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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

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