Flex Life II presentation

© 2016 National Life Group®

For Agent Use Only – Not For Use With The Public

National Life Insurance Company® | Life Insurance Company of the Southwest®

National Life Group is a trade name of National Life Insurance Company, Montpelier, VT, Life Insurance Company of the Southwest (LSW), Addison, TX and their affiliates. Each company of NL Group is solely responsible for its own financial condition and contractual obligations. LSW is not an authorized insurer in New York and does not conduct insurance business in New York.

TC91958(0916)1 For Agent Use Only – Not For Use With The Public

Introducing FlexLife II


For Agent Use Only – Not For Use With The Public2

Overview of Enhancements

Benefit Distribution Option4

Participating Fixed Loans3

Charitable Matching Gift Rider5

Straight Through Processing2

Product Overview1

Guaranteed Account Value Enhancement6



FlexLife II

• Death benefit to protect loved ones from financial uncertainty

• Potential for cash value accumulation

• NEVER exposes premium dollars to market risk

• Potential for guaranteed income for life

• Living benefits in the event of a qualifying terminal, chronic, critical illness or critical injury

1 National Health Interview Survey, 2012 2 2015 Life Insurance Barometer Study3 LaCanfora, M. (2010 July 15)

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Cap and Par Rates (as of 9/15/2016)

Strategy Cap Rate

Participation Rate

Maximum Illustrated Rate

Basic N/A N/A 3.25%

Fixed N/A N/A 3.25%

S&P 500 Cap Focus Point-to-Point 12.00% 100% 6.91%

S&P 500 Par Focus Point-to-Point 9.75% 140% 6.26%

S&P 500 No Cap Point-to-Point No Cap 55% 6.27%

S&P 500 Point-to-Average No Cap 110% 6.54%

MSCI Emerging Markets Point-to-Point 10.75% 100% 5.96%

Rates are subject to change



FlexLife II – Straight Through!

No Fluids Underwriting to Age 65 and $250,000

NEW!



FlexLife II– New Underwriting

Choice of two underwriting paths at $250,000 and below

1. Streamlined non-medical underwriting, no-fluids

2. Full Underwriting

Targets are higher for

sub-standard ratings



FlexLife II – $250K or Less with Non-medical

Rate Class Issue Ages

Verified Standard NT/NS 0 – 65

Express Standard NT/NS 1 0 – 65

Express Standard NT/NS 2 0 – 65

Verified Standard Tobacco/Smoker 20 – 65

Express Standard Tobacco/Smoker 20 – 65



FlexLife II – $250K or Less with Full U/WRate Class Issue Ages

Elite Non-tobacco/Non-smoker 20 – 75

Preferred Non-tobacco/Non-smoker 20 – 85

Select Non-tobacco/Non-smoker 20 – 85

Verified Standard Non-tobacco/Non-smoker 66 – 85

Express Standard Non-tobacco/Non-smoker 1 66 – 85

Express Standard Non-tobacco/Non-smoker 2 66 – 85

Preferred Tobacco/Smoker 20 – 85


Express Standard Tobacco/Smoker 66 – 85



FlexLife II – Over $250KRate Class Issue Ages

Elite Non-tobacco/Non-smoker 20 – 75

Preferred Non-tobacco/Non-smoker 20 – 85

Select Non-tobacco/Non-smoker 20 – 85

Verified Standard Non-tobacco/Non-smoker 0 – 85

Preferred Tobacco/Smoker 20 – 85


4 Table ratings and temporary flat extras are available with the Standard Non-tobacco and Standard Tobacco rate classes. Permanent flat extras are available with any rate class.

5 For pension cases, this product will be available under the same underwriting rules as non-pension cases, plus automatic issue, simplified issue and guaranteed issue.



FlexLife II – Retirement Income Options

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Ways to take income• Withdrawals• Standard Loan

6 USA Today 2014

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The ability of a life insurance contract to accumulate sufficient cash value to supplement retirement will be dependent upon the amount of extra premium paid into the policy, and the performance of the policy, and is not guaranteed. Policy loans and withdrawals reduce the policy’s cash value and death benefit and may result in a taxable event. Surrender charges may reduce the policy’s cash value in early years.

• Participating Variable Loan• Participating Fixed Loan New• Lifetime Income Benefit Rider (LIBR)



FlexLife II – Loan Options

Old Name New NameLoan Rate Charged Collateral is in…

Collateral credits

Fixed Net Cost Loan

Standard Loan

Variable Loan Collateral Account

Fixed

Variable Net Cost loan

Participating Variable Loan

Variable Indexed Strategy Allocation

Indexed

New! Participating Fixed Loan

Fixed @ 5% for the life of the policy

Indexed Loan Account

Indexed



FlexLife II – Participating Fixed Loans

Are your clients concerned about:

Increases in the cost of borrowing from their contract?

Prefer the simplicity ofknowing in advance the loan

rate they will pay?

AND

They will like …

The New 5% Fixed Loan Rate Option



Benefits • Policyholder always knows what loan rate they will pay

• Eliminates a competitive disadvantage

How does it work? • Fixed rate locked in at the time of issue

• An addition to current loan options and LIBR

• Choose the loan type when loan is initiated

• Loans taken placed in a dedicated index strategy

Participating Fixed Loans

5%FIXED



FlexLife II – Income Feature

Are your clients interested in either:

“True” IncomeReplacement for Their

Beneficiaries?

More Potential Income in Retirement?

OR

They will like …

The BenefitDistribution Option



Benefit Distribution Option

Benefits• Paying the death benefit over time better

replaces future income lost by the death of the insured

• Lowers the charges for the death benefit

=> Improves cash build and income potential

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7 2015 Insurance Barometer Study



Benefit Distribution Option

How does it work? • Benefit payments paid over a period of

years

• Choice of 10 to 30 years

• Choice of combining a lump sum with income

• Elected only at issue and terms cannot be changed

• Lowers the charges for the death benefit

• Portion of benefit payments are taxable because there is interest



Death Benefit With and Without BDOMale Age 35 Verified Standard NT Face $350,000, Pay Target (3,574) Annually, assume death @ 65, 6.91% assumed interest (not guaranteed)

BDO % / Years CSV@65

Lump Sum @ 65

Annual Installment Total Paid

No BDO 253,381 350,000 0 350,000

100% / 30 269,448 0 13,428 402,827

100% / 20 265,110 0 19,203 384,067

100% / 10 259,556 0 36,588 365,878

50% / 30 261,445 175,000 6,714 376,413

50% / 20 259,245 175,000 9,602 367,033

50% / 10 256,469 175,000 18,294 357,939



Income With and Without BDOMale Age 35 Verified Standard NT Face $350,000, Pay Target (3,574) Annually, Participating Variable vs Participating Fixed vs Standard vs LIBR @ 65, 6.91% assumed interest (not guaranteed)

BDO % / Years CSV@65 PVL PFL SL LIBR

No BDO 253,381 24,534 23,831 16,422 17,610

100% / 30 269,448 26,600 25,847 18,043 18,727

100% / 20 265,110 26,169 25,428 17,744 18,425

100% / 10 259,556 25,554 24,831 17,315 18,039

50% / 30 261,445 25,571 24,843 17,233 18,170

50% / 20 259,245 25,351 24,629 17,081 18,018

50% / 10 256,469 25,043 24,329 16,866 17,825



ABRs With and Without BDOMale Age 35 Verified Standard NT Face $350,000, Pay Target (3,574) Projected ABR @65 Terminal, Chronic, Critical – Life Threatening, 6.91% assumed interest (not guaranteed)

BDO % / Years CSV@65 Terminal Chronic Critical

No BDO 253,381 310,084 5,857 303,036

100% / 30 269,448 289,651 5,793 289,651

100% / 20 265,110 284,975 5,700 284,975

100% / 10 259,556 278,669 5,573 278,669

50% / 30 261,445 280,707 5,614 280,707

50% / 20 259,245 278,312 5,566 278,312

50% / 10 256,469 275,148 5,503 275,148



FlexLife II – Coverage with CAUSE

They will Like …No Additional Cost

Charitable Matching Gift Rider

Are your clients interested in leaving a legacy and buying from a company that shares

their values?



Charitable Matching Gift Death Benefit

Benefits • Helps policyholders leave a legacy

• People like to do business with a company that shares their values

• No additional cost rider

How does it work? • Matches a portion of death benefit left to a charity

– Match is up to 2% of base death benefit not to exceed $30,000

• A charity is any organization accredited as a charity that qualifies for charitable deductions under IRS rules.



FlexLife II – Illness or InjuryAccelerated Benefits Riders (ABRs)• Terminal Illness

• Chronic Illness

• Critical Illness

• Critical Injury New100% of APB Rider can be accelerated

Accelerated Benefits Riders are optional and may not be available in all states. Receipt of Accelerated Benefits will reduce the cash value and death benefit otherwise payable under the policy, may result in a taxable event, and may affect your client's eligibility for public assistance programs.



FlexLife II – Accumulated Value Enhancement

• Begins in Year 11

• Guaranteed• Extra 10% of interest credited

• Not to exceed 0.60% of accumulated value

For Example:Interest earned on Fixed or Indexed Segment$1,000 X 10% = $100

Accumulated Value on Fixed or Indexed Segment prior to interest credit $10,000 X 0.60% = $60.00

Accumulated Value Enhancement is $60.00 credited on policy anniversary

What’s guaranteed? The formula



FlexLife II – Childrens’ Term Rider Changes

• New Children’s Term– Maximum coverage age is now 25– Maximum conversion privilege is 6 x the CTR amount, can be up to

$150,000!



Recap• Long-term cash surrender values

improved

• Base product income solves improved 5-10%

• BDO increases CSVs 2-5%

• BDO increases income solves 5-10%

• BDO decreases ABR benefits

• Indexed Strategies maintained at current competitive levels

• Overall income solve improvements FlexLife to FlexLife II – 5-15%



Competitive Stack-up

Company ProductIllustrated

RateTarget

PremiumDeath Benefit

Annual Income

1 NACOLAH Builder IUL 7.28% 1,845 177,381 58,9022 ANICO Signature IUL 7.28% 2,580 250,001 56,3583 American General Max Accumulator + 7.38% 2,112 190,055 54,005*4 Minnesota Life Omega Builder 7.10% 1,876 188,579 53,581*5 NLG FlexLife II 6.91% 2,065 202,240 51,279*6 Minnesota Life Eclipse 7.10% 1,984 188,579 50,1237 Allianz LifePro+ 7 7.09% 1,796 179,613 49,7858 Penn Mutual Accumulation Builder Advantage 7.20% 2,083 200,282 49,1809 NLG FlexLife II 6.91% 2,065 202,240 48,45010 Lincoln WealthAdvantage IUL 6.56% 2,232 179,007 44,86611 John Hancock Accumulation IUL 6.75% 1,966 184,968 44,28912 Voya Indexed Universal Life Global Choice 7.28% 2,116 191,000 40,12913 Accordia Lifetime Builder 6.90% 2,101 198,731 39,90614 Pacific Life PIP LT2 6.48% 2,100 178,694 38,373*15 AXA Bright Life Grow 6.89% 1,960 185,968 32,28816 Nationwide YourLife Indexed UL Accumulator 6.86% 1,970 192,464 30,307

Male 35 - Preferred Non-Smoker - $500 premium/mo. To age 65- Death Benefit Option increasing, switch to level after premium period, solve for maximum loan income, maximum BDO when available.

* BDO-type benefit included



Transition Rules

New Applications• LSW 8121(0616)• NL 9212(0616)

New Interest Crediting Strategy Form• LSW 8612(0616)• NL 8411(0616)

Pending Cases• All pending FlexLife cases, upon request, will be allowed to switch to

FlexLife II if approved in that state. • Will require a new application and Interest Crediting Strategy

Allocation form prior to issue.

Rewrites• Will be allowed within the 120-day Rewrite period



At the end of the day

It’s about protecting what matters most…

Figuring out life’s puzzles8 Living Benefits are provided by optional, no additional premium Accelerated Benefits Riders.9 Provided by the optional Lifetime Income Benefit Rider once qualifications are met to exercise the rider. There is an additional premium for this rider.

The Lifetime Income Benefit Rider provides a benefit for the life of the insured if certain conditions are met, including but not limited to the insured’s attained age being between age 60 and 85, and that the policy has been in force at least 10 years. Insufficient policy values or outstanding policy loans may also restrict exercising the rider.



Q&A

Lifestyle

Flex Life II presentation