Phoenix will not issue a new policy to a client who settled a policy within 30 months of the policy issue date.

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1 Phoenix Position on Stranger-Originated Life Insurance The objective of this communication is to share Phoenix s position on Stranger-Originated Life Insurance and to notify you of the consequences a producer faces in submitting this kind of business. Stranger-originated life insurance (STOLI), also known as investor-originated life insurance (IOLI), is a practice where a policy is initiated with the sole intent of being sold to speculators or investors. Unfortunately, STOLI promoters often target retirees who may be unaware of tax liability and transaction costs as well as the impact on their ability to obtain insurance in the future. This and other inferior business practices have led to industry abuses. Phoenix will not engage in this business and is opposed to any transactions that manufacture life insurance specifically to position it for early sale. We have rigorous screening measures in place today to detect this business, and we continue to refine this process. It is also important to note that there is a difference between STOLI/IOLI and life settlements. Phoenix believes a life settlement can be a valuable financial tool for consumers who have life insurance policies that they no longer need or want. Our Phoenix Life Solutions subsidiary will offer life settlements based with a focus on customer value and transparency. Phoenix Life Solutions will adhere to strict industry standards and settle only those policies that were purchased originally to meet an insurance need; we will not settle STOLI or investorinitiated policies. Phoenix will not issue a new policy to a client who settled a policy within 30 months of the policy issue date. It is our expectation that the producers who do business with us share in this commitment. If a producer or firm attempts to place business with Phoenix that is clearly intended for resale in the secondary market, or where fraudulent information is provided to support the insurance need, Phoenix will terminate the producer and/or firm and employ all other remedies available to protect the Phoenix Company. Premium Financing Premium financing is not, in and of itself, a reason to purchase life insurance. It is one option available to the policy owner for paying for life insurance and, in the right circumstances, is a highly effective strategy. Due to the complexities of these arrangements, such options should only be considered by knowledgeable individuals and business owners who have access to experienced tax advisers. Such individuals should fully understand the risks and benefits of such borrowing and undergo these transactions as part of a complete financial plan. Phoenix requires that the insured have a bona fide need for the coverage, the insured and policy owner must have a real cost associated with the purchase and the overall terms and conditions of the transaction are reasonable. Phoenix will require Premium Financing disclosures signed by the Insured, Owner, Producer and Lender in cases where premium financing is being used for life insurance premiums. This disclosure will be communicated under separate cover. For a listing of accepted Premium Financed programs please contact your Wealth Management Consultant. BPD /08 For Producer Use Only. 1

2 Financial Underwriting Practices Phoenix Underwriting considers medical and financial underwriting integral to successful mortality assessment. We rely on the producers who submit business to us to assist in gathering the information that is essential in evaluating this risk. Total Line of Coverage: Phoenix s practice is to review the total line of coverage to be placed in force and analyze this amount in the context of the client s financial position. The total line of coverage should not exceed the amount of anticipated financial loss and the total premiums should not exceed the client s ability to pay. The total line would include all of the following: In force coverage amounts Amounts of coverage currently being applied for with all carriers Any increasing death benefit riders Any settled policies Estate Growth: Phoenix calculates the estate preservation need by projecting the client s estate at 4-6% for 50% of life expectancy, the resulting amount is then divide in half. This amount can be placed on an individual life or distributed between spouses, so long as the aggregate amount placed (for this purpose) does not exceed the estate preservation need. The maximum age for estate projections is age 80. Information regarding the in force and applied for amounts of coverage on the spouse of the insured will be required. Ability to Pay: Anticipated premium expense should not exceed 50% of an applicant's total income. If assets are being liquidated to pay the life insurance premium we will consider this when determining estate preservation needs. Settled Policies: Phoenix will not issue a new policy to a client who settled a policy within the past 30 months. Layering or Stacking: Phoenix does not engage in the practice of issuing several smaller policies in lieu of one larger policy. For example, the insured applies and is approved for $35,000,000 of coverage then subsequently requests that it be issued as 7 separate policies for $5,000,000 each. Premium Financing Documents: For applications involving approved Phoenix premium financing programs, we require a copy of all financial records and other pertinent information submitted to the lending institution for financial qualification of the loan. Retention For insureds age 65 and older, Phoenix retains the risk up to $10 million on permanent, single life plans and up to $12 million on survivorship plans to age 80, subject to age, rating and risk review. Face Amount Single Life Survivor Age 65 to 80 $10,000,000 $12,000,000 Age 81 to 85 $4,000,000 $4,000,000 BPD /08 For Producer Use Only. 2

3 Financial Underwriting Requirements It is important for Phoenix to have a clear understanding of the client s financial position, planning strategy and how the in force coverage and the amounts applied for currently serve the needs outlined in this strategy. Clients under age 65 $1,500,001 to $1,999,999 $2,000,000 to $2,999,999 $3,000,000 to $10,000,000 $10,000,001 and above Tax returns Ad Hoc Requirements and Notes Tax Returns. Should be sent by client. In lieu of a copy we will accept IRS authorization form 4506T Report (PHI) Report (PHI) publicly available Brokerage Statement Agent Cover Letter Commercial Report Financial Supplement publicly available Brokerage Statement Agent Cover Letter Commercial Report CPA Statement Financial Supplement publicly available Tax returns may also be required if Brokerage Statements are not available. Brokerage Statement. Should be sent by client. A Phoenix fillable PDF is available. Commercial Report CPA Statement. Must include license number and State. Copy of Insurance policy on art, collectibles, gems etc. Required when these assets are 40% or more of the net worth. Financial Supplement publicly available BPD /08 For Producer Use Only. 3

4 Financial Underwriting Requirements, cont d Clients age 65 and older. $1,500,001 to $1,999,999 $2,000,000 to $2,999,999 $3,000,000 to $10,000,000 $10,000,001 and above Tax returns Ad Hoc Requirements and Notes Tax Returns. Should be sent by client. In lieu of a copy we will accept IRS authorization form 4506T Report (PHI) Brokerage Statement Agent Cover Letter Report (PHI) Financial Supplement publicly available Brokerage Statement Agent Cover Letter Commercial Report Financial Supplement publicly available Brokerage Statement Agent Cover Letter Commercial Report CPA Statement Financial Supplement publicly available Tax returns may also be required if Brokerage Statements are not available. Brokerage Statement. Should be sent by client A Phoenix fillable PDF is available. Commercial Report CPA Statement. Must include license number and State. Copy of Insurance policy on art, collectibles, gems etc. Required when these assets are 40% or more of the net worth. Financial Supplement publicly available Financial Underwriting Requirements Strategy We will search publicly available on all cases $2,000,000 and greater. We will secure tax returns and CPA statements on all cases $10,000,001 and greater. Clients with more than 40% of their net worth in an asset class other than real estate and equities, we will need to secure additional information to verify the asset value. We require a copy of the insurance policy on assets like gems, art, collectibles, etc. Other items will be handled on a case by case basis. For clients under 65 we require: financial supplements, brokerage statements, agent cover letter, commercial inspection reports at face amounts of $3,000,000 and greater. For clients 65 and older we require: financial supplements, brokerage statements, agent cover letter, commercial inspection reports at face amounts of $2,000,000 and greater. In circumstances where the client has no brokerage account we will pursue tax returns. BPD /08 For Producer Use Only. 4

5 At any time Phoenix reserves the right to request additional information to verify the client s income or to verify the ownership and valuation of assets. Financial Supplement The financial supplement noted in the grid above is designed to capture important details relative to the client s personal and business finances. The financial supplement needs to be signed by the Insured and policyowner. The following are some of the items which will need to be provided on this supplement: Financial references A detailed inventory of client s assets/liabilities Details of business holdings Addresses and ownership structure for real estate holdings Agent Cover Letter The Agent Cover Letter in the grid above is designed to give Phoenix a better understanding of the writing agent s relationship to the insured and the financial need for the coverage. This form needs to be signed by the writing agent(s). The agent is encouraged to fully complete this fillable form to satisfy the cover letter requirements. We are willing to accept a cover letter completed in another format providing the letter contains all of the elements outlined in our cover letter form. The following are some of the items which will need to be provided on this supplement: Agent s knowledge of client Purpose of coverage How the amount of coverage was arrived at Source of funds to pay premiums Transition Guidelines These updated guidelines will become effective on June 1, On formal applications that are currently pending, the underwriter will search publicly available and secure reports as outlined in the new requirements grid. Circumstances may require that the underwriter pursue additional requirements on some of these cases. Questions pertaining to these guidelines and requirements can be directed to your Underwriter. At Phoenix, it is our objective to retain our position as a leader in providing life insurance products that provide exceptional consumer value to our high net worth clients. By insuring that we are placing quality business on the books, we will be able to meet that goal. As our distribution partners, we are confident that you recognize the value of this approach, and will work together with us in achieving this objective. BPD /08 For Producer Use Only. 5

6 Financial Questionnaire The following financial disclosures are for the purpose of establishing financial insurability in connection with this application for insurance. Insured s Name: Phone Number: References: Accountant Banking Attorney Other Name Phone Number Length of Relationship Personal Insurance: Purpose of coverage: Is the policy in accordance with your insurance objectives and your anticipated financial needs? Please indicate the source of funds being used to make premium payments. Yes No Amount of coverage currently in force (including any policies previously sold): Amount of coverage currently applied for at all carriers: Total line to be placed: Amounts of coverage in force on your spouse: Amounts of coverage currently applied for on your spouse: Please explain how the amount of coverage was determined and why this amount of coverage is necessary. Income Statement Annual salary Dividends, etc. Other Income Total Last Year Prior Year Describe Source: Estimated Net Worth Assets Liabilities Cash Notes Payable Notes Receivable Accounts Payable Accounts Receivable Loans on Life Insurance Cash Value Life Insurance Taxes and Interest Due Real Estate Mortgages Business Holdings Other Liabilities Marketable Securities Total Personal Property Other Assets Total Net Worth For any asset amounts listed under real estate please complete the Real Estate section on page 3 of this form. For any asset amounts listed under business holdings, the Business Insurance section on page 2 must also be completed. Failure to fully complete these sections will result in these asset amounts not being included in the net worth calculation. BPD # /08 page 1

7 Financial Questionnaire Business Insurance: This section is to be completed if the policy is owned by a business, the purpose of coverage is business needs or if business holdings were indicated in the Personal Coverage section of this form. Purpose of Business Insurance: Explain Other : Name of company: Type of organization: Date established: Nature of business: Publicly traded: Corporation Partnership Sole Proprietorship Yes No Key Person Deferred Compensation Buy/Sell Other Other business coverage in force: Company Amount Purpose If key person insurance, why is the person to be insured important to the company: If buy/sell is there a written buy/sell agreement in effect? If yes, how is the business being valued in the agreement? Yes No If debt indemnification coverage: Name of Debt Holder Purpose of Loan Amount What percentage of the business do you own? Are other corporate officers or partners being insured? Names % Ownership Yes No Business Insurance In Force Amount Currently Applied for Financial Details of the Business Fiscal Year Ending Date: Total Assets Total Liabilities Gross Sales of Revenue Net Income (after taxes) Fair Market value Previous Year How was the amount of coverage arrived at? BPD # /08 page 2

8 Financial Questionnaire Personal or Business Bankruptcy Have you or any business in which you either directly or indirectly held an ownership interest greater than 10% been in bankruptcy? If yes, please provide: Yes No Type Date State Discharged Real Estate This section is to be completed if Real Estate holdings are indicated in the personal insurance section. Please provide the following details for each property: Address Structure of Ownership Percent of Ownership By signing below, the undersigned declare and certify that the information contained in this Financial Supplement is true, correct and complete to the best of their knowledge, information and belief. The undersigneds further declare that each of them understand, acknowledge and agree that Phoenix is relying on the information contained in this Financial Supplement in making its determination to issue the policy applied for and that the statements contained herein shall continue to be true, correct and complete as of the time of issuance and delivery of the policy. In the event that prior to issuance and delivery of the policy, the answers to any of the above questions are no longer true, accurate and correct, each of the undersigned warrants that they shall notify Phoenix immediately of such changed answers and that such notification shall occur prior to delivery of any policy. Proposed Insured Signature State Signed In Date Owner s Signature (if other than Proposed Insured) State Signed In Date BPD # /08 page 3

9 Phoenix Cover Letter Phoenix requires a cover letter, prepared by the writing agent for all applications which meet the following criteria: Clients under age 65, a cover letter is required for face amounts $3,000,000 and greater. Clients age 65 and older, a cover letter is required on face amounts $2,000,000 and greater. The writing agent is encouraged to fully complete this fill able form to satisfy the cover letter requirements. We are willing to accept a cover letter completed in another format providing the letter contains all of the elements outlined in our cover letter form. The writing agent is also encouraged provide any additional information he/she feels may help support the sale. Section 1: Agents Knowledge of Client and Advisors How long have you known this client? What is the nature of your relationship to the client? Please describe any pertinent information regarding health and lifestyle of client. If this client is a referral, what is the nature of your relationship to the referral source? Section 2: Client Need Please provide full details explaining the purpose of the coverage. Section 3: How Insurance Amount was determined Please describe how the amount of coverage was determined. Attach copies of any estate planning and/or business planning analyses that were prepared to support the amount of coverage applied for and the total line of coverage on this client. Section 4: Other Life Insurance - Please list the amount of coverage in-force (including the amount of any settled policies) and any other amounts of coverage applied for on this client and his/her spouse. Proposed Insured Company Amount Pers/ Bus In-force/Pending $ $ Spouse $ Company Amount Pers/ Bus In force/pending The Phoenix Company reserves the right to ask for any additional information that may be required to fully evaluate this risk, including copies of individual and business tax returns, and other financial information. BPD /08 Page 1

10 Phoenix Cover Letter $ $ Section 5: Lien(s), Judgments, Criminal Acts Please describe any pertinent information on the client s back ground that may have resulted in civil penalties, or a criminal record. Section 6: Premium Financing If the premium is to be financed, an explanation of the proposed exit strategy must be provided. Section 7: Ownership If the insurance is to be owned by a trust, an explanation of the purpose of the trust, with disclosures of the trust beneficiaries is required. Purpose of Trust: Beneficiary Name(s): Beneficiary Name (Print First and Last Name) Relationship to Proposed Insured Beneficiary Name (Print First and Last Name) Relationship to Proposed Insured Beneficiary Name (Print First and Last Name) Relationship to Proposed Insured The Phoenix Company reserves the right to ask for any additional information that may be required to fully evaluate this risk, including copies of individual and business tax returns, and other financial information. BPD /08 Page 2

11 Phoenix Cover Letter Section 8: Additional Information The Phoenix Company reserves the right to ask for any additional information that may be required to fully evaluate this risk, including copies of individual and business tax returns, and other financial information. BPD /08 Page 3