LONG TERM CARE May 19, 2006

1. LONG TERM CAREMay 19, 2006 Catching the long term care wave Presenter: Kim Adler, CLTC Stephanie Hanson

2. Agenda Catching the long term care wave Helping employees understand the need for coverage and how Long Term Care can help protect their financial futures • Why sell LTC insurance? • The need and the opportunity for LTC coverage • Helping your clients design a LTC plan that meets their needs

3. Why sell group long term care insurance? A fast growing product 1 Tax benefits for employers and employees Affordable coverage that helps differentiate your client’s benefit plan What employees are talking about now Be the first to approach existing clients 1 2 3 4 1 “U.S. Employer-Sponsored Group Long-Term Care Insurance Annual Survey,” LIMRA,2004

4. The need for LTC insurance - Fact vs. Fiction FICTION: Only the elderly need long term care. 40% of people who need long term care today are working adults under the age of 65 1 FACT • Injuries and illnesses associated with LTC for younger people include: • Car accidents • Head trauma • Stroke • Neurological conditions such as ALS (Lou Gehrig’s Disease) or Multiple Sclerosis The need for long term care services can be experienced by anyone, at any time. Workplace = the perfect setting to offer long term care insurance. 1Guide to Long-Term Care Insurance, America’s Health Insurance Plans (AHIP),2003

5. The need for LTC insurance - Fact vs. Fiction FICTION: Consumers can rely on Medicare, Medicaid, or other benefits to cover their long term care expenses. Medicare pays: • 12% 1 of nursing home costs • Even less for home care • Limited amounts for a limited time for skilled care after a hospital stay of at least 3 days FACT FACT FACT • Disability and medical insurance do not cover LTC expenses • Medical insurance: • Generally covers diagnostic and • treatment costs • Not designed to pay for ongoing care • Medicaid only pays after personal assets have been depleted to the poverty level 1 • Assists only those in financial need • Limited choice in where/by whom care is provided 1Guide to Long-Term Care Insurance, America’s Health Insurance Plans (AHIP),2003

6. The need for LTC insurance - Fact vs. Fiction FICTION: • Home health aide = $1,000 per month 2 • Nursing home care = $50,000 per year 2 The average consumer can save enough to cover LTC expenses. FACT FACT FACT Based on today’s costs, a $250K nest egg would last less than 5 years 1 Projection: • Long term care costs will more than quadruple in the next 30 years • Will far outpace the rate of inflation 1 • Personal savings are at an all time low • 2004 savings rate: 1% average • Previous 30 years:nearly 7% average 3 1 “Awareness of LTC Insurance Value Growing: ACLI Report,” National Underwriter, May 2003 2 AHIP, Guide to Long Term Care Insurance, May 2003 3 http://www.federalreserve.gov/boarddocs/hh/2005/february/testimony.htm, viewed September 6, 2005

7. The need for LTC insurance - Fact vs. Fiction FICTION: Long Term Care Insurance is not affordable. Rates are level for the life of the policy, and may only increase on a class basis. FACT FACT The younger you are when you purchase LTC insurance, the lower the premium will be Once benefits begin, total premium paid typically canbe recovered in only a few months As shown in the table, the math tells a different story.* * Illustrative. Based on UnumProvident Group LTC rates for $4,000 monthly benefit ($2,000 employer-paid, $2,000 employee-paid), 100% Professional Home Care, 3 year duration, 5% compound annual inflation. Monthly benefit adjusted for 5% compound inflation and rounded to the nearest $100

8. Tax advantages for your clients and their employees 1 Federal • Employer-paid premiums deductible by businesses • Employee premiums not considered imputed income • Employee benefits received not considered part of gross income State • 28 states offer tax credits or deductions for LTC premiums The federal government and 22 state governments 2 offer LTCinsurance programs to their employeesto help prepare them for afinancially secure retirement 1 Rules and Regulations, Department of Treasury, Internal Revenue Service, 26 CFR Part 1 RIN 1545-AV56, Qualified Long Term Care Insurance Contracts, December 1998, last updated November 2004; Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191, 110 Stat. 1936, 2054 and 2063 (HIPAA) added section 7702B to the Internal Revenue Code of 1986 (the Code)) 2 The American Council of Life Insurers, “Passing the Trust to Private Long-Term Care Insurance,” January 2003

9. 8% 9% 24% Number of employees 34% 33% 51% Group long term care - today’s market Inforce • 7,288 cases • 1.8M participants • $1,078M in premium Sales • 968 cases • 120,349 participants • $67.4M in premium How many employers are thinking about adding LTC? 2 2005 GLTC market results 1 • Future interest in LTC • also informed by projected rise in retiree population: more than 45 million by 2020 3 1 “U.S. Employer-Sponsored Group Long-Term Care Insurance Annual Survey,” LIMRA,2005 2 “The Changing Group Insurance and Health Care Marketplace, Overview 2003” LIMRA, 2003 3 Walker 2002. Data from the Bureau of the Census, “Projection of the Total Resident Population by 5-year Age Groups and Sex with Special Age Categories: Middle Series.”

10. Current LTC market trends • LTC insurance gradually folding into the nation’s extensive private health insurance system • Strong and steady growth, sustained in part by significant increases in employer-sponsored plans • Consistent improvement in product design • High persistency rates underscore the value of LTC insurance to those who purchase • Continued evolution toward more consumer driven products with increased choice in care settings and levels of service Source: America’s Health Insurance Plan (AHIP), Research Findings, Long Term Care Insurance in 2002, June 2004

11. Claim trends Major causes of disability in LTC claims 1 Where long term care is received 2 Care in a nursing facility10.7% Care at home by professionals 57.2% • Care at home by informal caregivers32.2% 1 Claims Distribution Query June 2004, UnumProvident inforce claims data 2 Claims Distribution Query, December 2003, UnumProvident inforce claims data

12. Loss of Activities of Daily Living (ADLs) Home Care* Nursing Home Care Feeding Continence Toileting Toileting Transferring Transferring Transferring Dressing Dressing Dressing Dressing Bathing Bathing Bathing Bathing Least Impaired Most Impaired * Includes both Professional and Total Choice Home Care

13. Frequency of ADLs Lost Based on UnumProvident paid claims, 2005

14. Key motivators and common obstacles What motivates employers to offer LTC insurance? (% ranking as extremely/very important) What are the barriers to employers offering LTC insurance? • Lack of awareness of the need • Perception that cost would be too high • Have not heard of LTC insurance, lacking knowledge • Company not interested in adding benefits now • Feeling that LTC planning should be the employee’s responsibility • Perception that LTC insurance is too new • Still considering LTC/undecided Desire to offer a leading edge benefit Low cost to the employer Good fit for the workforce Employees/retirees have asked for it Senior management wants it Source: Long Term Care Insurance Sales Strategies, Volume 4, Number , January/February 2002

15. Helping meet your client’s needs through plan design LTC Product Features • Types of LTC – Indemnity Vs. Reimbursement • Level of care • LTC facility • LTC facility with home care* • Duration of care (number of years) • Elimination period • Benefit amount (may be expressed daily, weekly or monthly) • Optional enhancements typically include: • Inflation protection • Benefit increase options • Non-forfeiture benefit • Return of premium at death • Restoration of benefits • Cash surrender • Alternative care • Shared/pooled benefits • Survivorship waiver of premium • Accelerated payment options * typically covers care by professionals, may also cover care provided by informal caregivers

16. Strategies to Increase Group LTC Sales • Target the right company • Consider average age of employee population and average income • Determine the real decision maker • Key players may include HR leadership, benefits managers, purchasing managers or the CFO • Execute a comprehensive enrollment strategy • Maximize participation results by securing management support, communicating the education and enrollment process in detail, and focusing on employee education • Ask your client to fund a base plan Source: Life Insurance Selling, The Pie in the Sky: Targeting the Group LTC Client, Christine McCullugh, July 2004

17. A winning approach to group LTC When an employer funds a minimum level of coverage… 1 Employer-paid base plan with employee-paid buy-up • Greatly increases employee interest in the plan • Generally guarantees employer commitment to the enrollment strategy 1 Typically $2,000, 3 year duration. Minimum coverage requirements may vary by state

18. Base/Buy-up case study Sample customer: 247 life law firm 1 Employer-paid base plan with employee-paid buy-up • Firm funds base plan ($2,000 monthly benefit, 3 year duration) • Broker stresses importance of education in driving employee participation • Comprehensive enrollment strategy • Distribution of pre-communications • Custom website • Mandatory group meetings 1 For illustrative purposes only. Rates based on GLTC Advantage product (Policy Forms GLTC04, RGLTC04)

19. Base/Buy-up case study: 247 life law firm 1 Sample customer: 247 life law firm 1 Employer-paid base plan with employee-paid buy-up Results • Firm funds base plan ($2,000 monthly benefit, 3 year duration) • Broker stresses importance of education in driving employee participation • Comprehensive enrollment strategy • Distribution of pre-communications • Custom website • Mandatory group meetings • Base plan generates $36,000 • 76 employees buy coverage in addition to the base plan • Buy-ups generate an additional $55,000 in premium • Total premium: $91,000 1 For illustrative purposes only. Rates based on GLTC Advantage product (Policy Forms GLTC04, RGLTC04)

20. Leading the industry Top Writers of Group LTC (2004) Source: “U.S. Employer-Sponsored Group Long-Term Care Insurance Annual Survey,” LIMRA 2004