$500k
Mass Affluent
$500k-$5m
High Net
Worth
$5m-$50m
Ultra-High
Net Worth
Over $50m
60+ years
40-60 years
0-40 years
Share of investable assets
Number of households
Jackson National Life’s (JNL) current market positioning
10 Prudential plc Annual Report 2001