FOR IMMEDIATE RELEASE

NAIC SELECTS PIMCO TO MODEL RESIDENTIAL MORTGAGE-BACKED SECURITIES
Third Party Vendor Will Work With Regulators
To Determine Designations for Complex Securities

WASHINGTON, D.C. (Nov. 17, 2009) — Members of the National Association of Insurance Commissioners (NAIC) selected PIMCO as a third party financial modeler that will assist state regulators to ultimately determine the risk based capital (RBC) requirements for residential mortgage-backed securities (RMBS). For approximately 18,000 RMBS securities owned by U.S. insurers at the end of 2009, the new model will produce expected losses at the RMBS security level for insurers to map their holdings to the appropriate NAIC designation and accompanying RBC requirements.

The selection of PIMCO to perform this assessment was conducted in an accelerated timeframe that was designed to be extremely thorough. Defined objective criteria were used to evaluate more than 20 RFP responses and to develop a short list of 11 vendors. A deep-dive was performed on each short-listed vendor by NAIC staff and independent financial consulting firm Oliver Wyman. The short list was then further reduced to four firms with additional questions posed and analytical reviews with several companies on individual Committee on Uniform Security Identification Procedures (CUSIP) assessments. The NAIC's objective was to identify a vendor with a sound assessment methodology, proven ability to process a large amount of transactions in a very short timeframe and processes and procedures in place to address potential conflicts of interest — all at a cost-effective price.

“Creating this new assessment process is an important step toward providing more transparency about these complex securities,” said Roger Sevigny, NAIC President and New Hampshire Insurance Commissioner. “This unique treatment of residential mortgage-backed securities distinguishes the NAIC as the only regulator to analyze these securities and require capital based upon the expected loss amount for a particular company.”

PIMCO will work with regulators to develop a set of price ranges for designations one through six to be used by insurers in their statutory financial statements and to calculate the risk-based capital charges for each specific security they own. These designations will apply only to year-end 2009 reporting.

A Valuation of Securities Task Force call (open to the public) is scheduled to take place on November 30 to discuss the model assumptions, which is a critical component of the new methodology. There will also be a task force briefing at the NAIC Winter National Meeting on December 7 in San Francisco. The objective is to finalize designations and price ranges by year-end so companies can begin reporting under the appropriate designation in early 2010. The NAIC will continue to look at this process going forward.

About the NAIC

Formed in 1871, the National Association of Insurance Commissioners (NAIC) is a voluntary organization of the chief insurance regulatory officials of the 50 states, the District of Columbia and five U.S. territories. The NAIC has three offices: Executive Office, Washington, D.C.; Central Office, Kansas City, Mo.; and Securities Valuation Office, New York City. The NAIC serves the needs of consumers and the industry, with an overriding objective of supporting state insurance regulators as they protect consumers and maintain the financial stability of the insurance marketplace. For more information, visit www.naic.org.

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