1. PD-23 Guaranteed Minimum Withdrawal Benefits 2009 Annual Meeting Assemblée annuelle 2009 2009 Annual Meeting Assemblée annuelle 2009 Presented by: Pierre Vincent Friday June 26, 2009 9:30am – 10:45am

2. Key features of GMWB products A segregated fund product that offers some or all of the following features: Income Benefit Guarantees – Income for specified period / life – Income bonuses – Resets (automatic / client initiated) – RRIFs – Spousal benefit Death Benefit Guarantees – 75%, 100% or more of deposit – Resets (automatic / client initiated) Deposit / Contract Maturity Guarantees – 75%, 100% or more of deposit after 10 (or more) years – Resets 2009 Annual Meeting Assemblée annuelle 2009 2009 Annual Meeting Assemblée annuelle 2009

3. Key features of GMWB products A segregated fund product that offers some or all of the following features: Deposit flexibility – Maximum Age – Minimum & maximum deposit – Deposit/redeposit restrictions – Minimum age to start taking withdrawals Investment options – Maximum equity percentage allowed – Policyholder’s ability to select Company’s ability to change – Fees – Features – Fund selection 2009 Annual Meeting Assemblée annuelle 2009 2009 Annual Meeting Assemblée annuelle 2009

4. Key risks to consider Equity market returns and volatility Interest rate Longevity / mortality Lapse Currency Regulatory Market conduct Sales distribution – Age – Sex – Registration status – By fund – Multiple contracts Advisor behavior Policyholder behavior – Timing of deposits to maximize bonuses – Re-deposits – Lapse behavior – Withdrawal behavior 2009 Annual Meeting Assemblée annuelle 2009 2009 Annual Meeting Assemblée annuelle 2009

5. Understanding the various risks Modeling is key to understand and quantify the various risks: Projection of revenue, benefits, reserves and capital is complex Market assumptions – Real world – Market consistent – Real world assumptions with cost of hedging Scenario generation – Number of scenarios – Parameters – Fitting investment selection to scenarios – Different scenarios for cash flow projections, reserve and capital? Non market assumptions – Relevant experience Inclusion of policyholder behavior – Related to each scenario Interpreting the results 2009 Annual Meeting Assemblée annuelle 2009 2009 Annual Meeting Assemblée annuelle 2009

6. Understanding the various risks Diversifiable risk? – Mortality – Lapse – Equity – Interest rate – Currency Controllable risk? – Product design – Management action 2009 Annual Meeting Assemblée annuelle 2009 2009 Annual Meeting Assemblée annuelle 2009

7. Appetite for risk Determine risk tolerance – Impact on capital and reserves – Risk limit – Risk / reward Options: – Keep risk – Manage / hedge risk – Reinsure Considerations: – Impact – Cost – Availability – Effectiveness – Knowledge/expertise 2009 Annual Meeting Assemblée annuelle 2009 2009 Annual Meeting Assemblée annuelle 2009

8. Capital management Keep risk: – Impact on reserves and capital can be severe – Ability to raise capital in adverse scenarios Reinsure risk: – Ability to get capital credit – Predictability of income – Counter-party risk Hedge risk: – Long term instruments are not effective due to multitude of product options – Dynamic hedging is required to hedge risk – Difficult to get capital credit for GMWB products based on current rules – High cost of hedging and low capital credit – Predictability of income What is the solution? 2009 Annual Meeting Assemblée annuelle 2009 2009 Annual Meeting Assemblée annuelle 2009

9. Changes can occur quickly Sample cost of hedging of a balanced fund: Q2 2008: 1.3% Q4 2008: 3.4% How should insurance companies react? 2009 Annual Meeting Assemblée annuelle 2009 2009 Annual Meeting Assemblée annuelle 2009