Investment Analyst Views CIA General Meeting Chicago, Illinois October 19, 2006

Veritas Investment Research Independent Unbiased Research Rooted in Forensic Accounting Based on Business Fundamentals Long-term Investment Horizon

What do investors want to do? Measure earnings Evaluate risk Value the company Evaluate how well management is investing the company’s capital

What tools do investors have? GAAP F/S Source of Earnings disclosures Embedded Value disclosures Notes to the F/S and MD&A, e.g.: CALM disclosures Reserve movements Fair values

What the Street does Forecasting earnings by segment Key drivers appear to be: Premium growth Net Income margin Forecasts are then used to plug into: Forward P:E analysis Forward P:BV analysis

Relative Price : Earnings Source: BMO Nesbitt Burns

Price : Book Regression

Why we don’t use these techniques The market doesn’t need a 15th EPS estimate Target P:E multiples are difficult to justify theoretically ROE regressions should be a means, not an end Short term forecasts are inherently fraught with danger Cause & effect (Dis)connect between market events and GAAP earnings

Veritas approach to life insurance Profitability is driven by two key components: Did the Lifeco sell profitable new business? Existing book of business – did the LifeCo manage better or worse than model ?

SOE: Earnings Quality Concerns? Source of Earnings, Common Size Q1-F06 Source: Company reports and Veritas calculations.

SOE - Returns on Surplus Return on Assets Backing Surplus*, Source: Company reports and Veritas calculations * Simple average of opening and closing balances

SOE - “Core earnings”

How is shareholders’ money invested? Assets Backing Capital Asset Mix Supporting Capital (and Other Liabilities) – Dec. 31, 2005 Source: Company reports, Veritas calculations Includes non-policy liabilities and shareholders' equity ** Includes shareholders' equity, long-term debt, liabilities for preferred shares and capital instruments and non- controlling interest in subsidiaries

Allowances for future credit losses Key takeaways Dollar amounts are much more significant than impaired loans MFC has been reducing its reserve GWO carries a lower reserve Source: Company reports and Veritas calculations. IAG does not disclose this figure. Note: Amounts in millions of Canadian dollars

The Whole Portfolio Invested Asset Composition, Q4-F04 vs. Q1-F06

Bonds Only Bond Portfolio Composition, Q4-F04 vs. Q1-F06

Policy Liabilities - the Rollforward Difficult to glean useful information Source: MFC 2005 annual report MFC Policy Liability Rollforward, 2005 (Amounts in millions of Canadian dollars)

Assumption changes – MFC 2005

EV Valuation MFC share price, EV/share, BV/share

P:EV Multiples

VNB Multiples (Implied)

Implied VNB Growth Discount RateMFCSLF Price$36.06$ %0.96%0.99% 9.00%1.46%1.49% 9.50%1.96%1.99%

VNB / Share Growth

SLF EV Growth Analysis VNB growth rates are not all that affect EV growth The market discounts for EV adjustments – the risk inherent in managing the existing book of business

EV Adjustments Note: circles are annual summary; squares are individual components MFC - black SLF - white

Investment Thesis

VNB / Share Growth V-LIST BUY Target: $43.50

Directly Forecasting EV Supplement with high level EV forecast: Opening EV + EV Accretion + Value of New Business -Capital Returned to Shareholders Closing EV

3855: What’s My Number? Vanishing earnings Balance sheet volatility Gains / losses on assets backing surplus

3855: Vanishing Earnings Forecasted EPS is affected Therefore, forecasted valuation is affected for those using P:E approach BV will increase – how does this affect those using P:BV regression? Does the change adversely affect management decisions?

3855: Balance Sheet Volatility Assets backing surplus will be marked to market – GOOD! Assets backing liabilities will be marked to market – Not so good. Analysts taking a wait and see approach

3855: Gains on Assets Backing Surplus What is the “right” level? Accounting is similar to banks’ for Investment Securities Operating earnings / Core earnings Analysts taking a wait and see approach

3855: New Disclosures, Please! Fair value of assets backing surplus, by asset class Gains recognized in earnings & OCI separately, by asset class Liability rollforward by quarter, separately showing effect of asset valuation

Other Requested Disclosures PfADs, reserve details VNB / segment SOE / segment Experience gains or losses by type Sensitivity to interest rates / equity markets

Questions and Answers

LifeCo Fair Values - Example Fair Value of Assets Backing Equity, as at December 31, 2005 (Amounts in billions of Canadian dollars) Source: Company reports and Veritas calculations. * Includes goodwill and intangibles.