1.  CAS Spring Meeting Solvency Models Compared June 19, 2007

2. Agenda/Contents Overview Comparison of Solvency Capital Requirements

3. PricewaterhouseCoopersJune 2007 Slide 3 Comparison of Formula Elements Overview US RBCSolvency II – QIS3

4. PricewaterhouseCoopersJune 2007 Slide 4 Comparison of Formula Elements Overview Solvency II – QIS3 US - RBC

5. PricewaterhouseCoopersJune 2007 Slide 5 Overview Formula CalibrationComponents of the QIS3 formula are calibrated to VaR 99.5 Certain components of NAIC formula are calibrated to 1% EPD Regulatory CapitalQIS3 formula reflects correlations between and within risk categories NAIC formula assumes independence between risk categories (with the exception of credit and reserve risk) Market Risk – Fixed IncomeQIS3 formula reflects interest rate risk and spread risk NAIC formula reflects fixed income default risk Underwriting Risk - ReservesQIS3 capital charge applied to the best estimate reserves; the QIS3 balance sheet reflects fair value reserves NAIC capital charge applied to US statutory value of reserves discounted using fixed discount factors by line of business Underwriting Risk - Catastrophe Considered as an additional shock within the QIS3 formula Not considered explicitly within the NAIC formula Underwriting RiskQIS3 formula combines premium and reserve risk together using assumed correlations NAIC formula treats premium and reserve risk independently Operational RiskConsidered explicitly within the QIS3 formula Not considered within the NAIC formula Significant Differences between “Standard” Formulas

6. PricewaterhouseCoopersJune 2007 Slide 6 Limitations of Model Comparison The “standard approach” for measuring the solvency capital requirement within the Solvency II framework continues to be under development. Currently, Quantitative Impact Study 3 (QIS3) is underway, with a request for companies to review the standard solvency formula and assumptions and respond to CEIOPS with detailed feedback and commentary by June 30 th. The standard approach (Excel model), user instructions, and background information are all available for review on www.ceiops.org. For purposes of this session, we have applied the current Solvency II standard approach to the financials of a hypothetical property and casualty insurance company, and to the extent possible, compared the calculated solvency capital requirements to those produced by the US NAIC RBC model. The purpose of this exercise is to provide participants with an overview of the key assumptions and considerations within the current Solvency II standard approach. It is likely that many of the assumptions currently reflected within QIS3 standard approach may be modified prior to completion based upon further review, calibration, and feedback from the industry. We are making no representations as to the appropriateness of the assumptions, the solvency formula, or the resulting solvency capital presented within the following exhibits. Comparison of Solvency Requirements

7. PricewaterhouseCoopersJune 2007 Slide 7 Sample Company Key Characteristics Multi-line writer, personal and commercial Net written premium (NWP) $5.9 billion Reserves $7.6 billion Assets $17.5 billion Surplus $5.9 billion Simplifying assumptions: -No affiliates -No currency risk -Diversified asset portfolio Comparison of Solvency Requirements

8. PricewaterhouseCoopersJune 2007 Slide 8 Market, Credit and Underwriting Risk – Consistent Categories Comparison of Solvency Requirements Key Considerations: QIS3 Market capital excludes interest rate risk QIS3 Underwriting capital excludes CAT risk Total US RBC based upon square root rule without cross terms Total QIS3 BSCR based on the correlation matrix: ($Millions) $656.9 131.4 1,337.5 2,125.7 1,495.9 Risk Market Credit Underwriting Subtotal Total RBC US RBCSolvency II – QIS3 Risk Market Credit Underwriting Subtotal Total BSCR ($Millions) $1,551.6 111.3 2,754.1 4,417.1 3,540.4 Note: All values subject to Slide 6 limitations.

9. PricewaterhouseCoopersJune 2007 Slide 9 Risk Market Credit Underwriting Subtotal Total BSCR Operational Total SCR ($Millions) 2,247.3 111.3 2,930.0 5,288.7 4,170.3 151.1 4,321.4 QIS3 – Total Solvency Capital Requirement Comparison of Solvency Requirements Solvency II – QIS3 Key Considerations Interest rate risk & CAT risk included BSCR based on the correlation matrix: Operational risk capital added to BSCR Note: All values subject to Slide 6 limitations.

10. PricewaterhouseCoopersJune 2007 Slide 10 ($Millions) 1,440.3 1,154.3 1.4 786.3 0.0 3,382.3 2,247.3 Risk Interest Rate Equity Property Spread Concentration Subtotal Market BSCR QIS3 – Market Solvency Capital Requirement Comparison of Solvency Requirements Solvency II – QIS3 Key Considerations Interest rate risk reflects shocks to fixed income investments & liabilities Spread risk reflects shock due to change in credit curve Market BSCR based on the correlation matrix: Note: All values subject Slide 6 limitations.

11. PricewaterhouseCoopersJune 2007 Slide 11 Risk NWP Reserves Pre-Covariance Subtotal Excl. CAT CAT Subtotal Underwriting BSCR ($Millions) 1,076.8 2,132.6 3,209.4 2,754.1 1,000.0 3,754.1 2,930.0 QIS3 – Underwriting Solvency Capital Requirement Comparison of Solvency Requirements Solvency II – QIS3 Key Considerations QIS3 aggregates premium and reserve risk in a single step Subtotal Excl-CAT based upon X-LoB correlations (not shown) CAT & Non-CAT capital aggregated assuming independence Note: All values subject to Slide 6 limitations.

12. PricewaterhouseCoopersJune 2007 Slide 12 Underwriting Risk - Premium Comparison of Solvency Requirements Risk ($Millions) 2006 NWP5,858 Growth Factor NA 2007 NWP5,858 Implied Capital Charge.156 Pre-Concentration 914 Concentration.760 NWP RBC 695 US RBC Risk ($Millions) 2006 NWP5,858 Growth Factor 1.05 2007 NWP6,150 Implied Capital Charge.262 Pre-Covariance 1,612 Cov. Adjustment.668 NWP BSCR 1,077 Solvency II – QIS3 Key Considerations QIS3 growth factor is a standard assumption that may be overwritten QIS3 implied capital charge reflects credibility weighted average of the standard deviation of company and industry historical loss ratios QIS3 “NWP BSCR” is identified separately from “Reserve BSCR” for purposes of this comparison only Note: All values subject to slide 6 limitations. xxxxxx xxxxxx

13. PricewaterhouseCoopersJune 2007 Slide 13 Underwriting Risk - Reserves Comparison of Solvency Requirements Risk ($Millions) 2006 Reserves 7,561 Discount Factor.873 Discounted Reserves 6,603 Implied Capital Charge.202 Pre-Concentration 1,333 Concentration.787 Reserve RBC 1,049 US RBC Risk ($Millions) 2006 Reserves 7,561 Discount Factor.898 Best Estimate Reserves 6,791 Implied Capital Charge.431 Pre-Covariance 2,927 Cov. Adjustment.729 Reserve BSCR 2,133 Solvency II – QIS3 Key Considerations QIS3 discount factor is based upon company-specific payout pattern and standard term structure QIS3 capital charge reflects a fixed assumption regarding the standard deviation of industry loss reserves QIS3 “Reserve BSCR” is identified separately from “NWP BSCR” for purposes of this comparison only Note: All values subject to Slide 6 limitations. xxxxxx xxxxxx

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