Life Insurance Companies Facing Pressure to Enhance Financial Management

WASHINGTON, December 19, 2007 – Life insurance companies will be under
growing pressure to enhance their financial management system capabilities
as they face changing financial reporting requirements and more extensive
risk management challenges in 2008, according to insurance actuarial and
risk management experts at Watson Wyatt Worldwide, a leading global
consulting firm.

The financial reporting environment in the life insurance industry is in
the midst of significant change, driven by the movements toward an
international reporting standard and toward principles-based approaches to
setting reserves and capital in the United States. In addition, companies
are experiencing a wide range of information-related demands from
regulators, rating agencies and shareholders, Watson Wyatt’s experts noted.

“Life insurance companies are facing a host of pressures, and many are
finding their current financial modeling software may soon be pushed to the
limit,” said Craig Buck, leader of the U.S. life actuarial practice in
Watson Wyatt’s insurance and financial services consulting group.
“Increasingly, there is a competitive advantage for executives who are able
to undertake a sophisticated analysis of their company’s performance and
explain it to stakeholders. This ability also can help increase
risk-adjusted returns and identify trapped capital that has been dragging
down performance. Many legacy systems are not able to provide this kind of
insight.”

At the same time regulations are changing, risk measurement and management
demands are becoming more complex. Some companies may find that their
existing systems are a source of risk that needs attention. But meeting
these demands requires more than investment in technology — companies will
need to invest in training their staff to fulfill the new reporting
requirements and use the latest methodologies. All of this means higher
costs.

“To be successful in this environment, companies need to deal in high
volumes,” Buck said. “The industry is searching for growth. One likely
result of this will be more consolidation among life insurers in 2008. Many
large companies are in a strong financial position and will continue to
seek growth opportunities through acquisitions. Especially considering the
weakness of the U.S. dollar, it would not be surprising to see more foreign
insurers exploring the U.S. market.”

About Watson Wyatt Worldwide

Watson Wyatt (NYSE, NASDAQ: WW) is the trusted business partner to the
world’s leading organizations on people and financial issues. The firm’s
global services include: managing the cost and effectiveness of employee
benefit programs; developing attraction, retention and reward strategies;
advising pension plan sponsors and other institutions on optimal investment
strategies; providing strategic and financial advice to insurance and
financial services companies; and delivering related technology,
outsourcing and data services. Watson Wyatt has 7,000 associates in 31
countries and is located on the Web at www.watsonwyatt.com.

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