Prudential 2003 Annual Report Download - page 37

2003 to 2002 Annual Comparison. Sales of new life insurance excluding corporate-owned life insurance,
measured as described above, increased $21 million from 2002 to 2003. Sales of our universal life and term life
products, both of which were updated as to features and pricing in 2003, increased $46 million and $21 million,
respectively. These increases were offset by a decline of $46 million in variable life sales, which were negatively
affected by customer response to prolonged volatile equity market conditions. Sales of corporate-owned life insurance,
substantially all of which is sold by the third-party distribution channel, declined by $101 million. The decline
primarily resulted from a single large sale in 2002.
Sales from Prudential Agents decreased slightly from 2002 to 2003, reflecting a decline in the average number of
agents for the period from approximately 4,500 in 2002 to approximately 4,300 in 2003 associated with selective hiring
of new agents and closures of several offices to promote the cost effectiveness of the Prudential Agent distribution
channel as well as some attrition of agents resulting from the Company’s sale of its property and casualty insurance
businesses in 2003. Sales by the third party distribution channel, other than corporate-owned life insurance, increased
$29 million 2002 to 2003, reflecting increased universal and term life sales through this channel.
Total account values for fixed and variable annuities amounted to $47.5 billion as of December 31, 2003, an
increase of $28.7 billion, which included $22.4 billion from the May 1, 2003 acquisition of American Skandia. The
remainder of the increase came primarily from increases in the market value of customers’ variable annuities as well as
net sales of $526 million. Individual variable annuity gross sales increased by $3.0 billion, from $1.4 billion for 2002
to $4.4 billion for 2003, primarily due to $2.5 billion in variable annuity sales contributed by American Skandia from
the date of acquisition. Excluding American Skandia, variable annuity gross sales increased by $528 million driven by
improving market conditions, product enhancements, and continued expansion in third party distribution. Sales of fixed
annuities declined year-over-year by $358 million due primarily to management’s decision to lower crediting rates in
the current interest rate environment. Surrenders and withdrawals increased $1.7 billion in 2003 from 2002, including
$2.1 billion from American Skandia, reflecting the larger base of business.
2002 to 2001 Annual Comparison. Sales of new life insurance excluding corporate-owned life insurance,
measured as described above, increased $45 million from 2001 to 2002. Increased sales of our universal life insurance
products, which we introduced in late 2001, and our term insurance products, reflecting revised product pricing, more
than offset a $63 million decline in variable life sales associated with customer response to equity market conditions.
Sales of corporate-owned life insurance products, substantially all of which is sold by the third party distribution
channel, decreased $77 million, reflecting several large sales in 2001, as compared to a single large sale in 2002.
Sales from Prudential Agents increased $25 million from 2001 to 2002, an increase in agent productivity, partially
offset by a decline in the average number of agents for the period from approximately 5,200 in 2001 to approximately
4,500 in 2002. The decline in the number of average agents from 2001 reflected actions we took in 2001 to increase the
productivity standards required to continue agents’ contracts. Sales by the third party distribution channel, other than
corporate-owned life insurance, increased $20 million from 2001 to 2002, reflecting increased universal and term life
sales through this channel.
Total account values for fixed and variable annuities amounted to $18.7 billion as of December 31, 2002, a
decrease of $2.9 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 product and compensation enhancements as well as strengthening of
distribution relationships.
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
Prudential Financial 2003 Annual Report 35