PALIG Annual Report

• Outperformed industry in sales growth with 15% increase over prior year, compared to industry standard of 2%
• Successful execution of PALIG/Mutual Trust integration
• Transferred oversight of Mutual Trust assets to PALIG investment team, leading to increased investment yields
• Combined Oak Brook and New Orleans Life Operations teams to streamline support infrastructure for U.S. Life business
• Developed cross-selling opportunities across Mutual Trust and PALIG business units
• Executed strategic communication plan to stabilize and strengthen U.S. Life distribution
• Introduced a new whole life product with superior flexibility
• Mutual Trust highlights in 2016 included:
• A. M. Best rating upgraded to “A” from “A-“
• Increased statutory capital and surplus from $137.9 million in 2015 to $144.8 million, reflecting a 5% increase
• Maintained risk-based capital ratio in excess of 600%
• Announced increased aggregate policyholder dividend payout for 2017 despite continued low-interest rate environment, with over $8 million in dividends to be delivered to policyholders
• Extended string of continuous annual dividend payouts since 1909
• Grew distribution force to more than 7,000 licensed agents
• Named one of ”101 Best and Brightest Companies to Work For” in the Chicago area for the 11th consecutive year

• Continued to successfully navigate healthcare reform and other regulatory changes with flexible product offerings
• Delivered strong new account sales in Employee Benefits and Major Medical Stop Loss
• Added new coverages to accident product portfolio
• Strengthened service culture and customer service delivery
• Brought new Group Critical Illness solutions to market
• Added experienced talent to our Accident Underwriting team
• Maintained Hispanic niche market focus with Hispanic-owned businesses accounting for 65% of new group clients

• Doubled the size of the captive agency structure in Colombia
• Introduced new term life insurance portfolio across Latin America
• Launched new personal accident portfolio in the Caribbean and Latin America
• Added a personal accident product to the Private Client Life product suite
• Standardized agency training process with the introduction of the Professional Agency Selling System (PASS)

• Delivered strong growth in mass marketing business
• Achieved significant growth in Colombia operations
• Restructured international operations to better support growth and growth expectations
• Recruited experienced insurance executive with international credentials
• Created two new high level business leadership positions
• Promoted new country managers in El Salvador and the Caribbean
• Began life insurance sales in Mexico following license approval
• Invested in patient advocacy through the creation of a specialized case management team to coordinate treatment for insureds needing medical attention outside their country of residence
• Rolled out Benefits Direct, a portal to provide online support to our health insureds
• Continued to invest in operational excellence and our regional service center in Panama
• Actively engaged with local insurance industries, notably through leadership of industry associations by PALIG executives in Panama, Ecuador and Costa Rica

Costa Rica is one of our top performing and fastest growing international operations. After our first six years operating there we have:

• Become the leading private insurer in the country
• Achieved  $50 million in premium
• Experienced strong sales growth across all lines of individual and group business

Panama was our Chairman’s Award winning country. This recognition is given to the international operation that delivers the strongest performance across several KPIs including leadership and growth of top and bottom lines:

• $100 million in premium
• Market leaders
• #1 in individual life insurance
• #1 in employee benefits
• 105 year presence

• Successfully funded all growth initiatives through disciplined group-wide capital management
• Grew each of our business units while maintaining prudent underwriting standards
• Delivered top quartile investment performance within established, and strictly adhered to, investment policies
• Continued investments in Compliance, Information Security, Operations, Financial Reporting and Human Resources infrastructure to support sustainable and profitable growth

We’re proud to say that Pan-American Life Insurance Company enjoys an A (Excellent) rating from A.M. Best and an A (Strong) rating from Fitch Ratings. These ratings are strong endorsements of the financial strength that enables us to be there when our clients need us the most.

“Pan-American Life’s rating affirmations reflect the benefits derived from the company’s long-established presence and name recognition in Latin America and the U.S. Hispanic marketplace, as well as its improved balance sheet and income statement. The ratings also reflect Pan-American Life’s solid consolidated risk-adjusted capitalization, well-performing fixed-income investment portfolio and positive net operating performance.”

– A.M. Best

Pan-American's ratings reflect its very strong capitalization and relatively low-risk liability profile. The company’s strong balance sheet continues to be a key ratings driver with very strong capitalization and low leverage. The ratings also consider the successful integration of Mutual Trust, which has strengthened Pan-American's position in the U.S. life insurance.”

- Fitch Ratings

• Notwithstanding the low interest rate environment throughout 2016, Pan-American Life Insurance Group achieved a “new acquisition yield” of 5.70% on $837.3 million of bond purchases in 2016.
• Net unrealized gains in the PALIG bond portfolio stood at $131.8 million as of 12/31/16 – an increase of $83.5 million from the previous year.
• The Pan-American Life Insurance Company (PALIC) statutory bond yield in 2016 of 5.84% compares exceptionally well to the Life Industry average as published by A.M. Best. The most updated statistic available from A.M. Best reports that in 2015 the average bond yield for the Life Industry was 4.70%