Timothy C. Pfeifer, FSA, MAAA Pfeifer Advisory LLC November 13, 2014

2 Declared Rate Fixed Annuities Challenged by interest rate levels, resulting in more market value adjustments and CD-type sales – concerns about inforce Fixed Indexed Annuities Volatility controlled indexes and guaranteed lifetime income riders – sales have held up despite low rates – uncapped designs (PTP primarily); first combo FIA Variable Annuities Rise of IOVAs, de-risking in the form of managed volatility funds, higher prices, pricing as a function of external factors SPIAs Price focus (commodity); sales mildly higher, expenses and capital differentiate DIAs Sharp growth – key attributes are liquidity and benefit Contingent Deferred Annuities (CDAs) In its infancy – more basic product design – few current players

3 Declared Rate Fixed Annuities Trade off ROP for rate; manage inforce liabilities to recognize liquidity, guarantees; companies pick niche and pop in and out of market; syndications; persistency bonuses for wide array of behaviors Fixed Indexed Annuities Banks/BDs become prominent players, some FIA “naysayers” enter market, more volatility managed indexes, defined benefit income approaches, qualified focus Variable Annuities Continued de-risking in multiple forms (buy outs, DIA sleeves, functional rates), combination benefits, investment focus, structured products SPIAs Indexing arrives, new mortality table may crimp rate competitiveness, more creativity in joint benefits DIAs Significant pricing potential; selected liquidity; blend of DIA with other product types, indexing Contingent Deferred Annuities (CDAs) Regulatory clouds will clear in most states; opens new market for RIAs, other financial advisors; blend with other products

4 Term Life Steady (to slightly lower) sales, revisiting premiums after level premium period; supported by reserving management programs Guaranteed UL Companies exited; more rational pricing; use of reserve financing; shy away from single premium Non-Guaranteed UL Lowest premium to carry, income story; accelerated benefit riders Variable UL Fewer players – protection products with upside potential, favorable tax story Par WL Steady product sales – growth seen from mutual companies with portfolio asset management Indexed UL Fastest growing product – used more and more for protection; basic index framework; participatory loans

5 Term Life Mildly increasing prices; 20-year term dominance; flatter ultimate scale Guaranteed UL A few more carrier departures, prices to creep up; few feature changes Non-Guaranteed UL Some new players, attention to guaranteed lifetime income, combination contracts Variable UL Surge in sales due to AG48 and reinsurance credit impacts, pockets of guaranteed death benefit competitiveness remain Par WL More use of linked products; continued erosion of interest component to dividends Indexed UL Appearance of more structured designs; unique lifetime income features, more control over illustrations; loan designs will stay key

Timothy C. Pfeifer, FSA, MAAA