1. Sony Pictures Entertainment Inc.
April 5, D-R-A-F-T 15

2. SONY PICTURES ENTERTAINMENT
MISSION STATEMENT
PROTECT THE ASSETS OF
SONY PICTURES ENTERTAINMENT

3. RISK MANAGEMENT STRUCTURE
Janel Clausen
Vice President,
Risk Management
Aaron Au
Coordinator
Work Comp Claims &
Admin Support for Dept.
Kate Calabrese
Claims/Systems,
Administrator
Media Liab. Claims, EPL Claims,
Dept. Budget & Risk Mgmt Systems Mgr.
Douglas Hastings
Claims Manager
GL, Auto, Property & Production Claims
Donna Tetzlaff
Director
Global Corporate Risks including Distribution Activities
Dawn Luehrs
Director
Global Production Risks
Britianey Barnes
Administrator
Global Production Risk Support, Bonds & Notary

4. Risk Management and Insurance Strategy
Central to our role as SPE’s Risk Management Department is the rigorous process utilized to assess SPE’s exposure to risk on a long term strategic basis and day-to-day project basis.
Inherent to anticipating and proactively addressing SPE’s risk exposures, we:
Understand SPE’s objectives in designing and implementing a superior insurance program, using specialized professional resources as needed, in formulating cost efficient risk management and insurance solutions.
Formulate action plans to leverage SPE’s strengths and opportunities of SPE’s risk techniques relative to overall financial and operational conditions, the business environment as well as insurance market conditions.
In partnership with our Internal Group Contacts and External Risk Management Professionals, we continually identify / evaluate opportunities and threats which arise and implement processes and procedures to address them.
Examples of Risk Management Functions:
Develop, negotiate, and maintain insurance programs for global operations
Claims Management for Global Operations
Maintain insurable asset inventory and exposure data
Allocate risk costs to the Studio, each Production and all other groups
Executive Management Reports

5. Glossary of Insurance Coverage
Auto Liability
Insures SPE when legally liable for bodily injury and/or property damage to another party caused by an SPE owned/hired or non-owned vehicle
General Liability
Protects SPE against another party's bodily injury and/or property damage claims arising out of SPE's premises; operations; products and completed operations due to SPE's negligence.
Foreign Auto / General Liability
Policy covers same insurance as above
US Workers' Compensation & Employer's Liability
WORK COMP - provides no-fault statutory benefits for employees due to a job-related injury (including death) resulting from an accident or occupational disease
EMPLOYER'S LIABILITY - pays on behalf of the employer all sums that the employer becomes legally obligated to pay due to a job-related injury (including death) resulting from an accident or occupational disease caused by the employer's gross negligence.
Foreign Work Comp & Employer's Liab
Same coverages as US above
Non-Owned Aviation Liability & Hull
Covers SPE when SPE is legally obligated to pay for bodily injury, (including death) and /or property damage to another party arising out of the maintenance or use of an owned or non-owned aircraft. Hull Coverage included. Pays for physical damage to the owned or non-owned aircraft.
Media Liability & Technology Errors & Omissions
MEDIA LIABILITY - Protects SPE against third party infringement, (copyright/trademark) claims regarding SPE's created content produced and/or distributed by SPE through any medium.
TECHNOLOGY ERRORS & OMISSIONS - insures against third party liability claims against SPE relating to SPE's business activities of build, modify, supply, install, deliver and provide entertainment related software and technology services; i.e., interactive games, post production services, web hosting & design and related customer support, maintenance consulting and training.
Cyber Liability
Insures SPE against third party claims for network security breaches as respects corporate confidential and data privacy information.
Global Property
Property insurance against physical loss or damage of SPE's physical assets due to perils such as fire, lightening, vandalism, malicious mischief, water damage, earthquake & flood. Policy also provides insurance for loss of business income and extra expense
Production Package
Insures SPE's productions against losses of property & business interruption due to injury or illness of a covered artist; damage or loss of equipment; props; sets; wardrobe; physical damage to production vehicles and third party property damage
Boiler & Machinery
Covers SPE for physical damage or loss caused by a sudden and accidental breakdown of SPE's boilers and machinery equipment, HVAC or any other equipment.
Employment Practices Liability
Protects SPE from claims brought by employees arising out of discrimination, wrongful termination; sexual harassment.
D&O Liability
Covers SPE's directors & officers, or management equivalent for acts of errors or omissions committed in their capacity as Ds & Os or management equivalent of SPE and SPE subs
Crime
Covers SPE for employee theft or dishonesty acts, loss of money & securities, depositor's forgery, robbery, embezzlement.
Fiduciary Liability
Covers errors & omissions of SPE's trustees, employers, fiduciaries, professional administrators as respects the administration of employee benefit programs.
Employed Lawyers Errors & Ommissions Liability
Covers SPE when SPE is legally obligated to pay damages arising from a claim for wrongful acts of its corporate attorneys but only when SPE cannot legally indemnify the corporate attorney.
Special Crime
Protects all of SPE's Ds & Os, employees, leased or temporary employees, students, volunteers, loan outs, independent producers, employees paid by a payroll service company, consultants…for perils of Kidnap, Ransom and Extortion.
Terrorism
Insures for physical loss or damage for acts of terrorism or political violence, (Political Violence is physical loss or damage due to a government action: e.g., confiscation, expropriation, currency inconvertibility)
Marine
Covers non-owned watercraft liability, physical damage on hull and owned vessel pollution.
Ocean Cargo
Cover overseas shipments of property & equipment.

6. Production Risk Management – A Dynamic Process
Pre-Production
Initial Production Notice to Risk Management – Weekly Production & Business Affairs Meetings, Online Publications, Phone Calls
Script Review, Exposure and Location Analysis – Domestic/International determination
Cast declarations, medicals, stop dates and cast multi-production utilization
Budgeting –Finalize Insurance line, Identify special insurance extensions – cast (age, medical etc.), marine, aviation, railroad, automobile, stunting, international, disability, duration of production
SEHS Coordination
Production
Adapt to changes in pre-production schedule
Location changes
Contract Review – Standard SPE/Non-Standard, Vendor, Supplier and amendments to Insurance Policies and Insurance Certificates as needed
Claim activities
Special Hazard Identification and Insurance treatment
Watercraft
Aviation
Stunting
Railroad
Automobile
SEHS Coordination
Post-Production
Additional Filming and Re-Shoots
Claims Finalization
Annual Production Renewal Process

7. Corporate Risk Management – A Dynamic Process
Risk Management Analysis and Administration
Identify corporate global risk exposures
Review contracts, leases, agreements
Monitor changes to locations, human resources, inventory and warehouses
Assess impact of insurance laws and requirements by country of operation
Due diligence for mergers & acquisitions
Analyze insurance solutions for new/changing exposures
International
Media
Terrorism
Cyber Risk
Surety Bonds
Respond to internal SPE inquiries (e.g. clearance procedures, claims, INFOSEC, legal, SEHS)
Coordinate insurance responses for promotions, sales, marketing, distribution, studio operations, digital, the internet
Ongoing claim management
Manage annual insurance budget
Global Insurance Renewal Process
Activities begin 120 days before renewal and varies by coverage (Property, Casualty, E&O, D&O, Marine, Aviation, etc.)
Collect exposure data from SPE entities (values, payrolls, productions costs, sales, vehicles)
Update claim summaries/status by line of coverage
Partner with broker to finalize submission and renewal program design and negotiation strategy
Meet with insurers as necessary
Monitor renewal progress and respond to insurer requests
Analyze insurer proposals and make recommendations to SPE management
Implement renewal and coordinate certificate issuance, reviews and approves insurers’ premium invoices for payment.
Manage ongoing relationships with brokers and insurers until subsequent renewal cycle (e.g. Tokio Marine – major strategic partner)

8. SPE Risk Management: The Day-To-Day
Contract reviews
Corporate (200)
Productions Domestic and Foreign(1,500 per year)
Coverage Requests (600 per year)
Scope, limits, extensions, amendments
Outgoing Certificates Issued and Reviewed (3,000 per year)
Same Day Issuance
Notice of Cancellation Compliance
Incoming Certificates Reviewed (600)
Special Endorsements (2,000 per year)
City Specific Additional Insured – General Liability
Specific Vendor Additional Insured – General Liability
Notice of Cancellation – General Liability
Additional Insured – Media Liability; Errors & Omissions
Policy Renewals
Gather and transmit renewal data to insurer for negotiations
Policies reviewed to verify terms and conditions match quotations received
Policies summarized updated and maintained
Ongoing Cross-Team communication
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9. SPE Risk Management Broker Relationships
Risk Assessment – conduct annual review of SPE’s risk profile, highlighting changes which could impact coverage requirements.
Quantitative Analysis – assess recent and historical loss trends. Emphasize improvements which can result in deductible / structure improvements
Benchmarking of Insurance Markets – annual assessment is undertaken to identify best-in-class insurers capable of responding to the SPE Risk Management Standards.
Program Negotiation – negotiate optimal program structure with cost effective balance between deductibles and premiums. Program must provide the most comprehensive coverage with the flexibility to respond quickly to SPE’s inherent and contractual exposures.
Day-to-Day Administration – timely and accurate responses to SPE’s unique day to day requirements.

10. SPE Risk Management Underwriter Relationships
Long standing and beneficial partnerships with Fireman’s Fund and Tokio Marine Nichido Fire and Insurance Co. developed over time.
Production Package market is limited and Fireman’s Fund has been identified as a preferred partner
Have $250,000,000 per picture capacity available
Provide rating structure that keeps costs low
Works closely with SPE on difficult placement issues
Appreciates our Risk Management approach
Tokio Marine has been a preferred partner since the Sony acquisition and participates on major portions of the property & casualty programs
Appreciates Risk Management approach and provides solutions to production liability coverage not easily obtained from other markets.
Includes hard to obtain coverage for production risks in basic policy:
Stunt activities including driving
Pyrotechnics
Will include loan outs & independent contractors as additional insureds
Hiscox has emerged as a strategic partner for the specialized Media Liability risks of SPE
Insurance Company providers are continually assessed for their financial stability and a long term commitment to the Entertainment Industry

11. Risk and Insurance Total Cost of Risk – Fiscal Year 2012
Premiums: $15,000,000
(includes all U.S./Canada and Master International)
Retained Losses: $4,500,000 Estimated
(includes: auto, general liability, workers compensation, errors & omissions/media and cyber, production)
Exposures
Revenue: $7,900,000,000
Property Assets (Total Insured Values): $1,920,000,000
(Replacement Cost including Business Interruption + Extra Expense)
Workers Compensation Payroll (subject payroll): $733,389,809 (Head Count 4,568)
Insurable Production Cost: $800,000,000
(TV, MP, Home Entertainment, Digital and Studio)
Protection
18 Major Lines of Coverage
Over 40 Underwriters providing over 70 Policies plus numerous local and international policies for non-US production offices

12. Annual Total Casualty Premium/Retained Losses vs
Annual Total Casualty Premium/Retained Losses vs. Total Annual Revenues – 2006 thru 2012

13. Annual Workers’ Comp Premium/Retained Losses vs
Annual Workers’ Comp Premium/Retained Losses vs. US Headcount – 2006 thru 2012

14. Annual Global Property/B&M/Terrorism Premium/Retained Losses vs
Annual Global Property/B&M/Terrorism Premium/Retained Losses vs. Property Values – 2006 thru 2012
Property Values (in 000s)
Note: An aggressive marketing effort at locking in rates for multi-year programs proved beneficial during several years of natural disasters

15. Annual Production Package Premium/Retained Losses vs
Annual Production Package Premium/Retained Losses vs. Net Insurable Production Costs – 2006 thru 2012

16. Risk and Insurance Strategy: SPE Risk Management Achievements
Casualty, Property and Executive Risk
Financial
Collateral reduction of $900,000 in 2012
Implemented International Master Control Program ; savings of $243,000
Workers’ Compensation program moved from ACE to Tokio Marine in 2010 after aggressive marketing in 2009; saving $900,000
Work Comp Medical Bill Review pricing shifted from percentage (25%) of savings to per bill ($12.50). Estimated cost savings in excess $100,000
Major Insurance Claim Settlements
Marvel - $3,000,000
SPE Cyber Attack - $400,000
Grouper - $15,000,000
Pinewood - $15,000,000
Crime and Employment Claims –$1,400,000
Program Enhancements
Lowered Workers’ Compensation deductible from $750,000 to $500,000
Increased CA Earthquake Coverage from $70,000,000 to $100,000,000
Increased Property Program Loss Limit from $400,000,000 to $500,000,000
Cyber Liability program was separated from the Multimedia/Technology program and now have a separate $20,000,000 limit with expanded coverage
Cyber Liability amended to provide coverage for the care, custody and control of Third Party Intellectual Property Assets

17. Risk and Insurance Strategy: Sampling of SPE Risk Management Achievements
Program Enhancements (cont.)
Terrorism Coverage - Expanded Policy Form to include Coverage For Political Violence; Secured Coverage For $193,000,000 International Office Schedule at No Charge; Expanded Policy To Provide $1,000,000 in Coverage For Previously Excluded Territories (War Risk when declared)
Regular testing of Broker Offerings with RFP's in 2007 and 2011
Maintaining experienced staff while developing new staff assuring quality service continuity with regular staff evaluations and goal setting
Unique claim settlements (Pinewood property claim, certain E&O claims, 9/11 Civil Authority)
Implementation of Risk Management Information System (RMIS)
Reduction of Cost of Risk over the last few years despite upward cost pressure from insurers
Production Program              
Cast clearance extensions negotiated for higher risks                   
Anna Nicole Smith                    
Grown Ups 2                      
London Calling
Michael J. Fox Project
One Direction         
Increased coverage for Ingress/ Egress (relevant for Hurricane Sandy claims est. $300,000)                
2013 renewal enhancements:                    
Premium savings of $900,000                     
Increased sub-limits for civil authority                     
Increased covered artists from 20 to 25

18. Insurance Combination Opportunities/Challenges
Opportunity to combine due to commonality of exposures for these coverage lines:
Umbrella
Fiduciary
Directors and Officers
Employment Practices
Employed Lawyers
Crime
Kidnap, Ransom & Extortion
Due to minimum premium levels, combination savings would be modest and result in a dilution of limits.
Note: Maintaining broadened definition of insured and on-location extensions of coverage are important
Challenges
Relative to risk exposures-most types of insurance purchased by SPE would not generate positive leverage by combining with SCA
SPE Property Program consists of significant values in California providing coverage with finite amount of Earthquake limits available which would be diluted if combined with SCA values particularly in California
Types of Property insured by SPE significantly different than those of SCA (SPE’s sound stages vs. SCA’s HPR manufacturing/distribution locations)
SPE Workers’ Compensation and General Liability coverages would not be viable lines of business to consider combining because of the unique film production exposures
Cyber Liability policy has been drafted specifically for SPE’s risk profile along with coverage for the care, custody and control of any third party intellectual property assets (not combinable due to market relationships and exposures)
Media/Technology policy has been drafted to the specific needs and requirements of SPE and its contractual requirements (not combinable due to market relationships)
Production Package policy is unique to SPE covering motion picture and TV production ( could roll in SME’s video production activities)

19. Appendix

20. SPE Business Partners & Resources
INTERNAL
Procurement
Legal/Litigation
Business Affairs
Studio Operations & Facilities
Real Estate
Corporate Safety/Security & Environmental Affairs
Information Security
Compliance
Corporate Communications
Information Technology
EIS Infrastructure
Marketing & Publicity for MPG/TV and HE
Digital Group – SPI, SPII, SPA, SP Technology
Production Acquisitions for Sony Pictures Classics, Worldwide
Corporate Acquisitions and Mergers
Corporate Events
SCA/SEL/SME Risk Management
Finance
Medical Department
People & Organization
Transportation
Tax
Labor Relations
Home Entertainment
Post Production
International Groups

21. SPE Business Partners & Resources
EXTERNAL
Adjusters
Artists
Business Managers
Attorneys
Physicians/Nurses
Studio Risk Managers
Insurance Brokers & Carriers
Appraisers
Vendors/Contractors/Consultants
Investigators
Muni/Government Agencies
Finance Companies

22. Corporate Example – Cyber Insurance
CYBER ISSUES:
In 2011, SPE’s Cyber Insurance was included in the Media Liability Policy.
SPE experienced a breach on June 2, 2011 through the sonypictures.com website. Claims expense was $1.6 million.
Due to our claim and several other significant cyber claims, our underwriters made the decision to get out of the Cyber Insurance arena.
INTERACTION:
SPE Risk Management gathered data for three insurance applications. Before starting the marketing and quoting process, SPE Legal needed Non-disclosure Agreements (NDAs) from the three insurance companies involved in quoting. Applications were prepared by SPE Risk Management with assistance from InfoSec, Legal Compliance and Litigation. Other required information was also compiled and submitted to the insurance companies with the application (i.e., Sony Global Basic Principles on Personal Information, [name others].
After submission was received by the insurance companies, Risk Management facilitated many meetings and conference calls over a three month period. Participants were SPE Risk Management, InfoSec, Legal Compliance, Litigation, Lockton and the underwriters from the insurance companies. Discussions included private information (credit cards, bank accounts, social security numbers); systems security; how information is collected, stored and monitored; and breaches (including procedures after a breach is discovered). These meetings also addressed Ultraviolet and Media Cloud Services and third party content that SPE has in its systems (including in the “Cloud”) for outside studios and production companies.
RESOLUTION:
As a result of our efforts, we were successful in obtaining a program through [Brit]??, Liberty Mutual and Beazley for $20 million in limits with a $10 million self insured retention.
It is important to note that this policy includes coverage for third party content in our care, custody and control. This is a difficult risk to insure and new to the insurance market.
SPE personnel involved in obtaining coverage:
Janel Clausen & Donna Tetzlaff - SPE Risk Management
Len Venger - SPE Litigation
Ophir Finkelthal – SPE Corporate Legal
Jason Spaltro, David Lin and Danny Chi from SPE InfoSec
Cynthia Salmen and Courtney Schaberg – SPE Compliance
Emily Freeman – Lockton, SPE’s insurance broker
Underwriters from Brit, Liberty Mutual & Beazley

23. Production Example – London Calling
CAST INSURANCE ISSUES
There are broad exclusions built into SPE’s production package policy, these include Stop Dates (when an artist needs to be released to another production), and participation in Stunting and Hazardous Activities. To the extent there is an exclusion imposed by the underwriters, Risk Management needs to work with everyone involved to get the exclusion waived. London Calling aka Amazing Spider-Man 2 is an example of the process to secure full coverage.
Notification - Underwriters receive notification of possible excludable cast situation by various methods. Risk Management gives verbal or written notification or Cast Medical paperwork identifies an issue (e.g. hazardous stunt activities, pre-existing medical conditions, participating in other projects at the same time.)
Example - Shailene Woodley’s Medical exam revealed – Stop Date issue as well as hazardous activities, i.e., motorcycle riding
First result - $2MM deductible for any loss due to training, practicing & riding motorcycle.
INTERACTION
Shailene Woodley - Stop Dates & Hazardous Activities -
Risk Management first notified during pre-production phase that artist needed to learn how to ride a motorcycle and that she would be performing in another production.
Worked with Producer, Denise Pinckley & Stunt Coordinator, Andy Anderson to obtain training info, i.e. current experience, anticipated activity, training schedule.  This type of information needs to be very detailed, i.e., speeds, where, who is training, what is involved, make sure the safety group is aware. Carrier requested their Executive Director Loss Control, Paul Holehouse review documentation & coordinate with our safety team
To lift stop date – need day out of days report and activities for both shows; are there any shoot around possibilities.  To reduce deductible for motorcycle riding, need average daily shooting costs; shoot around possibilities; scenes riding in, etc.
Andrew Garfield, Emma Stone, Jamie Foxx, Dane DeHaan­ – all had stunting exclusions in addition to a medical issue for Emma Stone.  Resolved by soliciting the help of production, the carrier, our broker and Sony’s internal Motion Picture team (Michael Marshall, EVP Business Affairs; Deb Bruenell, Sr. VP Legal; Debra Bergman, VP Production Administration; Pete Corral, Sr. VP Production Administration; John Clements, Exec Director, Production Loss Control
RESOLUTION
Shailene Woodley’s issue took nearly 3 months of back and forth discussions before a positive resolution. The end result was lifting the stop date restriction and acceptance of a one day deductible (equivalent to $500,000).
All other artist restrictions were removed following the same process.