1. Weiss Ratings, Inc. A View of the Life and Health Insurance Industry

2. Who is Weiss Ratings? How Does Weiss Rate Life and Health Insurers? How Rating Agencies Differ The State of the L&H Insurance Industry L&H on the Horizon

3. The Weiss Ratings Philosophy Develops ratings from the viewpoint of the consumer Accepts no compensation from the companies for issuing ratings Provides companies no advance preview of rating Does not give companies the right to suppress publication of rating

4. Rating Methodology Capitalization Risk-Adjusted Capital The amount of capital an insurer should have based on the risks it takes with its asset portfolio, underwriting practices, credit arrangements, and general business activity

5. Rating Methodology Profitability Measures insurer’s ability to generate sufficient income to cover its expenses and contribute to its capital base. Primary Factors: Impact of operating results on surplus Consistency of operating results Gain or loss on operations by lines of business Expenses in relation to industry averages Adequacy of investment income

6. Rating Methodology Investment Safety Measures the exposure of an insurer’s investment portfolio to a loss of principal and/or income due to default and market risks. Primarily measures exposure to: Bond and mortgage defaults Market value declines Changes in interest rates

7. Rating Methodology Liquidity Scenario testing, if claims experience in the coming year is as bad as the worst single year’s experience, in the last five, would the insurer have sufficient cash flow to cover claims?

8. Rating Methodology Stability Measures factors that affect consistency (or the lack thereof) in maintaining financial strength over time. Primary factors: Relationship with holding companies and affiliates and potential impact on financial health Prior capitalization and liquidity test results Risk diversification Cash flow history Growth in premiums or assets that exceed industry norms Substantial shifts in the insurer’s operations Deterioration of operations as reported in critical asset, liability, income, or expense items

9. Comparison of Insurance Company Rating Agency Scales WeissBestS&PMoody’sD&P A+,A,A-A++,A+AAAAaaAAA B+,B,B-A,A-AA+,AA,AA-Aa1,Aa2,Aa3AA+,AA,AA- C+,C,C-B++,B+A+,A,A- BBB+,BBB,BBB- A1,A2,A3 Baa1,Baa2,Baa3 A+,A,A- BBB+,BBB,BBB- D+,D,D-B,B- C++,C+,C,C- BB+,BB,BB- B+,B,B- Ba1,Ba2,Ba3 B1,B2,B3 BB+,BB,BB- B+,B, B- E+,E,E- F D E,F CCC R Caa,Ca,CCCC+,CCC,CCC- DD Source: U.S. General Accounting Office

10. Weiss and Best Rating Distributions

11. Industry Trend in Profitability for L&H Insurers ( $Billions)

12. L&H Company Failures

13. Weiss L&H Rating Distribution

14. On the Horizon Challenges of developing products to meet the needs of the retiring baby boomers Affect of improving mortality rates on annuity pricing Investors burned by the market seeking safer products but still want to profit on the upside Well-capitalized industry poised to take advantage of a rebounding economy