Tillinghast's New Variable Annuity Software Applications Help Insurers Satisfy Impending Regulatory Requirements; Applications Calculate Risk-Based Capital for Current RBC C-3 Phase II Proposals; Assist in Hedging Guarantees to Manage Risk.

STAMFORD, Conn. -- The Tillinghast business of Towers Perrin recently unveiled two new software applications to help insurers prepare for impending capital standards for variable annuity products. The applications, called "Variable Annuity (VA) Reserves and Capital" and "VA Hedging," offer superior auditability and transparency over other products. They were developed to help insurers satisfy the new Risk Based Capital (RBC) C-3 Phase II requirements expected to be mandated for companies at year-end 2005, as well as the proposed VA CARVM reserving requirements, which will likely become effective in 2006.

"The C-3 Phase II capital requirements mark the beginning of a new era. While the underlying modeling requirements are challenging, current product and investment strategies require sophisticated financial models," said Jack Gibson, the leader of Tillinghast's North America life insurance practice. "This new approach can provide insurers with a far better understanding of their risk exposures, and will help inform decisions about pricing products appropriately and selecting the best risk mitigation strategies."

--VA RBC and Reserves. In the past, regulatory reserves and capital were generally based on formulas. The new C-3 Phase II RBC and VA CARVM reserve methodologies proposed by the National Association of Insurance Commissioners (NAIC) require that reserves and capital are calculated by evaluating the tail risk from thousands of scenario simulations. In particular, it is expected that the new C-3 Phase II capital model will become effective at year-end 2005, requiring VA providers to have these models in place prior to year-end. Tillinghast's new VA Reserves and Capital application is able to perform these calculations quickly and efficiently.

--VA Hedging. Tillinghast's new VA Hedging application assists insurers in hedging equity market risks related to their VA product guarantees. In addition to reducing the insurer's exposure to risk, a clearly defined hedging strategy will help lower capital requirements under the new C-3 Phase II RBC standards. This new hedging application has the ability to handle "non-standard features," such as unusual guarantees and benefit types, giving users more flexibility than other products.

"VA providers will be able to get a tangible reduction in required capital by implementing sound and clearly defined hedging techniques," said Hubert Mueller, Principal and leader of Tillinghast's financial risk management services in North America. "Companies without hedging capabilities will be faced with significant increases in capital requirements that will make it difficult to maintain the economic viability of current VA products. In addition, companies can leverage the knowledge gained by developing less capital-intensive product features having lower tail risk, and better capitalize on current market opportunities."

Tillinghast has developed a comprehensive library of VA applications over many years of providing consulting, software and software-related services to the industry. With our VA applications and Tillinghast implementation support, insurers can be well positioned to meet pending regulatory requirements quickly and efficiently.

Our latest VA applications were developed using the MoSes(TM) platform, a preeminent financial projection software platform offered by Tillinghast and used by leading insurers around the world. These applications are fully transparent, allowing insurers to see the actual code used to make the calculations and, in turn, to trace the calculations and ease auditability. To facilitate high-speed applications, the MoSes platform also supports distributed processing and grid computing technology.

For more information about Tillinghast's financial modeling software applications, call 404-365-1700 or send an e-mail to [e-mail].

About Towers Perrin and Tillinghast

Towers Perrin is a global professional services firm that helps organizations improve their performance through effective people, risk and financial management. Through its Tillinghast business, Towers Perrin provides global actuarial and management consulting to insurance and financial services companies and advises other organizations on risk financing and self-insurance. Areas of focus include mergers, acquisitions and restructuring; financial and regulatory reporting; risk, capital and value management; products, markets and distribution; and financial modeling software solutions. The firm's other businesses are HR Services, which provides human resource consulting, and Reinsurance, which provides reinsurance intermediary services. Together, these businesses have offices in 24 countries. More information about Tillinghast is available at www.towersperrin.com/tillinghast.