Timothy C. Pfeifer, FSA, MAAA Pfeifer Advisory LLC April 17, 2013 LOMA/ LIMRA/SOA Life Insurance Conference

2  Sales in 2012 reached at least $1.3 billion  Continuation of ten-year trend of average premium growth of about 30% (34% in 2012)  Strong growth by National Western, Allianz Life, American General  New entrants poised to enter  Top four carriers nearly half the market  Some insurers likely never to offer Index UL  Product is now mainstream, well suited for low interest rate environment Market Profile Indexed Universal Life

1 year3 year5 year Large-cap (vs. S&P 500) 63.3%86.5%75.4% Medium-cap (vs. S&P 400) 80.5%90.2%90.0% Small-cap (vs. S&P 600) 66.5%83.1%82.8% All US Equity (vs. S&P 1500) 68.2%83.8%79.2% 3 Source: Standard & Poors, December 2012 SPIVA Scorecard

4 Strengthened death benefit guarantees, but not competitive for single and limited pay Treasury-Indexed UL Policy loan designs which control divergence between AV and Loan Balance New index crediting approaches, but S&P variations and rainbows dominate Focus on 25-year look back bogey for index selection vis-à-vis illustrations Death benefit paid as a stream Addition of LTC and chronic illness features

5 Sales Illustrations Lack of Uniformity ACLI Task Force-25yr LB Loan Performance Inforce Illustration Capabilities Front-ended COIs, Expense Loads Not as viable in rising interest rate environment Nearly Lapse Supported Life expectancy adequate? Shadow Accounts? Pressure to Provide Strong DB Guarantees Simplified Issue Survivorship New Indices New Directions

Variable Life Sales: Premium = 0% growth Count = (10)% growth COLI and Private Placement Sales very Influential in these Numbers Source: LIMRA A.Analysis of ability to add competitive death benefit features B.VUL not subject to AG38, but VUL has its own reserve rules C.Only one carrier has really shaken market with competitive DBG on VUL

7 Recrafted products from existing players, not new players Reaction to lowered valuation interest rates Insertion of Indexed Accounts into VUL, a la VAs Meaningful chatter about guaranteed income/withdrawal features Inclusion of LTC and Chronic Illness Components

8 Low interest rates challenge the competitive illustration story Some carriers have migrated away from SGUL to a non-guaranteed, but competitive, premium-to-carry structure Modest period of true no-lapse guarantee death benefits Limited pay scenarios can be priced more attractively due to lack of guarantee

9 Limitations of Premium Payments impact Single Pays Rates increased as of January 1, 2013 if not sooner Shift to Single Tier Shadow Accounts Another round of pricing changes in early Q3 Older ages seeing the biggest price bumps Trimming of commissions

Timothy C. Pfeifer, FSA, MAAA