State of the annuity industry

1. © Oliver Wyman
WEALTHVEST LEADERS COUNCIL
STATE OF THE ANNUITY INDUSTRY
WASHINGTON, DC
JANUARY 9, 2019
Nicholas Carbo, FSA, MAAA

2. 1© Oliver Wyman
Agenda
1 Annuity market update
2 Product innovation
3 Rate action update

3. 2© Oliver Wyman
VA sales have slowed meaningfully in recent years; other lines have largely
remained stable, while “registered FIAs” have taken off
Trad. FA ex. MVA
SPIA
DIA
Marketriskforpolicyholder
LowerHigher
201320122011201020092008 20172014 2015 2016
VA
Registered FIA
Trad. FA with MVA
FIA
Annual retail annuity sales in recent years
By product line; $BN
Source: LIMRA

4. 3© Oliver Wyman
$238 $220 $230 $237 $236 $222 $204
0%
10%
20%
30%
40%
50%
60%
70%
$0
$50
$100
$150
$200
$250
$300
2011 2012 2013 2014 2015 2016 2017
Incomeelection(%ofsales)
Sales($B)
Accumulation (FA/FIA/VA) VA GLWB FIA GLWB Income annuity % of income sales
Income vs. accumulation sales
Income sales are decreasing!
VA GLWB sales declined sharply due to de-risking. Until 2016, this was partially compensated by
rising FIA GLWB sales. The recent FIA GLWB slowdown is caused by DOL/distribution changes.
Source: LIMRA

5. 4© Oliver Wyman
In earlier years, the fixed index annuity market was heavily concentrated in
“niche players” focusing on the independent channel …
Banks and broker dealers
Independent and banks
Independent organizations
Recent
Acquirers
USStock
Companies
Foreign
Subsidiaries
Mutual
Companies
OwnershipStructure
Privately
Held
Size of bubbles represents 2005
market share
Primary distribution channels
Lower HigherCredit Rating
A++AA-B++B+B A+
Source: Advantage Compendium and Oliver Wyman Research
Allianz Life
AmerUs
(Athene/Aviva block)
Old Mutual
(now Fidelity&
Guaranty)
Midland National
Equi Trust
Jackson National
32.3%
9.9%
All other
companies
8.8%
15.2%
American Equity
ING (now VOYA)
Jefferson Pilot
(now Lincoln)
Sun Life
(now Delaware
Life)
8.7%
7.5%
Market share and dominant distribution channels in 2005
By ownership structure and credit rating

6. 5© Oliver Wyman
… by 2013 the numbers of players in the FIA market had increased with
diversification outside of the independent channel …
Banks and broker dealers
Independent and banks
Independent organizations
Recent
Acquirers
USStock
Companies
Foreign
Subsidiaries
Mutual
Companies
OwnershipStructure
Privately
Held
Size of bubbles represents 2013
market share
Primary distribution channels
Lower HigherCredit Rating
A++AA-B++B+B A+
Source: Wink’s Sales & Market Report and Oliver Wyman Research
Allianz Life
15.5%
Career
National Life
10.4%
American Equity
Sagicor Life
CNO companies
Phoenix
Midland National
North American
Pacific Life
11.7%
7.1%
7.9%
Security Benefit
Fidelity & Guaranty
Equi Trust Athene Lincoln Benefit Life
All other companies
Forethought
Genworth
Nationwide
Western &
Southern
OneAmerica
Jackson National
Great American
Lincoln
Protective
Voya
AIG
National Western Symetra
Market share and dominant distribution channels in 2013
By ownership structure and credit rating

7. 6© Oliver Wyman
… today’s fixed index annuity market has a broad range of players with
distribution across all channels
Banks and broker dealers
Independent and banks
Independent organizations
Recent
Acquirers
USStock
Companies
Foreign
Subsidiaries
Mutual
Companies
OwnershipStructure
Privately
Held
Career
Size of bubbles represents 2017
market share
Primary distribution channels
Lower HigherCredit Rating
A++AA-B++B+B A+
Source: LIMRA and Oliver Wyman Research
All distribution channelsAllianz Life
Athene USA
Nationwide
American Equity
Midland National
Fidelity & Guaranty
North American
Security Benefit
Equi Trust
National Life
Jackson National
Americo
Phoenix
Voya
Great American
Symetra
Pacific Life
Protective
AIG
Global Atlantic
Lincoln
Mass Mutual
13.9%
9.0
%
8.5%
7.6% 6.5%
Small mutual
companies Reliance Standard
Delaware Life
American National
Western & Southern
Bankers Life & Casualty
Ohio National
All other companies
9.2%
Market share and dominant distribution channels in 2017
By ownership structure and credit rating

8. 7© Oliver Wyman
Top 10 annuity writers
In 2008, top annuity writers were stock companies with significant VA sales
Rank Company Structure Sales % VA
1 MetLife Stock 20.0 70%
2 AIG Stock 19.2 43%
3 ING Foreign 16.2 86%
4 TIAA Non-profit 14.4 100%
5 Lincoln Stock 13.5 82%
6 AXA Stock 13.4 100%
7 John Hancock Foreign 11.3 84%
8 Prudential Stock 11.3 91%
9 New York Life Mutual 10.7 16%
10 Hartford Life Stock 10.7 74%
Source: LIMRA
2008 Top 10 annuity writers 2017 Top 10 annuity writers
Rank Company Structure Sales % VA
1
Jackson
National
Foreign 18.4 95%
2 AIG Stock 14.3 45%
3 New York Life Mutual 13.8 23%
4 TIAA Non-profit 12.0 100%
5 AXA Foreign 10.3 100%
6 Nationwide Mutual 10.0 49%
7 Allianz Foreign 9.9 25%
8 Lincoln Stock 9.1 78%
9 Pacific Life Mutual 6.5 47%
10 Prudential Stock 6.2 94%
The top 10 annuity writers continue to make up slightly more than 50% of the industry sales

9. 8© Oliver Wyman
Top 10 annuity writers
Top writers now include writers who sell less VAs than in 2008
Rank Company Structure Sales % VA
1 MetLife Stock 20.0 70%
2 AIG Stock 19.2 43%
3 ING Foreign 16.2 86%
4 TIAA Non-profit 14.4 100%
5 Lincoln Stock 13.5 82%
6 AXA Stock 13.4 100%
7 John Hancock Foreign 11.3 84%
8 Prudential Stock 11.3 91%
9 New York Life Mutual 10.7 16%
10 Hartford Life Stock 10.7 74%
Exits from the top 10 Entrants into top 10
Source: LIMRA
2008 Top 10 annuity writers 2017 Top 10 annuity writers
Rank Company Structure Sales % VA
1
Jackson
National
Foreign 18.4 95%
2 AIG Stock 14.3 45%
3 New York Life Mutual 13.8 23%
4 TIAA Non-profit 12.0 100%
5 AXA Foreign 10.3 100%
6 Nationwide Mutual 10.0 49%
7 Allianz Foreign 9.9 25%
8 Lincoln Stock 9.1 78%
9 Pacific Life Mutual 6.5 47%
10 Prudential Stock 6.2 94%

10. 9© Oliver Wyman
FIA and VA M&A
The industry has been shaped by an influx of alternative capital and
landmark transactions …
Alternative buyers Japanese insurers IPOs and spinoffs
2010 2011 2012 2013 2014 2015 2016 2017 2018

11. 10© Oliver Wyman
Recent annuity innovation
Other than the advent of RFIAs, product innovation in retail annuities has
been largely incremental and focused on de-risking
Variable
annuities
Fixed index
annuities
RFIA
development
• GLWB rider inclusion
• Buffer vs floor design
• Volatility-control indices
– Higher potential upside
• Liquidity-focused features
– Shorter surrender charge periods
– Bailout provisions
• Index-linked income
– “Stacking” roll-ups
– Growth potential in income even after
policyholder begins withdrawals
• Volatility-control funds
– Required for most living benefits
• UST-indexed features
– Roll-up/payout rates linked to the UST
• VIX-indexed features
– Rider fees linked to the VIX
• Tiered withdrawal rates
– Payout rate declines after account
value depletes

12. 11© Oliver Wyman
Registered fixed index annuity product launches
Product launches have been accelerating recently with top competitors
launching version 2.0 of their products
2010 2011 2012 2013 2014 2015 2016 2017
Oct 2010
• AXA introduces
Structured Capital
Strategies
May 2013
• MetLife introduces
Shield Level
Selector
August 2013
• CUNA introduces
Member’s Zone
Annuity
September 2013
• Allianz Life
introduces Index
Advantage
January 2015
• Voya introduces
Potential Plus
October 2015
• Voya closes
Potential Plus
August 2017
• Brighthouse
introduces Shield
Level Select Access
(Fee based)
August 2016
• CUNA introduces
Member’s Horizon
Annuity
Feb 2017
• AXA Structured
Capital Strategies
Plus filed
2018
February 2018
• Great West
introduces Capital
Choice
March 2018
• Great American
introduces Index
Frontier 7
May 2018
• Lincoln introduces
Level Advantage
August 2018
• Protective
introduces Market
Defender
Recent introductions have included a GLWB rider as an option

13. 12© Oliver Wyman
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
December 2015
• Midland National
– MNL Prosper 5
Fee-based FIA product launches
Fee based FIAs have made up 0.52% of the market in Q2 20181
August 2016
• Great American
– Index Protector 7
February 2017
• Allianz
– Retirement Foundation
ADV Annuity
February 2017
• Lincoln
– Lincoln Core Capital
May 2017
• Pacific Life
– Pacific Index Advisory
July 2017
• Symetra
– Advisory Edge
– Income Advisory Edge
July 2017
• Nationwide
– Nationwide Summit
March 2018
• Jackson National
– Market protector advisory
1Source: Wink’s Sales & Market Report

14. 13© Oliver Wyman
300
400
500
600
700
800
900
1,000
0 1 2 3 4 5 6 7 8 9 10
VA GLWB Income annuity life only Income annuity cash refund FIA GLWB
Guaranteedmonthlyincome
Deferral period
Guaranteed income rates by product and deferral
1.Income illustrated for a single premium of $100k
2. Rates based on common products in the marketplace
60 year old male guaranteed monthly income by deferral period
FIA GLWB guaranteed
income exceeds
income annuity life only
FIA GLWB guaranteed income exceeds
income annuity cash refund
FIA GLWB income can exceed pure income annuities

15. 14© Oliver Wyman
10 years from issue
5 years from issueAt issue
Cash value (immediate income scenario)
FIAs provide stronger cash value guarantees but with very limited upside
relative to VA
$0
$50
$100
$150
$200
FIA GLWB VA GLWB Income annuity cash refund
$0
$50
$100
$150
$200
$250
FIA GLWB VA GLWB Income annuity cash refund
$0
$25
$50
$75
$100
FIA GLWB VA GLWB Income annuity cash refund
Cashvalue($k)
Cashvaluerange($k)Cashvaluerange($k)
1.Income illustrated for a single premium of $100k
2.Range based on S&P returns from 1/1/87- 1/1/2017, using the best and worst results for the number of years of experience
Historical
experience
Historical
experience
60 year old male with income starting at issue
1FIA GLWB has paid out
$6k more than VA GLWB
1FIA GLWB has paid out
$12k more than VA GLWBProduct Cash value commentary
Income annuity
cash refund
No cash value offered, cash refund is only a death benefit
FIA GLWB Narrow range of possible cash values, with guarantee
VA GLWB Wide range of possible cash values

16. 15© Oliver Wyman
VA GLWB income history
Carriers began to re-risk late last year, likely pressured by declining VA sales
in 2016-2017
VA GLWB income available after 10-year withdrawal delay
Based on consistent set of major VA issuers in industry
• Oliver Wyman has tracked the annual income
guaranteed by major variable annuity GLWB
products since 2009
• In 2009, the average policyholders can withdraw
over 10% of initial premiums each year after
deferring for 10 years
• By 2014, this amount has dropped to 8% as legacy
benefit parameters become unsupportable given
low interest rates
• Range of variation across major products has also
shrunk in the same timeframe, as industry has
consolidated and moved to similar pricing methods
• In mid-2017, numerous carriers began re-risking –
i.e., increasing benefit richness and removing
investment restrictions
– Changes “front ran” recent interest rate increase
– Likely driven by rapidly-declining sales in 2016
and 2017, led partially by DOL threat
• As a result, range of product variation has opened
up once more, signaling heating competition
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2009Q1
2009Q3
2010Q1
2010Q3
2011Q1
2011Q3
2012Q1
2012Q3
2013Q1
2013Q3
2014Q1
2014Q3
2015Q1
2015Q3
2016Q1
2016Q3
2017Q1
2017Q3
2018Q1
2018Q3
Incomeavailableafter10years(%ofpremium)
Range of income available Median income available 10-year UST

17. 16© Oliver Wyman
Fixed annuity rate offerings
Fixed annuities have seen no margin improvement from the recent interest
rate rise, as all yield enhancements were passed back to the consumer
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
Guaranteedcreditingrate
Range of crediting rates Median crediting rate
Reference portfolio gross yield
Evolution of crediting rates for 5-year MYGAs
Based on consistent set of MYGA issuers in industry
Reference portfolio
comprises 50/50 A/BBB
public corporate bonds

18. 17© Oliver Wyman
Key takeaways
1 FIA sales will likely continue to expand and surpass VA sales
2
FIA GLWB sale grew due to flexibility combined with strong guarantees (echoes earlier VA
GLBs)
3 M&A will continue to influence the annuity market

19. Q&A