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BUSINESS SOLUTIONSUtilizing Corporate Owned Life Insurance (COLI) to help protect and enhance the future of your business

Presented by:(First Name) (Last Name),(Title)BB&T Life Insurance Services

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DisclosureThese materials are provided for educational purposes and may be used in conjunction with the solicitation of an insurance product to the public. For use with non-registered products only. Variable insurance products are not discussed within this presentation. The insurance products described may be issued by various companies and may not be available in all states. All comments about such products are subject to the terms and conditions of the annuity and/or insurance contract issued by the carrier and policy terms, conditions and limitations may apply. Not all applicants will qualify for coverage. Your insurance producer may recommend insurance products based on the individual circumstances you communicated. You should not purchase an insurance product unless accompanied by a compliant carrier illustration. Carrier illustrations are based on the individual circumstances you presented to your producer. The underwriting class illustrated may not be the underwriting class ultimately issued by the carrier. The carrier may, in its sole discretion, issue a policy other than applied for based upon information received during the underwriting process. The premiums and benefits illustrated are based on information provided by the carrier at the time the illustration is run and are subject to change at any time at the sole discretion of the carrier.

BB&T Life Insurance Services, its agents and representatives may not give legal or tax advice. Any discussion of taxes herein or related to this document is for general information purposes only and does not purport to be complete or cover every situation. Tax law is subject to interpretation and legislative change. Tax results and the appropriateness of any product for any specific taxpayer may vary depending on the facts and circumstances. Clients should consult with and rely on their own independent legal and tax advisors regarding their particular set of facts and circumstances before purchasing an insurance product. To ensure compliance with requirements imposed by the IRS, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

Please note that in order to provide a recommendation to a client about the transfer of funds from an investment product, including those within an IRA, 401(k), ROTH IRA, or other retirement plan, to fixed or variable insurance product, an insurance producer must hold the proper securities registration and be currently affiliated with a broker/dealer or registered investment adviser. Investing advice can only be provided by an appropriately qualified investment advisor.

Policy riders are available at an additional cost and may not be available for all products. Terms and conditions apply.

Case studies are offered to show how BB&T Life Insurance Services can provide valuable assistance to clients in meeting their insurance needs. Results may vary. These are hypothetical examples and do not guarantee a similar result.

Insurance products are offered through Crump Life Insurance Services, Inc. DBA BB&T Life Insurance Services, AR license #100103477, a wholly owned subsidiary of BB&T Insurance Holdings, Inc. Insurance products are not a deposit, not FDIC insured, not guaranteed by the bank, not insured by any federal government agency and may go down in value. Insurance.BBT.com. 10.19 BBTL19-9153-A, 1020

© 2019 Branch Banking and Trust Company. All Rights Reserved.

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Agenda What discussion topics are most important to you today?

Concerns of business owners

Strategies to recruit, reward and retain key employees; personal retirement

Executive Bonus, Deferred Compensation, Supplemental Employee Retirement Program (SERP); Life Insurance Retirement Planning (LIRP)

About COLI

COLI as a tool

Features, uses, mechanics, balance sheets, product summary

Survival, exiting, reward and retain, retirement

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What are they?

Common Concerns of Business Owners

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Similar Unspoken Concerns

“Would my business survive

without me?”

“How can I exit my

business with its value?”

“How can I reward and

retain my best people?”

“How do I best preparefor my own

retirement?”

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53% probability that one of three partners, age 50, will not live to 65*

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Considerations for business continuation:

*Virtual Sales Assistant, Consider the Odds of a Business Owner Dying Prior to Age 65

Traditional: Multiple term policies

Corporate Owned Life Insurance (COLI):Single policy covering multiple owners/employees

“Would my business survive without me?”

Key Person Insurance

Buy-Sell Agreement

Long Term Care

Insurance

Disability Insurance

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Considerations for business succession:

“How can I exit my business with its value?”

Stock Repurchases

Estate Equalization

ESOP: Utilizing COLI can help provide tax savings for the business and retirement benefits for the employee(s)

Employee Stock

Ownership Plans

(ESOPs)

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Considerations for executive benefits:

“How can I reward and retain my best people?”

OPTIONS: Can be discriminatory (executives and owners only); COLI is one of the ways toaddress this need

Simple programs (Executive Bonus)

Complex arrangements (Deferred Compensation)

Supplemental Employee Retirement Programs (SERPs)

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Considerations for retirement plans:

“How can I better prepare for my own retirement?”

There are other individual strategies available outside of COLI

Life Insurance Retirement

Plan (LIRP)

Owner(s) can fund amounts in excess of the typical limit restrictions placed on qualified plans

Tax-free death benefit to the beneficiaries

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What is it?

Corporate Owned Life Insurance (COLI)

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Understanding COLI

Institutionally priced product, earnings are tax-deferred

Designed with no surrender charges

Offers competitive returns that grow on a tax-deferred basis

Has a death benefit that can provide liquidity for the business/owner

Able to fund nonqualified executive benefit plans

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Key Features of COLI

Transparencyand

flexibility

Accessto

cash values

Positive balance

sheet

Income tax-free death

benefit

Liquidity

Potential underwriting advantages

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Uses of COLI

No surrender chargeLiquidity day one forfully funded contracts

Asset on a balance sheet

Positive charge to earnings

Tax-deferred gain on financial instrument

Surrender at retirement or exit

May be used for supplemental retirement income for policy owner

Permanentproduct

vs.covering a term

period

Death benefitto address the need for providing liquidity

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Advantages of COLI

Qualified Plans

Non-Qualified

Plans

COLI is an affordable and efficient method for financing nonqualified plans – provides tax-free dollars

when they’re needed the most

Each plan creates an “obligation” or liability for the company:

SERPs Deferred Compensation ESOPs

Buy-Out or Pay-Out

Obligations

Group Insurance(life, disability, medical, other)

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Basic Mechanics of How COLI WorksFollowing the guidelines of §101(j) - COLI Best Practices

Group of management or highly compensated employees

Consent to be insured

The company is the owner and beneficiary

Death benefit is tax-free*

All earnings are tax-deferred

Account balance is an asset

*Death benefit is tax-free based on proper design

Annual filing of Form 8925

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COLI as a Vehicle to Facilitate Yield / Enhance Earnings

Favorable tax treatment:

Permanent tax deferral under the Generally Accepted Accounting Principles (GAAP )– No tax on inside “build up” of cash surrender value (CSV)– No tax on unrealized gains

Purchaser is the owner of the policy and beneficiary of the death benefit– Death benefits are tax-free to the company

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Why Banks & Insurance Companies Use COLI as a Financial Vehicle

Investment platform in the case of “Separate Accounts” products

Improvement in tax adjusted yield

Clear regulatory guidance exists

Banks have purchased $140B+ of Bank Owned Life Insurance (BOLI)

Insurance companies have purchased $20B+ of Insurance Company Owned Life Insurance (ICOLI)

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Let’s look at some

examples

Implementing COLI

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Sample Balance Sheet

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Sample COLI Product Summary

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Addressing common concerns

COLI as a Tool

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BUSINESS CONTINUATION

“Would my business survive

without me?”

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Buy-Sell and Key Person

Key Person Tax-free death benefit

- Helps ensure your business would have funds immediately available

- Fills in the temporary gaps- Covers the costs of

recruiting, hiring and training replacements

Continuing the business without you

Business Continuation

Buy-Sell Buy back company stock at the

owner’s death Insurance solutions are often used Provides improved financial

position May enhance rate of return

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Business owners aren’t planning for the unexpected.

1Virtual Sales Assistant, Consider the Odds of a Business Owner Dying Prior to Age 65

With three different types of business owners, all age 45, these are the statistical chances of one owner dying prior to age 65:1

Consider this…

Business Continuation

57%THREE

PARTNERS

43%TWO PARTNERS

24%SOLE PROPRIETOR

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Key Person and Buy-Sell

CASE STUDY

CLIENT Large commercial construction company Has $10 million term policy on the owner, annual premium = $30,375

- Help the company buy back his stock according to the buy/sell agreement- Help compensate the company for the loss of the owner

OBJECTIVES Key person coverage to compensate for the loss of the owner Buy/sell agreement funding to help buy back the company stock at his death Improve financial position and internal rate of return (IRR)

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Key Person and Buy-Sell

SOLUTION

STRATEGY

Bonding requirements, the company must have a substantial amount of liquid assets on its balance sheet

Replace the term policy with a $10 million COLI policy (allows the company to reposition liquid assets)

Year 1

Premium = $651,880

Cash Surrender Value = $661,162

Impact to Earnings ($9,282) = 1.42% IRR

Aggregate

Total Premium = $4,563,159

Cash Surrender Value (Year 10) = $5,122,451

Impact to Earnings ($559,292) = 1.66% IRR

Tax Deferred Growth

Eliminated Expenses(Term Life Insurance)

Annual Premium = $30,375

10 Year Premium = $303,750

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BUSINESS SUCCESSION

“How can I exit my

business with its value?”

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ESOP and Stock Repurchase

Help mitigate associated risks and efficiently manage the cash reserves

Institutional life insurance products on key participants (COLI)

If a participant dies – proceeds are paid to the company to fund repurchase obligation

If a participant leaves – funds are withdrawn from cash value of policy to meet repurchase obligation

Life insurance to fund a Buy-Sell agreement

Relieve potential strain on cash flow or added debt during time of an accelerated transition

Participants take comfort in knowing they can assume control before the transfer completes

Exiting the business and keeping its value

Business Succession

Partial Ownership TransferRepurchase Obligation

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ESOP

CASE STUDY

CLIENT Large Manufacturing Company 100% ESOP Owned 150 Total Employees Currently setting aside cash and other assets to help offset emerging ESOP liability

OBJECTIVES Diversify existing asset profile Use “Sinking Fund” to offset 10% of expected ESOP liability beginning in year 8 Need more life insurance coverage – implementation needs to be easy to manage Insure top 15 actively at work Highly Compensated Executive Employees (HCEEs)

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SOLUTION

STRATEGY

ESOP

RepositionPortion of cash and assets

“Sinking Fund”Established for repositioning

COLI ProductUse funds to purchase life insurance

Year 1

Premium = $410,000

Cash Surrender Value = $414,827

Impact to Earnings ($4,827) = 1.18% IRR

Aggregate

Total Premium = $2,870,000

Cash Surrender Value (Year 7) = $3,065,159

Impact to Earnings ($195,159) = 1.64% IRR

Guaranteed Issue (GI) Underwriting

Aggregate Death Benefit = $6,523,305

Death Benefit(per individual) = $434,887

New insureds can be added annually

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EXECUTIVE COMPENSATION

“How can I reward and

retain my best people?”

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Executive CompensationStrategies to recruit, reward and retain key employees

Executive Benefits

Employee (Deferred Compensation)

Cash bonus to employee

Taxable to employee

Employer (SERP)

Deductible to employer

No recovery to employer

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“…investing in people is a priority for most business owners, with 59% planning to increase wages this year. Additionally, 4 in 10 plan to increase contributions to employee retirement plans and 46% expect to increase funding for employee health insurance. 1”

1 2018 U.S. Trust Insights on Wealth and Worth® survey

Did you know?

2 2019 PlanSponsor survey

Consider this…

Executive Compensation

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91%

70%

offer nonqualified deferred compensation plans2

Of large employers…

Of those employers…

say these types of plans are used to recruit and retain executive-level talent.2

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Construction Company 50 Employees Retain 5 employees Distribute money to ownerBusiness

Executive

Bonus Payment Employer makes taxable bonus payment to executive and

receives corresponding federal income tax deduction.1 Executive reports bonus as additional income.

Accessing the BenefitsBeneficiaries receive death

benefit.

Beneficiaries

Life Insurance Purchase Executive uses bonus payment

(minus income taxes) to purchase life insurance policy.

Executive reports bonus as additional income.

1Provided amount of bonus is reasonable and employer retains no ownership rights or beneficial interest in the policy. In the case of any publicly held corporation, no deduction shall be allowed to the extent that employee’s compensation exceeds $1,000,000 unless considered “performance-based compensation.” IRC Section 162(m)(1).

Executive Bonus

CASE STUDY

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XYZ, LLC REBA Summary

Executive Annual ContributionContribution

YearsTotal

ContributionTotal Tax-Free

IncomeAnnual Tax-Free Income

Life Insurance

Face Amount

Male age 57 $83,333 12 $999,996 $1,717,632 $107,352 $1,746,474

Female age 54 $41,667 12 $500,004 $916,080 $45,804 $1,055,865

Male age 53 $25,000 12 $300,000 $510,528 $31,908 $523,944

Male age 32 $20,000 20 $400,000 $2,794,800 $139,740 $1,168,616

Male age 29 $20,000 20 $400,000 $2,941,920 $147,096 $1,216,599

Female age 47 $30,000 17 $510,000 $1,243,200 $62,160 $790,456

Totals: $220,000 $3,110,000 $10,124,160 $534,060 $6,501,954

Indexed Universal Life assumed rate of return 6.5%. Current plan floor is 0% with a 13% Cap Rate.

SOLUTIONExecutive Bonus

The information in this chart is not definitive and other factors are taken into consideration. Not all applicants will qualify for this type of coverage.

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PERSONAL FINANCIAL SECURITY

“How do I best preparefor my own

retirement?”

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What Are the Types of Retirement Vehicles?

*Mutual funds may be subject to income tax and/or capital gains tax. The examples show do not guarantee a similar result. Consult your tax advisor for more information.**Roth IRAs can offer tax-free distributions. Withdrawals made prior to age 59½ may become taxable and result in a 10% penalty if they are not considered a “qualified distribution” or one of the exceptions provided by the IRS.

PRE-TAX

Pre-taxdollars

Distributions

Ordinaryincome

TAXABLE

After-taxdollars

TAXADVANTAGED

After-taxdollars

Growth taxed?Tax-deferred

Considerations:Withdrawal penalties before age 59½; distribution required at 70½

Growth taxed?Ordinary income &capital gains

Considerations:No contribution limits

Growth taxed? Tax-deferred

Considerations: Roth has withdrawal penalties before 59½ and contribution limits;** Life insurance provides a tax-free death benefit

Qualified plans; 401(k)s, IRAs, profit-sharing, etc.

Mutual funds*, stocks, bonds, real estate, etc.

Municipal bonds, Roth IRAs**, cash value life insurance

Distributions

OrdinaryIncome &

capital gains

Distributions

Tax-free

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Life Insurance Retirement PlanningPersonal strategy for retirement income

Retirement Planning

Uses a cash value life insurance contract

Value grows tax-deferred

Income is tax-free

Value (not used as income) is passed tax-free to beneficiaries

No limit on contributions

No 70 ½ rule

Death benefit (tax-free) to provide liquidity

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CASE STUDY

Life Insurance Retirement Plan (LIRP)

Small business owner Wants to maximize his

tax advantaged withdrawals during retirement

Can put $20,000 annually toward this goal

SOLUTION

4Potential tax-free distributions assumes distributions on a non-MEC policy. 5IRR percent value represents cash flow in (premium received over time) and cash flow back out (withdrawals/loans) at the year of the last illustrated distribution (age 85). This percent value does not include any remaining surrender value or death benefit. 6Cash flow IRR tax equivalent rate at 28.00%.

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Summary

Business Continuation

Business Succession

Executive Benefits

Retirement Planning

Which is the most important to you?

COLI can help with any of these strategies!

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QUESTIONS?Can I clarify anything for you?