For producer use only. Not for distribution to the public. TRANSLINK ® TRANSAMERICA’S LENDING INSTITUTION NETWORK PROPRIETARY PREMIUM FINANCE PLATFORM

For producer use only. Not for distribution to the public. Premium Financing is an alternative insurance funding method for high-net-worth individuals to pay life insurance premiums without liquidating high-performing assets Premium Financing is not an alternative to having sufficient funds to pay for a life insurance policy What Is Premium Financing?

For producer use only. Not for distribution to the public. Borrowing premiums allows current investments to remain intact There may be tax and economic consequences associated with liquidating the assets The continued growth of assets may be a better use of money May reduce annual gifting requirements Premium financing could be one possible strategy to reduce annual gifting Why Premium Financing?

For producer use only. Not for distribution to the public. Consistent messages from affluent clients: “I make an excellent rate of return on my money in my own business, so it doesn’t make sense to use capital for large premiums to a life insurance company.” “My money is tied up in highly profitable investments.” “I’d prefer not to sell off my assets to pay the premiums for the coverage that I need.” The Problem

For producer use only. Not for distribution to the public. Premium financing allows clients to: Purchase the life insurance needed to accomplish their financial goals Borrow the premiums and pay back the loan using the death benefit or another exit strategy Keep high-performing investments in place without having to liquidate capital to pay premiums The Solution

For producer use only. Not for distribution to the public. A step-by-step program designed to: Offer a customized solution to high-net-worth clients Allows you to focus on insurance Eliminates the need for intermediaries Offers case management from A - Z What is TransLINK ®

For producer use only. Not for distribution to the public. A unique program that simplifies a complex transaction A preferred group of lenders Case design support with customized premium financing proposals Consultation with client’s financial and/or legal advisors On-going annual loan renewal assistance No commission splitting TransLINK ® Benefits

For producer use only. Not for distribution to the public. Individuals ages 40 to 80 with net worth greater than $5 million (excluding primary residence) Business owners or individuals with unencumbered, illiquid assets Life insurance need with annual premium of $100,000 or more Comfortable with leverage and borrowing premium TransLINK ® Candidates

For producer use only. Not for distribution to the public. Client Access is Vital Need financial statements and tax returns Access to other advisors TransLINK ® Candidates

For producer use only. Not for distribution to the public. How It Works Insured/Borrower: (Individual, ILIT, Corporation, Partnership, or LLC) Insurance Carrier Premium Finance Lender (1b) Applies for a loan, pays loan interest and provides collateral (2b) Lender underwrites and extends a loan to the borrower, sends premiums to the insurance carrier (1a) Applies for life insurance policy (2a) Carrier underwrites & issues the policy (3b) Carrier adds lender as collateral assignee on the policy Beneficiary(ies) (4) At the policy owner’s death, beneficiary(ies) receives the death proceeds (net after loan repayment). (3a) Lender approves loan and sends premiums to the insurance carrier

For producer use only. Not for distribution to the public. Phase 1 – Prequalification Identify an opportunity Begin TransLINK consultation Collect Fact Finder data Identify appropriate collateral Client commits to process TransLINK ® Process

For producer use only. Not for distribution to the public. Phase 2 – Case Design Submit Fact Finder Develop personalized report and illustration Explore lender options TransLINK ® Process (cont.)

For producer use only. Not for distribution to the public. Phase 3 – Case Management Submit life insurance application Submit loan package Communicate loan status with all parties Facilitate lending process – close and pay case Assist with on-going loan renewal process TransLINK ® Process (cont.)

For producer use only. Not for distribution to the public. Interest Paid Annually The loan is for the amount of premiums only The client pays the interest in advance or in arrears to the lender with his/her own funds Loan Interest Payment Options

For producer use only. Not for distribution to the public. Interest Deferral For qualified borrowers, loan interest may be deferred at the discretion of the lender for a specified period Accrued interest is added to loan principal Interest deferral may be available for a specified period (e.g., 5 years), not for the life of the loan Deferring interest can cause the cumulative loan amount to exceed the death benefit, leaving no death benefit available to the beneficiary(ies) Loan Interest Payment Options (cont.)

For producer use only. Not for distribution to the public. The rate charged is made up of two components: 1.Current prime rate or London Interbank Offered Rate (LIBOR) 2.A spread that is determined by the lender, typically basis points An option to cap the interest rate for an additional fee may be available, if qualified Generally, larger loans receive more favorable rates Loans are renewed annually Lenders may charge a loan origination fee or other fees that will increase the total cost of borrowing Interest Rates and Loan Structure

For producer use only. Not for distribution to the public. Loan interest is generally not tax deductible Individual taxpayers generally cannot deduct personal loan interest IRC Section 264 disallows deductions of interest for loans greater than $50,000 to finance business owned policies on the lives of officers or employees Loan Interest Deductibility

For producer use only. Not for distribution to the public. Acceptable collateral will vary by lender. Lenders usually prefer certain types of collateral over others, and may allow: Loans must be fully collateralized 100% of the cumulative loan balance is collateralized by the policy cash value and other pledged assets Cash Letters of credit CDs Policy cash surrender value Traded securities (50% valuation) Personal guarantees Government bonds Loan Collateral

For producer use only. Not for distribution to the public. Policies owned outside the insured’s estate that are premium financed may eliminate the need to gift the entire premium Only loan interest and collateral may need to be gifted The loan interest may create gift tax liability if it exceeds available exclusions and exemptions Interest deferral increases the gifting leverage No need to gift premium or loan interest Creates a balloon note Gift Tax Leveraging

For producer use only. Not for distribution to the public. Death of the Insured Generally, simplest, most straightforward option depending on the age of the insured May need to reconsider if interest is deferred or loan costs increase Cash Value With lender approval, withdraw cash from the policy's cash surrender value to pay back all, or a portion of, the loan balance Loan Repayment Strategies

For producer use only. Not for distribution to the public. Loan Repayment via Outside Funds— If Liquidity Event Occurs Liquidation of a business interest or other existing assets Grantor Retained Annuity Trust (GRAT) Charitable Lead Trust Loan Repayment Strategies (cont.)

For producer use only. Not for distribution to the public. Reduces client’s cash outlay in early years Life insurance cash surrender value may serve as portion of the collateral Attractive interest rate on borrowed funds Based on LIBOR or Prime Client may not have to liquidate assets Benefits to Client

For producer use only. Not for distribution to the public. May produce positive arbitrage if loan interest rates are lower than crediting rates Depending on lender, loan may be paid off at any time without prepayment penalty or paid upon the death of the insured Benefits to Client (cont.)

For producer use only. Not for distribution to the public. Loan Interest Rate Risk Interest rates will fluctuate over time Loan interest rates may only be locked in for a limited period of time (e.g., 1–5 years) Future loans will be at then-available interest rates A rise in loan interest rates could result in additional collateral requirements, less net death benefit, etc. Financing Risks

For producer use only. Not for distribution to the public. Policy Crediting Rate Risk Crediting rate may be less than anticipated Collateral Call Risk Decreased policy interest crediting rate could lead to a collateral call In the event of a loan default, collateral could be called Financing Risks (cont.)

For producer use only. Not for distribution to the public. Premium financing has insurable interest as well as tax implications in a number of areas including estate, gift and income taxes Clients must rely on their independent legal and tax advisors to navigate through the various tax and legal issues Legal and Tax Considerations

For producer use only. Not for distribution to the public. Approximately three months if: Client commits Appropriate collateral is identified No surprises in underwriting Documents are submitted timely TransLINK ® Timeline

For producer use only. Not for distribution to the public. Make TransLINK ® your “Single” Solution Identify an opportunity Contact your agency Work with TransLINK, your one-stop shop Seizing the Opportunity

For producer use only. Not for distribution to the public. This material was not intended or written to be used, and cannot be used, to avoid penalties imposed under the Internal Revenue Code. This material was written to support the promotion or marketing of the products, services, and/or concepts addressed in this material. Anyone to whom this material is promoted, marketed, or recommended should consult with and rely solely on their own independent advisors regarding their particular situation and the concepts presented here. Transamerica Life Insurance Company, Transamerica Financial Life Insurance Company (collectively “Transamerica”), and their representatives do not give tax or legal advice. The material in this presentation and the concepts presented here are provided for informational purposes only and should not be construed as tax or legal advice. Clients and other interested parties must be urged to consult with and rely solely upon their own independent advisors regarding their particular situation and the concepts presented here. Discussions of the various planning strategies and issues are based on our understanding of the applicable federal tax laws in effect at the time of presentation. However, tax laws are subject to interpretation and change, and there is no guarantee that the relevant tax authorities will accept Transamerica’s interpretations. Additionally, this material does not consider the impact of applicable state laws upon clients and prospects. Although care is taken in preparing this material and presenting it accurately, Transamerica disclaims any express or implied warranty as to the accuracy of any material contained herein and any liability with respect to it. This information is current as of November OLA