1. Katie Lenzini February 9, 2011 2/9/2011 1 On the Horizon

2. Question What was the significance of the Corporation for Relief of Poor and Distressed Presbyterian Ministers and of the Poor and Distressed Widows and Children of Presbyterian Ministers? 2/9/2011 2

3. Answer 2/9/2011 3

4. Today’s Discussion 1. Market Outlook 2. Life Insurance Trends 3. Annuity Trends 4. On the Horizon 2/9/2011 4

5. Market Outlook Strengths Economic climate improved from 2008 Surviving companies stronger Increased capital Reduced expenses Potential opportunity in middle market 2/9/2011 5

6. Market Outlook Weaknesses Dependency on US, global economies Discretionary income Riskier and more complicated products Non-insurance competitors (banks, telemarketing, internet) Overall Outlook = Stable (upgraded from Negative Q2 2010) 2/9/2011 6

7. Market Outlook Qualities of Top Insurers Strong brand name Broad & varied distribution channel Product diversity Top quality service Advanced technology Pricing power 2/9/2011 7

8. Question Which life insurer held the most assets at year-end 2009? 2/9/2011 8

9. Answer 2/9/2011 9

10. Market Outlook Uncertainties Investments Interest Rates Distribution 2/9/2011 10

11. Question Where do you go for consumer information? 2/9/2011 11

12. U.S. Individual Life Sales Trends 2/9/2011 12 Source: LIMRA’s U.S. Individual Life Insurance Sales Trends, 1975-2009

13. Term Life Insurance Most popular product From insurer’s perspective: Competitive market Little flexibility in premium changes Sensitive to mortality 2/9/2011 13

14. Whole Life High level premiums, not flexible for policyholder From insurer’s perspective: Mutual company uses dividends to reflect experience Profits affected by mortality, interest, expenses, and persistency Resurgence in popularity 2/9/2011 14

15. Universal Life Flexible premiums Unbundled product Secondary Guarantees Specified Premium Shadow Accounts Concern over profitability & level of reserves 2/9/2011 15

16. Variable Universal Life Sales followed stock market Peaked in 2000 Equity-Indexed UL 2/9/2011 16

17. Variable Market Share 2/9/2011 Source: LIMRA - The Future of Flexible Premium Products 17

18. U.S. Individual Life Annualized Premium Market Share 2/9/2011 18 Source: LIMRA’s U.S. Individual Life Insurance Sales Trends, 1975-2009

19. Life Insurance Ownership Percentage of Households 2/9/2011 19 Source: LIMRA Household Trends in U.S. Life Insurance Ownership

20. Life Insurance Ownership Amount of Life Insurance 2/9/2011 20 Source: LIMRA Household Trends in U.S. Life Insurance Ownership

21. Annuity Trends Variable or Fixed Deferred and Immediate Tax-qualified available 2/9/2011 21

22. Annuity Sales Trends ($bil) 2/9/2011 22 Source: LIMRA U.S. Individual Annuity Yearbook & U.S. Individual Annuities

23. Variable Annuities Sales following stock market trends Guarantees on account value Guaranteed minimum death benefit Guaranteed living benefits Accumulation Withdrawal Income From insurer’s perspective: Risk management and hedging Asymmetrical risk Revenues derived from % assets When stocks decline, so do revenues collected 2/9/2011 23

24. Fixed Annuities – Deferred Guaranteed interest rates Spread from fixed account earnings rate Equity Indexed Growing market share 2/9/2011 24 Source: LIMRA U.S. Individual Annuity Yearbook & U.S. Individual Annuities

25. Fixed Annuities - Immediate Poor sales Opportunity for growth Mitigate post retirement uncertainties 2/9/2011 25

26. Question Which state was the first to forbid gender discrimination in insurance rate-setting? 2/9/2011 26

27. Answer 2/9/2011 27

28. On the Horizon Regulation Principle Based Approach Baby boomers LTC combination products Longevity insurance Pandemic Scenario Life Settlements Genetic Testing 2/9/2011 28

29. Katie Lenzini State Farm Life/Health Actuarial Katie.Lenzini.QVBL@statefarm.com 2/9/2011 29