Financial Overview

1
Financial Overview

• Andy Hopping
• Executive Vice President,Chief Financial Officer
  and Treasurer

2
Key Advantages

• Low cost
• Flat organization structure
• Fast decision making
• Highly disciplined culture
• Excellent distribution
• 41,000 independent deal direct representatives
• 6th largest (based on revenue) independent
  broker-dealer (National Planning Holdings Inc.)
• Leading participant in the bank channel
  (Institutional Marketing Group)
• High customer value reputation
• Low costs benefit everyone
• Customers and representatives know we provide
  long-term value
• Full product line
• Products that sell well in any economic climate
• Strong position in our chosen product lines
• Platform built for sustainable growth
• Life sales support a more scalable platform
• Allows infrastructure cost to be spread over a
  larger base of policies

JNL the low-cost provider with full product
line and distribution excellence
3
Total Generally Accepted Accounting Principles
Assets
49,919
50,000
47,242
4,756
43,953
5,126
40,521
5,586
40,000
4,522
36,214
( millions)
33,096
1,952
1,122
29,148
45,163
42,116
370
30,000
38,367
35,999
34,262
31,974
28,778
20,000
1996
1997
1998
1999
2000
2001
H1, 2002
General Account
Separate Account
Excludes FAS-115, FAS-133, reverse repurchase
obligations, and securities lending deposits.
Total GAAP assets have shown strong and steady
growth
4
GAAP Aftertax Operating Earnings and Return on
Average Capital (a)
2,000
20
16.3
14.8
1,500
15
13.2
( in millions)
1,000
10
7.6
6.7
7.6
7.2
7.1
500
5
5.0
4.1
442
430
414
266
238
0
0
1998
1999
2000
2001
TTM H1, 2002
JNL aftertax operating income
Net Operating ROAE - Actual
Industry aftertax operating ROAC
Notes (a) Total capital is at book value and
excludes unrealized gains or losses in equity.
In addition, JNL excludes FAS-133. Excludes
net realized g/(l) and associated DAC
amortization, minority interest g/(l), and change
in accounting principle. Industry source
SNL Financial.

JNLs return on capital exceeds the industry
average by 1.7
5
Profit Signatures of Achieved Profit, Statutory
and GAAP Bases
Profit Signature of a Fixed Annuity Policy
Profits
0
1
2
3
4
5
6
7
8
9
10
Years
AP
SAP
GAAP
Under GAAP, expenses related to sale of product
are amortized in proportion to profits over life
of product
6
GAAP Profits - Hypothetical 1,000 Fixed Annuity
Policy
Profit emerges smoothly under the GAAP basis
7
SAP and AP Profits - Hypothetical 1,000 Fixed
Annuity Policy
Over the life of the policy
Distributable income is negative in year one
under statutory accounting
8
Achieved Profits Assumptions

• Investment spread on new business
• 140 grading to 175 bps
• Long-term market returns
• 8 gross of ME fees
• Mortality and lapses
• Consistent with current pricing and current
  experience
• Expenses
• Representative of long-term unit costs
• Discount rate and expense inflation
• Tied to US Treasury rate with equity premium

Achieved profits assumptions are generally
consistent with GAAP assumptions
9
Emergence of Spread Income

• Spread income represents
• Investment income earned on policyholder
  deposits
• Minus interest credited to policyholder accounts
• Spread income relates primarily to
• Fixed annuity policies
• Stable value business

Spread income recognition varies by asset class
and accounting methodology
10
Fixed Annuity Interest Spread Analysis
(Basis Points)
250
200
150
100
50
0
Jul-99
Jul-00
Jul-01
Jan-99
Nov-99
Jan-00
Nov-00
Jan-01
Nov-01
Jan-02
Mar-99
Sep-99
Mar-00
Sep-00
Mar-01
Sep-01
Mar-02
May-99
May-00
May-01
May-02
Target Spread
KPI Spread (Prospective)
01-02 spread depressed by corporate bond
defaults and performance of LP private equity
portfolio
11
Foregone Pretax Investment Income from
Non-Accrual Investments
( millions)
35
30
31.2
30.6
25
20
18.6
15
10
5
3.7
3.1
0

1998
1999
2000
2001
H1, 2002
Foregone non-accrual income
01-02 spread earnings depressed by corporate
bond defaults
12
Fee Income

• Calculated based on
• Daily closing market value of the separate
  accounts
• GAAP/STAT
• Recognizes fee income in period it is assessed
• AP
• Profits include present value of all future fees

Fee income mortality and expense charges plus
our share of asset management fees
13
Fee Income
SP month-end value
1,600
12,000
1,400
10,000
1,200
1,000
8,000
800
6,000
600
4,000
400
2,000
200
0
0

Jan-99
Jul-99
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Apr-99
Oct-99
Apr-00
Oct-00
Apr-01
Oct-01
Apr-02
Asset management fees
Variable annuity fees
SP 500 month-end value
Fee income correlates with SP 500 performance
14
GAAP Pretax Realized Gains/(Losses), Net of
Minority Interest, Before DAC Amortization
200
70
44
0
(71)
(235)
(200)
(400)
(568)
(600)
1998
1999
2000
2001
H1, 2002

Net realized gains/(losses)
GAAP gains/(losses) include sales of fixed
maturities, sales of equity securities, sales of
other invested assets and impairment losses.
01-02 results broadly in line with U.S. peers
15
GAAP Treatment of Investment Writedowns

• Written down to market or net realizable value
  when impairment is other than temporary
• Recorded as net realized loss, with associated
  tax and DAC benefit
• Deferred tax benefit recognized when writedown
  occurs

No hard and fast rules on what constitutes
other than temporary impairment
16
SAP Treatment ofInvestment Writedowns

• Writedowns generally follow GAAP unless rated
  NAIC 6
• Credit related losses flow through net income
  with surplus adjusted by change in AVR
• No tax benefit until investment sold
• Interest related charged to IMR and amortized to
  net income over remaining life of bond

Statutory rules require NAIC 6 to be carried at
current Securities Valuation Office published
market prices
17
AP Treatment of Investment Writedowns

• Current year realized gains/losses added to prior
  4 years gains/losses, and 1/5 brought through as
  current year operating profit
• Variance from actual current year treated as
  adjustment in deriving total long-term profits
• Represents estimate of long-term rate of capital
  return under U.K. GAAP

Approximate method but transparent to investors
18
Tax Treatment of Investment Writedowns

• No statutory tax benefit until investment sold
• Losses can be utilized only to extent of gains,
  subject to
• 3-year carryback
• 5-year carryforward

Income taxes drive much of the economics in
managing investment gains/losses
19
Guaranteed Minimum Death Benefit (GMDB) Reserves

• Statutory
• Statutory reserves assume
• No lapses
• Very conservative mortality table (from 50 to
  70 higher than standard)
• A further 11 drop in the market (net of ME)
• While ignoring future fee income

• GAAP
• JNL periodically evaluates expected long-term
  cost of GMDB benefit under various market and
  mortality scenarios
• JNL sets aside the portion of long-term cost
  accumulated from policy inception to valuation
  date (funded from VA fees)
• Paid claims charged against this reserve
• Continued declines in equity markets this year
  will result in higher provisions for GMDB reserves

GAAP literature for GMDB is still being developed
20
GMDB Costs

• Year-to-date 6/30/02 death benefit cash spend
• 10.3 million
• Statutory reserve 270m at 6/30/02 (more than
  13 times the 2002 run rate)
• After-tax capital impact 176 million
• Bulk of JNLs inforce variable annuity product
  has a 5 roll-up, meaning beneficiary receives
  greater of
• Current market value
• Or net premium accumulated at 5 annually

Actual GMDB costs are significantly less than
statutory reserves would imply
21
Deferred Acquisition Costs Overview

• Certain costs of acquiring new business are
  capitalized as deferred acquisition costs
• Commissions and certain costs associated with
  policy issue
• Which vary with and are primarily related to the
  production of new business
• Deferred costs recorded as an asset and amortized
  ratably over life of policy
• In proportion to gross profits
• To reflect a steady margin on the business
• DAC applies to all retail product lines
• Very few acquisition costs related to stable
  value business

Deferred Acquisition Costs are amortized into
GAAP earnings over life of policy
22
Deferred Acquisition Costs Amortization

• AP results are not impacted by amortization of
  intangibles
• Because acquisition costs are fully expensed when
  calculating the present value of new business
• For U.S. GAAP, amortization is increasing
  compared to our original assumptions
• Due to drop in Variable Annuity fee income stream

Separate account balances have decreased along
with equity markets
23
Statutory General Expense Trend Analysis

GA expense excludes the stable value
business and, in 2001, 7.8m marketing
reorganization expense. Average assets
excludes stable value and reverse repo
liabilities. The peer composite has not been
adjusted to eliminate industry stable value
assets and expenses, which would raise the peer
expense level.
JNL has maintained its expense discipline over
the past five years despite growing complexity in
products and the marketplace
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Capital Analysis
Pro
Forma
June 30,
1998
1999
2000
2001
2002
NAIC Risk-Based Capital Ratio
268
245
231
341
364
Capital Ratio
(a)
8.7
9.1
8.5
7.7
7.5
Capital, Surplus and AVR (millions)
2,519
2,733
2,662
2,651
2,292
Notes (a) (Capital and Surplus, AVR) / (General
Account Reserve Liabilities). 2001 data
represents consolidated JNL and JNLNY, 2000 and
prior are JNL only. June 30, 2002 reflects 500m
Q3 capital infusion.
Capital ratios impacted by high fixed annuity
sales, investment writedowns and Statutory GMDB
reserves
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Asset Growth and Capital Flows
(Cumulative net capital
(Total Assets in billions)
flow in millions)
50,000
500
47,242
43,953
40,521
40,000
400
36,214
33,096
29,148
282
30,000
300
26,000
238
226
21,600
19,100
20,000
200
169
16,700
13,600
113
78
10,000
100
59
53
39
20
0
0
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Total Assets
Cumulative net capital flow
From end of 1991 to end of 2001 JNL returned net
capital to the U.K. while nearly quadrupling
assets
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