Prudential LTC Evolution SM Sales Strategies

Prudential LTC EvolutionSMSales Strategies Fred Sherman, CLU, ChFC Prudential LTC Regional Sales Manager April 1, 2010 0174201-00001-00

Objectives • Learn about the benefits of Prudential LTC EvolutionSM – to you and your prospects/clients • Learn about the key features of Prudential LTC EvolutionSM that make the product unique • Gain an understanding of the main differences between Prudential LTC EvolutionSM and LTC3SM in order to discuss the right products with each prospect/client • Gain insight into how best to position Prudential LTC EvolutionSM with your prospects/clients as a key component of their financial portfolio

Long-Term Care Insurance • LTC insurance has been available for over 20 years • It’s estimated that approximately only 9% of those who need and can afford it have purchased it* • Prudential’s vast team of highly–paid Consultants have studied this in depth. • Their conclusion: “If only 9% of prospects have purchased it, that means 91% have not.” • How do we get LTC insurance to more people who need it? *Source: LTCI - Searching for The Value Proposition, Conning & Associates April 2008

LTC – Searching for the Value Proposition Conning & Co., April 2008 “As it is currently structured LTCI (long-term care insurance) is sold by predominantly a specialist cadre of agents to a small subset of the available marketplace – generally risk-averse, affluent and “mature” individuals. Some positive developments have emerged recently that may help LTCI to break out of this pattern, but sales growth in new policies has stalled. One possible future is that LTCI remains essentially unchanged as a niche product.”

Individual LTC Sales

Long-Term Care Insurance • So in 20 years, we’ve only penetrated 9% of the market… and new sales have declined almost every year for the last seven years • If you have been in this business for a few years (or more) you’ve got to ask yourself, “Am I happy with that? What can we, as an industry, do to turn it around?” • We may not get to the other 91% of the eligible LTCi Market – but maybe we can get to another 10% , 20%, or 30%

So What Are OURLTCi Challenges? • Average LTCi Premiums keep going up ($1924 in 2004, $2184 in 2008) • Producers who are not “LTCi Specialists” have been challenged to explain it and sell it • Producers and clients get confused by the many “moving parts“ of a traditional LTCi policy – many do not make a selling or a buying decision • The most common objection continues to be “It’s too expensive”

LTCi Market By Distribution 2000 – 2008 2000 New ILTCi Premium 2008 New ILTCi Premium LIMRA ILTC Distribution & Supplemental ILTC Reports 2000 & 2008:TC Sales Reports 1999 - 2008

Challenges to Non-LTCi Specialists Selling LTCi • Product design complexity • Long-Term Care, especially Nursing home Care, is a “tough subject” • Addressing premium “Sticker Shock”

Here are some Solutions: • Make LTCi premiums more affordable • Make LTCi product designs simpler but still provide comprehensive coverage • Agents and clients need to reassess LTCi alternatives to pre-paying (over-paying?) for 5% Compound Inflation Benefit increases

Prudential Has Found a Better Solution: Prudential LTC EvolutionSM • More affordable premiums • Comprehensive coverage that is easy to explain, sell, and buy • Alternative to (not replacement for) traditional-model LTCi products like LTC3SM

Prudential LTC EvolutionSMis Simpler • Fewer decision points in creating plan design • Lifetime Maximum ($100,000 - $1,000,000) • 90 Calendar Day Elimination Period • Built-in Benefit Increase Feature/Option (GIF) • Fewer Optional Benefits • 80/20 - coinsurance reimbursement model for most benefits • No daily or monthly dollar limit on benefits - policy automatically keeps pace with inflation’s effect on the daily or monthly actual costs of care • Lower premiums • Federally tax-qualified policy

80% of Actual Expenses – No Daily Dollar Limit • Used for whatever and whenever covered services are needed • No discussion needed on “Cost of Nursing Home Care” • CLIENT CHOOSES at Claim Time: • Type and expense of service • Frequency (hours per day) of service • It doesn’t matter how much inflation has increased the cost of that service • This takes the guesswork out of the DBA/MBA decision at time of application

Built-in Guaranteed Increase Feature (GIF) • Built-in Feature – no additional Premium at time of application • Lock in insurability today – “buy up” later • Every fifth policy anniversary, Policy Lifetime Maximum is increased by 25% of Original Life time Maximum up to Insured’s 76th birthday • No medical underwriting – Additional increment rated at attained age

Why Prudential LTC Evolution’s GIF “Fits” Today’s Economy In 5 years, 15 years, 30 Years: • Will the economy improve? Ups? Downs? • How will those changes affect the clients’ personal financial situation (cash flow)? • How will those changes affect the clients’ “Retirement Nest Egg”? • Will clients need the same amount of Asset/income protection then that they need today? Will they need more? Less? • What amount of premiums will clients be willing/able to pay for that LTC protection?

Prudential LTC EvolutionSM And LTC Partnerships • As of 3/2010: available in AL, AR, CT, DC, DE, GA, IL, IN, IA, KS, LA, ME, MI, MS, NE, ND, NH, NM, NY, OH, OK, RI, SC, SD, UT,WV, WY • Partnership–qualified w/GIF for all ages including under age 60 in AL, AR, GA, IA, KS, NE, ND, OH, OK, SC, SD, RI, WY • Will roll out subsequently in states as the product and marketing material are approved (DOI Product Approval – But not yet available in ID, MO, MT, NV*,NJ*, OR*,WA) *Approved for Partnership w/GIF all ages

Prudential LTC EvolutionSM w/GIF and Partnership Requirements • DRA mandates that a Partnership policy sold to ages 60 and younger must include “Compound Inflation” • Also allows increases that track CPI as long as benefit increases are automatic – policyholder cannot choose whether or not to take an increase • But LTC Evolution w/GIF allows a policyholder to decide whether or not to take the increases to Policy Max • How/why does that meet the “Compound Inflation” requirement?

Inflation Protection:A Different Approach • For traditional LTCi, inflation protection has two parts: • It increases the DBA by a % (i.e., 5%) • It increases the balance of the Policy Maximum Amount by a % • Because Prudential LTC EvolutionSM does not have a dollar limit/DBA, thebasic policy keeps up with inflation’s effects on the daily costs of care – No option needs to be added; “A” is taken care of

What About 5% Compound Inflation? • Clients are required to sign an “I reject (the most expensive, pre-funded, richest benefit) Inflation” form when not applying for 5% Compound Inflation • As an industry we sell 5% Compound to 45% of our (rapidly dwindling) base of LTCi buyers • A pre-funded, high-priced, 30-year “Service Plan” may be suitable for some people – but many do not buy LTCi at all because of “Sticker Shock”

Q. What is The Best Deal? Example: Annual Premium Comparison* LTC Evo GIF $948 LTC3 GPO $916 LTC3 5% Compound $1,816 LTC3 5% Simple $1,381 LTC3 5% Compound 2X Max $1,290 *Age 55, LTC3 = 5 Yr BP, 90 EP, $150 DBA, 100% HHC, Standard I, 2-Spouse Discount – LTC Evo = $200K

A. It Depends For 9% of the population: Any of the LTC3SM options could be correct For 91% of the population who won’t/don’t/can’t buy any Standard-model LTCi product: The Prudential LTC EvolutionSM w/GIF solution may be theonly one that’s correct! How many potential buyers of LTCi are you missing?

Key Built-in Features • Starter Benefit • Home Support Services Benefit • Guaranteed Increase Feature (GIF)

Starter Benefit • Cash Benefit of $1,500/month as soon as benefit eligibility is established • Cash can be used for any purpose • Can be paid while satisfying Calendar Day Elimination Period • Only available during first 12 cumulative months that a Chronic Illness or Disability exists • If Policy Lifetime Maximum is exhausted in less than 12 months, Starter Benefit may be paid for the remainder of the 12 month period (24 months in certain states)

Home Support Services Benefit • Pays 100% of Actual Eligible Charges up to $10,000 Home Support Services Lifetime Maximum • Can be used during the Calendar Day Elimination Period • Claims against Home Support Services reduce the Policy Lifetime Maximum • Provides benefits for: • Assistive Devices • Durable Medical Equipment not covered by Medicare • Caregiver Training • Home Modifications • Emergency Medical Response System • Transportation Services • Private Care Consultant not affiliated with Prudential

Optional Riders • Additional inflation protection: 3% and 5% Automatic Compound Increase Options • Non-Forfeiture Option • Shared Care Option (Allows up to $2M in combined benefits for a couple!)

Shared Care Option • Shared Care Partner can access benefits under the other Shared Care Partner’s policy once his/her own Policy Lifetime Maximum is exhausted • If one Shared Care Partner dies before exhausting his/her own Lifetime Maximum, the remaining Lifetime Maximum is “inherited” by the surviving Shared Care Partner at no extra premium • If one Shared Care Partner’s Lifetime Maximum is exhausted by the other Shared Care Partner, he/she can purchase a new policy at attained age up to 50% of the original Policy Lifetime Maximum (with a minimum of $100,000 and a maximum of $300,000) on a Guaranteed Issue basis if age 90 or younger

Shared Care Option - Considerations • Must purchase a policy and this rider together at policy inception • Both Shared Care Partners must have the rider and designate each other as the Shared Care Partner • Both Shared Care Partners must have and maintain identical Policy Benefits, including optional riders and premium payment options • Premium Factors range from 35% (younger age/$100k) to 5% (higher age/$1M) Example: Age 55 @ $500k = 24%

LTC EvolutionSM Premium Rating • Lifetime Pay Only • New Business rates will be re-priced each year on a “go-forward basis” to reflect increased cost of benefits/care • Geographic Rating • Multiple area rate tables based on cost of care throughout the US • Areas with higher cost of care will have higher rates • Majority of states have one area rate table • Premium variations exist in four states: CA, NJ, NY, and PA

Prudential LTC EvolutionSM Cost Areas NOTE: Premium variations exist in CA, NJ, NY, and PA.

LTC EvolutionSM Discounts1 • Spouse/Partner Discount2 • 15%: one Spouse/Partner applies and policy is issued • 30%: both Spouses/Partners apply and both policies issued • Affiliation Discounts3 – offset by commission reduction • Producer’s Discount: 5% • Loyalty Discount: 5% • Association Discount: 5% 1No cap on discounts unless restricted by state law. 2Available discount may vary by state. 3Not all affiliation discounts are available in all states. Maximum of one affiliation discount may be applied to a policy.

What Sellers are Saying About Prudential LTC EvolutionSM Prudential Career Agent – Southern Territory: • “I will no longer sell LTC3. LTC Evolution is much easier to explain to people.” • “I learned the product from brochures and from the PLN (Prudential’s web-based agent learning site).” • “It’s a great sale along with Life Insurance. Life Insurance protects you if you die too soon. LTC insurance protects you if you live too long.”

What Sellers are Saying About Prudential LTC EvolutionSM Brokerage Agent/LTCi Specialist – Midwest: • “LTC Evolution had visceral appeal to me due to its simplicity.” • “It’s easy to explain the bucket of money. And the 80/20 model fits my coinsurance model of sales.” • “LTC Evolution’s biggest feature is it’s the only product that can solve 24/7 home care. The wealthiest people are adamant about never going into a facility. I never had a product to satisfy this until LTC Evolution. Round the clock home care is key.” • “I don’t sell LTC Evolution w/Inflation; it’s built-in anyway.”

Prudential LTC EvolutionSM is a New and Different Tool for You, the LTCi Specialist • Younger market • Least expensive Partnership choice • Flexibility to add coverage down the road • Emphasis on Home Care • Ease of “explaining product” may allow you to get in front of more clients How will YOU use it?

Prudential LTC EvolutionSM The Future of Long-Term Care Insurance!

Prudential LTC EvolutionSM long-term care insurance policy is issued by The Prudential Insurance Company of America, 751 Broad Street, Newark, NJ 07102 (800 732-0416). This coverage contains benefits, exclusions, limitations, eligibility requirements and specific terms and provisions under which the insurance coverage may be continued in force or discontinued. Prudential is authorized to conduct business in all U.S. states and the District of Columbia. Product availability varies by state. Coverage is issued under policy number GRP 114018; however, policy numbers may vary by state. LTC3SM long-term care insurance policy is issued by The Prudential Insurance Company of America, 751 Broad Street, Newark, NJ 07102 (800-732-0416). This coverage contains benefits, exclusions, limitations, eligibility requirements and specific terms and provisions under which the insurance coverage may be continued in force or discontinued. Prudential is authorized to conduct business in all U.S. states and the District of Columbia. Product availability varies by state. Coverage is issued under policy number GRP 113096; however, policy numbers may vary by state.

Prudential LTC Evolution SM Sales Strategies