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LTCI 2003The Perfect Storm

Carol Gardner

President

LifeStyle Insurance Services, Inc.

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SOURCE: LIMRA International 2002 Report

*Includes Bankers Life & Casualty, Conseco Health Insurance Co., Conseco Senior Health Insurance Co., and Pioneer Life Insurance Co.

**Includes Fortis

*** Includes Life Investors Insurance. Co. of America, Monumental Life Insurance Co., AUSA Life Insurance. Co., Inc., Peoples Benefit Life Insurance Co. Transamerica Life Insurance Co., Transamerica Occidental Life Insurance Co and Transamerica Occidental of New York.

**** Formerly Aid Association for Lutherans & Lutheran Brotherhood

Company2002 Annualized

Premium In-Force (MM)

1) GE

2) CONSECO*

3) Hancock**

4) C N A

5) Aegon***

6) Penn Treaty

7) UNUM

8) IDS

9) Thrivent****

10) Allianz

TOTAL

$ 1,466.0

874.1

711.5

487.2

430.7

345.2

263.2

249.1

205.3

155.9

$6 Billion

2002 New Premium Sales (MM)

$ 248.4

89.3

131.1

75.9

63.2

4.4

64.4

25.4

28.1

41.4

$1 Billion

02/01 Growth

1%

(9)%

31%

21%

1%

(91)%

(18)%

(11)%

(7)%

(1)%

5%

Top Individual LTC Carriers

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Number of Lives

Growth Rate

Annualized New Premium

Growth Rate

Premium per Insured

Growth Rate

GE Financial Assurance 31,084 17% $59,816,180 6% $1,924 -9%John Hancock Financial Services* 23,160 122% 45,861,943 109% 1,980 -6%CNA Insurance 11,106 16% 19,525,000 13% 1,758 -3%Lincoln Benefit Life 4,127 82% 15,838,819 162% 3,838 44%Bankers Life And Casualty 10,750 -28% 15,390,000 -27% 1,432 1%UnumProvident 9,032 32% 14,523,042 21% 1,608 -8%Prudential Long Term Care 4,498 88% 8,407,699 72% 1,869 -9%Mutual of Omaha 4,812 124% 7,177,866 120% 1,492 -2%MetLife 3,103 29% 6,421,946 39% 2,070 8%State Farm Mutual Automobile 5,082 21% 5,956,689 36% 1,172 12%State Life 1,523 -- 5,254,620 -- 3,450 --New York Life 3,463 28% 4,689,127 18% 1,354 -8%MassMutual Financial Group 2,034 31% 4,216,095 29% 2,073 -2%Northwestern Long Term Care 2,075 48% 3,600,000 59% 1,735 7%Allianz Long Term Care 2,152 -61% 3,522,045 -75% 1,637 -37%Thrivent Financial for Lutherans 1,635 -62% 2,914,382 -55% 1,782 19%Equitable Life and Casualty 1,103 46% 2,217,936 50% 2,011 2%TIAA-CREF 1,059 7% 1,690,028 3% 1,596 -3%MedAmerica 742 -34% 1,490,000 -27% 2,008 10%Fortis Long Term Care* 359 -86% 1,322,760 -70% -- --Knights of Columbus 954 69% 970,149 49% 1,017 -12%Guarantee Trust Life 964 7% 943,409 -17% 979 -23%American Family Life 196 -16% 343,168 14% 1,751 35%

All Participants 125,013 14% $232,092,903 14% $1,851 -1%

Total Long-Term Care Insurance Sales

*Includes Fortis

LTCI Sales: 1Q-2003LTCI Sales: 1Q-2003

SOURCE: LIMRA International 2002 Report

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2002 Industry Sales Results

2002 new sales of 1.2 billion, up 18% over 2001 sales

Excluding Federal program, sales up 7% 2003 sales likely to increase by 25% 60% of 2002 sales produced by top six

companies 2003 sales becoming more concentrated

among fewer carriers

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Product is Target of Consumer Advocates

Privacy Legislation Suitability Standards Agent Education Requirements Required Provisions Rate Stabilization

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Carriers are Struggling

Limited experience Historical aggressive pricing & benefits High claims Low lapse rates Poor investment results-low interest

rate environment

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Carrier Activity

Record number of companies exit market Large multi-line companies increasing

fastest Prices increasing Tougher underwriting standards

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Companies Exiting…

IDS Life (10th largest in 2002) Thrivent Financial for Lutherans (11th largest in

2002) American Fidelity Assurance CNA (Valley Forge still available) Fortis-merged into John Hancock Two Aegon Subsidiaries Central States Health & Life of Omaha West Coast Life Life and Health of America

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News of Industry Leaders-John Hancock

June, filed new products in 50 states, rates higher by 20%-30%

June, UW guideline changes-will no longer insure insulin-dependent diabetics or applicant with history of stroke

June, reduced discounts & commissions on Sponsored Group programs

May, Preferred not available with lifetime benefits, except in CA

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News of Industry Leaders-CNA

June, no longer offer Affinity and Preferred Employer Group programs

May, limited presence in LTC market. New plan approved in only 23 states—no plan to release in more states

May, new rate increases up to 50%, rate increase on 1997 business

April, largest distributor, LTCP Inc., exits LTC business

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News of Industry Leaders-UnumProvident

June, announced the move away from brokerage and field office support for individual sales

June, announced that brokers will have contracts canceled Dec.1st, 2003—everyone will be on ‘rewards’ program, low commissions

Feb., pulled Advantage One product from market

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News of Industry Leaders-Conseco

On-going financial problems-Chapter 11 Raised rates across country Class action suit by policyholders April, announces that will no longer sell LTCI

through independent producers but will continue to sell through its Banker’s Life & Casualty unit

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Acute Need for LTCI

Baby boomers are aging Baby boomers haven’t been good ‘savers’ Baby boomers will demand certain lifestyle in

retired years People are living longer Government struggling with Medicare &

Medicaid

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People Need a Trusted Advisor to Help Them Navigate the Rough Sea

Agent Financial Advisor Friend Group Endorsement Employer

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Deliver the Good News….

Even with higher premiums, the cost of a lifetime of premiums usually equals a few months of care

A low interest rate environment decreases the cost for housing and credit financing—this offsets the higher cost of insurance

The younger you are when you buy, the lower the premium

New products have great benefits

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LifeStyle’s LTCI Choices for Individuals

MetLife

John Hancock

GE Capital

Transamerica

Prudential

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LifeStyle’s LTCI Choices for Multi-Life

MetLife

Transamerica

UnumProvident