FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC Understanding American General’s Index Strategies Presented by…

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC Agenda  Why do we use index strategies?  Options – Calls The Basics  Which Index?  1 Year Point-to-Point  5 Year Point-to-Point  The Power Of Hindsight Crediting  Which Strategy is Best?

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC Why Does An Insurance Carrier Use Index Strategies?

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC Fixed UL American General AG’s General Account 2 Policy Premium 3 Net Premium Crediting Rate Crediting Rate Crediting Rate Liability Assets Match Liability 1 Indexed UL Participation Limits Index Credit Liability Assets Do Not Match Liability 4 Guaranteed Floor Investment Bank 5 Hedging Budget 6 Indexed Liability Budget 7 Indexed Credit 8 Liability Hedging Costs Assets Match Liabilities It’s All About Matching Liabilities

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC Definition of 'Call Option'  An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period. Source: What Do We Use To Hedge?

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC Understanding A Call Option Source:

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC Bullish or Bearish?

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC  What % of the years in any of the decades since the Great Depression has the S&P increased in value?  There were 8 decades since the Great Depression  1930s: 40% of the years (Great Depression Decade)  1940s: 70% of the years (World War 2 Decade)  1950s: 80% of the years  1960s: 70% of the years  1970s: 70% of the years (High inflation/interest rates)  1980s: 90% of the years  1990s: 90% of the years  2000s: 60% of the years (Dot Com, 9/11 and the Great Recession) IUL is Bullish!

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC  A hypothetical group of securities, typically representing a particular market or sector  The securities in an index are weighted and measure changes within a particular financial market  AG uses “Price Indices” which exclude dividends  “Total Return Indices” include dividends What Is An Index?

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC What Index To Use?

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC Index Usage Breakdown 3 First-year premium allocations

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC IUL Terminology INDEX  The benchmark used for measurement to determine interest to be credited to the policy  What indices does American General use?

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC S&P 500 An index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC Dow Jones EURO STOXX 50 The EURO STOXX 50 Index, Europe's leading Blue-chip index for the Eurozone, provides a Blue-chip representation of supersector leaders in the Eurozone. The index covers 50 stocks from 12 Eurozone countries: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. The EURO STOXX 50 Index is licensed to financial institutions to serve as underlying for a wide range of investment products such as Exchange Traded Funds (ETF), Futures and Options, and structured products worldwide.

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC Hang Seng A market capitalization-weighted index of 40 of the largest companies that trade on the Hong Kong Exchange. The Hang Seng Index is maintained by a subsidiary of Hang Seng Bank, and has been published since The index aims to capture the leadership of the Hong Kong exchange, and covers approximately 65% of its total market capitalization. The Hang Seng members are also classified into one of four sub-indexes based on the main lines of business including commerce and industry, finance, utilities and properties.

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC 3-YearTerm End Point 1-Year Point-to-Point 2-Year Point-to-Point Monthly Averaging High Water Mark Monthly Point-to-Point Multiple Index 5-Year Point-to-Point Biennial Term End Point So Many Crediting Strategies…

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC It is based on combining three moving parts: 1.The equity index or indices used 2.Index term method and 3.Either a cap rate or a participation rate What makes up the crediting methodology?

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC Index Interest Crediting Methods Whenever the index is above the floor, an account will be credited by either one of two methods:  CAP RATE: The index interest rate up to a specified limit (the ‘cap’), such as 12% that can be applied to the policy.  PARTICIPATION RATE: A specified percentage (the participation) of the index’s increase used in crediting interest to the policy, (e.g., 60%). For BOTH Methods: The account will never be credited with less than the guaranteed ‘floor’ rate, typically between 0 - 2%, regardless of the performance of the index.

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC Cap Rate 12% Participation Rate 60% = 20% Breakeven Point Which One Is Better Cap or Participation Rate?

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC Source: Just Measuring The Difference Between Two Points In Time 1 Year Point-to-Point

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC Point-to-Point - Cap Example: Assume a cap of 10% (participation rate of 100%) and a guarantee of 1%:  If the index increases 8%, policy credited 8% (100% x 8%)  If the index increases 20%, policy credited 10% (100% x 10%)  If the index increases 0%, policy credited 1% (guarantee rate)  If the index decreases 10%, policy credited 1% (guarantee rate) Point to Point: the period of time over which the index is being measured. Each index term has a beginning date and an ending date.

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC Point-to-Point - Participation Example: Assuming no cap, a participation rate of 60% and a guarantee of 2%:  If the index increases 10% policy credited 6% (60% x 10%)  If the index increases 50%, policy credited 30% (60% x 50%)  If the index increases 0%, policy credited 2% (guarantee rate)  If the index decreases 10%, policy credited 2% (guarantee rate) Participation: the percentage of positive index movement which will be used in the crediting calculation Acts as one factor in determining a ceiling on crediting rate of the policy

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC S&P Year Point-to-Point Change = 60% 60% x 25% = 15% S&P Year Point-to-Point Change = 60% 60% x 25% = 15% 15% EURO STOXX 5 Year Point-to-Point Change = -28% EURO STOXX 5 Year Point-to-Point Change = -28% Hang Seng 5 Year Point-to-Point Change = 120% 120% x 75% = 90% Hang Seng 5 Year Point-to-Point Change = 120% 120% x 75% = 90% 90% + + = 105% 60% X 63% = = Adjusted Index Return Participation Rate Index Return 5 Year Point-to-Point - Participation

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC Overweighting Option vs. Equal Weighting Overweighting Approach Equal Weighting This example does not take into consideration option costs, participation rates, insurance loads, and other factors that would affect the actual results within a life insurance policy. Indices 01/01/07 12/31/11 Performance Weighting % Index A 1, , % Index B , % Index C 10, , % Yr Period Hindsight Option Growth (75/25/0 weighting) Equal Weight Option Growth (33.33% per index) Overweighting Outperforms Example Weighted Option Growth (50/30/20 weighting) Weighted Approach 38.67% 64.44%

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC Elite IndexRate Declared Interest Account3.00% Minimum Guarantee3.00% Cap Rate Index Account Cap Rate10.75% Illustrated Rate6.96% Minimum Guarantee1.00% Participation Rate Index Account Participation Rate60% Illustrated Rate7.60% Minimum Guarantee2.00% Elite Index Rates Current as of 04/10/2013

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC AG Choice Index GUL ® Rate Declared Interest Account3.20% Minimum Guarantee2.00% 1-Year Cap Rate Index Account Cap Rate11.50% Illustrated Rate7.30% Minimum Guarantee1.00% 5-Year Participation Rate Index Account Participation Rate65% Illustrated Rate9.48% Minimum Guarantee1.00% AG Choice Index GUL ® Rates Current as of 04/10/2013

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC Elite Global Plus ® II Rate Declared Interest Account3.00% Minimum Guarantee2.00% 5-Year Index Account Participation Rate65% Illustrated Rate9.28% Minimum Guarantee0.00% 1-Year Index Account Cap Rate10.75% Illustrated Rate6.76% Minimum Guarantee0.25% Elite Global Plus ® II Rates Current as of 04/10/2013

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC Which Strategy is Best in the Long Term?

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC  The best strategy is the one that is most aligned with the client’s opportunity cost & risk tolerance preferences  Companies primarily focus on the historical performance of a strategy using the current cap (or spread or participation)  We know these index parameters can and will change over time  What may not be clear is that some strategies have to change more than others when market conditions change. Which Strategy?

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC Questions

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC Policies issued by: American General Life Insurance Company (AGL) 2727-A Allen Parkway, Houston, TX Issued by American General Life Insurance Company (AGL) Policy Form No , Policy Form No , Policy Form No The underwriting risks, financial and contractual obligations and support functions associated with the products issued by AGL are its responsibility. Guarantees are subject to the claims-paying ability of the issuing insurance company. AGL does not solicit business in the state of New York. Policies and riders not available in all states. American General Life Companies, is the marketing name for a group of affiliated domestic life insurers, including AGL. Prior to soliciting business, be certain that you are appropriately licensed and appointed with the insurer and that the product has been approved for sale by the insurer in that state. If uncertain, please contact your American General Life Companies representative for assistance. Important: Do not state or imply that the purchase of an index universal life product is an investment or a means of participating in “securities,” “markets,” “stocks,” or “stock market index.” AGLC ©2013. All rights reserved.