Federal Advisory Committee on Insurance Robert A Kerzner

Federal Advisory Committee on Insurance Robert A. Kerzner President and CEO LIMRA, LOMA, LL Global June 12, 2013

Americans Households Owning Individual Life Insurance 34% currently own policies they bought face-to-face 72% 65% 62% 55% 50% 44% 1960 1976 1984 Source: LIMRA Household Trends in U. S. Life Insurance Ownership, 2010 1992 1998 2004 2010 2

Among households with children under 18, 4 in 10 say they would immediately have trouble meeting everyday living expenses if a primary wage earner died today. Another 3 in 10 would have trouble keeping up with expenses after several months. That’s 70% of households that would be in jeopardy within a few months. Source: LIMRA Household Trends in U. S. Life Insurance Ownership, 2010 © LL Global, Inc. SM 3

American Households That Say They Need More Life Insurance Source: LIMRA Household Trends in U. S. Life Insurance Ownership, 2010 © LL Global, Inc. SM

58 Million # of U. S. households that believe they need more life insurance Source: LIMRA Household Trends in U. S. Life Insurance Ownership, 2010 © LL Global, Inc. SM 5

CHANGING DEMOGRAPHICS IN THE UNITED STATES © LL Global, Inc. SM 6

History: US Growth in Numbers 2000 -2010 15. 2 2. 2 White 3. 8 4. 1 African American Asian (all numbers in millions) © LL Global, Inc. SM Source: U. S. Census Bureau Hispanics

Projected Growth Over the Next 20 years … 36 million Hispanics Asian* African American* White* 9 million 8 million 10 million *non-Hispanic Source: U. S. Census Bureau © LL Global, Inc. SM 8

Younger Generations Are Increasingly Diverse… Percent of Americans Who Are Hispanic and/or Non-white 46% Gen Next 41% Generation Y 39% Generation X 28% Boomers © LL Global, Inc. SM 9

Individual life insurance ownership by ethnicity (Percent of households) 63% 36% Hispanic 68% 47% Chinese American Household income of $25, 000 or greater 47% Asian Indian © LL Global, Inc. SM African American U. S. Population 10

One Parent Households Have More than Doubled Since 1970 Percent of households 1% 12% 87% 1970 2 Parent 2% 4% 5% 19% 24% 26% 78% 72% 69% 1980 1990 2000 1 Parent-Mother headed © LL Global, Inc. SM 31% 1 Parent-Father headed 11

6 in 10 insured single mothers need more life insurance “I need more life insurance. ” 59% “I am likely to buy more life insurance. ” 27% Source: 2010 U. S. Life Ownership study – Single Mothers © LL Global, Inc. SM 12

Fewer Americans are getting married… Married 41% decl ine 72% 51% 1960 Source: Pew Research, 2011 2010 © LL Global, Inc. SM

Fewer US Households Have Children Percent of U. S. Households with Children Under 18 60. 0% 56. 9% in 1960 Down 21% 40. 0% 44. 7% in 2010 20. 0% 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 Source: US Census Bureau © LL Global, Inc. SM

Wives earning more than husbands % 5 62 e s a e r c 29% in 4% 1970 Source: Pew Research Center 2009 © LL Global, Inc. SM 15

Household financial decisions When Husband Earns More Share 28% Share 33% Husband 35% Husband 21% Wife 46% Wife 36% Source: Pew Research Center When Wife Earns More © LL Global, Inc. SM 16

Retirees Are Here to Stay… The Number of People Turning 65 4. 0 Population (millions) 3. 5 3. 0 2. 5 Total: 72 Million Boomers 2. 0 Total: 81 Million Gen Next 1. 5 1. 0 0. 5 2000 2005 2010 Source: U. S. Census Bureau, 2012 2015 2020 2025 © LL Global, Inc. SM 2030 2035 2040 2045 2050

Retirement income opportunity will double to nearly $22 trillion by 2020 Early Career Age 25 -34 Investable Assets Mid Career with Kids Age 35 -44 Investable Assets Kids in College Age 45 -54 Pre-retiree Age 55 -64 Investable Assets Retired Age 65+ Investable Assets 2010 $0. 4 trillion $1. 7 trillion $4. 3 trillion $6. 1 trillion $5. 9 trillion 56% of assets 2020 $2. 5 trillion $5. 6 trillion $10. 2 trillion $11. 4 trillion 65% of assets 0. 6 trillion Asset Gathering Retirement Assets The Retirement Income Opportunity Source: LIMRA, Based on 2001, 2007 and 2010 Survey of Consumer Finances, Federal Reserve Board and U. S. Census Bureau’s. Current Population Survey, March 2011 Supplement. All estimates and calculations reflect consumer segments of age 25 or more, and households with assets between $50 K and $4. 9 M. Household HH by age group growth has been estimated by using Census projections by age and assuming that the proportion of HHs that have between $50, 000 and <$5 million is constant within age group over time and the proportion in equities remains constant within each age group over time © LL Global, Inc. SM 18

American’s Top Financial Concerns Money for a comfortable retirement Paying for long-term care services 58% Paying for medical expenses 57% Support myself if unable to work 57% © LL Global, Inc. SM Source: 2013 Insurance Barometer Study, LIFE and LIMRA 67% 19

Gen X and Y Americans’ Top Concern: 75% Having Enough Money For A Comfortable Retirement © LL Global, Inc. SM

But What Do They Really Save For? Top 5 Important Reasons for Saving Gen X Gen Y 46% Retirement 38% Vacations, travel Home improvements/repairs Education costs Large household purchases Retirement 29% 31% 41% Vacations, travel Home improvements/repairs 26% Education costs Large household purchases 23% 22% 20% 24% Source: LIMRA Retirement Study—Consumer Phase, 2012. Note: Based on 854 consumers aged 32 to 47 (Gen X) and 698 consumers aged 20 to 31 (Gen Y) currently working for pay. Top 10 based on the percent of consumers that ranked each reason as one of their household’s three most important reasons for saving (besides emergencies and unemployment). © LL Global, Inc. SM 21

Two Issues Undermining Retirement Security Longevity Insufficient Funds © LL Global, Inc. SM

Viewing Priorities Differently Retirees vs. Advisors Health Care 1 Longevity Inflation 2 Volatility 3 Health Care Longevity 4 Inflation Source: LIMRA, The Retirement Income Reference Book, 2009 © LL Global, Inc. SM

Couples Need to Plan Chances of Surviving Spouse 10 or 20 more years (65 -Year-Old Couple) 48% 10 years or more 20 years or more 14% Source: LIMRA’s 2012 Retirement Income Reference Book © LL Global, Inc. SM

Pre-Retirees (55 -70, non-retired) Are Not Prepared… 62% Pre-retirees who have less than $100, 000 in financial assets © LL Global, Inc. SM Source: LIMRA analysis of 2010 Survey of Consumer Finances, Federal Reserve Board,

Less than half of preretirees are confident that they will be able to live their desired retirement lifestyle © LL Global, Inc. SM Source: The Pre-Retiree Market: Surveying the Landscape, LIMRA (2012)

workers who think they need to save more to be on track for retirement © LL Global, Inc. SM

Half of Americans Not Saving for Retirement 49% not contributing to a retirement plan or individual IRA. Source: e. Nation survey, April, 2012, LIMRA © LL Global, Inc. SM 28

It’s worse with younger Americans… 56% of younger Americans, (ages 18 -34) are not contributing to a retirement plan. This is particularly troubling because younger people are less likely to have a defined benefit plan. Source: e. Nation survey, April, 2012, LIMRA © LL Global, Inc. SM 29

Younger Generations Unlikely to Have Pensions Fewer than one in five Gen X and Y Americans will have a pension. Source: LIMRA Analysis of Survey of Consumer Finances, 2010 © LL Global, Inc. SM

People Won’t Act Without Help Employer-matching is the single most significant factor in determining whether employees contribute to a 401 K plan or not. In fact, the presence of an employer match nearly triples the odds of employees contributing to their DC plan. © LL Global, Inc. SM Source: The Plan Participation Puzzle: Comparison of Not-for-Profit Employees and For-Profit Employees , LIMRA (2010)

WHY DON’T PEOPLE BUY © LL Global, Inc. SM 32

Americans’ Disposable Income Has Been Dropping for 30 Years © LL Global, Inc. SM

Every day expenses limit achieving financial goals ü 61% energy costs (oil, gas, electric) ü 58% every day living expenses (food, clothing, transportation) ü 50% debt payment (credit card balances, loans, equity lines of credit) ü 46% housing costs ü 43% taxes (income, sales, property) What limits your ability to save for goals or for discretionary items. Source: 2008 Middle Market Study © LL Global, Inc. SM 34

Families Have Other Priorities © LL Global, Inc. SM

Preference for Buying in the Future Preference for Buying Future Life Insurance Policy Gen Y 53% 54% Gen X Boomers 58% 23% 21% 20% 19% 14% 4% Financial Professionals 6% 8% Phone, Mail © LL Global, Inc. SM Understanding the Web Link: Gen X, Gen Y, and Life Insurance, LIMRA, 2010. Work Online 36

Advisors Make a Difference Contribute to a Retirement Plan 78% 43% With Advisor Source: Use of and Impact of Advisors, LIMRA, 2012 Without Advisor © LL Global, Inc. SM

Behavioral Economics Helping us understand the seemingly irrational decisions of consumers about investments, savings and insurance. © LL Global, Inc. SM

Which Would You Choose? 70% Consumers who chose chocolate © LL Global, Inc. SM Source: Presentation by Dr. Barbara Fasolo, Senior Lecturer in Behavioral Sciences, London School of Economics

Japan’s Population Skews Older Japan - 2050 Female Population Male Population . . .

While Indonesia Has a Relatively Young Population © LL Global, Inc. SM 44

Latin America’s Population is Younger Latin America - 2050 Female Population Male Population. .

Population by Age Groups in Latin America 2010 2020 60+ 57 mil 83 mil 25 -59 255 mil 296 mil 15 -24 104 mil 105 mil 0 -14 160 mil Source: Americas Market Intelligence 149 mil © LL Global, Inc. SM

Life Insurance Growth in China 1, 200 70 1, 000 60 50 800 40 600 30 400 20 200 0 10 2001 2002 2003 2004 2005 2006 Life Insurer Premium (Chinese RMB Bil. ) © LL Global, Inc. SM 2007 2008 2009 2010 Number of Life Insurers 0

Two-thirds of Middle-Income U. S. Households Save Less than 5% of their Income for Retirement 10% or more Nothing 15% 22% 5% to less than 10% 20% 19% 24% 3% to less than 5% © LL Global, Inc. SM Source: LIMRA, Consumers’ Retirement Perspectives, Fourth Quarter 2012 Less than 3%

U. S. Households Have Few Investable Assets* $500, 000 + $250, 000 to $499, 999 $100, 000 to $249, 999 70% of households have less than $100 K in investible assets 10% 9% 35% 11% <$10, 000 11% 24% $50, 000 to $99, 999 All U. S. Households $10, 000 to $49, 999 *Investable assets include retirement savings plans, and exclude homes and businesses. Source: 2010 U. S. Life Ownership Study, LIMRA © LL Global, Inc. SM

The Lure of Now – Present Bias 244 mortgaged U. S homeowners 120 underwater 124 with positive equity © LL Global, Inc. SM Source: Presentation by Dr. Barbara Fasolo, Senior Lecturer in Behavioral Sciences, London School of Economics 50

Consumers with Present Bias Are in Trouble More © LL Global, Inc. SM Source: Presentation by Dr. Barbara Fasolo, Senior Lecturer in Behavioral Sciences, London School of Economics 51