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Estate Planning Council of Indianapolis

Estate Planning Council of Indianapolis. Current State of the Life Insurance Industry Union. Timothy C. Pfeifer, FSA, MAAA Pfeifer Advisory, LLC November 19, 2009. Q. What have been the primary causes of Life/Health Insurance Company Impairments?. According to A.M. Best:.

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Estate Planning Council of Indianapolis

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  1. Estate Planning Council of Indianapolis Current State of the Life Insurance Industry Union Timothy C. Pfeifer, FSA, MAAA Pfeifer Advisory, LLC November 19, 2009

  2. Q.What have been the primary causes of Life/Health Insurance Company Impairments? According to A.M. Best:

  3. Q.What have been recent financial challenges for the Life Insurance Industry? Tight credit markets Vary wide, then narrow credit spreads Asset Writedowns Limited Capital Sales Decline Expense Overruns Poorer mortality and persistency experience

  4. Q. What has been the history of Life/Health Insurance Company Impairments?

  5. Q. Who were the Financial Impairments in 2008 in the L/H Industry? Company Key Driver Fraternal – Operating Losses Surplus depletion due to P&C problems Operating losses Operating losses, UCLs, A&H claims Poor A&H Loss Ratios, Fixed-Income Problems Investment losses (Preferred stock – FNMA) 2009 – Shenandoah Life – Asset Problems due to Subprime ACA Assurance Fremont Life Jordan Funeral & Insurance Life of America/Republic American Medical Savings Insurance Co. Standard Life of IN

  6. Q. What does the profile of L/H Industry Assets Look Like?

  7. Q. Who are the major rating agencies for Life Carriers’ Financial Strength? AM Best (A++ to B+ (secure); B to F (vulnerable)) Standard and Poor’s (Focus on ERM/Modeling) Moody’s (Generally negative on industry, particularly annuities) Fitch (Developing expertise to achieve market-influencing prominence)

  8. Q. Major Rating Agency Ratios for Company Strength Gross Change in Capital & Surplus Total Affiliated Investments to Capital & Surplus Net Income to Total Income Surplus Relief Non-Admitted Assets to Assets Change in Premium Ratio

  9. Q. What is the Prognosis for the Industry? • Despite media commentary, industry has withstood crisis well • Problems have been centered on asset side of balance sheet • Advantage goes to large companies, mutuals • Crisis has highlighted benefits of diversifications • Small/Midsize companies – sell blocks, leave certain LOB, consolidate

  10. Q. What are the Key Drivers of Future Financial Stability? Moderation of Competitive Environment (e.g. GLBs) Levels of Interest Rates (esp. mid-term) Ability of Reinsurance Companies to Provide Support Improvement in Product Design Improvement in Equity and Credit Markets

  11. Q. What are the Likely Trends in Life Insurer Product Development? Fewer product launches De-risking of certain products (e.g., VA, VUL) Re-aligned focus to aging Baby Boomers

  12. Q. What are the Likely Trends in Life Insurer Product Development? Prices generally expected to rise Slippage in Variable Life Upsurge in Indexed Life Continued development of LTC Combos

  13. Q. What are the Likely Trends in Life Insurance Product Development? Inforce Management Uneven Playing Field for Capital Solutions Product moves to address continued Life Settlement activities Income Guarantees Overlaid on Mutual Funds, Managed Assets Strong Term Sales and Product Strategy

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