AMF Risk Management Solutions (AMF) Captive Insurance Proposal for Funding Group Medical Stop Loss Insurance For: William G. McKelvey President bmckelvey@amfrms.com www.amfrms.com 300 Congress Street Quincy, Massachusetts 02169 Telephone: (866) 477-5263 Fax: (617) 507-6425 Cellular: (617) 645-5627 A.M. Franklin Insurance Agency, Inc. (AMF)

AMF Risk Management Solutions Unique Stop Loss Business Offer Traditional Stop Loss. Stop Loss With Profit Sharing. Innovative Captive Option – Bermuda. All Products/Services written with major A+ Insurance Companies.

Who Provides the Major Services Under the AMF Risk Management Solutions Program? Insurance companies with an “A+” Best Rating. The Marchmont Insurance Company – Subsidiary of BF&M, Bermuda’s largest health insurance underwriter for citizens of Bermuda. “A” Best Rating.

Driving Healthcare Cost Down…. The Need for Insurance Captives To foster more healthcare competition A. The D.O.L. is encouraging captive formations to fund employee benefits. Well managed healthcare programs funded through captives assist employers in controlling healthcare costs. Captives help stabilize reinsurance rates by offering additional capacity to underwrite risk. To reward brokers, agents & consultants for the design and implementation of well managed healthcare programs for employers.

Healthcare Cost Management TODAY Well Managed Healthcare Plan $$$ Profits $$ Insurance Company $$

Healthcare Cost Management Well Managed Healthcare Plan TOMORROW Well Managed Healthcare Plan $$$ Profits YOU And Your Clients

The AMF Risk Management Solutions Captive Program Operates Like Conventional Stop Loss from the Employer’s Stand-Point. Marchmont’s “Protected Cell” Captive serves as the vehicle for Producers to share profits/assume risk. Tax advantages….but please consult your tax advisor.

Sample Of One TPA’s Captive Results Financial Summary Gross Written Premium $ 93,498,751 Marchmont Specific/Aggregate Profit $ 16,049,791 Specific Pooling Profit $ 509,528 Total Profit $ 16,559,319 Total Profit as a % of GWP 17.7%

Sample: Marchmont Risk Structure $1,000,000/Person/Year Insurance Company Risk Marchmont/Producer Risk (80%) Insurance Co. Risk (20%) $500,000* ($7,500 to $500,000) Employer Stop Loss Risk Lives: 10 lives and greater. Deductible: $7,500 to $500,000. Captive Risk: Producer takes as little as 25%, or as great as 80% of Non-Insurance Company portion of $500,000 corridor; AMF takes the remainder (if any). Lifetime Max.: $1,000,000 Per Person Per Year recommended. * Set at this level for 2008 treaty year. May vary in future years.

Additional Product Features No outside reinsurance on first $1,000,000. Our carriers both front and reinsure. Aggregates – 20% & 25% corridors. PPO Database – over 2,200 networks evaluated by AMFRMS for discounted rates. Aggregate only stop loss (wrap) available over other insurers “high deductible” major medical plans. Aggregate only stop loss available over self-insured dental plans with more than 50 employee participants.

Functions & Responsibilities of Parties Involved in Marchmont Program Employer’s Self-Funded Group Medical Plan Producer Receive RFQ from Employers & Forward to AMFRMS for Proposal Provides Funds to Marchmont to back its Share of Risk and to Pay for Captive Fees Insurance Company Provides Policy to Employer Cedes Underwriting & Claims Paying Function to AMFRMS Retains a Portion of Risk Cedes Remainder of Risk to Marchmont AMFRMS Underwriters on Behalf of Insurance Company Pays Claims In Accordance with Policy/Employer Plan Document Retains a Portion of Risk through Marchmont Receives RFQ from Producer Collects/Premiums/Remits/Fees Marchmont Insurance Company Assumes a Portion of Risk Backed by Funds Held on Deposit from Producer/AMFRMS Provides Accounting Services Dividend Distributions to AMFRMS & Producer

AMF Risk Management Solutions Medical Stop Loss Risk Sharing Captive Program Projections Illustration # 1 40% GWP Loss Ratio I. Gross Premiums $ 1,000,000.00 II. Program Expenses (37.5%) (Commissions 15%; Taxes 3%; Fronting 5%; Block Cover 4.5%; MGU 10%) $ (375,000.00) III. Net Premiums $ 625,000.00 IV. Pooling Charges (Avg. 3% GWP @ $30,000 Spec) $ (30,000.00) V. Claims Expense (40% LR) $ (400,000.00) VI. Catastrophic Claims Reimbursement (Assumes 0%) $ 0.00 (Claims above the $500,000 corridor) VII. Profits from $500,000 corridor (III – IV – V + VI) $ 195,000.00 Total Estimated Profits as a % of GWP 19.5% GWP * Producer can assume 25% to 80% of risk. 80% of risk would generate an estimated Producer Profit/Loss of: 15.6% GWP

AMF Risk Management Solutions Medical Stop Loss Risk Sharing Captive Program Projections Illustration # 2 50% GWP Loss Ratio I. Gross Premiums $ 1,000,000.00 II. Program Expenses (37.5%) (Commissions 15%; Taxes 3%; Fronting 5%; Block Cover 4.5%; MGU 10%) $ (375,000.00) III. Net Premiums $ 625,000.00 IV. Pooling Charges (Avg. 3% GWP @ $30,000 Spec) $ (30,000.00) V. Claims Expense (50% LR) $ (500,000.00) VI. Catastrophic Claims Reimbursement (Assumes 0%) $ 0.00 (Claims above the $500,000 corridor) VII. Profits from $500,000 corridor (III – IV – V + VI) $ 95,000.00 Total Estimated Profits as a % of GWP 9.5% GWP * Producer can assume 25% to 80% of risk. 80% of risk would generate an estimated Producer Profit/Loss of: 7.6% GWP

AMF Risk Management Solutions Medical Stop Loss Risk Sharing Captive Program Projections Illustration # 3 65% GWP Loss Ratio I. Gross Premiums $ 1,000,000.00 II. Program Expenses (37.5%) (Commissions 15%; Taxes 3%; Fronting 5%; Block Cover 4.5%; MGU 10%) $ (375,000.00) III. Net Premiums $ 625,000.00 IV. Pooling Charges (Avg. 3% GWP @ $30,000 Spec) $ (30,000.00) V. Claims Expense (65% LR) $ (650,000.00) VI. Catastrophic Claims Reimbursement (Assumes 0%) $ 0.00 (Claims above the $500,000 corridor) VII. Profits (Loss) from $500,000 corridor (III – IV – V + VI) $ (55,000.00) Estimated Profits (Loss) as a % of GWP (5.5%) GWP * Producer can assume 25% to 80% of risk. 80% of risk would generate a estimated Producer Profit/Loss of: (4.4%) GWP

AMF Risk Management Solutions Medical Stop Loss Risk Sharing Captive Program Projections Illustration # 4 85% GWP Loss Ratio I. Gross Premiums $ 1,000,000.00 II. Program Expenses (37.5%) (Commissions 15%; Taxes 3%; Fronting 5%; Block Cover 4.5%; MGU 10%) $ (375,000.00) III. Net Premiums $ 625,000.00 IV. Pooling Charges (Avg. 3% GWP @ $30,000 Spec) $ (30,000.00) V. Claims Expense (85% LR) $ (850,000.00) VI. Catastrophic Claims Reimbursement (Assumes 0%) $ 0.00 (Claims above the $500,000 corridor) VII. Profits (Loss) from $500,000 corridor (III – IV – V + VI) $ (255,000.00) Estimated Profits (Loss) as a % of GWP (25.5%) GWP * Producer can assume 25% to 80% of risk. 80% of risk would generate an estimated Producer Profit/Loss of: Approximately (7.50%) GWP

AMF Production Requirements Traditional Stop Loss Source *15% Profit Sharing Arrangement AMF/Marchmont/Captive Risk Sharing Option Minimum Production: $1,500,000 Minimum Production: $3,000,000 Renewal Persistency: 80% New Business Growth: 3 Cases per year New Business Growth: 3 Cases per year minimum New Business Growth: 5 Cases per year Requirements: Complete premium/claims history for initial assessment. Last look guaranteed on all renewals & new business. If AMF matches or beats competitor – accounts to be placed with AMF. competitor – accounts to be placed with AMF. *applies to $500,000 risk corridor only.

Producer Cost To Participate Traditional Stop Loss Source * Profit Sharing Arrangement AMF/Marchmont Captive Producer’s Financial Commitment $0 Captive Rental Fee $25,000 first two years, $40,000 thereafter up to five years Preference Shares Purchase $1,000 – One time fee Risk Capital 1.8% to 7.5% of Gross Written Premium * Captive & Other Fees are charged against profits only if profits are generated.