CIA Annual Meeting LOOKING BACK…focused on the future

Session 1204 Group Sources of Earnings LOOKING BACK…focused on the future Principles of SOE Consistent with way business is managed Identifies fundamental drivers Comparable with other companies Comparable with other business units Sustainable vs. unsustainable earnings Principles of SOE Consistent with way business is managed Identifies fundamental drivers Comparable with other companies Comparable with other business units Sustainable vs. unsustainable earnings

Session 1204 Group Sources of Earnings LOOKING BACK…focused on the future Differences in interpretation Benefit (Life/LTD vs. Health/Dental) Risk sharing arrangements (pooled vs. refund accounted vs. ASO) Previous analysis Differences in interpretation Benefit (Life/LTD vs. Health/Dental) Risk sharing arrangements (pooled vs. refund accounted vs. ASO) Previous analysis

Session 1204 Group Sources of Earnings LOOKING BACK…focused on the future Methodology used Pricing earnings by source: Claims (underwriting) gain Expense gain Investment gain Actual dollars Methodology used Pricing earnings by source: Claims (underwriting) gain Expense gain Investment gain Actual dollars

Session 1204 Group Sources of Earnings LOOKING BACK…focused on the future OSFI SOE: Expected profit Underwriting gain Expense gain Investment spread Impact of new business- assumed as 0. Experience gains Variances of pricing underwriting, expense and investment gain from expected OSFI SOE: Expected profit Underwriting gain Expense gain Investment spread Impact of new business- assumed as 0. Experience gains Variances of pricing underwriting, expense and investment gain from expected

Session 1204 Group Sources of Earnings LOOKING BACK…focused on the future Changes in assumptions Income on Surplus Taxes Changes in assumptions Income on Surplus Taxes

Session 1204 Group Sources of Earnings LOOKING BACK…focused on the future True Group sources of earnings: ASO: Expense Gain Investment Gain Margins on pooling charges Life: Expense Gain Margins in premium for claims gain PfAD’s in reserves Investment gain Deficit recovery surcharges Margins on pooling charges for refund accounted clients Differences between client reporting and statutory reserves True Group sources of earnings: ASO: Expense Gain Investment Gain Margins on pooling charges Life: Expense Gain Margins in premium for claims gain PfAD’s in reserves Investment gain Deficit recovery surcharges Margins on pooling charges for refund accounted clients Differences between client reporting and statutory reserves

Session 1204 Group Sources of Earnings LOOKING BACK…focused on the future True Group sources of earnings: Health/Dental: Expense Gain Margins in premium for claims gain PfAD’s in reserves Investment gain Deficit recovery surcharges Margins on pooling charges for refund accounted clients Margins in trend factors True Group sources of earnings: Health/Dental: Expense Gain Margins in premium for claims gain PfAD’s in reserves Investment gain Deficit recovery surcharges Margins on pooling charges for refund accounted clients Margins in trend factors

Session 1204 Group Sources of Earnings LOOKING BACK…focused on the future True Group sources of earnings: LTD: Expense Gain Incidence Terminations Offsets PfAD’s in reserves Investment gain Deficit recovery surcharges Margins on pooling charges for refund accounted clients Differences between client reporting and statutory reserve assumptions. True Group sources of earnings: LTD: Expense Gain Incidence Terminations Offsets PfAD’s in reserves Investment gain Deficit recovery surcharges Margins on pooling charges for refund accounted clients Differences between client reporting and statutory reserve assumptions.

Session 1204 Group Sources of Earnings LOOKING BACK…focused on the future Conclusions: New SOE note has addressed many group issues, thus increasing understanding New SOE will contribute to embedded value analysis SOE is high level, need to drive deeper to understand business. Conclusions: New SOE note has addressed many group issues, thus increasing understanding New SOE will contribute to embedded value analysis SOE is high level, need to drive deeper to understand business.