The closer, the better

Implementing Solvency II The Asset side of the business

Presented by Philippe DenisJanuary 27th, 2011

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Agenda

BNP Paribas – a brief introduction

Expected capabilities for Solvency II

Summary

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Retail Banking

Investment Solutions Asset Management Securities Services

Corporate & Investment Banking

BNP Paribas Group

2nd bank in the Euro zone1

5th largest global custodian (in AUC) 3rd most valuable international banking brand

in Europe, 6th worldwide2

Among the world’s strongest banks3 One of the lowest CDS spreads in the industry Ranks 9th among the world’s safest banks4

Present in 85 countries worldwide 205, 000 employees

Access to multiple channels in a full service bank

1 ‘Global 2000 Forbes, 2009’2 Brand finance February 20103 According to Standard & Poor’s, Moody’s and Fitch4 Global Finance world’s safest banks 2009

BNP Paribas Group: Introduction

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BNP Paribas Securities Services:

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BNP Paribas – a brief introduction

Expected capabilities

Summary

Agenda

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Insurance CompanyMutual Society

Five capabilities relating to Asset Management:

Capability 1

Capability 2

Capability 3

Capability 4

Data & Information

Aggregation

Enrichment &Standardisation

AnalyticalServices

Decision

Asset Management

Financial Engineering

Capability 5

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Solvency II Processes

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A view of BNP Paribas in context:

Solvency II Measurement Strategy Decision and Implementation

Capability 1

Capability 2

Capability 3

Insurance Risk Office

BNP ParibasInvestment

Partners

BNP ParibasCorporate

Investment Bank

Asset Allocation Committee Solvency II Governance office

ALM / LDI Mandate

Overlay Asset Mgt

Other strategy

Structured Product

Inflation Swap

Other Derivative

SegregatedPooledFund 1

PooledFund 2

AM4 AM5In

House

Your Asset Management Platform

Actuarial Perspectives Indicators

Capability 4

Data & Information

Aggregation

Enrichment &Standardisation

AnalyticalServices

DecisionFinance Office

BNP Paribas Securities Services

Capability 5 Capability 5

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A Solvency II “Middle Office”

Basis for clean data for all types of analysis Not restricted to Solvency II For example stock-level attribution

Ability to look through your underlying investments

Data & Information

Expe

cted

Ben

efits

Provider Characteristics

Can show evidence of handling multiple Fund Managers and their respective outsource partners

Has evidence of data governance in their processes

Can evidence the Solvency II universe catalogue

Has capability of “attribution” as this typically drives the requirement for consistency and standardisation

Aggregation Enrichment & Standardisation

Capability 1 Capability 2 Capability 3

Project managing collection Portfolio list Properties held Derivatives Collective scheme values Hedge Funds Market associated data Evidence of governance

Multiple fund managers Multiple outsource providers Look through of fund of fund Consolidated view of assets A dynamic view of assets

Additional S-II information Make consistent for analysis Map to standard dictionary A dynamic view of assets

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Provision of Analytical Services for Pillar I & Pillar II

Market risk Back & Stress testing

Counterparty failure Market shock Market Up and Down

Attribution Versus performance

Independent view of risk versus known events

Understanding of assets to provide a complete Market SCR calculation

Remain focussed on your business products risks: Health Risk Life Insurance Risk P&C Insurance Risk

Pillar 1: Scenario Testing

Ant

icip

ated

Ben

efits

Provider Characteristics

Has capability to manage the data middle office

Can handle “multi-manager” and “multi-outsource” providers in the above model

Skills in place for risk (& performance measurement)

Flexible reporting, decision support, web delivered

Integrates with any downstream Asset Management capability to support a particular risk resolution

Pillar I: SCR Calculation Pillar II: Market & Credit Risk

Capability 4a Capability 4b Capability 4c

Market Interest rate Equity Spread Currency Concentration Illiquidity

Counterparty Risk Market risk reporting:

Asset classes Manager Volatility Value at risk Risk v Contribution

A “DNA” view of assets

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Example of Capability 4: Asset Allocation, Stress Testing, Risk:

Asset allocation

Interest rate risk Credit risk

Illiquidity risk Equity risk

Property risk FX risk TOTAL

Cost in capital 100% 9.2 17.9 3.2 4.0 1.3 3.6 39.2Equity 12% - - - 4.0 - 0.5 4.5 Global 6% 2.3 0.5 2.8 GBP 4% 1.6 1.6 EUR 1% 0.4 0.3 0.6 USD 1% 0.4 0.3 0.6

Others 4% 2.0 2.0 Listed and not listed equity 2% 1.0 1.0 Equity UCITS Funds 1% 0.5 0.5 Equity Hedge Funds 1% 0.5 0.5

Participations 2% 0.4 0.4

Real Estate 5% - - - - 1.3 0.0 1.3

Fixed Income 80% 9.2 17.9 3.2 - - 3.1 33.4 Government Bond (OECD & EEA) 40% 4.6 1.6 1.3 7.4 GBP 35% 4.1 1.4 5.5 EUR 2% 0.2 0.1 0.5 0.7 USD 3% 0.3 0.1 0.8 1.2

Corporate Bond 40% 4.6 17.9 1.6 1.8 26.0 AAA 1% 0.1 0.1 0.0 0.2 AA 8% 0.9 0.9 0.3 2.1 A 18% 2.1 2.6 0.7 0.9 6.3 GBP 15% 1.7 2.1 0.6 4.4 USD 4% 0.4 0.5 0.1 0.9 2.0

BBB 12% 1.4 3.7 0.5 5.6 B or lower 1% 0.1 1.7 0.0 1.8 Unrated 0% 0.0 9.0 0.0 9.0

Cash & cash equivalent 3% 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Stress UP

Stress DOWN

Equity 12% Global 6% GBP 4% EUR 1% USD 1%

Others 4% Listed and not listed equity 2% Equity UCITS Funds 1% Equity Hedge Funds 1%

Participations 2%

Real Estate 5%

Fixed Income 80% Government Bond (OECD & EEA) 40% GBP 35% EUR 2% USD 3%

Corporate Bond 40% AAA 1% AA 8% A 18% GBP 15% USD 4%

BBB 12% B or lower 1% Unrated 0%

Cash & cash equivalent 3%

Asset allocation / Breakdown compliant with Solvency II

Measuring the risk perspectives….

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Capability 4: Joining-up Assets to the liabilities

Stress DOWN

Stress DOWN

Stress UP

Stress UP

Cost in capital Mkt Up

Interest rate risk 1.2

Credit risk 2.5

Illiquidity risk 1.5

Equity risk 4.0

Property risk 1.3FX risk 0.0

TOTAL 10.5

Cost in capital Mkt Down

Interest rate risk 0.0

Credit risk 2.5

Illiquidity risk 1.5

Equity risk 4.0

Property risk 1.3FX risk 0.0

TOTAL 9.3

Asset side

Liability side

0-2 years 15%

2-5 years 5%

5-10 years 40%

10-15 years 40%

Liability allocation

Equity 12% Global 6% GBP 4% EUR 1% USD 1%

Others 4% Listed and not listed equity 2% Equity UCITS Funds 1% Equity Hedge Funds 1%

Participations 2%

Real Estate 5%

Fixed Income 80% Government Bond (OECD & EEA) 40% GBP 35% EUR 2% USD 3%

Corporate Bond 40% AAA 1% AA 8% A 18% GBP 15% USD 4%

BBB 12% B or lower 1% Unrated 0%

Cash & cash equivalent 3%

Asset allocation / Breakdown compliant with Solvency II

Event / MarketStress Testing

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Insurance CompanyMutual Society

Extending beyond Market Risk:

Capability 1

Capability 2

Capability 3

Capability 4

Data & Information

Aggregation

Enrichment &Standardisation

AnalyticalServices

Decision

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Solvency II Processes

Support full SCR Analysis

Capability 4d…

Health Life Non-Life Default Other

Provide for the full analysis life-cycle as a “toolset service provider” complementing your existing risk & actuarial capabilities

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Agenda

BNP Paribas – a brief introduction

Expected capabilities

Summary

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Summary:

E&Y and JP Morgan Asset Management continue E&Y – more on Capability 1 – 3 JP Morgan Asset Management – Capability 5

For consideration: Asset Manager service providers supporting your Solvency II challenges:

Must have solid capability in performance, attribution and risk analysis Have the expected governance processes in place for detailed data Have the tools to step beyond just the “Market SCR” analysis Have Asset Management overlays / skills to implement Solvency II change

The closer, the better

The information contained within this document (‘information’) is believed to be reliable but BNP Paribas Securities Services does not warrant its completeness or accuracy. Opinions and estimates contained herein constitute BNP Paribas Securities Services’ judgment and are subject to change without notice. BNP Paribas Securities Services and its subsidiaries shall not be liable for any errors, omissions or opinions contained within this document. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. For the avoidance of doubt, any information contained within this document will not form an agreement between parties. Additional information is available on request.

BNP Paribas Securities Services is incorporated in France with limited liability and is authorised by the CECEI and supervised by the AMF. BNP Paribas Securities Services' London branch is subject to limited regulation by the Financial Services Authority for the conduct of its investment business in the United Kingdom and is a member of the London Stock Exchange. BNP Paribas Trust Corporation UK Limited and Investment Fund Services Limited are wholly owned subsidiaries of BNP Paribas Securities Services, incorporated in the UK and are authorised and regulated by the Financial Services Authority. Details on the extent of our regulation by the Financial Services Authority are available from us on request.

The services described in this document, if offered in the U.S., are offered through BNP Paribas and its subsidiaries and its affiliates. Securities products are offered through BNP Paribas Securities Corp., a subsidiary of BNP Paribas, a broker-dealer registered with the Securities and Exchange Commission and a member of SIPC, the Financial Industry Regulatory Authority, New York Stock Exchange and other principal exchanges.