1. ACTUARIALACTUARIAL Futuristic Scenarios for LTCI Session 25: February 28, 2006 Session Producer: John Timmerberg, President Timmerberg & Associates, Inc.

2. ACTUARIALACTUARIAL 2 PANEL Jim Glickman, President and CEO, LifeCare Assurance Company Greg Gurlik, Director – LTC Product Development, Northwestern Mutual John Timmerberg, President, Timmerberg & Associates, Inc.

3. ACTUARIALACTUARIAL 3 Futuristic Scenarios For LTCI In this Open Forum session, panel members will briefly present and debate a Futuristic Scenario. After each Scenario, we will look to audience members for discussion and debate.

4. ACTUARIALACTUARIAL 4 Futuristic Scenarios For LTCI Over 50% of the session will be devoted to audience participation. We will cover four or five fully developed and distinct scenarios.

5. ACTUARIALACTUARIAL 5 Futuristic Scenarios For LTCI We will discuss and debate future developments involving the following topics: –Economic developments –Product innovations –Changes in the regulatory environment –Senior health and wealth –Changes to government programs –Care delivery

6. ACTUARIALACTUARIAL 6 Scenario #1 Federal Government Action – increases employment for the over-65 Global Competition - Price Stability –Very low interest rates –Strong growth in asset values Size of LTCI market is expanded –Diverse collection of niche markets

7. ACTUARIALACTUARIAL 7 Scenario #1 - continued Product Innovations –Interest sensitive product –Product structured as a “put” on planned asset accumulation –Product with a variable elimination period, based upon 50% of home equity value

8. ACTUARIALACTUARIAL 8 Scenario #2 LTCI through annuities Inexpensive home testing for genetic indicators Liberalized underwriting for employer groups LTCI through expanded 401(k) programs

9. ACTUARIALACTUARIAL 9 Scenario #2 - continued Medical advances impact underwriting tools and placement rates Very liberal underwriting of products written through 401(k) –Rapid expansion of market –Leads to poor early claims experience Federal Government action –LTCI is “mandatory” –Vouchers program initiated for Medicaid eligible

10. ACTUARIALACTUARIAL 10 Scenario #3 LTC piece of Medicaid is “Federalized” Higher interest rates –Lower premium –Larger market RBC and ratings agencies Aggressive entry of new companies

11. ACTUARIALACTUARIAL 11 Scenario #3 - continued Online processes –Online medical records leads to kitchen table underwriting decisions –50% sold through internet –Competitive pricing; reinsurers Competitive products leads to “day of reckoning” for several insurers

12. ACTUARIALACTUARIAL 12 Scenario #4 Substantial premium rate increases continue Industry looks for “Exceptional” rate increases –Denied Reserves: mandated tables for claim costs and claim termination rates

13. ACTUARIALACTUARIAL 13 Scenario #4 - continued Stories of impoverishment –Pressure to “solve” LTCI crisis Medicare expanded to first 180 days –Nationwide Partnership program; 3 yrs Medicare Part L is introduced –80/20 split in costs –Four standardized products Mainstream product and Market is greatly expanded