evolution and today's use of life ltc combination products final

10/1/15

Evolution and Today’s use of Life-LTC Combination Products

Parag ShahVice President Product DesignPacific Life

2

DEFINITIONS Life-LTC Combination Products

LIFE-LTC Combination Products

Linked Benefits ‘LTC’ Riders

Single Pay Multi-PayCIR

Chronic Illness Riders

LTCRLong Term Care

Riders

Characteristics:Acceleration and Extension of Benefits

(ABR&EBR)High Liquidity. Traditionally Return of Premium.

Integrated Product

Characteristics:Optional Rider, attachable to multiple products.

Typically only Acceleration of Death Benefit (ABR).

Single Premium. Can be on UL or WL

chassis.

Many times on the same chassis as Single

Premium. Pay options generally 10

years or less

101g qualified. Can we with or without an front charge. Charge drives

whether dollar for dollar or some lien/discount

method

7702B qualified.Traditionally with a charge for the rider

and a dollar for dollar benefit.

Asset BasedLiving Benefits

3

DEFINITIONS Life-LTC Combination Products

LIFE-LTC Combination Products

Linked Benefits

Single Pay Multi-Pay

Policies14,168

Premium$1,109M

Policies7,368

Premium$102M

Policies43,005

Premium$601M

Policies35,080

Premium$593M

Asset Based‘LTC’ Riders

CIRChronic Illness

Riders

LTCRLong Term Care

Riders

Characteristics:Optional Rider, attachable to multiple products.

Typically only Acceleration of Death Benefit (ABR).

Living BenefitsCharacteristics:

Acceleration and Extension of Benefits (ABR&EBR)

High Liquidity. Traditionally Return of Premium.Integrated Product

4

Combo Products Meet A Variety of Consumer Needs

Life Insurance Needs

Long

Term

Car

e N

eeds

Stand Alone

LTC

Linked Single

Pay

Linked Multi-

Pay

LTC Riders

CIR Riders

Life Insurance

5

When was the first Combination Product Released?

Trivia Question

a) 1981

c) 1992

d) 1995

e) 2003

b) 1987

6

EVOLUTION – LINKED BENEFIT (ASSET BASED)

Linked Benefit

7

1987

8

The First Combo Product was released by First Penn Pacific Life Insurance Company.

Built on a Universal Life Chassis.

1987: A long time ago, in a Galaxy known as Chicago

1987

First Combo product from

First Penn Pacific

(Lincoln)

Linked Benefit

9

Buying both Life & Long Term Care

Cost synergies because not paying duplicate Death Benefit and LTC

Simple Concept

Life Policy LTC PolicyDeductions (withdrawals)

10

1988

11

Golden Rule develops a combo Life plus LTC product to meet potential regulations in the health care space.

They build their combo product on a Whole Life Chassis. Product accelerates the Life policy for LTC (no Extension of Benefits)

1988 : UNRELATED DEVELOPMENT

First Penn Pacific & Golden RuleThe first two companies in the

Combo Marketplace!1987


First Penn Pacific

(Lincoln)

1988

Golden Rule (OneAmerica)

develops AssetCare (WL integrated LTC)

Linked Benefit

12

1995

13

Golden Rule adds EBR to their product.

Extension of Benefit Rider provides Long Term Care benefit after the Life Policy has been exhausted.

1995 : Extension of Benefits Rider (EBR)

19881987




First Penn Pacific

(Lincoln)

Golden Rule adds an

Extension of Benefits option

1995

Linked Benefit

14

2000

15

Between 1995 – 2000, First Penn Pacific introduced the MoneyGuard name into the market. MoneyGuard had both the ABR & EBR.

MoneyGuard sales had hit $100 million in sales but had plateaued.

2000 : MONEYGUARD. The Kleenex of the Linked Benefit Market

19881987




First Penn Pacific

(Lincoln)

Golden Rule adds an


1995 2000

MoneyGuard ~$100 million

Tough Sell• Full ROP• LTC Benefits• Death Benefit

Distribution Challenges• Competition for $s with Life Insurance Commission• Baby Boomers not there yet• Few competitors

Linked Benefit

16

2003

17

Lincoln transfers out MoneyGuard from First Penn Pacific

“Certain MoneyGuard experts leave First Penn/Lincoln …”

2003 : MONEYGUARD is LINCOLN MONEYGUARD

19881987




First Penn Pacific

(Lincoln)

Golden Rule adds an


1995 2000


2003

Linked Benefit

18

2005

19

2005 : MONEYGUARD REDESIGNED – MARKET LIFTOFF

19881987




First Penn Pacific

(Lincoln)

Golden Rule adds an


1995 2000


Linked Benefit

– Until now, MoneyGuard was a fully underwritten product. – Sales continued to increasing from 2000.– Sales in Banks / Wirehouse were gaining traction.– Lincoln redesigns MoneyGuard to a Simplified Underwriting with Cognitive testing– They also build a dedicated Wholesaling force focused on just selling

MoneyGuard.

2005

MoneyGuard moves to Dedicated

Wholesaler and Simplified

Underwriting

This makes the product ‘Transactional’ & removes the Distribution challenge.

20

2006

21

2003 “Certain MoneyGuard experts leave First Penn/Lincoln …”

They land at Genworth and they create their version of MoneyGuard known as TLC.

2006 : Next Competitor is Born - GENWORTH

19881987




First Penn Pacific

(Lincoln)

Golden Rule adds an


1995 2000


2005



Underwriting

2006

GenworthTLC

Launched

Linked Benefit

22

2009

23

Linked Benefit Market, composed of ~3 companies hit a half a billion $s.

MoneyGuard is driving the growth with over 80%+ market share.

Other companies start to take notice.

2009 : AMAZING MARKET GROWTH

19881987




First Penn Pacific

(Lincoln)

Golden Rule adds an


1995 2000


2005



Underwriting

2006

GenworthTLC

Launched

2009

$506m of premium on 7,849 polices

Linked Benefit

24

2011

25

Linked Benefit Market breaks $1 billion with over 21,000 policies.

John Hancock, who was in the ‘LTC Rider’ market, launches their Linked Benefit Solution in 2011.

2011 NEW short term PLAYERS ENTER

19881987




First Penn Pacific

(Lincoln)

Golden Rule adds an


1995 2000


2005



Underwriting

2006

GenworthTLC

Launched

2009


2011

John Hancock launches Linked Benefit Product

Sun Life also enters.

However, neither stays in the market long.

Linked Benefit

However, neither stays in the market long.

Sun Life also enters.

26

2012

27

Pacific Life enters the Asset Based Market with their product called PremierCare.PremierCare is the first Combo product with gender distinct LTC rates.

In the Linked Benefit market where inflation benefits were hardly being sold, Pacific Life launches with a focus on buying long term care with inflation benefit.

In a market where ~5 – 10% of the sales actually elected an inflation benefit option, Pacific Life starts selling 75%+ of the policies with inflation options.

2012 : INFLATION IS THE NEW STORY

19881987




First Penn Pacific

(Lincoln)

Golden Rule adds an


1995 2000


2005



Underwriting

2006

GenworthTLC

Launched

2009


2012

Pacific Life launches

PremierCare

Linked Benefit

28

2013

29

Nationwide joins the market with their Asset Based solution.They build on their success in the ‘LTC Rider’ market and build their CareMatters product with an INDEMNITY design.

The Asset Based Market breaks $1.5 billions with almost 24,000 policies

2013 : MORE PLAYERS

19881987




First Penn Pacific

(Lincoln)

Golden Rule adds an


1995 2000


2005



Underwriting

2006

GenworthTLC

Launched

2009


2012


PremierCare

NationwideLaunches

CareMatters

2013

Linked Benefit

30

2014

31

MoneyGuard changes the marketplace by removing their Day 1 Full Return of Premium benefit.

Asset Based Marketplace becomes the Linked Benefits marketplace.

New York Life and MassMutual join the market.

2014 : RETURN OF PREMIUM IS THE NEW OLD STORY

19881987




First Penn Pacific

(Lincoln)

Golden Rule adds an


1995 2000


2005



Underwriting

2006

GenworthTLC

Launched

2009


2012


PremierCare

NationwideLaunches

CareMatters

2013 2014

NY Life and MassMutual

Linked Benefit

32

Lincoln MoneyGuardAwareness, huge dedicated wholesaling force

Diverse Market Place – Offering Consumer OptionsLinked Benefit

Pacific Life PremierCareFull ROP, Inflation Story

GenworthFull Underwriting, Multiple Risk Classes

OneAmericaPortfolio of Linked Solutions [Life (single & joint life) & Annuity]. Lifetime LTC BenefitsNationwideIndemnity

MassMutualDividends

http://www.pacificlife.com/home.html

https://www.oneamerica.com/wps/portal/OneAmerica

33

2009 2010 2011 2012 2013 2014$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

0

5,000

10,000

15,000

20,000

25,000

$506.3

$838.1

$1,426.7 $1,451.3$1,505.1

$1,211.6

7,849

12,746

21,18120,807

23,701

21,536

Premium ($m) Policies

Source: LIMRA US Individual Life Combination Products: LTC (Only), Extension (Only), All Products, All Premiums

Linked Benefit SalesLinked Benefit

Policie

s

Premium

34

2012

35

2009 2010 2011 2012$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

0

5,000

10,000

15,000

20,000

25,000

$506.3

$838.1

$1,426.7 $1,451.3

7,849

12,746

21,18120,807

Premium ($m) Policies

Source: LIMRA US Individual Life Combination Products: LTC (Only), Extension (Only), All Products, All Premiums

HOW TO INVEST A $BILLION DOLLARS?Linked Benefit

Policie

s

Premium

($m)

36

SINGLE PAY (@10%) VS MULTI-PAYLinked Benefit

Policie

s

Premium

2009 2010 2011 2012 2013 20140

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

160,000,000

0

2,500

5,000

7,500

10,000

12,500

15,000

17,500

20,000

49,941,806

143,340,414

6,851,126

17,910,773

7,236

11,932

19,88119,305

613 832 1,300 1,502

Single Pay (10%) MultipaySingle Pay Policies Multipay Policies

Source: LIMRA US Individual Life Combination Products: LTC (Only), Extension (Only), All Products, Single vs Reoccurring Premiums

37

Lincoln arrives at the conclusion that investing $1 billions annually is TOUGH.

Wouldn’t it be great if money came in over time?

MoneyGuard has offered a 3, 5, 7 & 10 Pay version for a decade plus.

But Nobody is buying!

REALLY!!! INTEREST RATES ARE LOW???Linked Benefit

ACTUALLY:

NOBODY IS SELLING

Lincoln wasn’t compensating their Wholesaling force for selling their Multi-Pay versions.

Solution : Pay (Encourage) Your Wholesalers to sell the Multi-Pay versions.Price the Multi-Pay versions ‘better’ than your Single Pay

38Source: LIMRA US Individual Life Combination Products: LTC (Only), Extension (Only), All Products, Single vs Reoccurring Premiums

THE POWER OF COMPENSATIONLinked Benefit

Policie

s

Premium

2009 2010 2011 2012 2013 20140

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

160,000,000

0

2,500

5,000

7,500

10,000

12,500

15,000

17,500

20,000

$17,910,773

$88,487,551

$102,163,261

1,502

5,894

7,368

Single Pay (10%) MultipaySingle Pay Policies Multipay Policies

4x increase

39

THE POWER OF MONEYGUARDLinked Benefit

Solution : Pay (Encourage) Your Wholesalers to sell the Multi-Pay versions.Price the Multi-Pay versions ‘better’ than your Single Pay

With the multi-pay change, MoneyGuard changes the Linked Benefit marketplace.

Lincoln later removes the pricing benefit of their multi-pay solution, but the market now knows to ask/consider multi-pay options.

Market Reaction: “The MoneyGuard Effect”

MoneyGuard competitors with multi-pay options see their sales increase

Nationwide launches their product (2013) with a multi-pay solution.

Pacific Life launches their Multi-Pay solution in 2015.

• Combination Market Place is composed of two markets : Linked Benefits (Asset Based) and “LTC” Riders, but new products continue to blur the lines.

• Golden Rule and First Penn introduced products to the market back in late 1980s; but the MoneyGuard changes in 2005 that helped drive the Linked Benefit market to over $1 Billions [assisted by the Baby Boomers and their awareness of LTC].

• New entrants continue to join the market, each with a different market identity offering consumers more options.

• In the Linked Benefits Market, multi-pay product options are growing while single pay sales appear to be flattening/declining.

40

TAKE-A-WAYSLinked Benefit

19881987

Golden Rule develops AssetCare


First Penn Pacific

Golden Rule adds an


1995 2000


2005



Underwriting

2006

GenworthTLC

Launched2009


2012


PremierCare

NationwideLaunches

CareMatters.MoneyGuard focuses

on Multi-Pay

2013 2014

NY Life and MassMutual enter

the market

The Future

2011

Linked Benefit Market

breaks $1Bs

evolution and today's use of life ltc combination products final

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