Prudential 2002 Annual Report Download - page 45
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Please find page 45 of the 2002 Prudential annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Total account values for fixed and variable annuities amounted to $18.7 billion as of December 31, 2002, a
decrease of $3.0 billion from December 31, 2001. This decrease is due primarily to declines in market values of
our variable annuities resulting from adverse market conditions as well as net redemptions. Net redemptions for
2002 were $451 million as compared to $1.2 billion in 2001. The $730 million decline in net redemptions is
primarily the result of a $609 million increase in gross sales due to recent product and compensation
enhancements as well as strengthening of distribution relationships.
2001 to 2000 Annual Comparison. Sales of new life insurance, as measured by statutory first year
premiums and deposits, increased $83 million, or 21%, in 2001 from 2000. The increase came from a $157
million increase in the segment’s sales of corporate-owned life insurance products, substantially all of which is
sold by the third party distribution channel. Sales by the third party distribution channel, other than corporate-
owned life insurance, decreased $30 million, or 35%, in 2001 from 2000.
Sales from Prudential Agents, excluding corporate-owned life insurance, decreased $44 million, or 17%, in
2001 from 2000. The number of Prudential Agents declined to approximately 4,400 at December 31, 2001, from
6,100 at December 31, 2000, reflecting actions taken to increase the productivity standards required to continue
agency contracts. Prudential Agent productivity increased slightly to $35,000 in 2001 from $34,700 in 2000.
Total account values for fixed and variable annuities amounted to $21.7 billion as of December 31, 2001, a
decrease of $2.3 billion from December 31, 2000. This decrease resulted primarily from declines in the market
value of customers’ variable annuities as well as net redemptions, which increased from $839 million in 2000 to
$1.2 billion in 2001. The net redemptions of fixed and variable annuities in 2001 were partially offset by policy
credits we issued in connection with our demutualization, which increased policyholders’ account values by
$586 million.
Policy Surrender Experience
The following table sets forth the individual life insurance business’s policy surrender experience for
variable life insurance, measured by cash value of surrenders, for the periods indicated. These amounts do not
correspond to expenses under GAAP. In managing this business, we analyze the cash value of surrenders because
it is a measure of the degree to which policyholders are maintaining their in force business with us, a driver of
future profitability. Our term life insurance products do not provide for cash surrender values.
Year Ended December 31,
2002 2001 2000
($ in millions)
Cashvalueofsurrenders ..................................................................... $692 $637 $641
Cash value of surrenders as a percentage of mean future policy benefit reserves, policyholders’ account
balances, and separate account balances ....................................................... 4.2% 3.8% 3.7%
2002 to 2001 Annual Comparison. The total cash value of surrenders increased $55 million, or 9%, in 2002
from 2001. The level of surrenders as a percentage of mean future policy benefit reserves, policyholders’ account
balances and separate account balances increased from 2001 to 2002, reflecting an increase in lapses associated
with declines in variable life insurance account values.
2001 to 2000 Annual Comparison. The total cash value of surrenders and the level of surrenders as a
percentage of mean future policy benefit reserves, policyholders’ account balances and separate account balances
were relatively constant from 2000 to 2001.
Growing and Protecting Your Wealth44