Insurance Services Overview

John Ziambras

Managing Director & General Manager

๏ Division of NSCC Established in 1997

๏ Link Insurance Carriers with Broker/Dealers, Banks, and other Distributors of insurance products

๏ Provide automated, centralized and standardized framework for information (data) exchange and money settlement

๏ Support primarily variable annuity products

Insurance Services Overview

๏ Reduce operating costs by eliminating paper and manual processes

๏ Automate, standardize and streamline insurance processing and information exchange between carriers and broker-dealers

๏ Help establish and automate compliance procedures

๏ Aggregate money settlement: reconciliation of applications to premium dollars, and applications to commissions paid

๏ Help distributors and carriers grow revenue

Value Proposition

๏ Insurance Carriers

Manufacturers of insurance products

๏ Distributors

Large NYSE firms, Banks & Independent Broker/Dealers who sell insurance products.

๏ Solution Providers

Technology Vendors and Service Providers that offer services to carriers and/or distributors and enable them to connect to Insurance Services.

Parties to the Transaction

Distributor

A

Distributor

B

Distributor

C

Trading

Partner

X

Trading

Partner

Y

Trading

Partner

Z

Distributor

A

Distributor

B

Distributor

C

Trading

Partner

X

Trading

Partner

Y

Trading

Partner

Z

Operational Benefits

Proprietary ModelDistributors and carriers use their

own direct lines with multiple trading partners

Inefficient

Time Consuming

DTCC ModelAutomated processing solution for

applications and subsequent premiums, addressing the needs of

both insurance carriers and distributors

Central link

Efficient

๏ Variable life and annuity insurance products are considered securities under securities law

๏ Insurance in the U.S. is regulated at the individual state level (51 different jurisdictions)

๏ NSCC’s Insurance Services is regulated by the SEC. Need approval for all new services and changes to existing ones

๏ Insurance Services is a non-guaranteed service. NSCC is under no obligation to settle on behalf of a participant if they cannot meet their settlement obligations.

Legal Framework

๏ A financial product manufactured by insurance companies

๏ Investment & Insurance Hybrid

๏ Premiums can be invested by customer in mutual-fund-type investment subaccounts.

๏ Account value grows on a tax-deferred basis

๏ Can be used to provide income at retirement age

๏ Insurance company guarantees the income for a certain period (5, 10, 15 years, lifetime, etc.)

๏ An important product for 78 million people entering retirement

Annuities

๏ $1.8 Trillion in assets67% variable, 33% fixed

๏ $212 Billion of new sales (premiums) $133B or 63% variable

$79B or 37% fixed

๏ In 2006, DTCC processed $11 billion of VA premiums

๏ Total VA contracts in force: 29 million

๏ DTCC average daily VA Position records: 4 million

The U.S. Annuity Industry

Variable Annuity Sales by Channel

35%

31%

13%

10%

10%

1%

Captive Agents

Independents

Banks

Wirehouses

Regionals

Direct

๏ 53 Insurance Carrier “Families” –143 Companies

๏ 175 Distributors

๏ 28 Vendors & Service Providers

๏ $11 billion in annuity premiums

๏ $4 billion in annuity commissions

๏ 8 different products/services

Our Business Today

๏ From Distributor to Carrier:

Applications/Premium (APP)

Subsequent Premium (SUB)

Licensing & Appointments (LNA)

๏ From Carrier to Distributor:

Asset Pricing (AAP)

Commissions (COM)

Positions & Valuations (POV)

Financial Activity Reporting (FAR)

Automated Customer Account Transfer (ACATS/IPS)

Money Settlement (MSD / MSS)

Current Insurance Functionality

Is rep eligible to sell carrier’

s product?

Core Existing FunctionalityPay the rep

for selling carrier’s product.

APP Confir

mUSA

Patriot Act

Licensing & Appointments

(L&A)

Money Settlement

Money Settlement

Money Settlement

Initial Applicati

on & Premium (APP)

Commissions (COM)

Subsequent

Premiums (SUB)

Money Settlement

ACATS

Positions and Asset Pricing (POV, AAP)

Financial Activity Reporting (FAR)

๏ Continue to support insurance automation and work with our customers and the industry to enable Straight-Through Processing” or STP

๏ Expand to more distribution channels, such as banks and independent broker/dealers, and to more product lines (life insurance & long term care)

๏ Become a player in the retirement income space and benefit from the current demographic trends towards the use of annuities

Our Future

John Ziambras

Office: 212.855.5651

E:mail: jziambras@dtcc.com

Website: www.dtcc.com/products/insurance

Thank You!!