Michael Symonds, FSA, MAAALehman BrothersInsurance Products Group(212) 526-9525michael.symonds@lehman.com

Insurance SecuritizationIP-34 CIA Annual Meeting

June 28, 2007

Introduction

Insurance Securitization Market

Insurance Financing Spectrum

Transaction Constituents

Special Purpose Reinsurer

Monolines

Rating Agencies and Risk Analysis

Case Studies

The past five years has seen an explosion of issuance of insurance-linked securities. This presentation will discuss:

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Growth of the life insurance securitization market has been driven by:

Insurance Securitization Market

Optimization of the capital structure Match funding of redundant reserves Risk management

Seeking to diversify with non-correlated risks Increasing comfort with insurance risk

$16.0 billion life-insurance-linked securities issuance U.S. and international transactions Securitization of open and closed blocks Applications include:

Redundant reserve funding Embedded value monetization Mortality catastrophe bonds

Issuers

Investors

Development of the Market

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Insurance Securitization Market

Cumulative Life Insurance Securitization (by Issuance Amount)

3.6 4.2 4.3 4.3

1.52.2

3.7

5.5

8.4

14.1

16.0

1.5

8.2

3.40.6

9.4

1.82.7

2.1

0.80.4 0.4

2.11.8

$0

$2

$4

$6

$8

$10

$12

$14

$16

Redundant Reserve Embedded Value Mortality Cat Bonds Total

2003 2004 2005 200620022001 2007 YTD

$ Billions

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The Insurance Financing Spectrum

Financing Description

Agencies’

CapacitySenior Unsecured Debt Raises full-recourse capital at holding company

Securitization Financing (Senior)

Non-recourse financing Frees excess reserves or redundant capital Avoids reliance on LOC’s

Hybrid Capital Incorporates debt and equity features Tax deductible Favorable rating agency treatment

Securitization Financing (Junior)

Raises new capital against embedded value Investors provide non-recourse financing Use of proceeds is key to rating agency treatment

“Preferred Tracking Stock”

Raises equity capital at holding company Dividend payout can be an attractive feature to

investors

Equity Buyers assume all risks of the enterprise, both for the in-force as well as new business

“Equ

ity”

Hig

h C

ost

“Deb

t”L

ow C

ost

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Securitization Capital Structure

Normal Deviation from Economic Reserve

Moderate Deviation from Economic Reserve

Extreme Deviation from Economic Reserve

Equity Financing(Economic Capital)

MezzanineFinancing

Debt Financing

Liability Value Capital Structure

Economic Reserve Self-Financing

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Capital Structure in Practice

Redundant Reserve Embedded Value

Wrapped92%

Unwrapped8%

NR12%

BBB19%

AA69%

Unwrapped22%

Wrapped78%

A86%

BBB8%

BB6%

________________1. Ratings for public transactions only.

Wrapped vs Unwrapped Securitizations

Investment grade and wrapped portions correspond to “Debt Layer” financing

Trend is to increasingly incorporate mezzanine tranches and further sell down the capital structure

Wrapped execution remains efficient but unwrapped issuance is catching up as investor sophistication increases

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Transaction ConstituentsStructuring a capital markets solution for an insurance company requires finding the common ground between a number different parties

Investors

Demand driven by diversification and incremental spread

Investors include bank conduits, special investment vehicles, corporate money managers and hedge funds

Capital Markets Solution

Rating Agencies

Have encouraged securitization through favorable leverage treatment

Rate transactions based on analytical processes

Issuer Drive to optimize capital structure or manage risk

Regulators

May involve multiple jurisdictions Approval process driven by evaluation of

reinsurance contract

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Sample Securitization Structure

Special Purpose Reinsurer (“SPR”)

Non-Recourse Notes

Proceeds

Investors

Reinsurance1

2

Downstream Structure Transaction Steps

1. The Operating Company enters into a reinsurance contract, ceding a specific book of business to the SPR.

2. The SPR raises statutory capital through the issuance of Non-Recourse Notes to the capital markets.

3. The SPR deposits the proceeds of the capital markets offering into a trust, which is pledged to the Operating Company to secure reinsurance reserve credit.

Equity

Cash

Proceeds

3

Reserve

Credit Trust

Operating CompanyFor the benefit of

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Isolates the subject business

Increases transparency

Investors: specific, defined risk, divorced to the best extent possible from the sponsor

"clean" entity and well-defined reinsurance agreement key to investor comfort with respect to non-technical risks (e.g., market conduct risk)

Regulators / Rating agencies: statutory risk transfer emphasizes non-recourse nature

Performance of securities tied to the performance of the defined book

Aim to emulate to the best extent possible “true sale” opinion

SPR is often domiciled in different jurisdiction

Reinforces remoteness on bankruptcy

May require collateralization

SPR often owned directly by ceding company

Special Purpose ReinsurerUse of a Special Purpose Reinsurer (SPR) is critical

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Monolines - Overview and BenefitsMonolines are special highly rated insurance companies that underwrite transactions and “wrap” resulting notes

As insurance-linked issuance has increased, an increasing number of

monolines have built dedicated insurance teams

Increasing monoline demand can be viewed as proxy for development of the broader investor base

Investors value the due diligence that a monoline performs Financial guaranty eases distribution by eliminating risks that are unfamiliar to capital

markets investors Potential to achieve significantly better pricing offsets the costs of obtaining the financial

guarantee Secures the rating agencies’ non-recourse view of the financing by transferring multiple

risks to a third party Boost to ratings of securities allows more financing flexibility

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Rating Agencies and Risk AnalysisRole of Rating Agencies

Risks Mitigants Insurance/actuarial risk Asset risk Structure risk Regulatory risk Operational risk

Experience data, scenario analysis Defined guidelines, scenario analysis Model analysis, legal opinions Established jurisdiction, legal opinions Track record of sponsor, structural

protections

Key transaction risks and mitigants

Assessment of non-recourse nature of the transaction Sponsor’s broader capital and risk management framework

Quantitative and legal assessment of structure / key risks Financial strength of sponsoring entity

Transaction Rating

Sponsor Impact

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Case Study: River Lake IVSelected Case Studies

In April 2007, Lehman Brothers acted as the sole structuring advisor and sole bookrunner for a $965 million XXX financing facility for Genworth.

Transaction Overview River Lake IV was established to finance XXX reserves associated with a block

of term life policies written or assumed by Genworth Life and Annuity Insurance Company

Lehman Brothers worked with Genworth to expand the non-recourse structure to include two classes of notes that more efficiently finance XXX reserves

Facility is structured to allow for up to $425 million of additional Class A notes to be issued as needed

Significant Achievements Enabled Genworth to further expand its capital resources beyond reinsurance

and traditional credit investors in favor of the robust and continually growing universe of asset-backed investors

Significant oversubscription resulted in tight all-in execution.

Class A, Series A-1 notes priced at a spread of 0.27% over one-month LIBOR

Class B notes priced at a spread of 1.50% over one-month LIBOR (as of closing date, tightest ever execution of BBB tranche in life securitization)

River Lake IV is the first Bermuda-based reinsurance captive used in a XXX capital markets transaction

April 2007

$965,000,000 Facility

River Lake Insurance Company IV Limiteda wholly-owned subsidiary of

Genworth Life & Annuity Insurance Company

$500,000,000 Class A, Series A-1 Floating Rate Guaranteed Notes due 2028

financial guaranty provided by

$40,000,000 Class B Floating Rate Subordinated Notes due 2028

Sole Structuring Advisor & Sole Bookrunner

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Case Study: OSIRIS Capital plcSecuritization of Mortality Risk

Executive Summary

Summary Highlights

Transaction OverviewThis initial issuance consisted of three classes of notes linked to a combined mortality index consisting of mortality rates from three countries (based on defined weights): France (60%), Japan (25%) and the United States (15%)

The transaction was well received by the global investor base with diverse investor participation from Asia, Europe and the US. All tranches were oversubscribed with pricing tighten over the marketing process

November 2006€1,000,000,000

Floating Rate Note Programproviding mortality risk protection to

Co-Lead Manager / Co-Bookrunner

OSIRIS Capital plc

Series 1 Class B GuaranteedNotes insured by

a special purpose public limited company domiciled in Ireland

Lehman Brothers, as Co-Lead Manager / Co-Bookrunner, closed an inaugural $440.5mn offering (over three series / classes of notes) from OSIRIS Capital plc to provide four years of mortality risk protection to AXA Cessions(a wholly owned subsidiary of the AXA Group)

OSIRIS Capital plc was established to enable AXA Cessions to obtain fully collateralised mortality risk protectionon an ongoing basis utilising a flexible shelf program offering format

The transaction represents an important milestone in the mortality catastrophe bond market with numerous noteworthy achievements– First primary insurer to utilize mortality catastrophe bond protection– First mortality catastrophe bond issuance with tranches denominated in euros– First “BB”-rated mortality catastrophe bond to be issued– First mortality catastrophe bond with geographic exposure weightings not primarily driven by US mortality rates– First mortality catastrophe bond to use refined mortality trigger levels (vs prior deals’ 5% trigger

level increments)– Second mortality catastrophe bond program to utilise a financial guaranty (CIFG Europe)– Fourth mortality catastrophe bond program ever created

5.00%BB+/Ba1106%–110%$100mnSeries 3 Class D Principal At-Risk Notes2.85%BBB/Baa2110%–114%$150mnSeries 3 Class C Principal At-Risk Notes1.20%A-/A3114%–119%€50mnSeries 2 Class B Principal At-Risk Notes0.20%AAA/Aaa114%–119%€100mnSeries 1 Class B Guaranteed Notes

Tranche Pricing(Spreads to 3m

EURIBOR / LIBOR)Ratings (S&P/Moody’s)Mortality Trigger /

Exhaustion Level (%)SizeTranche

5.00%BB+/Ba1106%–110%$100mnSeries 3 Class D Principal At-Risk Notes2.85%BBB/Baa2110%–114%$150mnSeries 3 Class C Principal At-Risk Notes1.20%A-/A3114%–119%€50mnSeries 2 Class B Principal At-Risk Notes0.20%AAA/Aaa114%–119%€100mnSeries 1 Class B Guaranteed Notes

Tranche Pricing(Spreads to 3m

EURIBOR / LIBOR)Ratings (S&P/Moody’s)Mortality Trigger /

Exhaustion Level (%)SizeTranche

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Conclusion

The primary benefits of securitization include:

– Diversification of capital resources from traditional sources

– Enhanced financial strength of insurance company through permanent fully collateralized reserve credit

– Potential to achieve a lower weighted average cost of capital and boost ROE

– Transfer of insurance risk to the capital markets

– Tailored long-term financing

Continued momentum toward selling further down the capital structure (embedded value)

Continued expansion to new product and risk types

Annuities, longevity risk, new business strain

Benefits of Securitization

Future Potential

For issuers, securitization has become a critical component of an optimized capital structure

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This material has been prepared by the Insurance Products Group and is not a product of Lehman Brothers Research Department. It is for informational purposes only. Lehman Brothers makes no representation that the information contained in this document is accurate or complete. Opinions expressed herein are subject to change without notice. All levels, prices and spreads are historical and do not represent current market levels, prices or spreads, some or all of which may have changed since the issuance of this document. Under no circumstances should this document be used or considered as an offer to sell or a solicitation of an offer to buy any financial instrument mentioned in it. The products mentioned in this document may not be eligible for sale in some states or countries, or suitable for all types of investors; their value and the income they produce may fluctuate and/or be adversely affected by exchange rates, interest rates or other factors. Clients are advised to make an independent review regarding the economic benefits and risks of purchasing or selling the financial instruments mentioned in this document and reach their own conclusions regarding the legal, tax, accounting and other aspects of any transaction in the financial instrument in relation to their particular circumstances. Lehman Brothers enters into transactions on an arm's length basis and does not act as advisor or fiduciary to its counter parties except where a law, rule or written agreement expressly provides otherwise.

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