Timothy C. Pfeifer, FSA, MAAAPfeifer Advisory LLC April 17, 2013

LOMA/LOMA/LIMRA/SOALIMRA/SOA Life Insurance Conference Life Insurance Conference

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Sales in 2012 reached at least $1.3 billion

Continuation of ten-year trend of average premium growth of about 30% (34% in 2012)

Strong growth by National Western, Allianz Life, American General

New entrants poised to enter

Top four carriers nearly half the market

Some insurers likely never to offer Index UL

Product is now mainstream, well suited for low interest rate environment

Market ProfileMarket ProfileIndexed Universal LifeIndexed Universal Life

1 year 3 year 5 year

Large-cap(vs. S&P 500)

63.3% 86.5% 75.4%

Medium-cap(vs. S&P 400)

80.5% 90.2% 90.0%

Small-cap(vs. S&P 600)

66.5% 83.1% 82.8%

All US Equity(vs. S&P 1500)

68.2% 83.8% 79.2%

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Source: Standard & Poors, December 2012 SPIVA Scorecard

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Strengthened death benefit guarantees, but not

competitive for single and limited pay

Strengthened death benefit guarantees, but not

competitive for single and limited pay

Treasury-Indexed ULTreasury-Indexed UL

Policy loan designs which control divergence between

AV and Loan Balance

Policy loan designs which control divergence between

AV and Loan Balance

New index crediting approaches, but S&P

variations and rainbows dominate

New index crediting approaches, but S&P

variations and rainbows dominate

Focus on 25-year look back bogey for index selection

vis-à-vis illustrations

Focus on 25-year look back bogey for index selection

vis-à-vis illustrations

Death benefit paid as a stream

Death benefit paid as a stream

Addition of LTC and chronic illness

features

Addition of LTC and chronic illness

features

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Sales Illustrations

Lack of Uniformity

ACLI Task Force-25yr LB

Loan Performance

Inforce Illustration Capabilities

Front-ended COIs, Expense Loads

Not as viable in rising interest rate environment

Nearly Lapse Supported

Life expectancy adequate?Shadow Accounts?

Pressure to Provide Strong DB Guarantees

Simplified Issue

Survivorship

New Indices

New Directions

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2012 Variable Life Sales:

Premium = 0% growth

Count = (10)% growth

COLI and Private Placement Sales very Influential in these Numbers

Source: LIMRA

A. Analysis of ability to add competitive death benefit features

B. VUL not subject to AG38, but VUL has its own reserve rules

C. Only one carrier has really shaken market with competitive DBG on VUL

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Recrafted products from existing players,

not new players

Reaction to lowered

valuation interest rates

Insertion of Indexed Accounts into VUL, a la VAs

Meaningful chatter about guaranteed income/withdrawal

featuresInclusion of LTC and

Chronic Illness Components

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Low interest rates challenge the competitive illustration storyLow interest rates challenge the competitive illustration story

Some carriers have migrated away from SGUL to a non-guaranteed, but competitive, premium-to-carry structure

Some carriers have migrated away from SGUL to a non-guaranteed, but competitive, premium-to-carry structure

Modest period of true no-lapse guarantee death benefitsModest period of true no-lapse guarantee death benefits

Limited pay scenarios can be priced more attractively due to lack of guarantee

Limited pay scenarios can be priced more attractively due to lack of guarantee

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Limitations of Premium

Payments impact Single Pays

Rates increased

as of January 1,

2013 if not

sooner

Shift to Single Tier Shadow Accounts

Another round of pricing changes in early Q3

Older ages seeing

the biggest price

bumps

Trimming of commissions

Timothy C. Pfeifer, FSA, MAAAE-mail: tpfeifer@pfeiferadvisory.com

www.pfeiferadvisory.com