1. 2009 NAVA Marketing Conference
A Look Back and a Look Forward The U.S. Variable Annuity Product Landscape
Timothy C. Pfeifer, FSA
Pfeifer Advisory LLC
2009 NAVA Marketing Conference

2. Resulting Product Reaction
Today and Yesterday
Market Drivers
Desire for Guarantee
Market Collapse and Volatility
Aging Population
Suitability of Sales
Price Sensitivity
Desire for Simplicity
Resulting Product Reaction
Guaranteed Living Benefits Arms Race and GMDBs; Fixed Accounts Target Date Funds
Increased prices, shaved or eliminated benefits
LTC Combos
Income Focus Asset Allocation, L Shares, C Shares
Plateauing/falling compensation
Fewer investment subaccounts, simpler loan structures

3. The Key Components of Recent VA Product Activity
Re-trenching of
Guaranteed Living
Benefits
Trimmed M&E’s
Offset by Higher
Rider Charges
Focused efforts to
Adapt Products to
Select Distribution
Channels
Life/Health
Combination
Features
Gradual realignment
of compensation
to asset-based
Streamlining of
Subaccount
Choices

4. What Do Trends in VA Sales Tell Us?
Market share percentage of Qualified Sales almost doubled over last ten years.
Income guarantees, guaranteed death and living benefits, flexibility all resonating.

5. What Do Trends in VA Sales Tell Us?
Market share percentage of Qualified Sales almost doubled over last ten years.
Income guarantees, guaranteed death and living benefits, flexibility all resonating.
Meaningful shifting of sales leaders occurred in 2008.
GLBs certainly partially explain, but focused wholesaling and new distribution arrangements also key.

6. What Do Trends in VA Sales Tell Us?
Continued growth in share of bonus VA Products.
May be hard to sustain due to capital costs, but address client fears.

7. What Do Trends in VA Sales Tell Us?
Continued growth in share of bonus VA Products.
May be hard to sustain due to capital costs, but address client fears.
B- and L-share products continue to dominate VA market.
Life insurers have positioned themselves to take on significant persistency and investment return risk.

8. What Product Trends May Be in Store for 2009?
Paring back of GLBs, increased prices
Re-structuring of compensation to share risk
Serious attempts to raise A-share penetration
Capital Conserving
Elements
Continued interest in Bonus Products
Return of appealing Dollar Cost Averaging
Greater focus on fixed account opportunities
Attracting and
Keeping the
Cautious Customer

9. Longer Term, What Does the VA Market Look Like?
Industry consolidation, once capital appears.
Greater market convergence of VA and FIA.
Intensification of retention efforts and associated product solutions.
Given developments in Social Security, Defined Benefit plans, even greater focus on income solutions of all types.