What impact will the sale of LBL have on Allstate agencies and exclusive financial specialists and their customers?

Transcription

1 Q&A Sale of Lincoln Benefit Life (LBL) to Resolution Life (as of 8/19/13) For Broker or Agent use only. Not for public dissemination. May not be distributed, reprinted or shown to the public in oral, written or electronic form as sales material. Overall What is the strategic rationale for the transaction? How does this transaction fit into Allstate Financial s strategy and what opportunities will it create? The sale of Lincoln Benefit Life (LBL) aligns with Allstate s strategy to serve distinct customer segments with differentiated offerings in markets where Allstate has a competitive advantage. The transaction will reduce the required capital in Allstate Financial by approximately $1 billion, reduce Allstate s life and annuity reserves by $13 billion, and generate total after-tax proceeds of approximately $785 million. This action sharpens Allstate Financial s focus and advances Allstate s key priorities by focusing on areas where Allstate can win with its strategy to serve distinct customer segments with differentiated offerings. This divestiture is one of many actions Allstate has taken to strategically focus Allstate Financial, deploy capital to earn attractive risk-adjusted returns, and reduce exposure to spread-based business and interest rates. What impact will the sale of LBL have on Allstate agencies and exclusive financial specialists and their customers? During this transition, Allstate agency and exclusive financial specialist customers will see no changes in the type of products offered or in the service of their existing products. To fulfill our Customer Value Proposition, Allstate agencies and exclusive financial specialists will continue to sell LBL life policies during a transition period of 12 to 18 months. Subsequently, Allstate companies will underwrite and offer a comprehensive suite of life insurance products. In addition, Allstate agencies and exclusive financial specialists will continue to sell LBL immediate annuities as well as Allstate Life Insurance Company (ALIC) annuities through the end of LBL-underwritten deferred annuities sold through the Allstate agency channel will continue to be serviced by Allstate for a 12- to 18-month transition period. Subsequently they will be administered by Resolution Life. When the transaction closes, in-force LBL life business sold through the Allstate agency channel and all LBL immediate annuities will continue to be reinsured to ALIC and be serviced through Allstate. As previously announced, Allstate is in discussions with se2, a leading third-party administration company, to take over administration of Allstate s annuity business. Allstate plans to transition the administration to se2 by late Following this transition, Allstate will continue to provide customers with a broad suite of protection and retirement products, including manufacturing new life products, such as the successful Whole Life Advantage product. Allstate Financial will continue to provide fair and equitable compensation and bonuses, including compensation earned from externally manufactured products, and will provide agencies and exclusive financial specialists opportunities to grow by ensuring they are affiliated with a strong brand and enhanced product offering. Proprietary policies sold (PPS) 1

2 will be replaced with a broader metric of insurance policies sold (IPS), which includes all AF proprietary and nonproprietary insurance products except Allstate Benefits - Individual. Current goals of 12 and 18 will remain for 2014 and will apply for IPS. This change does not apply in New Jersey. Serving Customers Are there any customer-facing materials available to help customers better understand what the sale of LBL means for Allstate and their policies? Yes. There are several new, customer-facing materials available that agencies/efss/fss can use and distribute to help customers better understand what the sale of LBL means for them and their policies and ensure them that they are still In Good Hands. These materials are available to order on MOD on August 20. See the information below. Brochure - Find Strength in Allstate FIN has been refreshed. This piece includes ALIC credit ratings and investment portfolio allocation information. Please note that CT will have a separate version in the coming days. Insert Sale of LBL to Resolution Life FIN2698. This is an insert that can be ordered to compliment the Find Strength in Allstate brochure. This is intended to be used with existing customers who own deferred annuity contracts. This insert includes LBL credit ratings as of August 8, Insert Your policies are serviced and reinsured by ALIC FIN2697. This is an insert that can be ordered to compliment the Find Strength in Allstate brochure. This is intended to be used with customers who are looking to purchase LBL life insurance or immediate annuity products. Will the Auto/Life discount still apply for customers that own/buy an LBL Life product? There is no change to the Auto Life discount. Agencies/EFSs/FSs will continue to service existing life insurance customers. Is there an official announcement that can be sent out to customers/agents? Notification of the sale was already sent to both AF and MBA channel producers. In addition, detailed information and resources are being provided to Allstate agencies, exclusive financial specialists, financial specialists, and independent brokerage agency partners within the MBA channel to help explain any anticipated changes that directly impact customers. With regard to customers, we will send out notifications after the sale of LBL closes. Will Allstate s annuity customers receive notification of this transaction? Yes, we will be sending notifications to both Allstate agency channel and MBA channel annuity customers in advance of any administration transition. We are also providing detailed information and tools to Allstate agencies and exclusive financial specialists as well as our independent brokerage agency partners to help explain any anticipated changes directly to customers. 2

3 Transition When will we start selling products under the Allstate Assurance Company name? We expect the first products to be launched in market sometime in late How long does the reinsurance through ALIC stay in place? Certain life and annuity policies will be reinsured by ALIC. This reinsurance does not have a specific termination date and there is no expectation that this reinsurance will be terminated any time in the future Are agencies/efss/fss going to have access to the policies once the sale goes through? Yes. Access to the business won't change. Agencies/EFs/FSs will have online access to forms, phone assistance and mail addresses during the transition period as Allstate moves business to Resolution Life. After the transition period, Resolution Life will provide service though a new LBL website rather than via AccessAllstate.com. Where can agency owners/exclusive financial specialists/financial specialists find information regarding the transition and sale of LBL? Information can be found in efocus or on Gateway. Will accessallstate continue? Yes. accessallstate.com will continue to be available as a resource for agencies/exclusive financial specialists (EFSs)/financial specialists (FSs). What will happen to our existing relationship with LBL? Can we still service and sell existing customers? What happens to our renewal commissions? LBL life business and LBL immediate annuities will be reinsured and serviced by Allstate Life Insurance Company (ALIC), and will not be affected. Servicing of LBL fixed annuities will be transitioned to Resolution. Agencies/EFSs/FSs will continue to have access to information to be able to help customers with service inquiries. These changes will have no impact on renewal commissions. What are the current credit ratings for LBL? A.M. Best A+ (Superior) -- Second highest of 13 company ratings. Ratings Range from A++ (superior) to D (poor). A.M. Best s rating measures insurer s financial strength. Standard & Poor s BBB+ (Adequate) -- Eighth highest of 20 ratings. Ratings range from AAA (extremely strong) to CC (currently highly vulnerable). S&P s rating is for insurer s financial strength. Moody s Baa1 (Adequate) -- Eighth highest of Moody s 21 company ratings. Ratings range from Aaa (exceptional) to C (extremely poor). Moody s rating is for insurer s financial strength. Ratings are as of August 8, 2013 and are subject to change without notice. These ratings do 3

4 not pertain to the performance of any investment product or the investment options offered within any Lincoln Benefit Life Company product. Products Is Allstate still making the decisions regarding bonus and caps when the policies are serviced by se2? Se2 will not make decisions regarding caps or bonuses. After the sale of LBL closes, for LBL underwritten deferred annuities, Resolution Life will make all decisions regarding caps and bonuses. For deferred annuities underwritten by ALIC, Allstate will continue to make decisions regarding caps and bonuses. What will happen to the book of LTC business? Who will service LTC? Resolution Life purchased LBL with the Long Term Care (LTC) business, and it expects to keep all of the LTC business with no changes to how it is managed. After December of 2013 will we still be allowed to contribute to an Allstate Income Protector Fixed Annuity that currently allows for deposits within the first 2 contract years? The flexible premium provisions of IP and GP are contractual, and no customer contracts have changed as a result of the sale of LBL or the decision to discontinue manufacturing annuities. Therefore, yes, the customers will be able to contribute for the duration specified in their contracts. Will we still have a VUL product after the coming changes? We expect to have a VUL product available in the future. Will bailouts (if they occur) still be able to be utilized? Customer bailout provisions are contractual and have not changed as a result of the transaction with Resolution. Can someone explain what life and annuity products we will be able to sell? Are we out of Prudential, AXA and Protective Life? There is no change in Prudential, AXA or Protective Life. For new sales for life, is the new whole life the only product available for now? All current LBL life products will remain available for sale by Allstate agents/efss/fss through the transition period and will continue to be reinsured by Allstate Life Insurance Company. 4

5 Will we still have a product for non-6/63 licensed agents to sell, as a fixed, nonvariable annuity? Starting in 2014, we will distribute new third party annuity products, including fixed annuities, through Allstate agents and EFSs. We are currently evaluating products in order to provide your customers with annuity options starting in We're going to have more life products. Where are they coming from? Allstate will continue to manufacture a comprehensive portfolio of life products. With the IPS increasing in 2015, I assume that we will have a broader product offering under the Allstate channel? Allstate is committed to making the changes necessary to strengthen and grow the Allstate Financial business. Allstate Financial will continue to serve its customers by offering a broad suite of protection and retirement products either issued by Allstate or provided by other companies. These products include: life, retirement, savings, long-term care and disability products to better meet the needs of its customers and strengthen its customer relationships and retention. Allstate Financial will continue to issue life products, such as the successful new Whole Life Advantage product. Compensation As an EFS/FS, will I still continue to be paid my renewal commissions on my book of business with LBL? Yes, agencies/efss/fss will continue to get paid renewal commissions (see the additional information below). If an agent/efs/fs left Allstate would we still get paid over 10 years on these policies sold through LBL? Agencies/EFSs/FSs will continue to receive tenure interest for LBL policies that earned ACB credits. How will the move to IPS affect the 2014 year end AF number for bonus? Starting in 2014, the Allstate Financial component of Variable Compensation will change from proprietary policies sold (PPS) to insurance policies sold (IPS). This broader Agency Success Factor metric will include all AF proprietary and nonproprietary insurance products (except Allstate Benefits individual policies and mutual funds). With the move to IPS in 2014, all life insurance, annuities and other insurance products will qualify as a policy count in the compensation and recognition programs. What's the game plan with respect to what will happen to our LBL residual compensation months from now? Will Allstate "buy out" this component of our vested books of business? Commissions and renewals on all LBL products in your book of business today or the ones added during the transition period will not be affected by the sale of LBL. 5

6 About Resolution Life Can you provide some background on Resolution Life? What were some of the criteria used in selection Resolution Life? When we made the decision to sell, we looked for buyers that met three critical criteria: established quality service, integrity and financial strength; offered a fair price; and demonstrated a willingness to work with Allstate during a transition period to ensure there was no gap in product availability for Allstate customers. Resolution Life met those criteria. Resolution Life has been founded by The Resolution Group, which has a consistent track record of establishing businesses in the United Kingdom for the management of in-force life insurance policies. Its operations in the United States are led by a seasoned executive team with extensive life insurance experience. Resolution Life has a long-term view of the market and is committed to retaining in-force customers and providing excellent customer experiences and support. What is the plan for persistency -- We've not seen a great trend in persistency in these books, so what will Resolution Life do if it sees replacement activity? Annuity business persistency bonus - will it still be paid? Resolution Life believes there is value still in LBL policies, and wants producers to help keep all the policies and contracts in place. Resolution Life is committed to retaining in-force customers and providing excellent customer service, and understands that this is key for policyholders and producers. If Resolution Life were to see large amounts of replacements from one producer it would want to have a conversation with the producer to understand why they believe it is better for the policy owners to move to another company and product. Will Resolution Inc. still honor the guarantees on current inforce Lincoln Benefit policies? Yes. All guarantees and contractual policy provisions will remain in full force. What opportunities does this transaction provide me with Resolution Life? The sale of Lincoln Benefit Life is expected to close by the end of the year. At the close of the transaction, LBL immediate annuities will continue to be reinsured to ALIC and be serviced through Allstate. Allstate will continue to service in-force Lincoln Benefit Life deferred annuity and life business sold through the independent brokerage channel for a 12- to 18-month transition period. After this transition period, the in-force deferred annuity and life business sold by independent life insurance and annuity agencies will be administered by Resolution Life, which is well-positioned to provide you with a service model that meets your needs over the long run. Resolution Life brings 10 years of experience managing in-force life insurance business in the U.K. Its United States operations are led by a seasoned executive team with an average of more than 20 years of life insurance experience. Lincoln Benefit Life is expected to be the platform acquisition from which Resolution Life will grow its U.S. business managing in-force life insurance policies. 6

7 Resolution Life is focused on working collaboratively with you and maintaining the high levels of service and support that you and your customers have grown to expect from Lincoln Benefit Life. Resolution Life has a long-term view of the market and is committed to retaining in-force customers by fulfilling all contractual obligations and providing excellent customer experiences and support. Additionally, Resolution Life will continue to pay commissions on all in-force business administered by the company. Is Resolution Life committed to serving the existing policyholders in a manner similar to what the policyholder expected when they purchased the policy? Yes, Resolution Life has a long-term view on the market and is committed to retaining inforce customers and providing excellent customer experiences and support. Resolution Life has been founded by The Resolution Group, which has a consistent track record of establishing businesses in the United Kingdom for the management of in-force life insurance policies. Its operations in the United States are led by a seasoned executive team with extensive life insurance experience. Where is the US office going to be? 2nd question: Inforce forms - Will agencies/efss/fss have access to them and what kind of support will be provided? Resolution Life's executive offices are in New York. The plan is to also have support offices in Lincoln, NE and/or Chicago, likely a combination of both. Access to the business won't change. You will have online access to forms, as well as be able to use call in and mail addresses during the period when Allstate transitions business over to Resolution Life. After the transition period, Resolution Life will provide the same service, though access will be via a LBL website rather than via AccessAllstate.com. Eventually Life insurance policies end with death claims, so why would Resolution Life care if there's persistency? What is the ultimate goal that this hedge fund is trying to achieve? Resolution Life is not a hedge fund. Persistency is where the value comes from and, therefore, LBL is the platform to which Resolution Life intends to add more blocks of life business through acquisitions (rather than just simply run the LBL book off). The expectation is for Resolution Life to grow by several hundreds of thousands policies at that time with each acquisition. Resolution Life believes there will always be a role for a business that acquires and manages in-force blocks. The achievement of Resolution Life's value proposition depends on persistency of the in-force business, so Resolution is fully aligned with keeping all of the policies in force until the natural expiry. Who are principals and source of capital behind Resolution? Weldon Wilson is leading the management of Resolution Life and Clive Cowdery is an additional principal of Resolution Life. Resolution Life s sources of capital are institutional investors including entities affiliated with The Resolution Group. 7