Enterprise Risk Management Symposium

1. Enterprise Risk Management Symposium Bridging the Gap � The Difference Between What�s Needed and What�s Provided for Analysts and Investors to Assess Risk in Insurance Companies

2. 2 Eric Berg � Short Biography

3. 3 The Four Major Risks Facing Life Insurers That Analysts Don�t Get Enough Information About

4. 4 Credit Risk: Investors Are Wringing Their Hands Over the Lack Of Investment Disclosure By Some Insurers

5. 5 Useful Additional Investment Detail Investors Are Seeking Top ten investment holdings Any specific exposure above a certain percentage of total invested assets that would indicate that an insurer has exposure to that issuer Upgrades and downgrades in the quarter Definition and size of the company�s watch list Fair Value versus Market Value by industry Holdings of troubled companies making headlines

6. 6 The Risk of Products with Embedded Guarantees The problem: while some companies such as Manulife, Nationwide, and Hartford Financial disclose info such as net amount-at-risk for GMBDs, DAC stats, and actuarial liabilities for variable products, assumptions regarding reserves are nowhere to be found. The Wall Street community needs to know whether a company is using a deterministic or stochastic modeling system. And if the company is using a stochastic modeling system, which path is ultimately chosen to set reserves.

7. 7 Guarantee Risks: What We�d Like to See in the Company Presentations Analysts are looking for the breakdown of customer investment choices. Specifically, disclosures about the percentage of guaranteed policies that are in-the-money (from the customer�s perspective) and have assets invested in money market funds would be of enormous help in analyzing the adequacy of reserves. Details about the frequency of annuitization and mortality assumptions would also be useful. Company management�s attitude that since investors won�t fully understand the actuarial assumptions it�s better to leave them out entirely must be revisited. The bottom line: The more disclosure, the better.

8. 8 Interest-Rate Risk: Very Little Given to Investors Nationwide Financial and Jefferson Pilot are among the companies that disclose crediting spread data on a quarterly basis. But that�s about all the disclosure currently being provided. Source: Nationwide Financial 1Q03 Statistical Supplement Where is the discussion on crediting rates? Where is the disclosure regarding company exposure to surrenders? Where is the data on convexity � the risk of exposure to prepayment and extension risk on residential MBS? Investors are keen for more disclosure around asset-liability matching and how companies use derivatives to hedge credit losses, losses from interest-rate changes, as well as capital guarantees.

9. 9 Manulife on Interest Rate Risk: Should Its Comments be Taken At Face Value?

10. 10 Enterprise Risk Management: Much Ado But Nothing Companies talk about enterprise risk management all the time. Specifically, American International Group is one of a number of firms that include an annual Value at Risk (VaR) chart in their 10-K� � But that�s all Wall Street gets � a lot a talk and a couple of charts once a year. If a company has a Chief Risk Officer, it would incredibly helpful for this individual to have a better discourse with analysts on Wall Street. As of now, CRO�s are, for the most part, virtually locked up, holed away far from the rest of their senior management peers who make the regular appearances at company events. Example: While Manulife�s Bev Margolian is one of the few CRO�s that makes a regular appearance in front of the investment community, she was silent when the company went to tremendous lengths on its 2nd quarter conference call, talking about how its U.S. results were hindered due to the deterioration of the dollar relative to the loonie in the June quarter. We would have liked to have heard from Ms. Margolian as to how her department handles such FX risk.