FIRST MONETARYMUTUAL LIMITED

TWENTY FIFTH ANNUAL

SHAREHOLDER’S MEETING

RISK PERSPECTIVERisk Management Process

IdentifyAssess

Comprehensive PortfolioRisk Matrix

MitigateInternal Policies, Practices, Procedures and Limits Underwriting – Financial

ReinsuranceInternal ControlsMIS – E-BoardGovernance

MonitorModify

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BLACK SWAN RISK PYRAMID

Systemic

Legal | WeatherRegulatory | Sovereign

Reputational | Competitive

Reinsurance | Concentration | Strategic

Insurance: Underwriting | Pricing | Claim ReservingCredit/Asset | Market | Liquidity | Operational/IT

More Control

Less Control

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RISK MANAGEMENT:CREDIT | MARKET | LIQUIDITY

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Credit risk is related to market changes or performance of a financial assetMarket risk, is risk resulting from adverse movements in market rates or pricesLiquidity risk is the potential that an institution will be unable to meet obligations as they come, due to inability to liquidate assets or obtain adequate funding

RISK INVESTMENT & MITIGATIONInvestment Risk Management

Performance, Returns, Liquidity, and Portfolio Structure

70% of assets are cash: Insured CD’s20% trust invested in Government SecuritiesNo losses in program: EVER!

Risk MitigationPolicies: LimitsInternal ControlsMIS: E-BoardGovernance

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LIMITED

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CONCENTRATION RISK MANAGEMENT

Concentration risk management is risk resulting from the exposure to losses due to a concentration by business/product lines and geographic area

Financial Services Sector: Community Banking15% of net income (after reinsurance expenses) first investments25% of net income (after reinsurance expenses) from D&O product line60% of net income (after reinsurance expenses) from PMI product line

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RISK MITIGATIONMultiple States: Spread risk of loss in both PMI and D&O linesReinsurance: Risk TransferSecond Position D&O Contracts: Risk avoidance/LimitationsPolicies, Practices, and Procedures: Loss ControlInternal Controls: Reduce/Avoid ErrorsMIS: E-Board | Governance: Reporting/Oversight

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D&O UNDERWRITING RISKUnderwriting risk is risk that insurance prices won’t cover the corresponding level of insurance claims

SHAREHOLDERS

CUSTOMERS

EMPLOYEE

S

REGULATORY

AGENCIES

COMPETITORS

SPECIAL INTERESTGROUPS

A WHO’S WHO OF GROUPS THAT SUE:

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D&O UNDERWRITING CONTINUEDFinancial Institutions: Hedge Funds, Broker Dealers, Large Banks, and Community BanksD&O Rates have been driven by public company shareholder claims

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CAF INDEX

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

111

173

242209 215

180

224189

215175

92128

10981

10 24

3976

Annual Number of Class Action Filings: 1996-2008

Options Backdating Auction Rate SecuritiesSubprime/Liquidity Crisis All Other