1. INT401 SURETY BONDS SOUTH OF THE BORDER

2. Presented by: Chad Rosenberg Principal Rosenberg & Parker Carlos Pliego Partner & Surety Vice President Intertec Karen Vogler, ARM Senior Risk Analyst Sun Microsystems, Inc.

3. Rosenberg – U.S. Broker’s Perspective –U.S. Market Comparison –U.S. Companies with Mexican Surety Needs –Need for Local Presence Pliego – Mexican Broker’s Perspective –Laws, Rules & Regulations –Mexican Markets –Owner Directed Surety – Mexican Perspective Vogler – U.S. Risk Manager’s Perspective –Sun’s Bonding Requirements –Previous Surety Process –Current Surety Process Preview

4. U.S. Broker’s Perspective Chad Rosenberg Principal Rosenberg & Parker

5. Outline Overview U.S. Surety Market U.S. Companies with Mexican Bond Needs Types of Bonds Required U.S. Sureties Operating in Mexico Need for Local Presence

6. A Bond is NOT Insurance 1.Three Parties Obligee Principal Surety 2.No Losses 3.Indemnity 4.Rate

7. U.S. Surety Market $4 Billion Premiums 100% Obligations Owner Directed Surety Rates Typically 0.5% - 2.5% Premiums Paid to Broker Broker Compensation Fee or Commission Licensed at State Level

8. U.S. Companies with Mexican Bond Needs Pharmaceutical Construction Manufacturing Technology Service

9. Types of Bonds Needed Bid Performance Maintenance Penalties Tax Appeal Court Customs Lease Bond

10. U.S. Sureties Operating in Mexico Surety Must Have License in Mexico Sureties Willing to Write Bonds in Mexico Through Fronting Companies –ACE –AIG –CNA –Travelers –Liberty Mutual Rates and Fronting Fees

11. Need for Local Presence in Mexico Bond Forms Language Barrier Laws Customs & Practices Local Relationships Credibility Collateral Requirements

12. Mexican Broker’s Perspective Carlos Pliego Partner & Surety Vice President Intertec

13. Outline Laws, Rules & Regulations Mexican Markets –Number of Sureties –Industry Restructuring –Current Developments –Market Share –Annual Profits –Progress –Local Capacity Guarantees Types of Bonds Owner Directed Surety

14. Laws, Rules & Regulations Ministry of Finances and Public Credit IRS (Regulation) Federal License: Individuals Corporations Federal Law of Bonding Institutions National Commission of Insurance & Surety (Supervision)

15. Number of Mexican Sureties YearSureties% 200712*57 199521100 199116 198614 *Excludes Sureties specializing in Fidelity; another focused on Trusts.

16. Industry Restructuring Half of the Sureties Exited Business Rules Changed: –Underwriting Regulations Reserves Rules “ω Factors” –36 Months Liabilities in Force vs. Claims Ratio Credit Bureau Consult Money Laundering Prevention

17. Current Developments Mapfre Surety Afianzadora Insurgentes -- Former St. Paul Travelers’ Acquired Back by its Former Mexican Holders Electronic Bond

18. Mexican Markets Market Share US $ Millions 2006 Source: Afianza

19. Mexican Markets Annual Profit (in $US Millions) 2006 Source: Afianza

20. Mexican Markets Annual Profit as a Percentage of Retained Premiums 2006 Source: Afianza 89% 86% 63% 40% 27% 16% 13%12%

21. Progress Premium  11% ‘06  12% ‘07  Private Market Expansion Annual Profit  312% ’06  20% ‘07

22. Mexican Local Aggregate Capacity Total Market: US $400 Million Premium Per Bond: US $69 Million Per Principal: US $300 Million

23. Guarantees Indemnity Agreement –Rating Fronting Collateral –Cash Deposit –Stand By L/C –Up to 100%

24. Mexican Markets Type of Bonds Premium in US $ Millions 2006

25. Types of Bonds Construction & Commercial Premium is Paid to the Order of the Surety BondStandard Bonded Amount Market Annual Rate on Bond Amount Bid10-20% on offer0.30% Advance Payment100% on payment1.20% Performance10-20% on Contract1.20% Maintenance10-20% on Contract1.20% Penalties10-20% on Contract1.20% Tax Appeal100% on Tax2 to 4 %

26. Owner Directed Surety Legally Nationwide for Private Industry Suppliers, Contractors & Subcontractors Single Bonds or Global Benefits –Rate –Bond Language –Claims Procedure –Bonds Termination

27. Owner Directed Surety OWNER – INTERTEC Bonding Agreement Contractors & Suppliers Contact INTERTEC INTERTEC Integrates files, executes Bond. Monthly Report Releases or Claims Bond Cancellation / Claim Surety

28. A U.S. Risk Manager's Perspective: Sun Microsystems' Mexican Bond Experience Karen Vogler, ARM Sr. Risk Analyst Sun Microsystems, Inc.

29. Outline Worldwide Surety Bond Distribution for Sun Surety Requirements Mexican Surety Process Prior to 2006 Issues with Prior Surety Program Objectives Current Mexican Surety Program Results

30. Surety Requirements - US vs. Mexico US Bonds: –Bid Bonds – 5% - 20% –Performance/Contract – 100% –Court/Appeals – 100% –Customs – 100% –Workers' Comp/Disability – 100% –Sales Tax Bonds – 100% –Permit Bonds – 100% Mexico Bonds: –Performance/Contract – 10%

31. Mexico Surety Process Prior to 2006 Company’s Mexico Finance Manager Risk Management Department U.S. Surety Broker Surety’s Mexican Affiliate U.S. Surety Home Office Company’s Mexico Finance Manager

32. Issues with Prior Surety Programs 1.Turnaround Time 2.Contract Translation 3.Time Zones 4.Points of Contact 5.Language and Cultural 6.Costs & Complexity

33. Objectives Business Opportunities Cannot Be Lost Leverage Local Relationships and Expertise Minimize the Number of Touch Points on Each Bond Contain and Minimize Costs

34. Current Mexico Surety Program Company’s Mexico Finance Manager Mexico Surety Broker Support by: U.S. Surety Broker & Risk Management Mexico Surety Company

35. Results Business Transacted More Efficiently Local Relationships have been Forged Communication Path is Well-Defined Bonds are Procured in a Matter of Hours Costs have been Reduced

36. Wrap Up 1.Dealing with a Mexican Broker has Simplified Process 2.Mexican Broker Understands Local Laws & Customs 3.Using a Mexican Broker Can Expedite Bond Process and Create Cost Savings

37. Questions & Answers

38. Karen Vogler Karen.Vogler@Sun.com Carlos Pliego cpliego@intertec.com.mx Chad Rosenberg crose@suretybond.com