Society of Actuaries annual meeting 111 Panel Discussion Indexed Product Deep Dive (Life and Annuity) Timothy C. Pfeifer, FSA, MAAA Pfeifer Advisory LLC October 13, 2015

Fixed Indexed Annuity Sales Have Performed Impressively, Despite a Difficult Environment Average size of FIA sale popped in mid-2013, now nearly $90, year SC and 7-year SC Domination– two thirds of sales pay bonuses S&P 500 Accounts for 55% of sales, Hybrid Indexes account for 28% Banks and Broker/Deale rs sold 25% of FIAs, Independent Agents 70% Q2 YTD Sales $23.6 billion, up about 1% over

FIA Sales Show Substantial Dispersion in Terms of Meaningful Carriers, but Overall Production is Dominated by 6–8 Life Insurers Top Six Players At least 27 carriers are on track to sell $250 million or more of FIA in 2015 At least 36 carriers are on track to sell $50 million or more of FIA in Allianz Life 2.American Equity 3.Great American 4.Athene USA 5.Security Benefit Life 6.American General Life Notable by their absence  Large Mutual Life Insurers  Most of the largest Variable Annuity Insurers 3

Majority of major players offer one or more investment firm-created or index sponsor-created VC indexes with a spread (uncapped) Carriers targeting niches and sophisticated treatment of Benefit Bases More 7-8 year products under development, usually without Premium Bonuses, but generous crediting bonuses on 10+ year Surrender Charge products Product Design is Unrelenting on FIAs, but Several Major Themes Continue to Dominate Bonus and Surrender Charges Guaranteed Lifetime Withdrawal Benefits Volatility Controlled Indexes A B C Much higher caps, par rates on Benefit Base De-emphasize Accumulation Gender Distinctions Participating Income Simple Interest Roll-ups Stacked Benefit Bases 4

Challenges for the Indexed Annuity Space Going Forward Environmental Low Interest Rates Negative Press Unknown Policyholder Behavior Fierce Competition Regulatory DOL Fiduciary Outcome New Reserve Table Impact on GLWBs Nonforfeiture Compliance with GLWB Charges Illustration Practices Despite all of these, I remain very bullish on Indexed Annuities 5

Indexed Life Sales Have Been Outstanding over the Past Five Years, and Momentum Continues Average size Death Benefit for IUL is now $479,000, slightly rising 10-year SC and 15-year SC periods dominate – nothing beyond 15 years S&P 500 Accounts for 60% of sales, Hybrid Indexes only 3.5% (Rainbows 25%) Independent Agents accounted for 73% of sales, Career Agents 16% Q2 YTD Sales $838 million, up about 20% over

* Dump-ins not reflected. A very different Sales Ranking would result if Dump-ins were included. Indexed UL Sales Show a Considerably Broader Dispersion of Sales by Carrier, and a Regular Re-positioning of Industry Leaders Top Six Players At least 8 carriers are on track to sell $75 million* or more of IUL premium in 2015 At least 12 carriers are on track to sell $50 million* or more of IUL premium in Transamerica 2.Pacific Life 3.National Life/LSW 4.Minnesota Life 5.Nationwide 6.AXA US Notable by their absence  Large Mutual Life Insurers Notable by their presence  Most of the Variable UL Insurers 7

In Volatility Controlled Indices, Lifetime Income Riders. On Death Benefit Guarantees The Recent Product Design Trends in the IUL Space Have Been Largely Related to the New Illustration Guideline Persistency Bonuses – Credited Rate enhancements, refund of charges Accounts with Non-zero Guarantees – Creates need for Hypothetical Benchmark Other Account Variations – Multi-year Crediting, Non-APTP structure, Cumulative Return Guarantees Interest In: Stable Focus Still Relatively Little Activity 8

Challenges for the Indexed Universal Life Space Going Forward Environmental Low Interest Rates Weak Policy Performance Relative to Illustrations Unknown Policyholder Behavior Fierce Competition NAIC Illustration Rules, and Associated Ambiguity Rise in Litigation Impact of PBR Tax Questions Surrounding Linked-Benefits, Lifetime Income Once again, despite these challenges, the IUL outlook is strong. Legal/Regulatory 9

Thank You Timothy C. Pfeifer, FSA, MAAA Pfeifer Advisory LLC