CRD Implementation Impact on Issuance, Private Mortgage Insurance & Investors

1. CRD Implementation Impact on Issuance, Private Mortgage Insurance & Investors Sacha Polverini Genworth Financial Managing Director Government Affairs – Europe Randy Szuch AIG United Guaranty Global Director Structured Products Global ABS Conference, Barcelona – June 10, 2007

2. AIG United Guaranty … • Member company of AIG - the largest insurance company in the world by market value, with operations in more than 130 countries • Specialist insurer which manages all mortgage insurance risks • 40+ years experience… tested in downturns • $142BN mortgages insured worldwide • Present in 18 locations globally (10 in Europe) • Dedicated local resources, people and know-how … Committed to credit protection and innovative solutions for customers • Monoline insurer with a proven track record… fewer than 0.3% claims denied since 1963 • Unmatched financial strength… Rated AA or higher by all three major agencies • Only mortgage insurer able to offer structured capital relief through an OECD affiliate • Global risk program to protect customers wherever they are • Steady support to customers in designing new and specialized products and exploring new opportunities • Access to the wide range of AIG products and services AIG-United Guaranty

3. Genworth Financial • GE Launched Genworth Financial IPO 24th May 2004 On NYSE • Three Business Segments: MI, PPI & Retired Income • Over 7000 Employees Across 25 Countries Serving 15 Million Customers • $110BN Assets, $11BN Revenues, $1.3BN Net Income (2006) Mortgage Insurance • Present In 9 European Countries, Plus Asia, The US, Canada, Australia & New Zealand • Largest Provider Of MI Outside Of The US* • $350BN+ MI Risk Worldwide • 20+ Years Experience… Tested in Downturns • Dedicated In-Region Resources *Source: Inside Mortgage Finance Genworth Financial Committed To Long-Term Partnership • Genworth Financial MIE Is A Monoline Supplier With A Proven Track Record • We Have A High Financial Strength Rating… AA (S&P, Fitch), Aa2 (Moodys) • Genworth Supports You By Offering Global High LTV Risk Management Expertise • We Source Global Solutions To Help Lenders Grow Their High LTV Mortgage Portfolio Global Expertise With Multi-Market Operating Presence

4. "It would be a mistake to conclude... that the only way to succeed in banking is through ever-greater size and diversity. Indeed, better risk management may be the only truly necessary element of success in banking.” Alan Greenspan, Former Federal Reserve Chairman

5. What Is MI? What Is It Not? What Is Mortgage Insurance? • Protects Lenders / Investors From Borrower Default on Residential Mortgages. MI Providers Deal Directly With Lenders, Not Borrowers • Makes Home Ownership Possible With Low Down Payment, Replacing Borrower’s Add‘l Securities & Administration Cost For Lenders • Generally Used When Loan-To-Value >75-80% • Is NOT Mortgage Life Insurance… Form Of Life Insurance Which Pays Off Loan Amount In Event Of Borrower’s Death • Is NOT Payment Protection Insurance... Form Of Credit Insurance Which Provides Directed Income Support In Event Of Borrower’s Involuntary Unemployment Or Disability Public Facilities Private Facilities Recognized & Used In Many Countries… Key Component Of Home Ownership Equation Belgium Canada Estonia Finland France Kazakhstan Hong Kong Netherlands Latvia Lithuania Slovenia United States Australia Belgium Canada France Germany Ireland Israel Italy New Zealand Poland Portugal South Africa Spain Sweden United Kingdom United States Mexico MI Is Trusted By Lenders & Regulators As A Reliable Partner For HLTV Lending

6. Default rates associated to different HLTV mortgage loans in the US market How often does it happen? Average Default Frequency by LTV% Downturn Downturn Downturn Downturn 25% 25% 25% Claim Frequency per 100 Loans 20% 20% 20% LTV LTV 97% 97% 15% 15% 15% LTV LTV 95% 95% LTV LTV 90% 90% 10% 10% 10% 5% 5% 5% LTV LTV 85% 85% 0% 0% 0% How bad can it get? 1991 1991 1992 1992 1993 1993 1994 1994 1995 1995 1996 1996 1997 1997 1998 1998 1999 1999 1990 1990 1976 1976 1977 1977 1978 1978 1979 1979 1980 1980 1981 1981 1982 1982 1983 1983 1984 1984 1985 1985 1986 1986 1987 1987 1988 1988 1989 1989 1991 1992 1993 1994 1995 1996 1997 1998 1999 1990 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 Average Loss Severity by LTV% Source: Mortgage Insurance Companies of America (MICA) represents the private mortgage insurance industry. MICA provides information on relative legislation and regulatory issues and strives to enhance understanding of the vital role Private MI plays in housing. • HLTV loans are more volatile during recessions: • The higher the LTV the higher the probability of default • Loss frequency experience markedly higher in downturn phases • Probability of default shows exponential growth when High LTV is coupled with deteriorating economic variables Loss Severity as a Percent of the Outstanding Loan Amount Source: Fitch Ratings RMBS Criteria Reports – BBB rating level for Germany (Dec ’04), UK (Feb ’07), Italy (Nov ’05) and Spain (Sep ’05). Default rates shown reflect prime loans with mid-range DTIs. HLTV Loans Are Riskier Assets

7. HPA cycles

8. Mortgage Insurance: Adding Value • Traditional ‘Flow’ MI • Loan by Loan Coverage • Effective for many markets – Regulatory drivers best • MI as part of Securitization • Pool Insurance for Mezzanine Tranche • First Loss via Pool Insurance • MI as part of a Synthetic Securitization • Effective risk-transfer mechanism Mortgage Insurance Adds Value by Ensuring Certainty of Cash Flows. MI provides Value broadly in three ways - Rated MI reduces Rating Agency credit enhancement requirements leading to optimized capital structure and improved execution

9. Improved Profitability Capital & Funding Benefits Product Illustration* How Mortgage Insurance Works • Sharper Capital Management (Rated & Economic Today) • Reduced Regulatory Capital Expected Under Basel 2 • Funding Flexibility: Risk Mitigation Recognised By Regulators, Investors & Ratings Agencies 95% LTV Loan Practical Example Original Property Value Foreclosure Value Outstanding Debt Accrued Interest Other Expenses Total Net Loss Claim Payment Lender Net Loss 100,000 85,000 (95,000) (5,000) (5,000) (20,000) 20,000 0 100% Borrower Equity 95% Genworth Cover 75% Lender Retained Risk 0% • Provides Earlier Access To Homeownership… Valued Alternative To Personal Guarantee Or Down Payment • Increased Loan Volumes • Lower Risk Exposure May Assist Earnings/ Stock Price Stability (Managing Financial Statement Volatility) • Housing Affordability Without Government Subsidy • Credit Risk Insurance Provided To Mortgage Lenders Only • Portfolio Or New Production Flow Can Be Insured • Policy Terms Co-Drafted Upfront To Suit Insured… Delegated Insurance… 2 Hour Referral Underwrite For Exceptions In Most Markets • Flexible Payment Options – Lender Or Borrower Paid: • Through Interest Rate & Paid To GNW • Capitalised In Loan & Paid To GNW As Single Premium Upfront… Other Options Available • Rapid Claims Payment… ~15 Days In Most Markets MI Reduces Risk & Capital For Lenders

10. MI Exposure Loan Amount Lender Exposure Flat Cover • Lender Exposure Declines as Loan Amortizes • Constant $ MI Cover • Most Comprehensive Coverage Years After Origination Loan Amount Proportional Cover • Lender Exposure Declines at a Constant Proportion of Loan Amortization • Constant % MI Cover Years After Origination Loan Amount Declining Cover • MI Exposure Declines as Loan Amortizes • Only Lender Exposure Remains After Loan Amortizes Beyond MI Cover Level Years After Origination Mortgage Insurance – Coverage Options Rating Agency credit for MI correlates with coverage structure and depth!

11. CRMs Under the CRD – Highlights Insurance products mentioned only twice in the CRD…..but recognition possible if CRD requirements met. Final CRM’s economic effect more important than CRM category …..ensuring long term flexibility. RSA more prescriptive than AIRB regarding characteristics of the guarantor and CRM requirements. AIRB banks will enjoy more flexibility…. but benefits will be limited during transition period. MI generally compared to a guarantee… but key differences exist. New CRD provisions address issues relating to CRM applied to collateralised assets…….emphasising the role of the mortgage collateral

12. Credit Risk Mitigation - RSA Risk Weighting [RSA] General Principles • The Guaranteed Exposure Should Not Attract A Risk Weighting Lower Than That Of Direct Exposure To The Guarantor. • Counterparty Credit Rating: At Least A- • Guarantees Shall Be • Direct • Explicit • Irrevocable • Unconditional. • Claims Shall Be Paid Within Max 24 Months From Default • Proportional Recognition Of Credit Risk Transfer Benefits • Substitution Approach Used = Counterparty Risk Weight Is Applied To The Portion Of The Mortgage Loan Covered By MI • MI Not Explicitly Recognized CRM But Falls Within The Broad Definition Of Unfunded Credit Protection Application Of the Substitution Principle Loan: €100K LTV: 95% Without MI With MI 5% 20% 75% RW AA MI 20% RW 75% 35% RW Loan Capital Requirements W/O MI: [2.8 % * 75]+[6% *20] = [€2.1K + €1.2K]= €3.3K With MI: [2.8% * 75] + [1.6%*20] = [€2.1K+€0.3K] = €2.4K Rated MI Eligible As CRM Under Basel II … Deeper Cover Encouraged

13. Calculating The Benefits of MI - RSA

14. Credit Risk Mitigation A-IRB A Valid Guarantee Counterparty Credit Rating Coverage Depth Capital Relief • Evidenced In Writing • Non -Cancellable • In Force • Legally Enforceable • Conditional Guarantee Eligible No A- Minimum Counterparty Position Management • Ability/Willingness To Pay • Concentration Limits Counterparty Details Must Be Disclosed To Regulator, Investors And Stakeholders Integral Part Of Risk Management System Assessment Non Proportional Recognition Of the Credit Risk Transfer Benefits Determination Based On LGD Reduction Recognition of all unfunded CRM products provided over retail exposures is limited by the restrictions on the recognition of double default effects in this area Likely To Generate Demand For Customized Coverage Options Credit Derivative Competition More Individualized Impact Highest On Riskiest Exposures MI Cannot Reduce Capital To 0%…10% LGD Floor In Transition Period Rated MI Eligible As CRM Under Basel II … Deeper Cover Encouraged

15. CRD & Mortgage Credit: RSA vs A-IRB UK Example: MI Cover Down To 70% LTV 80% (*) GNW Estimates Based On Basel Formula Using Fitch Default Model IRB (No MI) 70% IRB (With MI) RSA 60% 50% 40% Risk Weights 30% 20% 10% 0% >65  70 >70  75 >75  80 >80  90 >90  95 >95  100 Loan To Value % • IRB Capital Greater Than RSA Capital For >80% LTV… RSA Banks Will Have Significant Competitive Advantage Over IRB Banks, On Loans >80% • MI Gives Greater Capital Reduction For IRB CRD Possible Source Of Inconsistencies With Main Basel II Goals

16. Pillar I: Implications A-IRB Credit Risk / IRBA: Increased Flexibility • More Flexible Roll Out (Partial-Use Issue Under CRD) • Recognition of Data Limitation, Asset Classes And Business Units Issues • Increased National Discretion • More Flexible Minimum Requirements • Recognition Of Different Internal Organisation & Environment Advantages Drawbacks For Banks For Supervisors For Banks For Supervisors • < costs Implementation • Promote internal Model Development • Facilitate Access to Advanced Approaches • Suit for National Specificities • Suit For Banks Specificities • > Complexity for Internationally Active Banks • > Competitive Issue • > Complexity for Cross Border Supervision, Pillar II Implementation and Model Validation > Flexibility Likely To Undermine Level Playing Field

17. Risk Weighting For Res. Mortgages Basel I 50% Basel II RSA 35% Basel II A-IRB ~13% * Basel II Implications Release Approx. 75% Of Equity Reduce Incentive For Securitisation As Tool For Capital Relief More Business Expectedly Held On Balance Sheet But – Any Equity Release Will Enable Multiple Of New Business Compared To Basel I Basel II: Implications For Mortgage Funding Capital Relief Less Vital... Best Execution To Decide RMBS: “AAA-Tranche-Only” • Lower Rated Tranches Potentially Issued But Retained By Lender Or… Covered Bonds – The New Model? • Funding Motifs Stronger Than Capital Relief • Cheapest Funding Instrument • Remains Privileged Asset In Europe (Banks, Asset Managers, Insurance Companies) • Market Expects Mix Of Both • Different Investors • Diversification Of Funding Sources • Opportunistic, Depending on Market Conditions * Figures: Following Morgan Stanley European Covered Bond Outlook November 05; Assuming PD Of 1%, LGD Of 10% And Strong Originator

18. Rating Agencies, Regulators & Capital Markets • Both Fitch and Moody’s have published MI criteria papers explicitly confirming the value of MI in determining credit enhancement levels in RMBS securitizations**. • To date, S&P has not published specific MI criteria though it does recognize the benefit MI provides in a securitization. • Basle 2 Compliant • FSA UK explicitly recognizes MI as a Credit Risk Mitigant • Genworth & AIG-United Guaranty expect MI recognition throughout the European markets for purposes of bank capital adequacy • The cost of issuing RMBS (credit enhancement) is directly dependent on rating agency loss assumptions **Fitch Ratings: "European Criteria for Mortgage Insurance in RMBS Transactions", April 18, 2006 and Moody's: "Mortgage Insurance in EMEA RMBS Transaction: Potential Advantages and Analytical Considerations of Partially Insured Transactions", June 1, 2006.

19. RMBS As A Structured Finance Building Block, AA MI Adds Significant Value Based on Fitch Criteria for EMEA With Coverage Down To 80% LTV • Especially Effective In Equity And Mezzanine Tranches • Enhances Execution and Increases Profitability of Cash Securitisation Program • Deeper Cover Provides Up To 65% Reduction In Credit Enhancement • Reduces Reserve Fund Requirements and Increases Probability of Recovery if MI Takes First Loss Position And The Benefit Increases As The Coverage Deepens… A Valuable Borrower – Paid Benefit

20. Rating Agency Methodology and MI Credit • Rating agencies determine a default frequency (DF) and loss severity (LS) for each loan in a pool. • Loss severity is directly tied to expectations of Market Value Decline (MVD) following foreclosure • Expected Loss (loss coverage) is a function of DF and LS. • Rated MI lowers the loss severity and thus, expected loss. • Rating Agencies* determine MI credit by calculating Loss Severity taking into account the following: • Depth and Type of coverage; Strength of the master policy (exclusions) • The MI Provider’s historical track record in paying/declining claims and MI Provider’s operational strength (Fitch ORQ**) • The MI Provider’s total risk exposure to the given mortgage market (Moody’s) • Rating of the MI provider relative to the bonds being rated * Moody’s Report describes the credit given to MI in a completely qualitative way and therefore estimating –quantitatively – the credit Moody’s will give to MI is not possible. ** Operational risk and quality adjustment