Milliman Life Insurance & Financial Services

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2 About Milliman For more than 60 years, Milliman has pioneered business solutions and strategies worldwide. One of the world s largest independent actuarial and consulting firms, we are recognized leaders who have helped shape change in the markets we serve. We are independently owned, and offer unbiased advice based solely on the needs of our clients. With insight that crosses borders and connects industries, Milliman offers innovative services in life insurance and financial services, employee benefits, healthcare, investment, and property and casualty insurance. Our consultants serve a wide range of clients, delivering personalized service and a unique combination of actuarial and business skill. With offices in principal cities worldwide, Milliman integrates global expertise with local knowledge and management. We can help you expand to new markets and better understand how your current operations are influenced by developments around the world.

3 Depth of knowledge, objective analysis, and practical strategies for the evolving life insurance and financial services industry. To succeed in financial services today, companies need a clear understanding of political, economic, and demographic trends coupled with a rigorous analysis of markets, opportunities, and risk. Milliman has played an active role in the evolution of the insurance industry. We have the experience required to deliver insight into emerging trends in the context of your specific business dynamics. Supported by expert analysis, we offer focused advice on corporate strategy, risk management, product offerings, distribution, and other key areas. Milliman s sophisticated software tools reflect the most advanced financial technology. In an era of changing standards and law, our consultants provide the industry s latest products and the know-how to use them to address the risks you face. Used by leading insurance and financial firms worldwide, Milliman software supports essential risk-management and reporting functions, from hedging through projections, pricing, reserving, and analysis of capital needs. Milliman consultants bring knowledge, experience, and an unbiased perspective. Combining technical prowess with broadbased business expertise, we develop solutions that are practical and actionable and customized for your organization s needs. 1

4 Clients and Industries If you are an insurer Milliman offers objective advice on products, risk management, financial reporting, and other key facets of your business. We are known for thought leadership in the newer fields of enterprise risk management, securitization structures, and calculation of embedded value. a reinsurer Reinsurers rely on us for help in transaction pricing and identification of market opportunities. We also provide expert analysis of emerging industry issues, such as products with secondary guarantees, risk elements, financial models, and the financial implications of potential deal structures. a financial services company We offer assistance in a wide range of areas, including mergers and acquisitions, securitization, product design, market evaluation, compensation, regulations, and compliance. an investment bank We consult on mergers and acquisitions, securitizations, and risk transfer, and are often called on to give advice prior to deal negotiations. We use financial analysis, deal modeling, mock-portfolio evaluations, and tutorial sessions to help you understand transaction risks and possible outcomes. a product distributor Whether you are a domestic or non-u.s. distributor, we can help you develop new market strategies and financial products, including retirement products, living benefits, indexed annuities, and combination life insurance/long-term care products. We specialize in strategic alliances, product development, market evaluation, distributor and producer compensation, market conduct, and regulatory compliance. a financial guarantor Milliman has assisted most of the financial guarantors currently involved in insurance industry securitizations. Clients depend on us to guide them through these complex transactions, helping to identify and analyze risks. Services include assessing projection models and assumptions, examining baseline transaction cash flows, stress-testing potential business performance, and reviewing transaction documents to ensure they accurately reflect the negotiated agreement. an insurance regulator Milliman provides advice and analysis to support your oversight responsibilities. Our independent actuarial advice, litigation support, and discretion are particularly valuable in cases where a state insurance commissioner has taken control of an insurance company, when bankruptcy court is involved, and when sale negotiations are required. a law firm Milliman can support your litigation needs through expert-witness testimony, attorney education, contract language analysis, and insight on state regulatory and tax issues. 2

5 Consulting Services Capital management Product and financial market innovations are driving dramatic change in the realm of capital management. Formulaic approaches are giving way to more sophisticated analyses of economic capital. As insurance products grow in complexity, companies need enhanced methods to support the measurement, allocation, and fine-tuning of capital. Today s competitive environment demands that risks be supported by adequate funds no more, no less. With Milliman s track record in tailoring capital models, you can be confident that appropriate and innovative techniques will be applied to your specific business dynamics. We provide the analysis necessary to reflect current regulatory requirements and to incorporate emerging industry standards in the United States, Solvency II in Europe, and the IAIS global framework. Depending on your needs, Milliman can develop capital models from the ground up, using our exclusive software tools MG-ALFA and MG-Hedge. Or we can adapt your existing models to incorporate newer, more sophisticated risk-evaluation techniques. Together with your professionals, we take a comprehensive approach that reflects underwriting, credit, market, liquidity, and operational risks aiming for capital optimization in a highly competitive marketplace. Enterprise risk management Milliman professionals are knowledge leaders in the emerging field of enterprise risk management (ERM). Drawing on years of hands-on experience and close ties to academia, we have developed a powerful suite of techniques to quantify risks that until recently were difficult to address. While many insurers struggle with the valuation of nonfinancial risks, Milliman clients already benefit from our broad ERM expertise. We work with clients at many stages. You may already have strong financial risk calculations, but need to value your operational and strategic risks. Or you may need to build all aspects of an ERM model from the ground up. Whatever your requirements, Milliman models give you innovative, actionable ways to quantify risk. With our proven approach, you can integrate all types of business risk into one coherent view and identify how risk factors across your organization affect each other, so that each decision is informed by an understanding of its impact on the dynamics of your entire organization. This critical analysis allows you to optimize your overall risk/return trade-off and confidently capitalize on risk-bearing profit opportunities. Principles-based reserves, MCEV, IFRS, and Solvency II Principles-based methods are emerging worldwide as part of a remarkable convergence of ideas. While details vary by locale, most jurisdictions are discarding formula-based approaches in favor of methods that require companies to determine reserves and surplus based on their individual dynamics. As the industry leader in financial risk management, hedging, and stochastic model analysis, Milliman has extensive experience supporting traditional reporting around the globe. We are now actively involved in the evolution of principles-based methods. In this changing landscape, Milliman is on the leading edge of a global dialogue. Whether it s Market Consistent Embedded Value, Solvency II in Europe, Principals-based Reserving in the United States, or IFRS around the globe, we can support your transition. Combining our current research with decades of experience in reporting and risk management, our consultants are ideally positioned to offer advice as you move to a principlesbased approach. Financial risk management and hedging services Milliman pioneered the field of financial risk management and we continue to set industry standards for innovation and best practice. Major financial institutions around the world retain us to manage complex risks in their portfolios. With clients ranging from small, closely held insurance firms to large multinationals, our team has the depth of experience required to customize risk-management programs for your unique needs. Milliman was the first to develop and use analytical tools, such as MG-Hedge, for risk management of financial guarantees. And we were the first to offer a distributed computing solution, C-squared, to accelerate complex calculations. In 2004, Milliman became the first actuarial firm to provide derivative execution services, assembling an in-house team with deep experience on Wall Street and the major futures and options exchanges. We are industry experts in 3

6 Consulting Services (continued) risk transfer of financial guarantees, through vehicles including reinsurance, risk pools, and securitization. Our expertise in product design gives you an edge in creating differentiated, low-cost guarantee products and gaining rapid entry to new markets. With experience managing one of the largest derivatives positions in the insurance industry, our hedging services team offers significant advantages, including dealer pricing that reflects our scale and extraordinary breadth in dealer and instrument coverage. Milliman gives you access to an exceptional group of traders, quantitative finance experts, capital markets specialists, risk managers, actuaries, operations specialists, and technologists the expertise of a leading capital markets firm. Our services include derivatives execution, operations support, and performance attribution. Milliman s skill with the market-leading MG-Hedge software enables you to employ the most sophisticated hedging techniques. And we are continually revising methods in an ongoing effort to define and enhance best practices. Our hedging team is immersed in the derivatives markets every day, gaining up-to-the-minute insights. We are independent and do not trade a proprietary book, so we can align ourselves fully with your objectives. Litigation support Milliman experts will work with your legal team on all aspects of litigation. We can help you assess a case s strengths and weaknesses, and weigh them against the costs of prolonged litigation and risk of possible loss. Our services include briefing attorneys on insur ance industry issues and practices; reviewing the consistency of contracts, illustrations, systems specifications, and pricing decisions; quantifying damage exposures; recommending settlement benefits; and building actuarial models to value potential settlements. Milliman has years of experience and a reputation for offering independent and unbiased advice. We are frequently called on to serve as expert witnesses and have extensive experience with class action lawsuits. Mergers and acquisitions Over the past 10 years, Milliman consultants have advised buyers or sellers in more than three-quarters of the life insurance industry s completed transactions. This experience gives us unique insight into current market pricing, historical trends, the market s views of potential transactions, regulator perspectives, and the competitive implications of a transaction. With offices throughout the United States and around the globe, Milliman can assemble a cross-disciplinary team to evaluate virtually any merger or acquisition scenario. Our services include actuarial appraisals, purchase GAAP projections, tax valuation, and analysis of risk-management alternatives for an acquisition. We also help clients manage the post-deal integration process. Because we never serve as a broker, we are a trusted independent source on the valuation, merits, and weaknesses of a proposed deal. Product development and management Whether you re looking to outsource product development or build the knowledge to create new products in-house, Milliman experts can provide the assistance you need. Our consultants combine extensive product expertise with a comprehensive knowledge of distribution strategies, regulatory compliance, underwriting approaches, and product implementation, bringing superior insight into the industry s changing landscape. And our cutting-edge software tools support the profit testing, reserving, and risk-management facets of new product development. Milliman s leadership has facilitated new product concepts, such as living benefits, special or secondary guarantees, and indexed annuities. We are actively involved in establishing industry standards for these new products and developing the risk-management techniques required as product dynamics evolve. Our compliance experts will guide you through the maze of changing insurance law. With an in-depth knowledge of requirements and substantial experience working with state regulators, our support can accelerate product approval. Financial reporting and analysis As financial reporting standards evolve, Milliman clients benefit from our broad knowledge of current best practices and insight on emerging issues. We support you with practical advice and advanced tools to ensure the most accurate and efficient reporting process. We can review your existing methods and suggest improvements or create tailored financial 4

7 reporting systems. We can perform all calculations for you or train your actuaries to use the customized tools we develop. For some clients, we serve as appointed actuaries. Our consultants keep you apprised of evolving requirements, whether statutory, tax, U.S. GAAP, or IFRS. And our analyses of new pronouncements facilitate your planning and implementation processes. Securitizations Over the past several years, Milliman has participated in most of the life insurance industry s securitizations and a wide range of private transactions, advising on more than $12 billion in structured finance insurance solutions. In this complex, rapidly developing field, companies turn to us for up-to-date information, industry-leading experience, and unbiased advice. Our services include the development of precise cash flow projections, as well as thorough deal and portfolio risk analysis. We are well versed in all types of structured finance insurance solutions, including XXX and AXXX transactions, embedded value, closed block, and mortality catastrophe bonds. Market-entry support Milliman has worked with clients around the globe to evaluate market-entry opportunities and strategies. We can help you work with regulators, evaluate potential joint venture partners, develop distribution strategies, adapt products and systems to new markets, and build a talented team of professionals to run your operations. Our market-entry services typically include the development of a business plan, analysis of capital needs, and long-term business forecasts. Stochastic modeling of insurance risks Milliman takes advantage of computing power and enhanced modeling techniques to deliver improved insight into your fundamental business risks, including longevity, mortality, and lapse. Using sophisticated stochastic methods, we can not only identify the expected returns on a portfolio of complex risks, but also better understand and manage the volatility of these returns. Coupled with rapidly evolving demographics in many of our markets, new stochastic techniques allow our clients to develop new products and fine-tune the financial management of associated risk. 5

8 Products and Tools Software solutions Milliman s leading software is used by top insurance firms around the globe. Designed for ease of use, our programs incorporate industry best practices as well as our ongoing research and hands-on experience in the field. As the industry shifts from formulaic calculations to principles-based methods, Milliman software can ease you through this critical transition. Used alone or in combination, our systems help you build value in today s fast-changing environment. MG-ALFA Milliman s Asset Liability Financial Analysis system (MG-ALFA ) is a dynamic financial modeling tool that dramatically speeds the process of pricing and projection for a wide range of financial products. This user-friendly, state-of-the-art Windows-based system puts Milliman s actuarial expertise to work for you. It already offers the nested stochastic capabilities needed to calculate and project principles-based reserves and capital values, as required by current and pending regulations. MG-ALFA offers unsurpassed flexibility, audit tools to ensure accuracy, and a powerful calculations capability that will shorten project time. And it can be customized to meet your company s unique needs. MG-Hedge Designed and supported by an integrated team of software engineers, actuaries, and capital-markets professionals, Milliman s proprietary software for risk analysis and hedging of exposures is a market leader used by top firms worldwide. The core of the system is a market scenario generator that produces thousands of time-series paths, based on either a risk-neutral or realistic scenario methodology. Unlike programs that aggregate data and make broad assumptions, MG-Hedge calculations are based on your actual portfolio and can be used to precisely calculate the optimal course of action. Our proprietary Hedge Simulation Tool allows Milliman experts to test various hedging strategies for performance potential before executing your program. We can also experiment with a variety of financial instruments to see which combination would best meet your goals. MG-Hedge works with Trade Positioning System (TPS), a Milliman tool that combines live market data and the output from MG-Hedge to develop hedging recommendations. MG-Triton This sophisticated family of software products enables you to efficiently calculate statutory, tax, and GAAP reserves, and provides the information needed to understand and manage financial results effectively. MG-Triton software products produce accurate reserves while enhancing your analytical capabilities. Windows-based and easy to use, the programs feature a powerful relational database, which allows unlimited querying and facilitates electronic reconciliation with other company financial statements. MG-Triton also includes a projection model that enables prospective and retrospective analyses. 6

9 Research and Publications At Milliman, we re well known for our front-line research and active involvement in the industries we serve. We are committed to publishing reports that offer practical insights into the many issues you face. Proprietary research: Data and analysis on topics such as overhead expenses, embedded value, and economic capital modeling. Research reports: Timely reporting on a range of subjects, including IASB discussions, AXXX securitization, and combination plans. Published articles: The views of our consultants on subjects such as combination plans, indexed annuities, and longevity insurance. NAIC meetings: Detailed quarterly reports on meetings of the NAIC to keep you informed about key industry topics and trends. IASB and Solvency II updates: Current information and analysis on emerging regulatory standards. White papers: Insight on emerging issues, such as principles-based reserving. 7

10 A Distinctive View Put Milliman s independent thinking, depth of knowledge, and breadth of experience to work for your organization. We ll help you ask the right questions and answer them with the best technical resources, business skills, and actionable creative ideas. Our consultants will listen closely to your needs and suggest solutions tailored to your situation and your markets. Find out how Milliman insight can help you thrive in a dynamic and challenging industry. To learn more, contact your local Milliman office or visit our Web site at 8

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12 1301 Fifth Avenue Suite 3800 Seattle, WA phone fax