1. Presented By Mark Puccia Managing Director Ratings Of Insurance Companies World Bank Institute Contractual Savings Conference Contractual Savings Conference

2. What are Insurer Ratings? How does Standard & Poor's produce ratings? Who uses Insurer Ratings and why? Who is Standard & Poor's ? What are Insurer Ratings? How does Standard & Poor's produce ratings? Who uses Insurer Ratings and why? Who is Standard & Poor's ?

3. Who is Standard & Poor's ? Who is Standard & Poor's ? Standard & Poor's Insurance Ratings Standard & Poor's Insurance Ratings... the global leader in Insurance Ratings...

4. Who is Standard & Poor's ? We currently rate approximately 4,000 companies 4,000 companies in over 70 countries, in over 70 countries, across all sectors of the market... across all sectors of the market...

5. Who is Standard & Poor's ? Our Purpose and Mission: " To help people around the world make well-informed financial decisions by providing impartial, value-added analytically driven SOLUTIONS.“ Our commitment to our customers is based on : Analytic Excellence Independence and Impartiality Integrity

6. What are Standard & Poor's Insurer Ratings? Our ratings are: prospective evaluations of an insurer's financial security to its policyholders.

7. The Insurer Itself Who uses Standard & Poor's Insurer Ratings and WHY? Buyers of Insurance - To ensure they purchase coverage from an insurer that can meet it's claims. Brokers / Agents - To ensure they meet professional "due diligence" and disclosure requirements. Investors and Banks - To support their credit evaluations. Regulators - For effective monitoring.

8. Standard & Poor's Recognition In The Market  Standard & Poor’s recognition in the market ultimately depends upon the credibility of our opinions  It is important that the users of our ratings understand how we arrive at our opinions  We regularly publish our rating definitions and detailed reports on criteria

9. What are Standard & Poor's Insurer Ratings? "Interactive Ratings" - with the full cooperation of the insurer. "Public Information Ratings" - based primarily on information in the public domain. Standard & Poor's InsuranceRatings Standard & Poor's Insurance Ratings produces two types of ratings:

10. What are Standard & Poor's Insurer Ratings? Interactive Ratings:  Requested by an insurer recognizing the global market-value of such a rating.  Process requires in-depth meetings with insurer's management.

11. What are Standard & Poor's Insurer Ratings? Public Information Ratings: Based largely on public financial accounts.

12. What are Standard & Poor's Insurer Ratings? Standard & Poor's insurer ratings are divided into two broad categories: Secure Vulnerable

13. Secure Ratings What are Standard & Poor's Insurer Ratings?

14. Vulnerable Ratings: What are Standard & Poor's Insurer Ratings?

15. Default Rates Percent CCC B BB BBB A AA AAA SecureVulnerable What are Standard & Poor's Insurer Ratings?

16. Rating Distribution Percent SecureVulnerable What are Standard & Poor's Insurer Ratings?

17. How Does Standard & Poor's Produce Ratings?

18. Overview Of S&P Ratings The Standard & Poor’s Analysis Is A Comprehensive Process That Considers The Following Factors Before Assigning A Rating To An Insurer: 1. Management & Corporate Strategy 2. Business Review 3. Operating Performance 4. Capital Adequacy & Reserve Adequacy 5. Catastrophe Risk Analysis,Reinsurance, Securitization 6. Investment Analysis 7. Liquidity Analysis 8. Holding Company Analysis Tailored To Each Industry / Sector / Region

19. Management & Corporate Strategy And Evaluating Risk Management The Effects Of Past, Present And Future Strategies  Strategic Positioning  Operational Skill  Financial Risk Tolerance and Risk Management Skills

20. Business Review The Overall Health And Standing Of The Company In The Areas Of:  Competitive Strengths/Weaknesses  Distribution Channels  Organization Structure  Diversification  Growth Rates  Market Share  Products Offered In Relation To Market Demand

21. Operating Performance  Risk-Adjusted Earnings Adequacy  Underwriting Performance & Expense Efficiency  ROA, ROR, ROE A Look Behind The Bottom Line:

22. Operational Analysis Return On Assets (ROA) Identifies The Degree To Which The Company Is Able To Earn A Spread On Asset Accumulation Business Return On Revenue (ROR) Identifies The Degree To Which The Company Is Able To Convert The Business (Revenues) Into Profits Return On Equity (ROE) Identifies The Value Relative To The Invested Capital Represented By A Company’s Profits – Its Profitability

23. Standard & Poor’s Earnings Adequacy Ratio (EAR)  A Risk-Adjusted Analysis Of A Company’s Earnings Stream, Reflecting The Insurer’s Underwriting Risks And Investment Income  Establishes Benchmarks That Reflect The Different Levels Risks Inherent In Different Lines Of Business  Evaluates Each Company On The Basis Of How Well It Performs Given Its Business Mix  Uses The Pretax ROR or ROA As Its Primary Measures  Uses The Consolidated Statutory Accounts For Property/Casualty And Consolidated GAAP For Life And Groups  The Measure Is Time Weighted To Mitigate The Effects Of Yearly Fluctuations And Industry Cyclicality

24. Investment Analysis Asset Management And Its Relationship To: Asset Allocation Portfolio Diversification Asset Credit Quality Interest Rate Risk Management Liquidity Market Risk

25. Capitalization  Operating Company Risk Based Capital  Leverage  Coverage Relationships  Double Leverage

26. Capital Adequacy & Reserve Adequacy The Management Of Capital And A Risk-Adjusted Analysis Of How It Relates To:  Asset Risks  Reserve Adequacy and Standard & Poor’s Reserving Model  Reinsurance Protection/Quality  Liability Risks (Mortality/Morbidity/Underwriting)  Interest Rate Risks  Pricing Risks  General Business Risks  Financial Leverage/Interest Coverage

27. Liquidity Analysis The Interrelationship Of Insurer’s Assets To Its Liabilities:  Sources Of Liquid Assets  Cash Demands And Liabilities  Large Contractual Maturities  Underwriting Operating Cash Flows

28. Standard & Poor’s Liquidity Model: What Is It? Standard & Poor’s Liquidity Model calculates the redundancy of a life insurer’s risk-adjusted liquid assets to it’s risk-adjusted liquid liabilities subject to scheduled and unscheduled withdrawals based on a crisis of confidence scenario

29. Holding Company Analysis The Approach Standard & Poor’s Uses To Evaluate Holding Companies:  Evaluating Management Policy  Ratios Used To Evaluate Holding Companies  Financial Leverage Ratio Guidelines  Off-balance-sheet Financing  Equity Credit For Preferred Stock And Hybrid Equity