Why Insurance Companies Outsource with …

1 Why Insurance Companies OutsourceSummary Based Upon Past EDH and Exchange ResearchThe Insurance Asset Outsourcing Exchange is a service of Eager, Davis & Holmes a fact-based perspectiveThe Insurance Asset Outsourcing Exchange promotes knowledge about third party Insurance asset management to benefit both Insurance Companies and investment managers. The Exchange gathers information from Insurance Companies and investment managers on a confidential basis, aggregates and analyzes information, and shares back with Exchange KNOWLEDGEA bout Third Party Insurance Asset ManagementContact: David Holmes, PartnerEager, Davis & Holmes LLC502 657 Other Research Available Through the Exchange on.

2 Periodic research on emerging Insurance asset management outsourcing issues Insurance Companies investment goals and practices Insurance Companies manager selection and evaluation practices Fee levels for third party Insurance asset management specific to asset class and styleWhat is Insurance Asset Tracker? Insurance Asset Tracker gathers detailed information about specific Insurance general account mandates that are outsourcedto third party investment managers. Insurance Companies and investment managers submit information to the database about the new investment mandates they have outsourced or won.

3 The data is gathered through the Insurance Asset Outsourcing Exchange website. Entries are verified, edited and duplicates are removed before inclusion in the database. The database is updated quarterly and can be downloaded from the Exchange is Insurance Asset Tracker Used? Insurance Asset Tracker provides unprecedented insightful detail about Insurance general account outsourcing activity. Exchange members can access the database to gain more detailed information management firms winning mandates similar to those an Insurance company seeks to class and investment style trends specific to Insurance company type, size.

4 Firms involved in manager management firms winning mandates that include the support services that an Insurance company may be seeking3 Why Insurance Companies Outsource Investment Management9%14%15%29%34%41%63%78%Retirem ent of key internal staffDifficult to find/retain qualified internal staffExternal management will reduce costsIncreasing complexity of investment managementissuesIncreasing challenge of meeting investmentperformance goalsNeed access to resources not available internallyNeed for specialized strategies and expertiseNeed for investment expertise not availableinternallyFew Outsource for cost reasonsPerceived Benefits of Outsourcing4 Historically, most outsourced assets come from cash flow (not terminations)

5 Source of Assets for Future Mandates4%13%15%23%28%38%62%Acquisition of another companyInternally managed assetsRebalancingReallocation of existing assets/targetsTerminating existing external managerSplitting assets from current outsourced moneyFuture cash flowRelated historical data:yInsurance asset managers lose only of their assets/year, on averageyInsurance asset managers gain about 7 new clients per year net (gain new clients and lose )Cash from operationsChanges with existing external managersInternal insurer influences 5 Growth typically comes from firms who already Outsource their general account assets to others, versus firms making the leap to outsourcingPercentage of All Insurers Broken Out By Third Party Manager Use/IntentionsCurrently useoutsourcersDefinitely/likely touse (but not usingnow)May use (but notusi ng now)D on't use/nointenti on of usi ng69%1%7%23%77%Key reasons why firms don t Outsource .

6 YLower cost in-houseyMore control in-houseyInternal core competency oryComparable/better in-house management