Webinar Presentation Slides Gone are the days of group annuity contracts only being able to satisfy the plan termination objectives of a pension plan sponsor. Today, there are a wide variety of useful applications for guaranteed institutional annuity contract structures to provide an alternative to traditional fixed income investments. Are you or your pension clients: •Struggling with cost and volatility issues surrounding a defined benefit pension plan? •Considering a liability driven investment strategy that will de-risk the plan investment and allow for stable, predictable funding? •Limited by fixed income funds that only allow for simple duration matching, and expose the plan to cash flow mismatch risks? •Unaware of the variety of customized institutional insurance contract structures available? •Lacking a fiduciary process for evaluating and monitoring the attractiveness of insured pension solutions?

1. A New Arrow For The Pension Practitioners Quiver
Pension Risk Transfer
Jay Dinunzio
Senior
Consultant
©2012 Dietrich & Associates, Inc.. All Rights Reserved.

2. The Typical Pension Plan
50% private sector DB plans frozen
private sector DB plans frozen
78% funded
Asset Liability Mismatch
Employer Contributions
60/40 equity/debt
17 years
liability duration
30% retiree obligations
Funded Status Volatility
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3. Insured Pension Risk Transfer Solutions
are an Attractive Fixed Income Alternative
Guaranteed insurance contracts
Customizable to sponsor objectives
Reduce plan size
Immunize plan liabilities
Plan terminations
Variety of different structures
V i t f diff t t t
Provide certainty to risk focused pension sponsors
Backed by the largest and most well capitalized US life insurance carriers
who meet Department of Labor I.B. 95‐1 criteria
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4. Pension Risk Transfer Solution Spectrum
Higher Cost
Buy‐out
Annuity
Buy‐in
Annuity
Less Risks More Risks
Transferred Transferred
Fixed Crediting Insured
Rate Guaranteed LDI
Lower Cost
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5. Retiree Benefit Payments Create
Significant Challenges for Pension Plans
Largest plan
g p Negative cash
g Near zero cash
expense flow returns
Consistent
Consistent
Mortality
investment
improvements
income
The typical pension plan has 20‐
Annual benefit payments can What approaches can 50% of its pension obligations
total 5‐10% of plan assets be used to insure owed to currently retired
participants
against these risks?
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6. Pension Risk Transfer ‐ Retiree Annuitization
Different Structures for Different Client Circumstances
Buy‐out vs. Buy‐in Group Annuities
Sponsor Circumstances Sponsor Circumstances
•Well funded plan •Plan is less well funded
•Shorter termination horizon
Shorter termination horizon •Longer termination horizon
Longer termination horizon
•Access to cash for full funding •Company cash not available to fund
•Pension plan small part of P&L •Pension plan large part of P&L
•Exit strategy is objective •Immunization strategy is objective
Retiree Buy‐out Annuity Retiree Buy‐in Annuity
• Plan Size Permanently Reduced • Liabilities hedged with guaranteed
• P&L Impact annuity contract
• Participants Paid Directly By Insurer • No P&L impact
• Participants paid by Plan Trust
Participants paid by Plan Trust
Removes Plan’s largest ongoing expense
Reduces plan’s negative cash flow
One time payment includes embedded
costs
5‐10% premium over GAAP Liability Value
Mortality guarantee
©2012 Dietrich & Associates, Inc.. All Rights Reserved. 6

7. Pension Risk Transfer ‐ Indexed Guaranteed Investment Contract
Unable or Unwilling to Lock‐in Annuity Costs ‐ Insured LDI
• Insurance contract guarantees • Fee Based (pay as you go)
same pension discount curve used Insured LDI • Plan retains risks of actual flows
to value liability vs. expected cash flows
• No financial penalties to exit
No financial penalties to exit
Tailored specifically to plan liability cash flows
Tailored specifically to plan liability cash flows
Insurance contract alternative to market valued bond
funds
Precise hedge against asset/liability movements
Fully transparent with no embedded costs
Guarantee Solves Key Challenges Associates With Investing to
Match Pension Liability Indexes
©2012 Dietrich & Associates, Inc.. All Rights Reserved. 7

8. 5 Important Questions To Consider
1. Is your pension program frozen?
2. Is plan termination the ultimate pension objective?
3. Are you concerned with pension funding volatility?
4.
. Are you looking to de‐risk the plan investments via liability driven investing?
5.
. Are you unfamiliar with insured pension risk transfer solutions?
If the answer to one or more of the
questions above is “YES” then a
Pension Risk Transfer specialist
Pension Risk Transfer specialist
may be able to help you
©2012 Dietrich & Associates, Inc.. All Rights Reserved. 8

9. Question and Answer Session
*Any questions not answered during the Q & A session will be answered individually
after the webinar concludes.
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10. Thank you for attending
Visit www.dietrichassociates.com for more information.
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Stay tuned for our upcoming webinar on The Dietrich (k) Annuity™.
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