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					           Crafting Successful Product
          Portfolios for 2010 and Beyond

Timothy C. Pfeifer, FSA, MAAA    March 2, 2010
Pfeifer Advisory LLC
           Our Panel Offers Two Distinct
          Perspectives on Future Products

 Consultant’s Perspective:       Tim Pfeifer

 Direct Insurer Perspective:     Phil Polkinghorn

Our focus will be the future of life insurance and
annuity products, over the next five to ten years.

     Primary Drivers of Product Portfolios of Future
1.    Aversion to risk               5. Tougher financial
2.    Doubts about value of active      regulation and sales
      management                        practice regulation
3.    Increasing role of             6. Concerns about inflation
      technology in commerce         7. Willingness to flatten sales
4.    Accommodating product             compensation
      and tax regulatory             8. 50-70 year old core
      environments for income,          clientele
             Profitability Dynamics of the Future

Depends on risk-free rates, but
                                                        Capital expectations have
    most lines sold through
                                                      continually increased, and not
 independent channels will be
                                                             likely to decline
       10% businesses

       Greater profitability potential in   Successful efforts to de-heap
           low-to-mid market for             upfront commissions key to
             customers/agents                     unlock more profit
                 Selling Dynamics of the Future
Growth in sales requires re-oriented sales    •   more women, African American,
                  force                           Hispanic, Asian presence
                                              •   greater pool of intelligent new hires

Greater comfort with Internet, Online sales   •   only straightforward products, but
                                                  model still needs improvement

Adoption of external marketing principles     •   smooth purchase decision,
                                                  promote “free”, relationship building
                                                  and branding

      Middle Market versus Affluent           •   target both, but distinctly different
                        Regulation of the Future

                    +                                               -
• Favorable tax elements, particularly        • Disclosure and suitability
  surrounding income, LTC

• Interstate Compact-speed, not               • Increased focus on securities
  creativity                                    treatment

• Principles-based elements (Term)            • Principles-based elements (VUL,

       Biggest unknown is Federal vs. State (primarily financial regulation)

                 How Will Products Get Done
                      in the Future?

   Fewer                   More
  Products               Modularity

  Focus on
Efficiency-to-            Execution       Aim for True
    Market                   vs.          Distribution
    versus                Creativity      Partnerships

What Products/Concepts will Drive the Headlines
          Between Now and 2020?
           Single most important factor is level of mid-term interest rates

                                 Providing income
    Need for Portfolio         guarantees inside and           Many patents, but
       Balance                  outside of traditional          less protection
                                insurance products

 Thumbs Up:                  Thumbs Down:
                                                             Mixed Results
 • Term                      • Fewer VA Subaccounts
                                                             • Combo products
 • Indexed Life              • Variable UL
                                                             • Competitive
 • Inflation-linked          • Steeply heaped comp
                                                               simplified issue
 • Rebound of VA             • Longevity Insurance in
                                                             • NLG UL
   guarantees                  present form