1. Life Insurance Professional Analysis and Review Presented By: Matt Woodson Zenith Marketing Group, Inc. Charlotte, NC

2. Is your client’s insurance up to P.A.R? To ensure that all clients have the best possible life insurance solutions available. Paramount Principle

3. Purpose Assure that the insurance need hasn’t changed Uncover changes in underwriting status, good or bad Review policy performance Review policy provisions Review beneficiary status Review loan status (if appropriate)

4. Who Needs A Review? Personal Clients Younger and Middle-Aged Clients  Changing Family Needs  Supplemental Income, make insurance permanent Older Clients  Need to keep policies in-force  Estate Planning and TOLI

5. Who Needs A Review? Business Clients Benefits – need to support promises  Deferred Comp.  Sec. 162 Bonus Plans  SERP Business Continuation and Key Person  More or Less Owners  Ownership Properly Structured?  Buy-Out Possibilities  Business Properly Valued?

6. Who Needs A Review? Trust Owned Life Insurance (TOLI) Survey Professional Trustees  83.5% - No Procedures or Guidelines for TOLI  95.3% - No Procedures for Variable Life Policies Family and Friends as Trustees  94.7% - No Procedures for Variable Life Policies  71.2% - Have not reviewed Life Policies in past 5 years. Survey published in Trusts & Estates magazine, May 2003, page 63.

7. Who Needs A Review? Code of Federal Regulations Title 12 Sec. 9.6 Mandates requirements for National Banks dealing with Trust Assets, including Life Insurance. Reviews  Pre-Acceptance, Post Acceptance, Ongoing Annual

8. Some Policies May be in Danger of Lapsing Because:  Low interest rate environment/ low interest crediting rate  Lower than anticipated investment performance (VUL)  review subaccount allocations  Increased Cost of Insurance More premium may be needed to fulfill the original goal. Issues You May Uncover

9. Interest Rate History

10. Some Policies May be in Danger of Lapsing Because:  Reduction in Dividend Rates (WLP)  Increasing Premium (Term)  Policy Loans  Excessive Withdrawals  Skipped Premium Payments More premium may be needed to fulfill the original goal Issues You May Uncover

11. If Under-Funded… Possible Solutions  Increase the future premiums to make up for the shortfall.  Improve underwriting class, if eligible  Drop unnecessary riders  Decrease face if need has decreased

12. Problems With These Solutions  Clients may not want to pay more  Increased premiums to ILIT’s may create taxable gifts  Reluctance to contribute to policy in economic environment of low interest rates (UL) or low subaccount growth (VUL) If Under-Funded…

13. Problems With These Solutions  If policy has existing loan and client making further loans to make premium and interest payments, problem only becomes worse  Need for current level of insurance remains  Desired changes may not be available nor meet planning objectives If Under-Funded…

14. Potential Solutions Reasons to Keep Current Policy  Surrender of an existing policy may incur a surrender charge; purchase of a new policy would impose yet another surrender schedule  Need for life insurance is temporary  Higher guaranteed minimum interest crediting rates may not be available

15. Reasons to Keep Current Policy  Adverse health change  New contestable and suicide periods  Limits on transferring loans  Tax consequences  Tax benefits issues  New acquisition costs Potential Solutions

16. Reasons to Consider Exchange or Replacement  Company strength – has the existing Insurer had significant recent drops in ratings  Extended maturity  Available since @ 1999  New benefits/riders may not be available on older plans  Term insurance getting expensive and need continues Potential Solutions

17. Why a Review?  Secondary No-Lapse Guarantees  Extended Maturity  Riders & features  Long Term Care  Critical illness coverage  Return of Premium  Estate Tax Repeal Riders/Options  Pref. Plus Underwriting Classes  Policy Loan Provisions  Improved Loan Rates –Zero Net Cost Loans Policy Options/Benefits Not Previously Available

18. Re-evaluation of Underwriting  More history since health occurrence  Improved health, lost weight, healthier lifestyle  Change in smoking status  Do they qualify for one of the new, improved underwriting classes available today?  Table Shave Programs (what’s left)  Change in avocation status  More experience (Example: pilots, divers)  Age of traffic violations Why a Review?

19. Why Review Now? Reinsurance – The 800lb. Gorilla  8 Major Reinsurers left in the North American market.  Less Reinsurers = Less Risk Diversification = Higher Pricing and Stricter Underwriting  Very difficult to get exceptions, especially in Preferred and better categories.  Max capacity @ $125 Million  Immediate Effect on Ages 70+

20. Why Review Now? Actuarial Guideline 38  Sets higher reserve requirements for extended guarantee plans.  Retro-active to July 1, 2005 2001 CSO Mortality Rates  Extends premiums beyond age 100  Helps offset impact of AG38  Especially helpful for lower ages

21. Potential Solutions Case Study – Loan Rescue Situation: Age 50 Male, Preferred Non-Smoker, has $250k face policy (non-guaranteed), paying $2,475/yr, cash value of $40,000, with $20k of loan against the cash value. Wants to get rid of loan and maintain the $250,000 face on a guaranteed basis.

22. Potential Solutions Case Study – Loan Rescue Solution: 1035 Exch. Cash and loan into new policy with face of $273,000 Take withdrawal in year 2 to pay off loan and loan interest Nets a guaranteed death benefit of $250,000 with new premium of $2,000/yr.

23. Jumbo Loan Rollover Male, Age 66, SNT, $75M face policy, $25M CV –$12.5M outstanding loan –Policy reprojections show lapse within 5 years on current factors –Goals: avoid “phantom income” and maintain net level db of $62.5M 1035 in Legend 300LR – no loan repayment Case Study

24. Jumbo Loan Rollover Results –Maintained guaranteed net level db of $62.5 –No phantom income with guaranteed db! Annual Cash outlay to keep guaranteed level death benefit at $62.5M ($75M - $12.5M) = $855,255 Paid as primarily loan interest ($687,500) + premium $167,755 in years 1-20 Case Study

25. Potential Solutions Leveraging Strategies Putting Turbo in the 1035  Exchange to SPIA  Other options:  Installment Refund or Cash Refund to protect principal  Age rated if adverse health conditions  Can be paid directly from carrier to carrier

26. Potential Solutions Leveraging Strategies Example: Male, Preferred Non-Smoker age 70 with $250,000 cash value Traditional 1035 Exch. Into another life policy produces $722,400 face amount 1035 Exch. Into SPIA creates $22,896 gross annual payout, or $20,575 net taxes (at 28%) $22,896 purchases $842,948 face amount $20,575 purchases $757,047 face amount

27. Potential Solutions Leveraging Strategies Life Settlements  Submit health records for L.E. projection  Gather Offers  Play the Game  Be mindful of capacity limits  At least 6-8 week process

28. The Review Process

30. Needs Analysis Quick Estimator

31. The Review Process Policy Evaluation Guide

32. The Review Process Inforce Request Form

33. PAR Presentation

39. Life Insurance Professional Analysis and Review... Why offer one? Deliver Value → Client satisfaction Deliver Value → Client retention Deliver Value → More referrals Deliver Value → Enhance your professionalism

40. Life Insurance Professional Analysis and Review… Ensuring you’re up to PAR.