1

The U.S. Retirement Market

Gregory B. Salsbury, Ph.D.Executive Vice President

Jackson National Life Distributors, Inc.

2

The U.S. Retirement Market

I. The scope of the U.S. retirement savings market

II. The evolution of retirement III. The need for financial planning and

advice

3

Retirement Assets by Country

Source: JNL Market Research

USA71%

UK10%

Japan9%

W. Europe7%

Rest of Asia3%

4

Top 10 Global Life Insurers(By Gross Written Premium)

Company Name Country of Incorporation

Domestic (US) Affiliates

Nippon Life Insurance Company

Japan Nippon Life Insurance of America

AXA France AXA Rosenberg, AXA Financial, Inc., AXA Advisors, AXA Distributors, LLC, The Equitable Life Assurance Society of the United States, Alliance Capital Management L.P. (53%-owned), AXA Group, Sanford C. Bernstein & Co.

ING Groep N.V. The Netherlands ING Aetna Financial Services, ING Aetna International, ING North America Insurance Corporation, ING ReliaStar Financial Corp., ING Baring (US) Financial Holdings Corporation, CLARION CRA Securities, ING Furman Selz Asset Management

Prudential plc United Kingdom Jackson National Life Insurance Company, Jackson National Life of New York, Jackson Federal Bank, National Planning Holdings, Inc., PPM America, Inc.

Metropolitan Life United States MetLife Securities, Inc., State Street Research & Management Company, GenAmerica Corp., General American Life Insurance Company, Metropolitan Tower Life Insurance Co., New England Life Insurance Co., Security First Life Insurance Co., Nathan & Lewis Securities, Walnut Street Securities

American International Group, Inc.

United States SunAmerica Inc., American General Corporation, 21st Century Insurance Group, AIG Global Investment Group, American Life Insurance Company, HSB Group, Inc., John McStay Investment Counsel, L.P.

The Dai-ichi Mutual Life Insurance Company

Japan American Family Life Assurance Company of Columbus (AFLAC)

Allianz AG Germany Allianz Insurance Company, Allianz Life Insurance Company of North America, Fireman’s Fund Insurance Company, Jefferson Insurance Company, NFJ Investment Group, Nicholas-Applegate Capital Management, Pacific Investment Management Company LLC

Aviva plc United Kingdom CGU Life Insurance Company of America, CGU Corporation, Commercial Union Life Insurance Company of America

The Hartford Financial Services Group, Inc.

United States Hartford Life, Inc., Hartford Investment Management Company, HartRe, Fortis Financial

Source: AM Best, UBS Warburg Research, Company Accounts. Worldwide Life 2001 GWP.

5

Investable Retirement Assets in the U.S.

$4.0

$5.3

$7.3$7.8

$9.2

$10.7

$12.5

$14.5

$6.6

$0

$5

$10

$15

1995 1997 1999 2001 2003 2005 2007 2009 2011

Ret

irem

ent M

arke

t Ass

ets

($Tr

illio

ns)

Total Private Retirement Market Assets(In $Trillions)

Source: Cerulli Report, Retirement Industry Update: Trends in 401(k) and IRA Markets 2002

$7 trillion and growing

6

Jackson National Life Assets

$29,148

$33,096

$36,214

$43,953

$47,242$49,919

$40,521

$20,000

$30,000

$40,000

$50,000

1996 1997 1998 1999 2000 2001 2002 (Q2)

JNL

Ass

ets

($M

illio

ns)

Total JNL Assets(In $Millions)

GAAP assets. Excludes FAS-115, FAS-133, reverse repurchase obligations, and securities lending deposits.

Nearly $50 billion and growing

7

U.S. Investor Holdings

19%

49%

15%19% 17%

30%

93%

3%0%

20%

40%

60%

80%

100%

RetirementAcounts

Certificatesof Deposit

SavingsBonds

MutualFunds

Stocks Bonds LifeInsurance

AnyFinancial

Investment

Source: Board of Governors of the Federal Reserve, Survey of Consumer Finances, 1998; The American Marketplace New Strategist Publications, 2001

Percentage of families holding investment assets

8

$146,500

$9,000

$63,000

$105,500

$127,500 $125,600

$0

$50,000

$100,000

$150,000

Less than 35 35-44 45-54 55-64 65-74 75 or more

Demographics: Net Worth by Age▲ Seniors hold the wealth▲ The myth of the young millionaire

Source: Board of Governors of the Federal Reserve, Survey of Consumer Finances, 1998.

9

The U.S. Retirement Market

I. The scope of the U.S. retirement savings market

II. The evolution of retirement III. The need for financial planning and

advice

10

Pension and Retirement Changes

1935

1974

1978

1997

2001

2002

Social Security Act

Employment Retirement Income Security Act

Revenue Act

Taxpayer Relief Act

Economic Growth and Tax Relief Reconciliation Act

Job Creation and Worker Assistance Act

11

Social Security Overburdened

▲ Social Security doesn’t pay very much▲ Most Americans depend on it▲ The ratio of payees to beneficiaries is

shrinking▲ Future retirees will not likely receive

Social Security

Source: General Accounting Office; Cerulli Associates.

12

Benefits warning!Benefits warning!

In 15 years or less, Social Security will start In 15 years or less, Social Security will start paying out more than it takes in. By 2075, it paying out more than it takes in. By 2075, it will be $22.2 trillion in the hole. will be $22.2 trillion in the hole.

Source:Source: Barron’sBarron’s, “Pension Poverty,” January 28, 2002, “Pension Poverty,” January 28, 2002

13

Death of the Company Pension

▲ Companies unable to meet pension responsibilities

▲ Defined Benefit yields to Defined Contribution

▲ The boom in additional retirement plans

Source: General Accounting Office; Cerulli Associates.

14

Today’s Retirement PlansDefined Contribution Plans

All Company

403(b)

IndividualEmployer/Group

Qualified

Public

457

Traditional 401(k)

Money Purchase

Profit Sharing

Small Company

Individual 401(k)

SIMPLE 401(k)

SIMPLE IRA

SEP IRA

Safe Harbor 401(k)

Traditional 401(k)

Traditional IRA

Roth IRA

Alternative Savings Vehicles

Non-qualified

Annuities

Life Insurance

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$1.3$1.8

$1.6$2.0

$2.5$3.0

$3.6

$4.4

$0.5 $0.6 $0.7 $0.6 $0.7 $0.8 $0.9 $1.1 $1.3$0.9

$0.0

$2.5

$5.0

1995 1997 1999 2001 2003 2005 2007 2009 2011

Ret

irem

ent A

sset

s ($

Trill

ions

)

Other DC Assets 401(k) Assets

Defined Contribution Assets Grow

Source: Cerulli Report, Retirement Industry Update: Trends in 401(k) and IRA Markets 2002

$1.4

$1.9

$2.5$2.2

$2.7

$3.3

$3.9

$4.7

$5.7

16

IRA Assets

$1.1$1.5

$2.2$2.6

$2.9

$3.5

$4.2

$5.1

$0

$2

$4

$6

1994 1996 1998 2000 2002 2004 2006 2008

IRA

Ass

ets

($Tr

illio

ns)

Source: Cerulli Report, Retirement Industry Update: Trends in 401(k) and IRA Markets 2002

Americans are managing nearly $3 trillion in IRA assets

17

Variable Annuity Sales Growth

$4.5

$112.8

$0

$20

$40

$60

$80

$100

$120

1985 2001

Source: J.P. Morgan and VARDS

($ in billions)

18

Variable Annuity Asset Growth

$176.0

$882.9

$0

$200

$400

$600

$800

$1,000

1991 2001

Source: J.P. Morgan and VARDS

($ in billions)

19

Fixed Annuity Sales Growth

$23.6

$74.3

$0

$20

$40

$60

$80

1985 2001

Source: LIMRA

($ in billions)

20Source: J.P. Morgan, VARDS, and LIMRA

$0

$50

$100

$150

$200

1997 1998 1999 2000 2001

Indu

stry

Ann

uity

Sal

es($

Bill

ions

)

Fixed VA EIA

Industry Annuity Sales

$131 $134

$196

$171$192

After Years of Variable Annuity Growth, Fixed Sales are Back

21

JNL Retirement Funding Vehicles

▲ Fixed annuities▲ Variable annuities▲ Equity-indexed annuities▲ Life insurance

22

Today’s Retirement PlansDefined Contribution Plans

All Company

403(b)

IndividualEmployer/Group

Qualified

Public

457

Traditional 401(k)

Money Purchase

Profit Sharing

Small Company

Individual 401(k)

SIMPLE 401(k)

SIMPLE IRA

SEP IRA

Safe Harbor 401(k)

Traditional 401(k)

Traditional IRA

Roth IRA

Alternative Savings Vehicles

Non-qualified

Annuities

Life Insurance

23

Today’s Retirement PlansDefined Contribution

All Company

403(b)

IndividualEmployer/Group

Qualified

Public

457

Traditional 401(k)

Money Purchase

Profit Sharing

Small Company

Individual 401(k)

Simple 401(k)

Simple IRA

SEP IRA

Safe Harbor 401(k)

Traditional 401(k)

Traditional IRA

Roth IRA

Alternative Savings Vehicles

Non-qualified

Annuities

Life Insurance

Under Review

Directly

Through TPA

24

Aging baby boomersAging baby boomers

++Pension Pension Self directed Self directed

==Enormous Enormous personalpersonal wealth wealth

Driven by a Dying Pension System

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The Aging of the Aged

▲ 80+ U.S. population growing 5 times faster than overall population

▲ By the year 2030 in the U.S., the demographics of 32 states will resemble those of Florida today

▲ By the year 2005, eldercare will replace childcare as the number one dependent care in the U.S.

Source: Peterson, Peter G. Gray Dawn, OECD (1996); Department of Labor, www.lifeinsuranceselling.com, “The LTC Solution,” December 2001.

▲ By the year 2030, one in four people in the developed world will be aged 65 or older

26

46

8086

48

8492

0

20

40

60

80

100

1900 2000 2050Men Women

Average Life Expectancy

Source: National Vital Statistics Report, Vol. 48, No. 18, Feb. 7, 2001; U.S. Census Bureau projections, 1996; National Center for Health Statistics

27

Retiring Younger

Source: Burtless, Gary and J.F. Quinn. (2000) “Retirement Trends and Policies to Encourage Work Among Older Americans” and AARP (2000), “Beyond 50: A Report to the Nation on Economic Security.”

70

65 6564

6362

56

60

64

68

72

1950 1960 1970 1980 1990 2000

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The Increasing Tax Bite

Source: Combined federal, state, and local taxes per capita as a percentage of income, 2001. Special Report, No. 104, April 2001, Tax Foundation

33.8%

30.3%30.1%29.3%

24.4%27.3%

20.0%

25.0%

30.0%

35.0%

40.0%

1950 1960 1970 1980 1990 2001

The Tax Foundation has shown that the typical two-earner family now spends more on federal, state, and local taxes than on shelter, food, clothing and transportation combined.

Source: “Tax Freedom Day Arrives,” www.house.gov/dunn/oped/txfree2.htm

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1 Top Taxpayer

49 Middle Taxpayers36%

60%

4%50 Bottom Taxpayers

Source: Tax Foundation, February 2002

Who Pays America’s Taxes?100 Taxpayers – February 2002

30

JNL Provides Answers

▲ Retirement funding vehicles– Taxed deferred savings– Accumulation and distribution– Options for every risk profile

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0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

Total Number of Policyholders

1995 to 2001Prior to 1995

Source: JNL Market Research1. Investment Clients are policyholders who purchased investment products such as

Annuities, Stocks, Bonds and Mutual Funds. It does not include Life Insurance.

JNL Growing Client Base

800,000

600,000

1,400,000

JNL investment clients1 increased 75%

32

JNL Investor Profile

30%

9%

66%

44%

60%

0%

25%

50%

75%

100%

Total Life Fixed VA EIA

% o

f Pol

icyh

olde

rs W

ho a

re R

etire

d

Source: JNL Market Research

Two-thirds of JNL Fixed Annuity owners are retired

33

JNL Investor Profile

44%54%

32% 34%22%

23%

30%

20% 10%

6%

0%

25%

50%

75%

100%

Total Life Fixed EIA VA

% o

f Pol

icyh

olde

rs Income $60K-$90K Income $90K67%

28%

52%

84%

44%

Source: JNL Market Research; 1998 Survey of Consumer Finances.

National Average = $33,000

Two-thirds of JNL investors have incomes in excess of $60K

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$74,000

$123,000 $121,000 $124,500$133,500

$184,500

$0

$100,000

$200,000

US Average JNL Total LifeInsurance

Fixed Perspective Persp.Advisor

Ave

rage

Hou

seho

ld In

vest

able

Ass

ets

JNL Product Line

JNL Investor Profile

Source: JNL Market Research; Board of Governors of Federal Reserve, Survey of Consumer Finances, 1998.

On average, JNL policyholders have 66% higher wealth

35

The U.S. Retirement Market

I. The scope of the U.S. retirement savings market

II. The evolution of retirement III. The need for financial planning and

advice

36

The Impact of the Bull and the Bear on Investors

37

Average Annual Returns

Certificates of Deposit3 6.48%

S&P 5001 16.29%

Average Investor2 5.32%

Sources: 1 Ibbotson Associates 2002 Yearbook2 Dalbar, Inc., “Quantitative Analysis of Investor Behavior,” June 21, 2001 3 www.federalreserve.gov, 1-month CDs

January 1, 1984 - December 31, 2000

38Sources: Gallup, Paine Webber, ICI, Strategic Insight, SIA, Federal Reserve Board, Nasdaq, Sept. 21, 2001; Yahoo Finance

The Equity Ride▲ 1982 to 1999 - large cap stocks

averaged 18.5%▲ Five consecutive years of 20+% growth▲ U.S. household equity ownership doubled ▲ Number of millionaires doubled between

1994 and 2000 (7.2 million)▲ 85% of all equity mutual fund accounts

were added in the 1990s (48% after 1995)▲ What investors were taught …

39

40

The Equity Ride▲ Investors ended the decade expecting annual

portfolio returns of 19-22%▲ Holding periods plummeted

▲ At the end of the decade, there were 8,000+ retail mutual funds. The 10 best-selling equity funds accounted for 44% of net inflows

Sources: Gallup, Paine Webber, ICI, Strategic Insight, SIA, Federal Reserve Board, Nasdaq, Sept. 21, 2001, Yahoo Finance

Mutual funds = 33 monthsStocks = 10 monthsNASDAQ = 5 months

41Sources: Gallup, Paine Webber, ICI, Strategic Insight, SIA, Federal Reserve Board, Nasdaq, Sept. 21, 2001, Yahoo Finance

The Equity Ride

▲ As of 3/00, an unprecedented percentage of household assets in categories subject to principal loss

▲ “Buy” recommendations outnumbered “sells” 72 to 1

42

And Then, The Ride Was Over …

▲ 2000 worst year for S&P 500 since 1974, and then it got worse

▲ By March of 2001 we hit official “Bear” territory for every major index

▲ Then it got worse again …

Sources: Gallup, Paine Webber, ICI, Strategic Insight, SIA, Federal Reserve Board, Nasdaq, Sept. 21, 2001, Yahoo Finance

43

From Their Peaks …

DJIA - 35.24%S&P 500 - 46.62%MSCI EAFE - 49.43%NASDAQ - 76.78%

Source: As of 9/30/02, www.mscidata.com, http://finance.yahoo.com

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The Five Stages of Loss

I. ShockII. DenialIII. Hurt IV. AngerV. Acceptance

45

Advisor Issues

▲ Frightened investors▲ Fee-based pricing▲ Pursuit of the affluent

46

JNL is Well-Positioned

▲ Capitalizing on the retirement market

▲ Focusing on advisors▲ Understanding investors

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