2007 General Meeting Assemblée générale 2007 Montréal, Québec 2007 General Meeting Assemblée générale 2007 Montréal, Québec Canadian Institute of Actuaries Canadian Institute of Actuaries L’Institut canadien des actuaires L’Institut canadien des actuaires

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 T100 and UL LCOI Lapse Studies Results Lloyd Milani Nikolai Serykh November 30, 2007

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 Agenda UL LCOI Industry Pricing – 2006 Munich Re Survey Lapse Studies Highlights Scope and Method Results

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 UL LCOI Industry Pricing 2006 Munich Re Survey – Sales and Funding – Lapse and Interest – Profit

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 UL Level COI Sales

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 UL Level COI Funding Level

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 UL LCOI Pricing Lapses

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 UL LCOI Lapse and Interest

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 UL LCOI - Profitability

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 T100 and UL LCOI Lapse Study 2007 Request for data - Beginning 2005 Enhanced Fields – Cash Value – NAAR Pattern – UL Deposit Results Database

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 Working Group Nikolai Serykh Elena Stoyanova

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 Individual Life Subcommittee of the Research Committee Lloyd Milani, Chairperson Stephen Beal Marc-Andre Belzil William Brath Emile Elefteriadis Beth Fitzmaurice Marc Tardif

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 Agenda UL LCOI Industry Pricing – 2006 Munich Re Survey Lapse Studies Highlights Scope and Method Results

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 Participating Companies AIG Canada Life Co-operators Life Desjardins Empire Life Industrial Alliance Manulife Financial Standard Life Sun Life Transamerica Life Wawanesa Top 5 companies contribution to total policy exposure: 97% for T10086% for UL LCOI

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 Highlights – T100 Study Period 92,587 lapses – Duration ,064 lapses – Duration ,594 lapses – Duration – 156 lapses Over 4.0 million policy exposures Over 251 billion face amount exposure Compared to 1999 T100 Lapse Study – 204.5% of exposure by policy – 139.0% of exposure by face amount

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 Highlights – UL LCOI Study Period 103,049 lapses – Duration ,972 lapses – Duration ,526 lapses – Duration ,551 lapses Over 2.1 million policy exposures Over 304 billion face amount exposure Compared to 2003 UL LCOI Lapse Study – 167.0% of exposure by policy – 149.0% of exposure by face amount

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 Method Calendar year method Exposure period as provided by company without modification Following Status codes included – Active – Death – Lapsed and Surrendered

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 Scope Results by Number and by Face Amount Durations 1-25 for T100 and 1-15 for UL – Total – Calendar Year – Sex and Joint – Smoking Status – Policy Size – Issue Age – Premium Frequency – Cash Value Availability (T100 only)

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 T100 Lapse Study Results Total Calendar Year Sex and Joint Smoking Status Policy Size Issue Age Premium Frequency Cash Value Availability Comparison to – 1999 Term-to-100 Lapse Study

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 Term-to-100 Study

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 T100 Study by Calendar Year

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 T100 Study by Sex and Joint Status

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 T100 Study by Smoking Status

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 T100 Study by Policy Size

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 T100 Study by Issue Age

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 T100 Study by Premium Frequency

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 Term-to-100 Study by Cash Value Availability (1)

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 Term-to-100 Study by Cash Value Availability (2)

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 Term-to-100 Study 1999 vs 2007 Composite Rates at Durations vs 2007 without Cash Value

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 T100 Study – 1999 vs 2007

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 T100 Study 1999 vs 2007 without Cash Value

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 UL LCOI Lapse Study Results Total Policy Size Comparison to – 2003 UL LCOI Lapse Study – 2007 Term-to-100 Lapse Study – Munich Re Pricing Survey

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 UL LCOI Lapse Study

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 UL LCOI Lapse Study Policy Size

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 UL LCOI Study – 2003 vs 2007 Overall Differences

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 UL LCOI – 2003 vs 2007

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 UL LCOI Study – 2003 vs 2007 Differences Different Study Periods: – vs Shift in Participants Contribution Change in Sample Demographic: – Male = -0.8% Female = +5.6% – Joint 1 st to Die = -1.2% – Joint 2 nd to Die = -3.6%

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 UL LCOI vs Term-to-100 Composite Rates at Durations 1-15 Non-Smoker, Single, 100K+ Band, Monthly Premium Mode

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 UL LCOI vs Term-to-100

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 UL LCOI vs Term-to-100 NS, Single, 100K+, Monthly Mode

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 Munich Re Pricing Survey 2002 Assumptions vs Experience 2006 Assumptions vs Experience

2007 General Meeting Assemblée générale General Meeting Assemblée générale UL vs MRe Survey 2002 Issue Age 25-35

2007 General Meeting Assemblée générale General Meeting Assemblée générale UL vs MRe Survey 2006 Issue Age (1)

2007 General Meeting Assemblée générale General Meeting Assemblée générale UL vs MRe Survey 2006 Issue Age (2)

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 Conclusion Careful with experience where exposure is limited Lapse Rates pattern are similar in both studies T100 lapse rates are lower than UL LCOI after duration 8 UL LCOI composite experience is in line with average pricing and valuation assumptions Average pricing and valuation assumptions are generally higher than actual experience for UL Non-Smoker, Single, Band 100K+, Monthly Premium Mode

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 Limitations Not every company was able to contribute each experience year Basic Policies only Limited Amount of Exposure T100 Data – Date of Cash Value on set – Premium Cease Date UL YRT COI changes to Level COI Partial Lapses Increasing Face Amount

2007 General Meeting Assemblée générale General Meeting Assemblée générale 2007 Questions