1. Midland National Life ® Insurance Company North American Company for Life and Health Insurance ® Sammons ® Corporate Markets Group Sammons Securities Company ®, LLC. (Member FINRA/SIPC) Sammons Retirement Solutions SM, Inc. Sammons Financial Network SM, LLC (Member FINRA) Sammons Financial Group Affiliate Companies 18122 PRT 02-13 Annuity Experience Studies March 12, 2013 Ingrid Guttin FSA, MAAA

2. Midland National Life ® Insurance Company North American Company for Life and Health Insurance ® Sammons ® Corporate Markets Group Sammons Securities Company ®, LLC. (Member FINRA/SIPC) Sammons Retirement Solutions SM, Inc. Sammons Financial Network SM, LLC (Member FINRA) Sammons Financial Group Affiliate Companies 18122 PRT 02-13 Company Background Annuity Experience Needs Annuity Experience Methodology Dynamic Annuity Environment Challenge: Annuity Lapses Agenda

3. Midland National Life ® Insurance Company North American Company for Life and Health Insurance ® Sammons ® Corporate Markets Group Sammons Securities Company ®, LLC. (Member FINRA/SIPC) Sammons Retirement Solutions SM, Inc. Sammons Financial Network SM, LLC (Member FINRA) Sammons Financial Group Affiliate Companies 18122 PRT 02-13 Affiliated Companies History Multiple Locations Sammons Annuity Group Annuity Inforce = $25B Company Background

4. Midland National Life ® Insurance Company North American Company for Life and Health Insurance ® Sammons ® Corporate Markets Group Sammons Securities Company ®, LLC. (Member FINRA/SIPC) Sammons Retirement Solutions SM, Inc. Sammons Financial Network SM, LLC (Member FINRA) Sammons Financial Group Affiliate Companies 18122 PRT 02-13 Annuity Experience Needs Withdrawals Lapses Mortality Premiums Policyholder Behavior Agent Behavior Rider Utilization Product Development ALM/Modeling Valuation Business Management

5. Midland National Life ® Insurance Company North American Company for Life and Health Insurance ® Sammons ® Corporate Markets Group Sammons Securities Company ®, LLC. (Member FINRA/SIPC) Sammons Retirement Solutions SM, Inc. Sammons Financial Network SM, LLC (Member FINRA) Sammons Financial Group Affiliate Companies 18122 PRT 02-13 Trending Modeling Methodology User Needs External Factors Annuity Experience Methodology Credibility Historical Data is the easy part…

6. Midland National Life ® Insurance Company North American Company for Life and Health Insurance ® Sammons ® Corporate Markets Group Sammons Securities Company ®, LLC. (Member FINRA/SIPC) Sammons Retirement Solutions SM, Inc. Sammons Financial Network SM, LLC (Member FINRA) Sammons Financial Group Affiliate Companies 18122 PRT 02-13 Dynamic Annuity Environment GLWB FIA with MVA Premium Bonus Rates based on Barclays U.S. Long Credit Index ?

7. Midland National Life ® Insurance Company North American Company for Life and Health Insurance ® Sammons ® Corporate Markets Group Sammons Securities Company ®, LLC. (Member FINRA/SIPC) Sammons Retirement Solutions SM, Inc. Sammons Financial Network SM, LLC (Member FINRA) Sammons Financial Group Affiliate Companies 18122 PRT 02-13 Challenge: Annuity Lapses Lapse ExperienceSurrender Value/Account Value Bonus Influence Policyholder Perspective Focus Group

8. Midland National Life ® Insurance Company North American Company for Life and Health Insurance ® Sammons ® Corporate Markets Group Sammons Securities Company ®, LLC. (Member FINRA/SIPC) Sammons Retirement Solutions SM, Inc. Sammons Financial Network SM, LLC (Member FINRA) Sammons Financial Group Affiliate Companies 18122 PRT 02-13 Thank You! Ingrid Guttin FSA, MAAA iguttin@sfgmembers.com

9. March 12 th, 2013 Experience Studies Michael Chen, FCAS MAAA

10. Experience Studies Property & Casualty Insurance The goal of a ratemaking analysis is to set the rates such that the premium charged will be appropriate to cover the losses and expenses while achieving the targeted profit for policies that will be written during a future time period. Premium = Losses + Loss Adjustment Expenses + Underwriting Expenses + Underwriting Profit. Note: Source: CAS Basic Ratemaking Manual

11. Experience Studies How do we as Actuaries accomplish this goal? There are two basic approaches for determining an overall rate level need: 1. Pure premium method The pure premium method determines an indicated average rate, not an indicated change to the current average rate. The pure premium method is generally used to determine rates of a new product where there is not internal historical experience. 2. Loss ratio method The loss ratio method is the more widely used of the two rate level indication approaches. The loss ratio method compares the estimated percentage of each premium dollar needed to cover future losses, loss adjustment expenses, and other fixed expenses to the amount of each premium dollar that is available to pay for such costs.

12. Experience Studies Rate Indication Example: (1)(2)(3)(4)(5)(6) AccidentTotalProjected Indicated YearAdjustedUltimateLossRate EndingPremiumLossesRatioWeightsChange 12/31/20083,000,000 2,000,00066.7%0.10011.1% 12/31/20098,000,000 5,000,00062.5%0.1504.2% 12/31/201012,000,000 7,000,00058.3%0.200-2.8% 12/31/201114,000,000 9,000,00064.3%0.2507.1% 12/31/201215,000,000 9,500,00063.3%0.3005.6% Total52,000,00032,500,00062.5%4.2% Weighted 62.8% 4.6% Permissible Loss Ratio = 60.0% Indicated Rate Change = ( Projected Loss Ratio / Permissible Loss Ratio ) -1

13. Experience Studies Rate Indication – Premium Adjustments  Adjustment of Premium to Current Rates Parallelogram Method Extension of Exposures  Premium Trend Company’s Own Trends Industry Trend [Insurance Services Office (ISO), National Council on Compensation Insurance (NCCI), etc.] Other Sources (Bureau of Labor and Statistics, fitting distributions)  Other Premium Adjustments Basic Limits Indications ?

14. Experience Studies Rate Indication – Loss Adjustments  Loss Development Loss Development based on Case Incurred Loss Development Method Loss Development from other methods example: Bornhuetter- Ferguson method  Loss Trend Company’s Own Trends Industry Trend (Fast Track, ISO, NCCI, etc.) Other Sources (Bureau of Labor and Statistics, fitting distributions, ?)  Large Loss Adjustments  Storm (Catastrophic) Loss Adjustments

15. Experience Studies Rate Indication – Other Adjustments / Assumptions  Credibility Standard  Complement of Credibility  Annual Weights Example of possible alternative to (10%, 15%, 20%, 25%, 30%) weights  Other Adjustments? (1)(2)(3)(4) Accident Year % Distribution ofAdjusted EndingWeightsTotal Premium Weights 12/31/200810.0%5.8% 2.5%=(10.0% * 5.8%) / 22.9% 12/31/200915.0%15.4%10.1% 12/31/201020.0%23.1%20.2% 12/31/201125.0%26.9%29.4% 12/31/201230.0%28.8%37.8% Total100.0% Sumproduct of column (2) & (3)22.9%

16. Experience Studies Besides changing rates to the full indicated rate change, what other initiatives may be used to effect the overall rate level?  Underwriting  Claims  Expenses  Other

17. Michael Chen, FCAS MAAA Actuary – PC Pricing Michael.Chen@fbfs.com Contact Information

18. Experience Studies Glen Reineke, FSA MAAA FRM March 12 th, 2013

19. Experience Studies Life & Annuity  Mortality (including a Cause of Death)  Premium Persistency (Flexible Premium Universal Life)  Surrender (and involuntary Lapse), including modifications for Dynamic Surrender formula  Partial Withdrawal (and Policy Loan Utilization)  Other policyholder characteristics Rider utilization Investment Type of activities

20. Experience Study & Assumptions Setting Process The root of the question: What should we assume in the future? While there are other purposes, this is my primary focus. One approach: Take a look at the past and adjust accordingly (Actual to Expected = A/E ratios)

21. Assumption Setting Must be coordinated with modeling efforts Even if you create the “best” (most accurate) assumption possible, you must be able to implement it in your actuarial projection models. If your model can’t implement it, have you really accomplished your objective? For example, financial credit scores (and other 3 rd party data obtained through Predictive Modeling) may provide excellent insight in to surrender behavior … but may not be implementable in to your actuarial projection models.

22. Assumptions Setting Is the past always the best predictor of the future? Could it ever lead you in the wrong direction? Must ask yourself if the past really is the best indicator of YOUR company’s future. Are there any “outliers” that should be thrown-out?

23. One example of modifying past experience Life Mortality Improvement modification example: If your company has recently adopted a mortality improvement assumption, you may want to modify your experience study to reflect your newest outlook on mortality.

24. Contact Information: Glen Reineke, FSA MAAA FRM Vice President – Product Reporting glen.reineke@avivusa.com