Federal Home Loan Bank Funding Strategies for Insurance Companies

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About the Presenters

Matt Stewart, CPCU, CLU, FLMI, vice president at Federal Home Loan Bank of Boston, leads the Bank’s insurance sector business development and relationship management. Prior to joining the Bank, Matt held executive positions at Liberty Mutual Insurance and Prudential Financial.

Bob Alban, principal of Montshire Advisors, focuses on insurance company capital optimization transactions, alternative investments, and insurance product distribution opportunities. Previously, Bob led corporate development at National Life Group and mergers and acquisitions at Sentry Insurance.

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Federal Home Loan Bank System

• Created by Congress in 1932 to provide liquidity and funding to member institutions

• Cooperatively owned by members and government-sponsored enterprise status

• Debt securities issued through Office of Finance are the joint and several obligations of all 11 banks

Investors FHLBanks$1,031 Billion Assets

MembersCurrently 7,265

Dealers Office of Finance

Customers

Debt Securities Investment Capital

Debt Securities

Issuance proceeds

Issuance proceeds

Collateral

Advances ($690 Bil)

Financial products

Data as of 2Q 2016

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Members purchase membership stock

• FHLB Boston: 35 basis points of residential mortgage-related assets, treasuries, and agencies

• All membership and activity-based stock eligible to receive dividend, currently 3-month LIBOR plus 300 basis points for FHLB Boston

Borrowing process

1. Submit collateral; value of pledged assets (post-haircuts) > total loans outstanding

Eligible asset types and valuations include treasuries and US securities, FNMA and FHLMC MBS and agency CMOs, CMBS AAA, CMBS AA, CMBS A, and residential, multifamily, and commercial real estate loans

Various custodian options available

2. Receive funding

3. Purchase activity-based stock, which may be repurchased after borrowing matures

Overnight term = 3% of borrowing

3 months term = 4.5% of borrowing

Stock Requirements and the Borrowing Process

4

Rating Agency and Industry Perspective on FHLB

Federal Home Loan Bank advances made to insurance companies, especially life insurers, have risen exponentially in recent years, as insurers seek stable funding sources.

SNL Financial

The borrowing capacity provided by the FHLB can be a powerful tool for managing risk and profitability.

NAMIC publication

FHLB programs provide financial flexibility for insurance company members and are an attractive source of capital because of the low rate offered on advances.

With respect to insurance operating company leverage, A.M. Best is most comfortable when operating leverage activities such as institutional investment products, FHLB, securities lending, etc. do not exceed 20% of reserves* at the operating company level.

For insurers utilizing FHLB borrowings for spread-enhancement activities (i.e., similar to securities lending in purpose), A.M. Best would view these activities as qualifying for operating leverage treatment provided the following features are present: Low duration mismatch between assets and debt, credit quality of assets purchased is high, assets purchased have low liquidity risk, or alternatively, the insurer maintains strong liquidity and/or has access to additional liquidity reserves, and there is positive spread generation.

AM Best’s Perspective on Operating Leverage

Fitch Ratings believes that membership in the Federal Home Loan Bank (FHLB) system can enhance liquidity and financial flexibility for insurance companies, particularly those insurers with limited access to capital markets.

The FHLB is able to source funds at very low rates due to its position as a government sponsored entity (GSE).

Fitch Ratings

Access to an alternative, low-cost funding source is credit positive. The FHLBs offer eligible insurers access to low-cost, collateralized borrowing capacity for both their ordinary operating needs and emergency liquidity.

Moody’s

Although not immune to major market dislocations, the FHLB System has proven to be a stable source of funding through good times and bad.

A material dislocation in financial markets will not likely affect the FHLB in providing insurers this alternative access to funding.

S&P

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FHLBank Insurance Membership on the Rise Nationally

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$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

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50

100

150

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Insurance members have combined $5.14 Trillion in Total Assets

Blue columns = # of insurance membersRed line = $ insurance member advances

MembersAdvances

(billions)$98.4 B

Chart1

19991999

20002000

20012001

20022002

20032003

20042004

20052005

20062006

20072007

20082008

20092009

20102010

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20122012

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20142014

20152015

Members

Advances

39

2.2

52

2.843

57

3.118

74

5.142

82

8.029

92

11.063

111

11.476

134

14.177

154

28.672

185

54.922

210

48.253

229

45.09

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46.862

264

51.584

293

59.389

304

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372

98.41

Sheet1

Year19992000200120022003200420052006200720082009201020112012201320142015

Members395257748292111134154185210229248264293304372

Advances$ 2$ 3$ 3$ 5$ 8$ 11$ 11$ 14$ 29$ 55$ 48$ 45$ 47$ 52$ 59$ 72$ 98

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Federal Home Loan Bank of Boston

• Location = Boston, Massachusetts

• Area served = Six New England states

• Members = More than 440 members, including 46 insurance companies

• Assets = $58.7 billion

• Capital = $3 billion

• Total regulatory capital ratio = 5.9 percent**Total regulatory capital ratio is capital stock (including mandatorily redeemable capital stock) plus total retained earnings as a percentage of total assets.

Low cost Easy to use Available

in all business cycles

Improvefinancial flexibility

Viewed favorably by

rating agencies

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FHLB Boston Insurance Company Members

Life Companies• Aetna Life Insurance• Hartford Life Insurance Company• Liberty Life Assurance Company• Mass Mutual Life Insurance Company• National Life Insurance• Prudential Retirement Insurance Annuity• SBLI of Massachusetts• Unum Life Insurance• Vantis Life

Health Companies• Blue Cross Blue Shield of MA• Blue Cross Blue Shield of VT• BCBS of MA HMO Blue• Harvard Pilgrim Health Care

Depositors Insurance• Depositors Insurance Fund• Mass Credit Union Share Insurance

P&C Companies• AIM Mutual• American European• Arbella Mutual Insurance• Barnstable County Mutual• Citizens Insurance Co of America• Commerce Insurance Company• CT Attorneys Title• Coverys• Danbury Mutual• Dorchester Mutual• Fitchburg Mutual• Hanover Insurance Company• Hingham Mutual• Housing Authority Property Insurance• Ironshore Specialty Insurance Company• Lexington Insurance• Liberty Mutual Insurance Company• New London County Mutual• Norfolk and Dedham• Peerless Insurance Company• Quincy Mutual Insurance• Safety Insurance• Vermont Mutual

Risk Retention Groups• American Excess• Housing Authority Insurance• ICI Mutual

Captives*• Cascade Re• CW Reinsurance Company• MHL Reinsurance LTD• Pedcor Insurance

*Captives are no longer eligible for membership based on Feb 2016 FHFA membership rule

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Expansive Product List

Advances (Loans)• Easy, one-call access to funds• Terms from overnight to 20 years• Fixed vs. floating• Bullet vs. amortizing• All types of derivatives can be embedded• Same-day settlement for term funding available until noon• Overnight funding available until 5:00 p.m.

Letters of Credit • FHLB Boston is an NAIC-approved bank for letters of credit

Housing & Community Investment• Affordable Housing Program • Community Development Advances

Getting the Most of FHLB Membership

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Asset-Liability Management

Finance Special Events

Contingent Liquidity

• Emergency/back-up liquidity• Gain liquidity from illiquid assets• Cash management• Fill reinsurance payment gaps• Enhance returns by redeploying

low-yielding cash and short-term investments into higher yielding investments and utilizing FHLB to offset needed liquidity

• Create liquidity for illiquid assets (e.g. mortgages)

• Spread-based borrowing• Extend duration of liabilities

to target an optimal point on the rate curve

• Interest-rate-risk management• Fill liability gaps associated with

policyholder behavior (lapsation) to smooth out liability cash flows

• Time purchase and sale of investments when market conditions are optimal rather than solely based on liability cash flows

• FHLB community development programs• Other restructuring events• Capital purchases• Debt and capital repurchases• Letters of credit to fund third-party reinsurance

Funding Uses

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Typical considerations for a spread-based borrowing program include:• Targeted spread. How much spread is needed for an attractive return on capital?

• Optimal investments. Which investments meet insurance company criteria for return on capital and are considered attractive from a risk/return perspective?

• Timing. Unlike other insurance lines of business, spread-based borrowing programs can be implemented upon the discretion of the insurance company. Typically, this will be timed with optimal investment opportunities to produce an attractive spread and/or when the insurance company has capital to deploy and desires to grow earnings.

• Structure of advance. FHLB Boston offers great flexibility in advance structures including floating- and fixed-rate (from one day to 20 years), amortizing and bullet structures, prepayment options, etc.

Spread-Based Borrowing

0.%

1.%

2.%

3.%

4.%

1 2 3 4

SpreadHistorically, larger life insurance companies took advantage of this opportunity, but increasingly, smaller life, P&C, and health insurers are implementing spread-based borrowing programs

Asset return

Advance Cost

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Spread-Based Borrowing – Illustration

• As of 5/2/16, 5-year FHLB fixed-rate advance cost was approximately 180 basis points and a 5-year 50/50 BBB/A corporate bond portfolio would have yielded about 300 basis points, generating about 120 basis points of net spread. Assuming a 35% tax rate, this would generate about 80 basis points of after tax spread.

• This would generate 12.7%, 15.1%, and 18.6% return on RBC capital, S&P capital, and BCAR capital, respectively.

• P&C insurers would have similar capital requirements: R0 for collateral, R1 for fixed income, and R2 for FHLB stock. Many P&Cinsurers have substantial covariance benefit for R1 and R2.

The following illustrates the return on capital for a life insurer entering into a $100 million funding agreement with the Bank, with 50% invested in A-rated corporate bonds and 50% in BBB-rated corporate bonds.

Size: $100 mmRBC @ 400% S&P (A-) BCAR

Funding Agreement Notes Funding Agreement Notes Funding Agreement NotesC0 4.0 1 C0 0.0 C0 0.0C1o - bonds 2.3 2 C1o - bonds 3.0 2 C1o - bonds 1.7 2C1cs 0.1 3 C1cs 0.0 3 C1cs 1.9 3C2 0.0 C2 0.0 C2 0.0C3 0.0 4 C3 2.4 C3 0.6C4 0.0 C4 0.0 C4 0.0

6.3 5.3 4.3

Notes:

4. Typically negative for RBC (C3 Phase I) and can offset positive C3 amounts if any exist.5. RBC and BCAR values adjusted for industry average covariance benefit

3. Assumes 4.5% of borrowing amount in FHLB stock purchased.

1. 1.3% charge. Assumes 85% haircut on collateral. 2. Assumes 50% NAIC 1 corporate bonds and 50% NAIC 2 corporate bonds.

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Spread-Based Borrowing – Optimal Investments

• As of

• Several asset classes are eligible as FHLB collateral and can deliver an attractive net spread. Numerous other NAIC 1 & 2 asset classes are not eligible as FHLB collateral but can produce an attractive net spread.

• Insurance companies with limited borrowing capacity will likely want to focus on the first group of asset classes, and those with excess borrowing capacity will likely also focus on the second group of asset classes.

FHLB Eligible Asset Classes Non-Eligible Asset Classes

AAA-, AA-, and A-rated CMBS Investment-grade corporates (Mostly A- and BBB-rated)

Fixed- or floating-rate CML CLOs

Investor-owned RML Nonagency RMBS

Jumbo RML ABS

Agency RMBS Structured settlements / lottery settlements

Synthetics (underlying treasury or agency) Emerging market inflation-linked sovereigns

Principal-protected note and rated funds

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Comparison of FHLB Boston’s five-year Classic Advance rate with five-year treasury rates

FHLB advance rate compared to treasuries has been highly correlated demonstrating its high quality.

The median spread has been 61 basis points and is currently ~55 basis points.

Spread-Based Borrowing – Timing

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Spread-Based Borrowing - Timing

During this period, the median, minimum, maximum and current BBB and A spreads to FHLB advance rates and median and current spread of selected other asset classes were as follows:

Median Maximum Current (5/2/16)A Corporate Credit Spread 62bp 478bp ~75bpBBB Corporate Credit Spread 138bp 623bp ~175bpAAA CMBS Spread ~50bp ~75bpCML Spread ~100bp ~125bpAAA CLO Spread ~75bp ~150bp

*Estimated based on Montshire analysis of FHLB advance rates, Moody’s credit spread data, and other publicly available data.

Comparison of historical BBB and A spreads to FHLB advance rates

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• Insurance company investment strategy tends to focus on liquidity.

• Industry median cash plus bonds maturing in less than one year as a percentage of invested assets is approximately 12 and 30 percent, respectively, for P&C and health companies.

• Reallocating a portion of cash and short-term bonds to higher yielding investments and relying on FHLB for cash management can meaningfully improve income.

• The following illustrates the benefit to a hypothetical health or P&C insurer.

Cash: $ 75M (15%) Cash: $38M (7.5%)

Total assets: $ 500M Total assets: $500M

Surplus: $ 250M Surplus: $250M

Net income: $ 20.0M Net income: $20.6M

ROE: 8.0% ROE: 8.2%

ROA: 4.0% ROA: 4.1%

Cash Management Illustration

Move $37M of cash to higher-yielding investment

Assume yield increases from 50 to 300 basis points, with 35% tax rate.

List of Insurance Company Members Countrywide

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Insurance Members – All FHLBanksCustomer Name State4 Ever Life Insurance Company IL5 Star Life Insurance Company VAA.I.M. Mutual Insurance Company MAAAA Life Insurance Company MIACA Insurance Company INAccident Fund Insurance Company of America MIAccordia Life and Annuity Company IAACREFI Insurance Services, LLC MIAetna Life Insurance Company CTAgents National Title Insurance Company MOAIG Specialty Insurance Company ILAllianz Life Insurance Company of North America MNAmerican Benefit Life Insurance Company TXAmerican Benefit Life Insurance Company TXAmerican Century Life Insurance Company of Texas TXAmerican European Insurance Company NHAmerican Excess Insurance Exchange, RRG VTAmerican Family Life Insurance Company WIAmerican Family Mutual Insurance Company WIAmerican Fidelity Assurance Co. OKAmerican General Life Insurance Company TXAmerican Home Assurance Company NYAmerican Mutual Life Association OHAmerican Mutual Share Insurance Corporation OHAmerican Public Life Insurance Company OKAmerican Republic Insurance Company IAAmerican United Life Insurance Company INAmerisure Insurance Company MIAmerisure Mutual Insurance Company MIAmerisure Partners Insurance Company MIAmeritas Life Insurance Corp. NEAmeritrust Insurance Corporation MIAmFirst Insurance Company MSAnthem Health Plans of Kentucky, Inc. KYAnthem Health Plans of Virginia, Inc. VAAnthem Insurance Companies, Inc INAnworth Insurance LLC MIARBC Insurance Company, LLC NJArbella Mutual Insurance Company MAArmed Forces Insurance Exchange KSAssurity Life Insurance Company NE

Customer Name StateAthene Annuity and Life Company IAAthene Life Insurance Company INAtlantic States Insurance Company PAAustin Mutual Insurance Company MNAuto Club Insurance Association MIAuto Club Insurance Company of Florida FLAuto Club Life Insurance Company MIAuto-Owners Insurance Company MIAuto-Owners Life Insurance Company MIAXA Equitable Life Insurance Company NYBaltimore Life Insurance Company (The) MDBankers Insurance Company FLBankers Life and Casualty Company ILBankers Life Insurance Company FLBarnstable County Mutual Insurance Company MABCS Insurance Company OHBelmont Insurance Company NYBlue Care Network of Michigan MIBlue Cross and Blue Shield of Alabama ALBlue Cross and Blue Shield of Georgia, Inc. GABlue Cross and Blue Shield of MA HMO Blue. MABlue Cross and Blue Shield of MA, Inc. MABlue Cross And Blue Shield of Michigan MIBlue Cross and Blue Shield of Minnesota MNBlue Cross Blue Shield of Arizona, Inc. AZBlue Residential Insurance, LLC TNBlueCross BlueShield of Tennessee, Inc. TNBoston Indemnity Company, Inc. SDBrickStreet Mutual Insurance Company WVBrotherhood Mutual Insurance Company INBuckeye State Mutual Insurance Company OHBuilders Insurance (A Mutual Captive Company) GABuilders Mutual Insurance Company NCCantor Real Estate Insurance Company, LLC NJCapitol Life Insurance Company (The) TXCapstead Insurance LLC TNCascade Re, LLC VTCatholic Order of Foresters ILCatholic Relief Insurance Company of America VTCentral Security Life Insurance Company TXCentral States Health & Life Company of Omaha NE

Customer Name StateChampions Life Insurance Company TXChesapeake Employers' Insurance Company MDChimera Insurance Company, LLC MOCHMI Insurance Company, LLC MICMFG Life Insurance Company IAColonia Life Insurance Co. of Texas TXColonial Lloyds Insurance Company TXColonial Penn Life Insurance Company PAColumbia Mutual Insurance Company MOColumbus Life Insurance Company OHCommerce Insurance Company (The) MACommunity Insurance Company OHConnecticut Attorneys Title Insurance Company CTConseco Life Insurance Company INConseco Life Insurance Company MSContinental Casualty Company ILCopper Insurance, LLC MOCountry Life Insurance Company ILCountry Mutual Insurance Company ILCSAA Insurance Exchange CACUMIS Insurance Society, Inc. IACW Reinsurance Company VTCYS Insurance Services, LLC TNDakota Truck Underwriters SDDanbury Insurance Company MADepositors Insurance Fund MADiamond Shoals Insurance LLC SCDorchester Mutual Insurance Company MAEARN Insurance LLC TNEMC National Life Company IAEmployers Assurance Company FLEmployers Compensation Insurance Company CAEmployers Insurance Company of Nevada NVEmployers Insurance Company of Wausau WIEmployers Mutual Casualty Company IAEmployers Preferred Insurance Company FLEquiTrust Life Insurance Company IAErie Family Life Insurance Company PAErie Insurance Company PAErie Insurance Exchange PAEssent Guaranty, Inc. PA

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Insurance Members – All FHLBanksCustomer Name StateEverence Association Inc. INFarm Bureau General Insurance Company of Michigan MIFarm Bureau Life Insurance Company IAFarm Bureau Life Insurance Company of Michigan MIFarm Bureau Mutual Insurance Company of Michigan MIFarm Bureau Property Casualty Insurance Company IAFarmers Alliance Mutual Insurance Company KSFarmers Mutual of Tennessee TNFCCI Insurance Company FLFederal Life Insurance Company (Mutual) ILFidelity & Guaranty Life Insurance Company MDFidelity Life Association ILFidelity Security Life Insurance Company MOFirst Catholic Slovak Union of the USA and Canada OHFirst Dakota Indemnity Corporation SDFirst National Life Insurance Company of the USA NEFirst Southeast Reinsurance Company, Inc. VTFirstcomp Insurance Company NEFitchburg Mutual Insurance Company MAFive Oaks Insurance LLC MIFlorida Peninsula Insurance Company FLFlorists' Mutual Insurance Company ILForethought Life Insurance Company INFounders Insurance Company ILGeneral American Life Insurance Company MOGenworth Life and Annuity Insurance Company VAGenworth Life Insurance Company DEGenworth Life Insurance Company of New York NYGleaner Life Insurance Society MIGovernment Personnel Mutual Life Insurance TXGrain Dealers Mutual Insurance Company INGrange Mutual Casualty Company OHGreat American Life Insurance Company OHGreat Lakes Insurance Holdings, LLC MIGreat Western Insurance Company UTGrinnell Mutual Reinsurance Company IAGuggenheim Life and Annuity Company IAGuideOne Mutual Insurance Company IAGuideOne Specialty Mutual Insurance Company IAHanover Insurance Company (The) NHHartford Life Insurance Company CT

Customer Name StateHarvard Pilgrim Health Care, Inc. MAHastings Mutual Insurance Company MIHawthorn Life Insurance Company TXHealth Care Service Corporation ILHeritage Life Insurance Company AZHICA Education Loan Corporation SDHightree Insurance, LLC TNHingham Mutual Fire Insurance Company MAHochheim Prairie Farm Mutual Insurance Assoc TXHorace Mann Life Insurance Company ILHunt Insurance Company, LLC TNIAS Services LLC MIICI Mutual Insurance Company, RRG VTIllinois Mutual Life Insurance Company ILInvestors Heritage Life Insurance Company KYIowa-Midwest Insurance Company IAIronshore Indemnity Inc MNIronshore Specialty Insurance Company AZJackson National Life Insurance Company MIJames River Insurance Company OHJefferson National LIfe Insurance Company TXJohn Hancock Life Insurance Company (USA) MIKansas City Life Insurance Company MOKansas Medical Mutual Insurance Company KSKentucky Employers' Mutual Insurance KYKentucky Farm Bureau Mutual Insurance Co KYKentucky Growers Insurance Company (The) KYKey Bridge Insurance LLC TNKilpatrick Life Insurance Company LALafayette Life Insurance Company OHLANCE Indemnity Company, LLC TNLandmark Life Insurance Company TXLee Financial Corporation NCLexington Insurance Company MALiberty Bankers Life Insurance Company OKLiberty Life Assurance Company of Boston MALiberty Mutual Fire Insurance Company WILiberty Mutual Insurance Company MALife Insurance Company of the Southwest TXLifeShield National Insurance Company OKLightning Rod Mutual Insurance Company OH

Customer Name StateLincoln National Life Insurance Company INMackinaw Insurance Company, LLC MIMackinaw Insurance Company, LLC MIMAG Mutual Insurance Company GAManufacturing Technology Mutual Insurance MIMassachusetts C.U. Share Insurance Corp. MAMassachusetts Mutual Life Insurance Co MAMeadowlark Insurance Company LLC MIMedical Assurance Company MSMedical Professional Mutual Insurance Co MAMedico Insurance Company NEMennonite Mutual Insurance Company OHMerit Life Insurance Co. INMetLife Insurance Company of Connecticut CTMetLife Insurance Company USA DEMetLife Investors Insurance Company MOMetropolitan Life Insurance Company NYMetropolitan Tower Life Insurance Company DEMFA Insurance, Inc. UTMHL Reinsurance Limited VTMichigan Insurance Company MIMichigan Millers Mutual Insurance Company MIMichigan Professional Insurance Exchange MIMidland National Life Insurance Company IAMidwest Family Mutual Insurance Company IAMinnesota Life Insurance Company MNMississippi Valley Company AZMITT Insurance Company LLC TNMMIC Insurance, Inc. MNModern Woodmen of America ILMONY Life Insurance Company NYMortgage Guaranty Insurance Corporation WIMotorist Mutual Insurance Company OHMountain States Mutual Casualty Company NMMt. Hawley Insurance Company ILMTL Insurance Company ILMutual of Omaha Insurance Company NENAMIC Insurance Company, Inc. INNational Guardian Life Insurance Co. WINational Life Insurance Company VTNational Slovak Society of USA PA

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Insurance Members – All FHLBanksCustomer Name StateNational Teachers Associates Life Insurance TXNational Union Fire Company of Pittsburgh, PA PANationwide Life Insurance Company OHNationwide Mutual Insurance Company OHNCMIC Insurance Company IANew Era Life Insurance Company TXNew London County Mutual Insurance Company CTNew Mexico Mutual Casualty Company NMNew York Life Insurance and Annuity Corporation DENew York Life Insurance Company NYNorfolk and Dedham Mutual Fire Insurance Co MANorth American Company for Life and Health IANorth Star Mutual Insurance Company MNNorthern Neck Insurance Company VANRZ Insurance Holdings LLC TNOhio National Life Assurance Corporation OHOhio National Life Insurance Company OHOld American Insurance Company MOOld Georgetown Insurance Co., LLC MOOld Republic Life Insurance Company ILOne Mortgage Partners Corporation VTOrchid Island Casualty, LLC TNOxford Life Insurance Company AZPacific Life and Annuity Company AZPacific Life Insurance Company NEPan-American Life Insurance Company LAParagon Life Insurance Company of Indiana INPedcor Insurance Company VTPeerless Insurance Company NHPenn Insurance and Annuity Company DEPenn Mutual Life Insurance Company PAPF Insurance Company, LLC OKPharmacists Mutual Insurance Company IAPhiladelphia American Life Insurance Company TXPhiladelphia Indemnity Insurance Co. PAPhysicians Life Insurance Company NEPhysicians Mutual Insurance Company NEPioneer State Mutual Insurance Company MIPlans' Liability Insurance Company OHPlateau Casualty Insurance Company TNPlateau Insurance Company TN

Customer Name StatePMT Insurance Company, LLC OKPremera Blue Cross WAPrincipal Life Insurance Company IAProAssurance Casualty Company MIProAssurance Indemnity Company, Inc. ALProspect Mortgage Insurance, LLC ILProtective Life Insurance Company TNProvident Life and Accident Insurance Co TNPrudential Retirement Insurance and Annuity CTPSL Insurance Company, LLC TNQuincy Mutual Fire Insurance Company MAReliance Standard Life Insurnace Co TXReliaStar Life Insurance Company MNRGA Reinsurance Company MORiverSource Life Insurance Company MNRLI Insurance Company ILRockhill Insurance Company AZRockingham Insurance Company VARoyal Neighbors of America ILRural Mutual Insurance Company WIRWT Financial, LLC DESABRE Business Insurance LLC MTSafe Auto Insurance Company OHSafety Insurance Company MASafety National Casualty Corporation MOSagicor Life Insurance Company TXSECURA Insurance, A Mutual Company WISecurity Benefit Life Insurance Co. KSSecurity Life of Denver Insurance Co. COSecurity National Life Insurance Company UTSelective Insurance Company of America NJSelective Insurance Company of New York NYSelective Insurance Company of South Carolina INSelective Insurance Company of the Southeast INSenior Health Insurance Company of PA PASFM Mutual Insurance Company MNShellpoint Insurance, LLC TNShenandoah Life Insurance Company VASociety Insurance, a mutual company WISoFi Insurance LLC NVSouth Street Lucid Insurance, LLC TN

Customer Name StateSouthern Farm Bureau Life Insurance Co MSSPT Captif Insurance, LLC UTSquire Reassurance Company LLC MIStandard Insurance Company ORStar Insurance Company MIStarmount Life Insurance Company LAState Auto Property & Casualty Insurance Co IAState Automobile Mutual Insurance Company OHState Compensation Insurance Fund CASun Life Assurance Company of Canada (U.S.) DESunAmerica Life Insurance Company AZSunset Life Insurance Company of America MOSuperior Guaranty Insurance Company MNTeachers Insurance and Annuity Association NYTexas Farm Bureau Casualty Insurance Co TXTexas Farm Bureau Mutual Insurance Co TXTexas Mutual Insurance Company TXTH Insurance Holdings Company LLC MOThe Bankers Guarantee Title & Trust Co OHThe Celina Mutual Insurance Compnay OHThe Lafayette Life Insurance Company OHThe National Mutual Insurance Company OHThe Prudential Insurance Company of America NJThe Savings Bank Life Insurance Co of MA MAThe State Life Insurance Company INThe United States Life Insurance Company NYThe Variable Annuity Life Insurance Company TXTokio Marine Specialty Insurance Company PATransamerica Life Insurance Company IATransamerica Premier Life Insurance Co IATrinity Universal Insurance Company TXTruman Insurance Company LLC MOTrustmark Insurance Company ILTuebor Captive Insurance Company LLC MIUnited Farm Family Life Insurance Company INUnited Farm Family Mutual Insurance Co INUnited Fire & Casualty Company IAUnited Funeral Benefit Life Insurance Co OKUnited Funeral Directors Benefit Life Insurance. TXUnited Insurance Company of America ILUnited Life Insurance Company IA

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Insurance Members – All FHLBanksCustomer Name StateUnited Missouri Insurance Company AZUnited of Omaha Life Insurance Company NEUnited Ohio Insurance Company OHUnited Property and Casualty Insurance Company FLUniversal Fidelity Life Insurance Company OKUniversal Guaranty Life Insurance Company OHUnum Life Insurance Company of America MEUpland Mutual Insurance, Inc. KSUSAA Life Insurance Company TXVantislife Insurance Company CTVermont Mutual Insurance Company VTVictor Coverage, LLC MIVoya Insurance and Annuity Company IAWashington National Insurance Company INWayne Mutual Insurance Company OHWest Bend Mutual Insurance Company WIWestern American Life Insurance Company TXWestern National Mutual Insurance Company MNWestern Southern Life Assurance Company OHWestern United Insurance Company INWestfield Insurance Company OHWilliamsburg National Insurance Company MIWilton Reassurance Company MNWisconsin Physicians Service Insurance Corporation WIWolverine Mutual Insurance Company MIWoodmont Insurance Co., LLC MOWoodward Insurance, LLC TN

Federal Home Loan Bank Funding Strategies for Insurance Companies

Slide Number 1About the PresentersFederal Home Loan Bank SystemStock Requirements and the Borrowing ProcessRating Agency and Industry Perspective on FHLBFHLBank Insurance Membership on the Rise NationallyFederal Home Loan Bank of BostonFHLB Boston Insurance Company MembersSlide Number 9Slide Number 10Funding UsesSpread-Based BorrowingSpread-Based Borrowing – IllustrationSpread-Based Borrowing – Optimal InvestmentsSpread-Based Borrowing – TimingSpread-Based Borrowing - TimingCash Management IllustrationSlide Number 18Insurance Members – All FHLBanksInsurance Members – All FHLBanksInsurance Members – All FHLBanksInsurance Members – All FHLBanksSlide Number 23Slide Number 24