Tillinghast Report Gives In-Depth Analysis of Variable Life Market Conditions and Forecasts Future Growth

Report Outlines Recovery Measures for Reversing Recent 35% Sales Decline

New York, NY, September 26, 2002 � While insurers in the variable life market face an estimated 2002 year-end sales
decline of 35% (from year 2000 levels), the market still holds long-term potential, according to Tillinghast � Towers Perrin’s
(Tillinghast) report The Variable Life Market: Insights and Outlook, released today.

“We believe that the variable life market has the potential to reach $10 billion in sales by the year 2006,” says John Fenton,
Principal and North America Product Group Leader for Tillinghast. “However, the market’s rebound will be largely
dependent upon a return to more favorable equity market conditions and insurers’ ability to tap investment-oriented

Priority One: Distribution

In order to recapture lost sales and drive future growth, insurers will need to focus on two crucial distribution-related

  • Aggressively making inroads into investment-oriented distribution channels, such as wirehouses,
    regional firms, banks and independent broker-dealers. These distribution channels account for a significant
    percentage of variable annuity sales, but only 5% to 10% of the representatives sell variable life products.
  • Recapturing the focus of career agents and insurance-oriented independent agents. These individuals
    represent about 85% of current variable life sales � and many have returned to selling fixed life products. They
    must believe, once again, that variable life products are strong long-term protection and accumulation vehicles.

Building Momentum: Product Development

Growth in the variable life market will also be driven by product evolution. Insurers must focus on:

  • Continuing to experiment with more simplified products that offer streamlined underwriting processes
  • Developing packaged products designed to meet multiple needs of individuals throughout their life cycle, from
    asset accumulation to retirement income to death protection

“Insurance companies must continue to develop new products for niche markets, fine-tune their core product offerings and
expand into new distribution channels,” says Nancy Kenneally, a survey leader and Senior Consultant at Tillinghast.

A fundamental challenge for insurers selling variable life insurance is how to achieve differentiation in today’s highly
competitive marketplace. In order to differentiate themselves further, insurers must fully evaluate the complexities of
distribution economics, carefully align the product strategy with the distribution strategy and identify specific customer
segments and target channels.

Variable Life Insurance at a Crossroads

Variable life sales have retreated dramatically since achieving a high of $6.95 billion in sales in 2000. Sales fell 15% in 2001
and are expected to plummet another 25% this year. Several factors have put downward pressure on sales, including
increased market volatility, changes in the economic environment and uncertainty about the regulatory and tax environment.
Some of the ways in which variable life products are used, such as Estate Tax Planning, Corporate Owned Life Insurance
(COLI) and split-dollar products are currently under regulatory review. The nature of their resolution will heavily contribute
to the market outlook.

“The market is now at a crossroads,” according to Eric Speer, Managing Principal of the Americas for Tillinghast. “There is
significant latent demand for variable life and other types of life insurance. Understanding the complex ecosystem of the
variable life marketplace with respect to market structure, products, economics, and particularly distribution, is critical to
anticipating and capitalizing on the future direction of the market.”

About The Variable Life Market: Insights and Outlook

The report objectively presents the current state of the variable life marketplace from both a qualitative and quantitative
perspective. It draws heavily from Tillinghast’s extensive experience consulting to the life insurance industry; Tillinghast’s
VALUETM Survey, a 10-year history of quantitative market data; and various proprietary surveys that Tillinghast has
conducted on the life insurance industry, including wholesaler effectiveness. As part of the firm’s research, Tillinghast also
conducted over 30 interviews with leading product manufacturers, a wide range of distributors, software and technology
vendors, and other industry experts.

The report also provides Tillinghast’s perspective on future market outlook, including projected sales levels. To forecast
sales for the variable life market, Tillinghast developed a supply side driven sales projection model. The model projects
2002 to 2006 sales under three different scenarios: baseline, high and low.

For more information on the report, please contact John Fenton at (404) 365-1619 or Nancy Kenneally at (212)
309-3953. The Variable Life Market: Insights and Outlook report is available on a prepaid basis: $7,500 for a single
hard copy and $10,000 for five hard copies. It can be ordered by contacting Ann Field at (860) 843-7091.

About Tillinghast � Towers Perrin

Tillinghast provides actuarial and management consulting to financial services companies and advises other organizations on
their risk financing and self-insurance programs. Tillinghast is the premier actuarial advisor to the insurance industry, and its
major clients include most of the world’s top insurance organizations. It operates globally through a network of 43 offices in
20 countries. Tillinghast is a division of Towers Perrin, one of world’s largest management and human resource consulting
firms. Towers Perrin provides global human resource consulting and administration services, helping organizations create
people solutions that meet business and financial needs. More information about Tillinghast is available at