Life Insurance Trends in US

June 4, 2010 2

World Life & Non-Life Premiums – Some Facts

4269249017792008

Non-Life Premium Life Premium TotalYear

5

4

3

2

1

Rank

242

273

449

473

1240

Total Premium

5.69

6.39

10.54

11.08

29.06

% of Total World Premium

111131Germany

18192France

342107United Kingdom

367106Japan

578662United States

Non-Life Premium Life PremiumCountry

* Note: All figures in USD Million

• Premiums fell in 2008 due to weak new business growth in most of the lines of life insurance business and softer rates in non-life businesses.

Source: Swiss Re World Insurance report

June 4, 2010 3

Trends in IndustryPressure on pricing -

Managing pricing cycle

Intense competition Pressure on profitability

Pressure on cost containment

Emphasis on volume of new business

Focus on investment profits – Investment

performance

Trend

Increase in complexity of

products

Emergence and Pricing new risks

Change in risk profiles of customers

Capital and Reinsurance availability

Fraud Long tail Liabilities

Trend

Change in portfolio of investments

Growing demand for healthcare

Increase in number of claims

Higher claims outpay

Emphasis on retirement, pension & health products

Re-thinking of marketing/distributi

-on strategies

Trend

Ageing baby boomer population and the rise

of Gen Y

Consolidation through M&A

Exposed to regulations and new

compliances (accounting, taxation

etc)

Exposed to diverse customer profiles or Changing customer

attitudes

Trend

Insurance companies are expanding operations and

Regulatory changes

Turbulent Economic and Financial market

environment

Changing risks management

techniques and Products

Sources: PWC, KPMG

June 4, 2010 4

Demographic Profile in US

Source: Swiss Re, Deloitte

June 4, 2010 5

Trends in Life Insurance Market in US – Revenue mix

Industry Revenue mix

327.63 347.37

184.22 169.98

050

100150200250300350400

2007 2008

Year

$ billi

on

Annuities

Life

•Traditional life insurance is no longer the primary business of many companies in the life/health insurance industry. Today, the emphasis has shifted to the underwriting of annuities.

•The recession and the upheaval in the equity markets have had a profound effect on the mix of new individual annuity business and on product design. The downward trend in the equities market has made a difficult environment for variable annuity sales in 2008 and for first 3 quarters of 2009. Total individual annualized sales are down 19% year to date in 2009.

Source: LIMRA, III

June 4, 2010 6

Distribution Trends

By 2008 independent agents held 56 percent of the new individual life insurance sales market, followed by affiliated (i.e., captive) agents with 36 percent, direct marketers (Internet, Telephone. No producers are involved. Does not include direct marketing efforts involving agents.) with 3 percent and others (Includes stockbrokers, financial institutions, worksite etc.) accounting for the remaining 5 percent

Source: LIMRA

31%

35%

12%

12%

8%2%

Distribution of Variable Annuities in 2008

Captive AgentsIndependent FINRA firms (Independent Agents)BanksWire housesRegional Investment FirmsDirect response

16%

36%

33%

12%

3%

Distribution of Fixed Annuties in 2008

Captive AgentsIndependent FINRA firms (In-dependent Agents)BanksWire housesDirect response

June 4, 2010 7

Technology Trends in Life Insurance Market in US

:T o p In it ia t iv e s

, , - -O p e r a t io n s a u t o m a t io n s t r a ig h t t h r o u g h ( ):p r o c e s s in g S TP A broad set of projects to improve

operational efficiency , , N e w b u s in e s s d is t r ib u t io n a n de B u s in e s s : Example: Portals, Rating engines and Underwriting functionality , , P o lic y a d m in is t r a t io n b il l in g a n d f in a n c ia l

:s y s t e m s Including some core system replacement projects, as well as other projects to improve current systems , , :P r ic in g p r o d u c t d e v e lo p m e n t g r o w t h Getting new products and/or new pricing methods to market, as well as other growth such as new geographies or channels

, U n d e r w r it in g d o m in a t e s a c c o u n t in g f o r a lm o s t o n e f if t h o f a l l n e w p r o je c t

. s p e n d in g R e m a in in g b u d g e t is e v e n ly s p r e a d a c r o s s v a r io u s d e p a r t m e n t s lik e

, , , P o lic y A d m in P r o d u c t C la im s C u s t o m e r s e r v ic in g a n d B il l in g

Source: Celent CIO survey 2010

20%

40%

50%

70%

40%

80%

35%

23%

42%

39%

74%

87%

Agility

Ease of doingbusiness (prospectsand policyholders)

Increasingprofitability

Cost reduction

Ease of doingbusiness (producers)

Growing the business

Life/Health Property/Casualty

Top business issues are turning to Growth, Cost

Reduction and Profitability

17%

21%

10%

6%

8%

8%

6%

7%

5%

4%

4%

4%

19%

13%

13%

12%

6%

6%

7%

6%

7%

6%

3%

3%

Underw riting

Po licy Admin & Service

Claims

General and Admin

Distributio n & Sales

Billing

Hardw are Infrastructure

Other

ActuarialPro duct Desig n

/ Po licyho ld Ag ent Co ntact Cen

. / Bus Co nt Disaster Reco v

So ftw are Infrastructure

Property/Casualty Life/Health

New project spending in 2010

June 4, 2010 8

Distribution – Technology Trends in Life Insurance Industry• Increasing independent distribution• Greater reliance on SEMCI services for electronic applications, underwriting status, and CRM.• Increased producer partnerships and consolidation• Solutions have built for the largest producers which tend to be digital immigrants and do not leverage web 2.0 or other emerging technologies.

• Fewer agents reaching a smaller segment of the population

Changing importance of technologies for Independent distribution

Source: Gartner

June 4, 2010 9

U n d e r w r it in g a n d P r ic in g Tr e n d s

Potential inflection point for increased

predictive modeling in life insurance

Emerging innovation by insurance competitors• Automated underwriting forsimplest policies• Use of medical data in some product lines (e.g., stop-lossinsurance)

Growing pressures from distribution• Demand for shorter application process – Interest in less burdensome application processfor the customer

Market participants (e.g., hedge funds, pharma cos) paying greater attention to life insurance (e.g., life settlements) and experimentingwith pricing innovation

Increasing computing power and data availability

(e.g., medical andprescription history)

Life insurance’s traditional underwriting approach is being challenged by market forces

Source: Strategic issues faced by US Life Insurers

June 4, 2010 10

U n d e r w r it in g a n d P r ic in g S o p h is t ic a t io n Life insurance underwriting is also becoming sophisticated. Increased use of predictive modeling in pricing.

Source: Strategic issues faced by US Life Insurers

June 4, 2010 11

Online Trends in US Life Insurance Market

• More than 125 million U.S. adults—or 49%—own life insurance, and roughly 25 million bought a new policy in 2008. But the way they buy life insurance is changing as more customers begin their journey online while still preferring in-person channels for applications: Over the past five years, the percentage of life insurance researchers who research online has grown from 22% in 2005 to 39% today, yet nearly 90% of life insurance applications are still made offline.

• Roughly more than 3 million Americans who have researched life insurance during the year, more than one in three used the Internet to do so, making it the second most popular research channel after researching in person. But researching on the Web often doesn't translate into a policy application through any channel. Low conversion rates are the result of a complex product and a low-commitment research channel.

Source: Forrester, Insurance Networking

June 4, 2010 12

Online Trends in US Life Insurance Market

Internet researchers are currently the least likely to convert into applicants. This is largely because the Web is a relatively low-commitment medium, making it more conducive to broader, lighter research, especially for a high-stakes product such as life insurance.

Just half of all online life insurance researchers buy a policy. Only 54% of online researchers applied for life insurance through any channel. By comparison, 80% of those who research in person convert into buyers. So a prospective client who visits a branch is nearly 50% more likely to purchase a policy than one who researches online. Telephone researchers and mail researchers are also more likely to convert than online life insurance researchers.

When they do apply, online researchers use the Web, while offline researchers don't. Although only half of online life insurance researchers become purchasers, those who do purchase tend to use the Web. Among online life insurance researchers who then purchased a policy, more than half applied for that policy online. In contrast, people who researched life insurance through other channels almost never used the Internet to apply for a policy. Only 1% of people who researched through other channels applied online in the past year, compared with 57% who applied in person and 34% who mailed in applications.

Source: Forrester

June 4, 2010 13

Web 2.0 applications in Life Insurers

Insurance Web Sites Are Largely Absent of Web 2.0.

• Mashups: Insurers should consider how the data they already possess could be combined to create new insights for visitors to their Web sites. For example, insurers could combine mortality and morbidity data with mapping software or combine customer characteristics with products so that prospects can see that others are making similar choices.

• Virtual worlds: Insurers should look to virtual worlds, to enhance their brand. Insurers can provide users with the opportunity of purchasing units of life insurance or other protections. Insurers can also establish a kiosk within virtual worlds such as Second Life for users to virtually experience the benefits of retirement or protection products. Creating these virtual experiences will be truly innovative for insurance companies.

•RSS feeds: Insurers should disseminate information among Web users via RSS feeds instead of forcing prospects to enter e-mail addresses to receive e-mail newsletters. Subscribing anonymously to RSS feeds is more convenient for Web users, and therefore, insurers will be more likely to reach out to new prospects.

• Social networking: One example of social networking sponsored by a life insurance company allows users to blog, see others online, create a profile of preferences and create folders for discussion threads. Other examples include participating in existing social networking sites as a corporate representative and interacting with other users as a human face of the company.

• Blogs: Blogs are a good way to engage customers in interactive discussions about important financial issues. Insurers should consider spurring conversation by asking key questions. Company employees, however, should be very careful to be objective, fair and honest, because visitors will be wary of hard-selling language and tone. There is also some evidence based on the review of one life insurance blog that customers will be less likely to complain on public blogs if they have a corporate place where they can be heard.

Source: Gartner

Suggestions/Recommendation:

June 4, 2010 14

Mobile Applications in Life Insurance Mobile device usage in the Insurance industry has continued to grow over the last few years. Insurance companies are increasingly looking to mobile applications to make it easier for consumers and agents to conduct business with them. Mobile apps are developed to help agents serve customers and potential policyholders faster and more efficiently. Insurers are considering these applications as great differentiator, helping companies not only retain and recruit customers but agents as well.

New York Life's enhanced Web Mobility: New York Life is one of the first insurers to offer online visitors enhanced mobile access. Several of its Web-based offerings are now available on more than 700 models or over 98 percent of cell phones and handheld mobile devices. New York Life Web content, including the company’s rich educational content and the ability to connect with, or become, an agent is now available on virtually every type of mobile device. "Mobile devices have become an indispensable part of consumers’ lives and as a result mobile technology is fast becoming a top customer request. With over 6,000 mobile visitors per month, it is clear that optimizing online offerings for all these devices is meeting the needs of customers and potential customers,".

New York Life’s mobile service now offers consumers the ability to find information on a range of financial products and their features, including research findings on insurance amounts and achieving financial goals such as securing retirement income and leaving an inheritance. It also allows customers the ability to connect directly with the "Click-to-Call" feature and speak with a service representative on a range of New York Life insurance, annuity, and long-term care insurance products, including those available through AARP. Further, consumers can find a New York Life office or agent by name, address, city, state, or zip code, call one directly with the "Click-to-Call" feature, or use a form to request a consultation; and learn how to become a New York Life agent and apply online with a short and convenient e-mail form.

Generali Group, recently unveiled a new life insurance application for iPhone. The new application, which will be made available in the beginning of 2010, will provide Generali France’s network of financial advisors real-time access through their mobile device to their client portfolio as well as detailed information for each client account, including savings, payment history, investment portfolios and the financial performance of each fund in which savings are invested. A "business-to-consumer" version will also be made available for the clients of Generali France’s network of financial advisors and for the direct clients of Generali France’s Internet subsidiary, who will have direct access to their own accounts.

Generali claims that the new iPhone application will be particularly helpful to financial advisers, who are looking for innovative ways to stay close to their clients, as well as to Generali's clients who will be able to directly access their account in a user-friendly way. Also helps to innovate and take advantage of the increased use of smartphones to give customers a distinctly different customer experience

June 4, 2010 15

Mobile Applications in Life Insurance

AXA's applications for Women: AXA Equitable Life Insurance Company has recently launched two new applications for Apple’s iPhone and iTouch. The free applications provide women consumers on-the-go access to financial calculators to help them keep track of financial objectives. The company released the iPhone apps in support of its education and empowerment program, "The AXA Equitable Connection: Women, Wealth and Wisdom." .

• The two apps currently available include a retirement income calculator and a college savings plan calculator. Additional apps expected to be released soon include a retirement shortfall calculator, life insurance calculator, life expectancy calculator and an all-in-one calculator. The all-in-one calculator combines all AXA iPhone apps for individuals who want to get a singular view of multiple aspects of their financial situation. The company is leveraging available Web technology to enhance the online experience by providing consumers with the resources, education and tools needed to make more informed financial decisions. The iPhone apps achieve that goal, while also providing a new level of convenience for our customers and prospects alike.

•Lifeinsuranceagency.com: LifeInsuranceAgency.com, one of the leading insurance comparison sites, recently introduced its new iPhone application LifeValue. LifeValue is a free iPhone application that helps people answer the at-times confusing question: What is the value of their life? LifeValue calculates the financial value of one’s life. Knowing the financial value of one’s life is important, especially when shopping for life insurance. LifeValue can help anyone who’s ever wondered about how much life insurance they need to buy. Consumers who are interested in calculating their life insurance needs without the assistance of an agent can simply input their information into the application. The LifeValue application will give suggestions on how much life insurance the consumer may want to consider purchasing.

•LifeValue also serves as a quote finder that can be used right on the iPhone. If a consumer wants to compare life insurance rates from a variety of competitors, they can use the quote search function and receive unbiased, customized life insurance quotes in no time. LifeValue helps users understand how much life insurance coverage they need. It also lets users input their information one time to compare rates for life insurance. Consumers can compare rates for up to three different life insurance companies almost instantly

Thank You

June 4, 2010 17

- A p p e n d ix T r e n d s t h a t a r e s h a p in g L if e In s u r a n c e M a r k e t in U S

•Product innovation opportunities, especially in the retirement space

•Shifting demographics

•Changing Buying Habits/Expectations

•Shifting distribution channels - Marketing arms race

•Underwriting and pricing sophistication

•Convergence of insurance and capital markets

•Continued consolidation – Changing Competitive landscape

•Expense Management

•Increasing revenues (Esp. when premiums are decreasing due to recession and financial crisis)

•Improving Customer satisfaction

•Improving efficiency and productivity of agents

•Changing regulatory environment