07 Washington RobinsonWellnitz 76

Capital Market Solutions
SOA Annual Meeting, Session 76
Steven Schreiber New York Office
Structured Insurance Solutions Types of Solutions

Embedded Value debt financing against future predictable cashflows
Redundant reserve financing (XXX / AXXX) Closed books of business (closed blocks, admin re) Acquisition financing
Extreme mortality risk transfer pandemic bonds
Life Insurance Securitization Transactions

XXX Catastrophe Embedded Value AXXX
Swiss Re
Swiss Re
AXA Swiss Re
Scottish Re Swiss Re Prudential MONY Forethought Forethought UnumProvident Swiss Re Scottish Re Scottish Re Genworth Genworth Genworth Genworth RGA
Protective
Banner Life Genworth Scottish Re
Banner Life
2000
2001
2002
2003
2004
2005
2006
2007
2008
Capital Market Solutions

For both Life and P&C, out-of-the-money insurance risk can be transferred to the capital markets
Liability Value Capital Structure
Catastrophic Deviation from Economic Reserve
Debt Financing
Moderate Deviation from Economic Reserve Normal Deviation from Economic Reserve Economic Reserve
Source: Lehman Brothers
Mezzanine Financing/Preferred Equity Financing Equity Financing (Economic Capital) Self-Financing
Structured Insurance Solutions Providers of Capital

Capital market investors Private placement transactions with bank financing (e.g., Protective, Prudential, Aegon, Scottish Re) Contingent-funded long-dated LOCs Short-term Bank facilities (e.g., HSBC Scottish Re) Warehouses -- store business until block is large enough for full securitization
Speakers
Bill Wellnitz TA Re Sean Nossel JP Morgan Chase Scott Robinson Moodys
Reinsurance Solutions
Knowledge. Experience. Performance.
THE POWER OF INSIGHT.
Capital Markets Solutions Society of Actuaries - Session 76 One Companys Experience
William Wellnitz October 16, 2007
2007 Society of Actuaries Session 76
Overview
Motivation Objectives Current Status Lessons Learned Risks of Reserve Credit Collateral Programs Risk Mitigants
Motivation
2001
From our position as a top tier reinsurer, Transamerica Reinsurance could see that reliance on traditional one year Letters of Credit for reserve credit security was high risk Price Capacity Credit exposure
2003
Guideline AXXX impact on UL with no lapse guarantees exacerbated the problems with relying on traditional one year Letters of Credit
Objectives
Reduce reliance on one year LOCs to an immaterial level Develop a basket of alternative reserve credit security programs Constraints
Do not add leverage to AEGONs balance sheet
(Transamerica Reinsurance is a division of Transamerica Occidental Life, a member of the AEGON Group)
Do not impede the growth prospects for other AEGON divisions Do not cause tax, accounting or regulatory problems
Current Status
AEGON has closed 6 transactions
5 different structures $6.4 billion in collateral financing
Characteristics
Fully Funded Recourse On Balance Sheet Off Balance Sheet Non-Recourse On Balance Sheet Off Balance Sheet
Public Partially Unfunded Fully Funded
Private Partially Unfunded
Lessons Learned
The essence of a capital market structure is always the same
Insurer Reinsurer
Collateral
Capital Markets
The capital markets care about credit risk

Reinsurer Reinsurers Parent or Affiliate Third party guarantor
Non-recourse is harder largely due to credit risk
More Lessons Learned

The more parties involved, the greater the execution risk
Simplest: 2 parties Complicated: 10 parties Company, monoline, investment banker, 2 regulators, 2 rating agencies, 2 trustees, captive manager
Corollary the more advisors involved, the greater the execution risk
Simplest: No advisors Complicated: 9 advisors 4 law firms, 3 actuarial firms, underwriting consultant, accounting firm
Breaking new ground is never easy Due diligence is never fun

It is hard to successfully balance all of the accounting and regulatory constraints
Risk transfer regulations Reserve credit regulations Accounting for investment in subsidiaries Consolidation for GAAP, TAX and STAT Surplus note regulations, requirements or approvals Tax capacity Position in organization and tax groups Accounting basis Tax sharing
Taxes matter

The domicile for the reinsurance company matters
Onshore / Offshore Receptive regulatory environment Experience with transactions Ability under law to designate the accounting basis
Regulatory rules vary depending on the charter for the reinsurance company
Onshore / Off Shore Life insurance company Captive reinsurance company

The amount of and restrictions on investable assets is material to the economics of the transaction
Depends on the deal structure and parties
The rating agencies are not your friends, but can be your allies in creating a successful transaction
Its all about risk Triggers, capitalization levels, scenarios, etc. Everyone has been learning including the rating agencies Recourse vs. non-recourse
New York is a different place
Risks of Reserve Credit Collateral Programs

Execution risk Principles based reserving eliminates substantial amounts of our anticipated redundant reserves Repricing risk - costs escalate or tax benefits disappear Changes in the rating agency comfort level with a transaction type or feature Impact of changes in the Sponsors credit rating
More Risks
Balance sheet capacity Counterparty risks Constraints of solutions - name limits Public policy risk of no FIT
Risk Mitigants
Basket of solutions to diversify risk
Recourse and nonrecourse Private and public Fully and partially funded On shore and off shore
Work with people who have gotten deals closed Wherever possible, lock in costs for the full term Fully fund at inception Call/bail out provisions on longer term solutions
OCTOBER 2007
Capital Markets Solutions: A Bankers Perspective

Sean Nossel, FSA, CFA
10
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Agenda
Page
Drivers of convergence Types and uses of life insurance securitization Various solutions available for securitizing future cashflows Impact of the recent market turmoil The future of life ILS (insurance linked securities)
1 4 7 11 15
Drivers of convergence between insurance and banking

Tapping wider capital markets
Total reinsurance capital is $300-400bn worldwide. Total size of global capital markets is over $140 trillion Investors are looking for diversification opportunities Some lines of business may have few traditional reinsurance options
Banks are looking for alternative opportunities to grow revenues

Technology and infrastructure has been built for XXX/AXXX The ABS (asset backed securities) market is growing its scope
C O N V E R G E N C E
Banks are looking for non-correlated risks
Structured finance methodology may provide favorable financial opportunities

In depth analysis of a block may reveal overcapitalization or an increased capacity for debt
D R I V E R S
O F
11
ABS market
Rapid growth in the ABS market Significant concentration Other ABS is 3-5% of the total Life ILS is 0.5% of 2006 issuance
HEL 65%
2006 Total Issuance by Collateral Type

Student Equip 8% 1% MH 0% Global RMBS 6% Other 3%
Auto 9%
Cards 8%
ABS Issuance by Year (Billions USD)
2007 YTD ABS Issuance by Collateral Type

1000 900 800 700 600 500 400 300 200 100 0
C O N V E R G E N C E
Growth = 22% p.a.

702 501 272 330 402
870
884
Global RMBS 15% Other 5% Auto 11%
470
Student 8% Equip 1%
Cards 14%
D R I V E R S
O F
2000
2001
2002
2003
2004
2005
2006
YTD 2007
MH 0%
HEL 46%
Agenda
Page
1 4 7 11 15
12
Types and uses of life insurance securitization

Two broad types of insurance securitization
S E C U R I T I Z A T I O N
1.Securitization of future cashflows
Embedded value securitizations

Redundant reserve securitization is a special case XXX/AXXX is a special case of a redundant reserve securitization Optimize capital level and structure using securitization technology Obtain credit for future cashflows 2.Transferring extreme risk
Extreme mortality
Vita Capital I, 2 and 3 (Swiss Re), Tartan Capital (Scottish Re), Osiris Capital (Axa)
U S E S
O F
L I F E
I N S U R A N C E
Used to:
A N D
reduce risk concentration improve capital efficiency reduce fluctuation in earnings
T Y P E S
Example of the potential advantages of an EV securitization

Example of financial impact of an EV Securitization
RBC cover Debt OP as a % of reserves Investment income Interest on debt Tax rate Net asset value Reserves RBC Balance sheet Debt EV Debt Equity Total capital Total Leverage Ratio Financial leverage ratio D/TC Income statement Operating profit Investment income EBIT Interest EBT Tax Net income ROE Pre EVS Post EVS 350% 200% 20% 60% 0.80% 0.80% 5% 5% 6.50% 6.50% 35% 35% 100 57.1 1,000 1,000 29 29 20.0 0.0 80.0 100.0 20% 20% 8.0 5.0 13.0 1.3 11.7 4.1 7.6 9.5% 0.0 34.3 22.9 57.1 60% 0% 8.0 2.9 10.9 2.2 8.6 3.0 5.6 24.5%
Lower RBC cover Higher level of debt to total capital Higher ROE Lower financial leverage despite higher use of debt
T Y P E S
A N D
U S E S
O F
L I F E
I N S U R A N C E
S E C U R I T I Z A T I O N
13
Agenda
Page
1 4 7 11 15
C A S H F L O W S
Various solutions available for securitizing future cashflows

XXX/AXXX have most widespread solutions Full securitization and sale to ABS investors
Non-recourse to parent company
S E C U R I T I Z I N G
F U T U R E
Bilateral solutions
Recourse to parent company Funded or Unfunded
F O R
A V A I L A B L E
Funded - bank capitalizes a reinsurance captive Non-funded - Letters of credit provided by a bank Bank provides funding only in the case of a capital shortfall
Optimize the level of capital required by the bank
S O L U T I O N S
Consider regulatory capital, economic capital and GAAP capital
V A R I O U S
14
C A S H F L O W S F U T U R E
Structure - Bilateral solution and full securitization
Equity stake
Holdco
Gu ar an te e
Bank
Bilateral solution
bt De n Fi c an e
Equity stake
F O R
Ceding insurer
Quota share reinsurance
A V A I L A B L E
Special Purpose Reinsurer
Debt finance
Investors
Guarantee Eligible Investments
S O L U T I O N S
Pledge
Reg 114 Trust
Full Securitization
Financial Guarantor
V A R I O U S
C A S H F L O W S
Merits of the various solutions

Advantages Disadvantages
F U T U R E
Full Securitization Non-recourse to parent company Less flexibility Does not use operating leverage More complex to issue capacity Bilateral Solution Lower funding cost Requires a guarantee from the parent
A V A I L A B L E
More flexibility e.g. funding the Less feasible for some risks hump, future years of new business, investment policy Simplified execution Letter of credit Flexible Parent is a joint applicant
S O L U T I O N S
F O R
Less intensive analysis by rating More expensive as no investment agencies return on invested assets May be difficult to obtain long enough LOC
V A R I O U S
15
Agenda
Page
1 4 7 11 15
The current credit market What has happened?

Housing market under pressure Severe effect on subprime mortgage ABS Less impact on prime mortgage ABS
T U R M O I L
Mortgage linked securities are the majority of ABS so implication on the ABS market is major Implication on economic growth - effect on other sectors Impact on risk profile of financial guarantors Decrease in liquidity Structured investment vehicles (SIVS) which buy ABS and CDOs have had trouble funding with CP and are liquidating assets Higher spreads on all fixed income assets including ILS
I M P A C T
O F
T H E
R E C E N T
M A R K E T
16
Spreads of ABS and financial guarantors

Spreads of MBS have increased significantly Spreads on other ABS have increased to a lesser extent
T U R M O I L
US Real Estate ARM Spreads (AAA - 7 yr)

165 165 180 160 140 140 140 110 110 120 100 70 80 60 50 60 40 3030 2826262626262626 32 40 20 0
8/ 9 8/ 23 5/ 3 5/ 17 5/ 31 6/ 14 6/ 28 7/ 12 7/ 26 9/ 6 9/ 20 10 /4
Spreads of financial guarantors have widened
M A R K E T
Financial guarantor - CDS Spreads

300 250 200 150 100 50 0
50 45 40 35 30 25 20 15 10 6 5 0
Floating credit card spreads (AAA -7 year)

45 40 40
40 27 16 1212 6 6 6 6 6 7 7
T H E
R E C E N T
38
O F
3/ 22 4/ 5 4/ 19 5/ 3 5/ 17 5/ 31 6/ 14 6/ 28 7/ 12 7/ 26 8/ 9 8/ 23 9/ 6 9/ 20 10 /4
4/ 12 4/ 26 5/ 10 5/ 24
I M P A C T
MBIA
AMBAC
XL
FSA
The impact on ILS

No life ILS issuance since the turmoil started in late July ILS spreads are likely to have widened in line with other nonmortgage related ABS Spreads on AAA wrapped tranches are likely to be in the 70-90bp
T U R M O I L
range versus 25-35bp before the turmoil There is still a significant saving relative to cost of equity
Equity costs 10-12% versus debt at 6.1% gross and 4% net May delay issuance
R E C E N T
M A R K E T
Dutch auction issue

Short term rolling funding for long term capital needs If the auction fails at the maximum interest rate, the investor who is left with the paper holds it until it can clear
I M P A C T
O F
T H E
8/ 2 8/ 16 8/ 30 9/ 13 9/ 27 10 /1 1
7/ 5 7/ 19
6/ 7 6/ 21
17
Agenda
Page
1 4 7 11 15
The future of life ILS

XXX/AXXX
Bilateral solutions most likely Principles based reserving would affect this market
S E C U R I T I E S )
L I N K E D
Growth and development of the market

Shorter time to market Unwrapped tranches Broader range of fixed income investors EV securitization for alternative product lines Extreme risk transfer for alternative risks
T H E
F U T U R E
O F
L I F E
I L S
( I N S U R A N C E
18
Capital Market Solutions: A Rating Agency Perspective
Scott Robinson, FSA, CFA V.P. & Sr. Credit Officer U.S. Life Insurance Group
Society of Actuaries October 12, 2007
Presentation Outline
Update on XXX/AXXX Funding Solutions Analytic Approach to Embedded Value Securitization To XXX and Beyond: What Lies Ahead
19
Update on XXX / AXXX Funding Solutions
Update on XXX/AXXX Funding Solutions

Full Securitization Non-recourse solution, generally for the life of the business
Redundant reserve funding (and potentially some capital) provided by capital markets Off balance sheet treatment; i.e. no financial leverage, no operating leverage Overall: A permanent solution but
Could be higher cost, trapped capital (Scottish Re)
20
XXX Reserve Securitization Funding Diagram
Parent Company
XXX Issuer
Pledged
Reg 114 Trust1
Reinsurance Collateral Eligible Collateral Cash
Collateral
Captive Reinsurer
Surplus Notes Cash
Intermediate Trust
Debt2
Investors
Cash
1Reg
114 Trust collateral is invested in high quality assets with ALM tied to the debt issued by Intermediate Trust.
2Debt
is non-recourse to XXX Reserve Issuer and mirrors the terms of the surplus notes issued by Captive Reinsurer. Debt may be wrapped by a financial guarantor.
Rated XXX Deals

Beneficiary
Genworth Genworth AEGON N.V Legal and General RGA Scottish Re Genworth Scottish Re Genworth Genworth Scottish Re Genworth Legal and General Genworth Genworth
Transaction
River Lake II (3rd Issuance) River Lake IV (1st Issuance) LIICA Holdings, LLC First British American II Timberlake Ballantyne Re River Lake III (1st Issuance) Orkney II River Lake II (2nd Issuance) River Lake (3rd Issuance) Orkney River Lake II (1st Issuance) First British American River Lake (2nd Issuance) River Lake (1st Issuance)
Issuance Date
June 2007 April 2007 April 2007 August 2006 June 2006 May 2006 January 2006 December 2005 October 2005 June 2005 February 2005 December 2004 November 2004 December 2003 July 2003
Issuance Amount
$250 MM $540 MM $550 MM $450 MM $850 MM $1,750 MM $750 MM $455 MM $300 MM $200 MM $850 MM $300 MM $550 MM $300 MM $300 MM
21
Update on Market
Key Risks For XXX
Standard: Mortality (misestimation, influenza, volatility), lapse, shock lapse at end of level premium period, credit, reinvestment
Other risks highlighted by recent events: funding costs if not fixed, step-up in guarantor fees
Dutch auction market turmoil

Notes reset at max spread after failed remarketing Investors wary of any investment with underlying ABS, even if notes are guaranteed
Update on Market
Optimal capital structures / solutions change based on market conditions
Banks ability and willingness to provide funds/LOCs
Regulatory, tax issues and ability/cost of hedging exposure help shape solutions offered
Insurance companies risk tolerance

Willingness to accept counterparty risk, pricing uncertainty, investment spreads
Market spreads
Intense competition among states for captives
22
Alternative XXX / AXXX Funding Solutions

Ceding company absorbs reserve strain
- Not realistic for company with material amount of business written
Reinsurance to 3rd party Debt issued from holding company used to fund redundant reserves Reinsure to captive and long-dated LOC provided by bank Reinsure to captive and redundant reserves funded by bank
Alternative XXX / AXXX Funding Solutions

Alternative funding solutions generally cheaper but for a reason
Alternative solutions often recourse to parent Potential duration mismatch Reserve true-up requirements often present; could be linked to holding company financial condition Additional capital contribution to captive (cliff type increase in economic reserves/capital requirements linked to change in assumptions prospectively)
23
XXX Reserve Alternative Funding Solution Example

Recourse / Collateral Requirements
Parent Company
XXX Issuer
Pledged
Reg 114 Trust
Reinsurance Collateral
Collateral
Eligible Collateral
Cash
Captive Reinsurer
Surplus Notes Cash
Bank
1Reg
114 Trust collateral is invested in high quality assets with ALM tied to the debt issued by Intermediate Trust.
Update on Market
Focus on AXXX business that had been on backburner Funded solutions more attractive
24
Moodys Analysis of Alternative XXX / AXXX Funding Solutions

Current funded solutions
Company / independent party perform analysis to confirm operating leverage Must achieve Aa3 rating or higher on expected loss to receive full operating leverage treatment
Contingent funded solutions

Company provides details on solutions to analyst, including information on capital, reserves, terms of LOC, etc. If more material to a companys credit, then more time will be spent on Moodys analysis
Embedded Value Securitizations
25
What is Embedded Value

Intended to represent todays value of the existing business to shareholders Includes three elements:
- Adjusted net asset value (past accumulated profits) - Value of future profits on existing policies - Cost of capital
Does not include:

- Franchise value
Significant potential growth area as capital management techniques advance in insurance sector
Embedded Value Securitization: Opportunity or Challenge?
Use of insurance securitization technology for embedded value transactions

Efficient way to monetize value of a non-core business
Ensures a minimum price tag
Credit impact depends on the use of proceeds

Invest in core businesses and adjacencies to grow earnings Fund large, challenging acquisitions; share buy-backs or extraordinary dividends
Can achieve no financial leverage, but have rating implications
26
Analysis of Securitizations
Life insurance linked notes will be treated as off balance sheet if the issuer demonstrates both of the following:
Absolutely no recourse to the sponsoring company under any circumstances Genuine risk transfer is achieved by the transaction
Analysis of Securitizations
Analytical treatment: If off balance sheet treatment, then debt is excluded from financial leverage Analysts also consider, depending upon structure:
(1) Elimination of securitized block earnings from interest coverage and profitability measures (2) Reduction of equity supporting securitized block
27
To XXX and Beyond: What Lies Ahead
Whats on the Horizon for Securitizations?

Embedded value securitizations Tranched (e.g., CBO) securitizations Naked (non-wrapped) securitizations and continued price compression for wrapped deals Adoption of financial institution business model of securitizing receivables to free up the balance sheet
Longer term, this is viable for some companies
Broadening of reserve redundancy- motivated transactions

Why just XXX and AXXX? Can extend to capital redundancy - Tailwind
28
Whats on the Horizon for Securitizations?

Growth in secondary market life settlement transactions
Drivers of market development: liquidity, transparency and pricing arbitrage
Intense competition among states creates securitization friendly captive states The impact of principles based reserving on securitization the end of the party?
29
Knowledge. Experience. Performance.
THE POWER OF INSIGHT.
Capital Markets Solutions Society of Actuaries - Session 76 One Companys Experience
William Wellnitz October 16, 2007
Overview
Motivation Objectives Current Status Lessons Learned Risks of Reserve Credit Collateral Programs Risk Mitigants
SOA 2007 Annual Meeting & Exhibit; Session 16: Life and Annuity Product Development Year in Review
Motivation
2001
From our position as a top tier reinsurer, Transamerica Reinsurance could see that reliance on traditional one year Letters of Credit for reserve credit security was high risk Price Capacity Credit exposure
2003
Guideline AXXX impact on UL with no lapse guarantees exacerbated the problems with relying on traditional one year Letters of Credit
Objectives
Reduce reliance on one year LOCs to an immaterial level Develop a basket of alternative reserve credit security programs Constraints
Do not add leverage to AEGONs balance sheet
(Transamerica Reinsurance is a division of Transamerica Occidental Life, a member of the AEGON Group)
Do not impede the growth prospects for other AEGON divisions Do not cause tax, accounting or regulatory problems
Current Status
AEGON has closed 6 transactions
5 different structures $6.4 billion in collateral financing
Characteristics
Fully Funded Recourse On Balance Sheet Off Balance Sheet Non-Recourse On Balance Sheet Off Balance Sheet
Public Partially Unfunded Fully Funded
Private Partially Unfunded
Lessons Learned
The essence of a capital market structure is always the same
Insurer Reinsurer
Collateral
Capital Markets
The capital markets care about credit risk

Reinsurer Reinsurers Parent or Affiliate Third party guarantor
Non-recourse is harder largely due to credit risk

The more parties involved, the greater the execution risk
Simplest: 2 parties Complicated: 10 parties Company, monoline, investment banker, 2 regulators, 2 rating agencies, 2 trustees, captive manager
Corollary the more advisors involved, the greater the execution risk
Simplest: No advisors Complicated: 9 advisors 4 law firms, 3 actuarial firms, underwriting consultant, accounting firm
Breaking new ground is never easy Due diligence is never fun

It is hard to successfully balance all of the accounting and regulatory constraints
Risk transfer regulations Reserve credit regulations Accounting for investment in subsidiaries Consolidation for GAAP, TAX and STAT Surplus note regulations, requirements or approvals Tax capacity Position in organization and tax groups Accounting basis Tax sharing
Taxes matter

The domicile for the reinsurance company matters
Onshore / Offshore Receptive regulatory environment Experience with transactions Ability under law to designate the accounting basis
Regulatory rules vary depending on the charter for the reinsurance company
Onshore / Off Shore Life insurance company Captive reinsurance company

The amount of and restrictions on investable assets is material to the economics of the transaction
Depends on the deal structure and parties
The rating agencies are not your friends, but can be your allies in creating a successful transaction
Its all about risk Triggers, capitalization levels, scenarios, etc. Everyone has been learning including the rating agencies Recourse vs. non-recourse
New York is a different place
Risks of Reserve Credit Collateral Programs

Execution risk Principles based reserving eliminates substantial amounts of our anticipated redundant reserves Repricing risk - costs escalate or tax benefits disappear Changes in the rating agency comfort level with a transaction type or feature Impact of changes in the Sponsors credit rating
More Risks
Balance sheet capacity Counterparty risks Constraints of solutions - name limits Public policy risk of no FIT
Risk Mitigants
Basket of solutions to diversify risk
Recourse and nonrecourse Private and public Fully and partially funded On shore and off shore
Work with people who have gotten deals closed Wherever possible, lock in costs for the full term Fully fund at inception Call/bail out provisions on longer term solutions

07 Washington RobinsonWellnitz 76

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Capital Market Solutions

SOA Annual Meeting, Session 76

Steven Schreiber New York Office

Structured Insurance Solutions Types of Solutions

Extreme mortality risk transfer pandemic bonds

Life Insurance Securitization Transactions

Banner Life Genworth Scottish Re

Capital Market Solutions

Catastrophic Deviation from Economic Reserve

Mezzanine Financing/Preferred Equity Financing Equity Financing (Economic Capital) Self-Financing

Structured Insurance Solutions Providers of Capital

Knowledge. Experience. Performance.

THE POWER OF INSIGHT.

Capital Markets Solutions Society of Actuaries - Session 76 One Companys Experience

William Wellnitz October 16, 2007

2007 Society of Actuaries Session 76

2007 Society of Actuaries Session 76

2007 Society of Actuaries Session 76

2007 Society of Actuaries Session 76

Public Partially Unfunded Fully Funded

Private Partially Unfunded

2007 Society of Actuaries Session 76

The capital markets care about credit risk

Non-recourse is harder largely due to credit risk

2007 Society of Actuaries Session 76

More Lessons Learned

Breaking new ground is never easy Due diligence is never fun

2007 Society of Actuaries Session 76

More Lessons Learned

2007 Society of Actuaries Session 76

More Lessons Learned

2007 Society of Actuaries Session 76

More Lessons Learned

New York is a different place

2007 Society of Actuaries Session 76

Risks of Reserve Credit Collateral Programs

2007 Society of Actuaries Session 76

2007 Society of Actuaries Session 76

Capital Markets Solutions: A Bankers Perspective

C:\Data\u299435\Documents\Risk magazine article\SOA2007 V2.PPT

C:\Data\u299435\Documents\Risk magazine article\SOA2007 V2.PPT

Drivers of convergence between insurance and banking

Banks are looking for alternative opportunities to grow revenues

Banks are looking for non-correlated risks

Structured finance methodology may provide favorable financial opportunities

C:\Data\u299435\Documents\Risk magazine article\SOA2007 V2.PPT

2006 Total Issuance by Collateral Type

ABS Issuance by Year (Billions USD)

2007 YTD ABS Issuance by Collateral Type

Growth = 22% p.a.

Global RMBS 15% Other 5% Auto 11%

C:\Data\u299435\Documents\Risk magazine article\SOA2007 V2.PPT

C:\Data\u299435\Documents\Risk magazine article\SOA2007 V2.PPT

Types and uses of life insurance securitization

1.Securitization of future cashflows

Embedded value securitizations

reduce risk concentration improve capital efficiency reduce fluctuation in earnings

C:\Data\u299435\Documents\Risk magazine article\SOA2007 V2.PPT

Example of the potential advantages of an EV securitization

C:\Data\u299435\Documents\Risk magazine article\SOA2007 V2.PPT

C:\Data\u299435\Documents\Risk magazine article\SOA2007 V2.PPT

Various solutions available for securitizing future cashflows

Consider regulatory capital, economic capital and GAAP capital