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1 ZERO IN ON YOUR D&O EXPOSURES AND PROGRAM NEEDS Play

2 The severity of securities litigation has been steadily increasing. Introduction INTROMENU

3 Settlement values in 2007 made the biggest absolute year-on-year jump since 1996 Introduction INTROMENU

4 Recent developments continue to complicate D&O program decisions Globalization of D&O exposureGlobalization of D&O exposure Subprime crisisSubprime crisis Board compensationBoard compensation Derivative claimsDerivative claims “Backdating” of stock options“Backdating” of stock options Foreign Corrupt Practices ActForeign Corrupt Practices Act New SEC compensation disclosure rulesNew SEC compensation disclosure rules Introduction INTROMENU

5 For companies facing: Complex program placement or renewal decisionsComplex program placement or renewal decisions Significant C-suite changesSignificant C-suite changes Mergers and acquisitionsMergers and acquisitions Sharp increases or decreases in market capitalizationSharp increases or decreases in market capitalization Concern about being underinsuredConcern about being underinsured Questions from the board of directorsQuestions from the board of directors Introduction INTROMENU

6 Marsh provides the expertise and unequaled analytical tools to help you better understand your exposures and program needs. Introduction INTROMENU

7 We help you answer critical questions… How susceptible is my company to a securities class action lawsuit?How susceptible is my company to a securities class action lawsuit? What would such a class action lawsuit potentially cost?What would such a class action lawsuit potentially cost? Is my current D&O insurance delivering economic value?Is my current D&O insurance delivering economic value? What programs do my peers have and what are they paying?What programs do my peers have and what are they paying? Introduction INTROMENU

8 Your path to better program value with Marsh… Introduction INTROMENU

9 Proven analytics + groundbreaking new tools = A stronger decision-making portfolio for your D&O program Please select an area to continue Main Menu INTROSTOP

10 How susceptible is my company to a securities class action lawsuit? INTROMENU

11 Knowing how likely you are to get sued is critical information for making D&O program decisions. INTROMENU

12 Solution: Class Action Susceptibility Modeling from Marsh Created with our sister company NERA Illustrating your firm’s statistical probability of a suit Illustrating your firm’s statistical probability of a suit and the driving causes of suits in your industry sector INTROMENU

13 NERA model input: Proprietary data on shareholder class action settlements from 1996 to 2007Proprietary data on shareholder class action settlements from 1996 to 2007 FactSet’s data on more than 7,500 companies traded on the U.S. national stock exchangesFactSet’s data on more than 7,500 companies traded on the U.S. national stock exchanges INTROMENU

14 The model is the first to examine the relationships between: Numerous firm-specific financial variablesNumerous firm-specific financial variables Litigation risk (frequency)Litigation risk (frequency) Settlement size (severity)Settlement size (severity) MENUINTRO

15 NERA model output: Multiple views of your susceptibility to a suitMultiple views of your susceptibility to a suit Susceptibility among your peersSusceptibility among your peers Causes of suitsCauses of suits Detailed peer group data on historical suitsDetailed peer group data on historical suits INTROMENU

16 Probability of a suit against your firm in the next 12 months Probability of Suit:8.40%Probability of Suit, Sector2.38% Probability of Settlement4.89%Probability of Suit, Overall:2.03% Settlement Value ($MM) 4.40% % % % % % Mean Median71.33 INTROMENU

17 Probability of a settlement Probability of Suit:8.40%Probability of Suit, Sector2.38% Probability of Settlement4.89%Probability of Suit, Overall:2.03% Settlement Value ($MM) 4.40% % % % % % Mean Median71.33 INTROMENU

18 Probability of a suit in your industry sector Probability of Suit:8.40%Probability of Suit, Sector2.38% Probability of Settlement4.89%Probability of Suit, Overall:2.03% Settlement Value ($MM) 4.40% % % % % % Mean Median71.33 INTROMENU

19 Overall probability of a suit (based on companies in all sectors) Probability of Suit:8.40%Probability of Suit, Sector2.38% Probability of Settlement4.89%Probability of Suit, Overall:2.03% Settlement Value ($MM) 4.40% % % % % % Mean Median71.33 INTROMENU

20 Overall probability of a settlement at different settlement values Probability of Suit:8.40%Probability of Suit, Sector2.38% Probability of Settlement4.89%Probability of Suit, Overall:2.03% Settlement Value ($MM) 4.40% % % % % % Mean Median71.33 INTROMENU

21 Mean and median likely settlement values (in millions) Probability of Suit:8.40%Probability of Suit, Sector2.38% Probability of Settlement4.89%Probability of Suit, Overall:2.03% Settlement Value ($MM) 4.40% % % % % % Mean Median71.33 INTROMENU

22 The effect of accounting allegations on settlement values Settlement Value ($MM) No Accounting Allegations Accounting Allegations 4.40% % % % % % % % % % Mean Median INTROMENU

23 The effect of accounting allegations on settlement values Suit without accounting allegations Settlement Value ($MM) No Accounting Allegations Accounting Allegations 4.40% % % % % % % % % % Mean Median INTROMENU

24 The effect of accounting allegations on settlement values Suit with accounting allegations Settlement Value ($MM) No Accounting Allegations Accounting Allegations 4.40% % % % % % % % % % Mean Median INTROMENU

25 Yearly claims susceptibility among peer groups INTROMENU

26 Yearly claims susceptibility among peer groups 500 closest market cap peers INTROMENU

27 Yearly claims susceptibility among peer groups 500 closest market cap peers 200 closest market cap peers INTROMENU

28 Yearly claims susceptibility among peer groups 500 closest market cap peers 200 closest market cap peers 20 th percentile sector peers (based on industry and market capitalization) INTROMENU

29 Percentage of claims involving specific types of allegations Accounting questions INTROMENU

30 Percentage of claims involving specific types of allegations Accounting questions Earnings guidance INTROMENU

31 Percentage of claims involving specific types of allegations Accounting questions Earnings guidance Industry-related allegations INTROMENU

32 Percentage of claims involving specific types of allegations Accounting questions Earnings guidance Industry-related allegations Product/operational defects INTROMENU

33 Percentage of claims involving specific types of allegations Accounting questions Earnings guidance Industry-related allegations Product/operational defects Customer/vendor issues INTROMENU

34 Percentage of claims involving specific types of allegations Accounting questions Earnings guidance Industry-related allegations Product/operational defects Customer/vendor issues Merger integration issues INTROMENU

35 Percentage of claims involving specific types of allegations Accounting questions Earnings guidance Industry-related allegations Product/operational defects Customer/vendor issues Merger integration issues Other INTROMENU

36 Historic filings and settlements among your peer groups, including: Totals Since Mkt Cap Peers200 Mkt Cap Peers 20 Percentile Sector Peers Number of Filings Resolved Settled 4119 Dismissed Issuer-Pool-Years 3,7431,9671,227 Claim Susceptibility 5.66%6.20%7.50% Dismissal Rate 47.44%50.00%60.42% Settlement Value Mean$ MM$ MM$84.62 MM Median$61.50 MM$49.25 MM$20.00 MM 1 st Quartile$23.00 MM$14.19 MM$6.30 MM 3 rd Quartile$ MM$ MM$56.40 MM All figures are cumulative since the passage of PSLRA. INTROMENU

37 Historic filings and settlements among your peer groups, including: Number of Filings Totals Since Mkt Cap Peers200 Mkt Cap Peers 20 Percentile Sector Peers Number of Filings Resolved Settled 4119 Dismissed Issuer-Pool-Years 3,7431,9671,227 Claim Susceptibility 5.66%6.20%7.50% Dismissal Rate 47.44%50.00%60.42% Settlement Value Mean$ MM$ MM$84.62 MM Median$61.50 MM$49.25 MM$20.00 MM 1 st Quartile$23.00 MM$14.19 MM$6.30 MM 3 rd Quartile$ MM$ MM$56.40 MM All figures are cumulative since the passage of PSLRA. INTROMENU

38 Historic filings and settlements among your peer groups, including: Issuer-Pool-Years Totals Since Mkt Cap Peers200 Mkt Cap Peers 20 Percentile Sector Peers Number of Filings Resolved Settled 4119 Dismissed Issuer-Pool-Years 3,7431,9671,227 Claim Susceptibility 5.66%6.20%7.50% Dismissal Rate 47.44%50.00%60.42% Settlement Value Mean$ MM$ MM$84.62 MM Median$61.50 MM$49.25 MM$20.00 MM 1 st Quartile$23.00 MM$14.19 MM$6.30 MM 3 rd Quartile$ MM$ MM$56.40 MM All figures are cumulative since the passage of PSLRA. INTROMENU

39 Historic filings and settlements among your peer groups, including: Claim Susceptibility Totals Since Mkt Cap Peers200 Mkt Cap Peers 20 Percentile Sector Peers Number of Filings Resolved Settled 4119 Dismissed Issuer-Pool-Years 3,7431,9671,227 Claim Susceptibility 5.66%6.20%7.50% Dismissal Rate 47.44%50.00%60.42% Settlement Value Mean$ MM$ MM$84.62 MM Median$61.50 MM$49.25 MM$20.00 MM 1 st Quartile$23.00 MM$14.19 MM$6.30 MM 3 rd Quartile$ MM$ MM$56.40 MM All figures are cumulative since the passage of PSLRA. INTROMENU

40 Historic filings and settlements among your peer groups, including: Dismissal Rate Totals Since Mkt Cap Peers200 Mkt Cap Peers 20 Percentile Sector Peers Number of Filings Resolved Settled 4119 Dismissed Issuer-Pool-Years 3,7431,9671,227 Claim Susceptibility 5.66%6.20%7.50% Dismissal Rate 47.44%50.00%60.42% Settlement Value Mean$ MM$ MM$84.62 MM Median$61.50 MM$49.25 MM$20.00 MM 1 st Quartile$23.00 MM$14.19 MM$6.30 MM 3 rd Quartile$ MM$ MM$56.40 MM All figures are cumulative since the passage of PSLRA. INTROMENU

41 Historic filings and settlements among your peer groups, including: Settlement Value Totals Since Mkt Cap Peers200 Mkt Cap Peers 20 Percentile Sector Peers Number of Filings Resolved Settled 4119 Dismissed Issuer-Pool-Years 3,7431,9671,227 Claim Susceptibility 5.66%6.20%7.50% Dismissal Rate 47.44%50.00%60.42% Settlement Value Mean$ MM$ MM$84.62 MM Median$61.50 MM$49.25 MM$20.00 MM 1 st Quartile$23.00 MM$14.19 MM$6.30 MM 3 rd Quartile$ MM$ MM$56.40 MM All figures are cumulative since the passage of PSLRA. INTROMENU

42 The Susceptibility Model bottom line: More robust information than ever before on your potential D&O exposure. INTROMENU

43 Proven analytics + groundbreaking new tools = A stronger decision-making portfolio for your D&O program Please select an area to continue Main Menu INTROSTOP

44 What would such a class action lawsuit potentially cost? INTROMENU

45 Anytime your company stock drops significantly, you may face a class action lawsuit from investors. INTROMENU

46 Wouldn’t it be nice to know how a securities class action lawsuit might impact your company financially? INTROMENU

47 Solution: Class Action Damages Model from Marsh Created with our sister company NERA Providing estimated damages and settlement costs based on how far your stock potentially drops INTROMENU

48 Model input: Client-specific data such asClient-specific data such as —Market capitalization —Share trading volume —Industry sector NERA’s vast data on security-holder claims and settlementsNERA’s vast data on security-holder claims and settlements INTROMENU

49 Model output: Estimates of: Potential investor lossesPotential investor losses Potential plaintiff’s damage claimPotential plaintiff’s damage claim Potential settlement amountPotential settlement amount Based on: Percentage drop in stock valuePercentage drop in stock value Length of class action periodLength of class action period INTROMENU

50 Potential Investor Losses Relative to S&P 500* INTROMENU *Based on market capitalization in excess of $20 billion

51 Potential Investor Losses For example, if your stock dropped 42.7% INTROMENU Based on market capitalization in excess of $20 billion

52 Potential Investor Losses And the class period of the lawsuit was 349 days INTROMENU Based on market capitalization in excess of $20 billion

53 Potential Investor Losses You might expect a potential investor loss of $10.2 billion INTROMENU Based on market capitalization in excess of $20 billion

54 Potential Plaintiff’s Damage Claim INTROMENU Based on market capitalization in excess of $20 billion

55 Potential Plaintiff’s Damage Claim Using the same example, INTROMENU Based on market capitalization in excess of $20 billion

56 Potential Plaintiff’s Damage Claim You might expect plaintiff’s damages of $8.6 billion INTROMENU Based on market capitalization in excess of $20 billion

57 Potential Settlement Amount INTROMENU Based on market capitalization in excess of $20 billion

58 Potential Settlement Amount Using the same example, INTROMENU Based on market capitalization in excess of $20 billion

59 Potential Settlement Amount You might expect a potential settlement cost of $227 million (not including defense costs) INTROMENU Based on market capitalization in excess of $20 billion

60 The Damages Model bottom line: A critical perspective on potential losses that Goes beyond benchmarkingGoes beyond benchmarking Is based on your industry and historical market capitalizationIs based on your industry and historical market capitalization Helps you choose adequate program limitsHelps you choose adequate program limits INTROMENU

61 Proven analytics + groundbreaking new tools = A stronger decision-making portfolio for your D&O program Please select an area to continue Main Menu INTROSTOP

62 Is my current D&O insurance delivering economic value? MENUINTRO

63 If your D&O premiums are too high, you may not be getting an optimal return on your insurance investment. MENUINTRO

64 Benchmarking on price alone does not offer the insight you need to make program decisions with confidence. MENUINTRO

65 Solution: D&O Economic Value Modeling from Marsh Created with our sister companies NERA and Oliver Wyman Offering a Risk Adjusted Rate of Return on Capital (RAROC) analysis of D&O risk transfer MENUINTRO

66 The model compares the economic cost of risk before and after the purchase of D&O insurance to help you see how well your program delivers economic value. MENUINTRO

67 D&O Value Model inputs: Layer-by-layer program data (including premium, carrier, and carrier rating)Layer-by-layer program data (including premium, carrier, and carrier rating) Your company’s internal rate of returnYour company’s internal rate of return Your company’s credit ratingYour company’s credit rating MENUINTRO

68 D&O Value Model outputs: Assessment of the economic value of your D&O insurance, including:Assessment of the economic value of your D&O insurance, including: —Overall value —Layer-by-layer value MENUINTRO

69 Overall Value of Your D&O Program Economic costs before insurance MENUINTRO

70 Overall Value of Your D&O Program Economic costs after insurance MENUINTRO

71 Overall Value of Your D&O Program The difference is the value created by your D&O program. MENUINTRO

72 Layer-by-Layer Value of Your D&O Program This shows how each layer of your insurance creates economic value. MENUINTRO

73 Layer-by-Layer Value of Your D&O Program The top of the bars is the premium cost at which the purchase of insurance is no longer justified from the insured’s standpoint. (buy-side maximum premium) MENUINTRO

74 Layer-by-Layer Value of Your D&O Program The bottom of the bars is the premium cost at which the sale of insurance is no longer justified from the insurer’s standpoint. (sell-side minimum premium) MENUINTRO

75 Layer-by-Layer Value of Your D&O Program By seeing where your premium falls in this “bid-ask” spread, you can see which layers contribute the most economic value. MENUINTRO

76 Layer-by-Layer Value of Your D&O Program Ultimately, the lower your premiums are on the spread, the higher the economic value of buying D&O insurance. MENUINTRO

77 The Cost of Capital Model bottom line: Powerful insight for helping you restructure your program to drive out excess cost. MENUINTRO

78 Proven analytics + groundbreaking new tools = A stronger decision-making portfolio for your D&O program Please select an area to continue Main Menu INTROSTOP

79 What coverage do my peers have and what are they paying? MENUINTRO

80 Knowing how your D&O program compares to that of your peers is one important piece of the D&O decision-making puzzle. MENUINTRO

81 The closer the benchmarking data matches your company profile, the more valuable the comparisons. MENUINTRO

82 Solution: Advanced Benchmarking from Marsh A vast, flexible database of information for close peer group comparisons A vast, flexible database of information for close peer group comparisons MENUINTRO

83 We provide advanced benchmarking mined from more than 6,500 primary and excess D&O placements of publicly traded companies. MENUINTRO

84 Based on a wide range of metrics, we provide real-time comparisons of: Limits *Peer Group: All industries $5 to $15 million market cap 2006 Q1 to 2007 Q4 MENUINTRO

85 Based on a wide range of metrics, we provide real-time comparisons of: LimitsPremiums *Peer Group: All industries $5 to $15 million market cap 2006 Q1 to 2007 Q4 MENUINTRO

86 Based on a wide range of metrics, we provide real-time comparisons of: LimitsPremiumsRetentions *Peer Group: All industries $5 to $15 million market cap 2006 Q1 to 2007 Q4 MENUINTRO

87 Advanced Benchmarking bottom line: Vast placement data and flexibility that provide closer comparisons than ever before. Vast placement data and flexibility that provide closer comparisons than ever before. MENUINTRO

88 In addition to these powerful tools for D&O program decisions, Marsh provides thorough support for the D&O placement process: Uninsured loss modeling Helps you determine the impact of an uninsured loss on key financials MENUINTRO

89 In addition to these powerful tools for D&O program decisions, Marsh provides thorough support for the D&O placement process: D&O risk profile Assists you in thoroughly preparing for your next renewal by showing you what underwriters are most concerned about MENUINTRO

90 In addition to these powerful tools for D&O program decisions, Marsh provides thorough support for the D&O placement process: Peer review process Helps you actively review your primary policy against a check list of more than 175 coverage items MENUINTRO

91 In addition to these powerful tools for D&O program decisions, Marsh provides thorough support for the D&O placement process: Excess “stress test” Helps you determine if excess layers truly “follow” form MENUINTRO

92 For more information on D&O tools and services, see a Marsh representative. MENUINTRO

93 The information presented provides only a general overview of subjects covered, is not intended to be taken as advice regarding any individual situation, and should not be relied upon as such. The information contained within this presentation is based on sources we believe reliable, but we do not guarantee its accuracy. All insurance coverage is subject to the terms, conditions and exclusions of the applicable individual policies. The hypothetical information contained is for illustrative purposes only and should not be relied upon as governing any specific facts or circumstances. Simulations based on past performance do not represent a guarantee of future results. Marsh is part of the family of MMC companies, including Kroll, Guy Carpenter, Mercer, and the Oliver Wyman Group (including Lippincott and NERA Economic Consulting). Copyright 2008 Marsh, Inc. All rights reserved. Compliance No. MA MENUINTRO


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