Session 131PD: Life Updates & Trends sOA Annual Meeting Session 131PD: Life Updates & Trends Timothy C. Pfeifer, FSA, MAAA Pfeifer Advisory LLC October 25, 2016

Topics for the Next Twenty Minutes Indexed Universal Life Variable Universal Life Participating Whole Life Current Assumption UL Principles-Based Reserves Charge Increases on Inforce

Indexed Universal Life— The Latest Market Landscape Second quarter 2016 sales dropped 7% over 2015 75% of sales by independent agent channel (declining) 20% of individual life premium in Q2 Transamerica has vaulted into leadership position in sales, followed by Pacific Life Fourteen carriers positioned to sell over $50 million in IUL premium this year Most players selling multiple IUL versions which meet different needs of accumulation, income, and protection guarantees

Indexed Universal Life— AG49 and Its After-Effects Stage 1 – Effective Last Fall Benchmark Index Account, Formats, Illustration Actuary Guidance Stage 2 –Effective Spring Participating Loan leverage limits, additional disclosures Stage 3 – Fine Tuning Allow for Tiered Caps, tighten Alternative Scale Stage 4 – ? Apply to inforce After-Effects Re-opening of Illustration Model Regulation More back-end bonuses, tilted load scales Uncertain impact on sales

Variable UL Back to Its Declining Ways Year-to-Date Sales Down 12% Substantial attention on IUL DB Guarantees losing competitiveness Top Heavy Product Line Top 10 carriers account for 85% Virtually no new entrants Design Considerations Stair-step M&E charges like persistency bonus Hybrid Indexed/VUL structure PBR/ 2017 CSO Unlikely to help VUL much

Whole Life Continues Its Powerful March Forward Sales Growth Manufacturers 8% YTD 2016 37% of Individual Life sales Top six writers are large mutuals Stock carriers represent second tier with SI products Rationale Future Low interest rate environment helps large mutual portfolios relatively Stable regulatory environment Index-oriented dividend scales Single-pay life PBR likely to have muted effects

Current Assumption UL (Non-Indexed) UL varietal sold by more mutuals, sometimes with death benefit guarantee rider Little focus on cash accumulation for most competitive products Low targets compared to accumulation products Primary guarantees taking center stage as compared to secondary guarantees One prominent carrier continues to be the competitive center of attention

Principles-Based Reserves (PBR) Shock & Awe Valuation Actuaries Pricing will never be the same More risk for Pricing Actuary Fewer products Unanswered questions Financial Actuaries Risk Management Product Actuaries Path: Term ULSG CAUL IUL WL VUL

Charge Increases on Inforce UL Mixed record of success in litigation New Plaintiffs’ Tactic – even if no COI changes, should have been lowered Contractual language firmed up Significant Negative Press STOLI Exposures Still in Spotlight

Timothy C. Pfeifer, FSA, MAAA Thank You Timothy C. Pfeifer, FSA, MAAA Pfeifer Advisory LLC www.pfeiferadvisory.com