Life Insurers Indicate the Need for Improved Disclosure and Increased Transparency of Financial Statements, According to New Tillinghast CFO Survey

Most are also planning changes to internal business practices.

New York, N.Y., July 10, 2002 — According to a
just-released Tillinghast – Towers Perrin survey of life insurance CFOs, improved
disclosure of key business risks and increased transparency of financial statements will
be vital to restoring public confidence shaken by the recent financial difficulties and
alleged incidents of improper accounting among high-profile companies. More than half of
the survey respondents are planning changes to internal business practices such as their
approach to risk management and financial reporting. The survey also revealed that, while
General Accepted Accounting Principles (GAAP) measures are used most extensively in the
industry today, most CFOs believe that measures of economic value better track the change
in company value over time.

“This survey is representative of CFO views, and it
underscores the urgency for companies to improve the transparency of their organizations,
both internally and externally,” said Patricia Guinn, Managing Director Tillinghast – Towers Perrin.

This Web-based survey, which is the first in a series of
Tillinghast’s quarterly “pulse” surveys of North American life insurance CFOs,
examined issues relating to the management and reporting of financial results. In
particular, the survey focused on how current events are affecting financial reporting and
disclosure practices, and explored the effectiveness of the financial reporting
methodologies used by companies.

Changing Business Practices

The survey indicated that the life insurance industry has
been strongly affected by the fallout from recent high-profile events. Sixty-seven percent
report moderate to significant defaults in their companies’ asset portfolios, and roughly
40% have experienced greater scrutiny of their financial reporting practices, risk
management practices and investment portfolios, and a change in their relationship with
their audit firms. Over half (56%) of respondents plan changes to internal business
practices. Thirty-seven percent have changed or are planning to change their use of audit
firm services. Of the companies considering changing their use of audit firm services, 82%
have already discontinued or scaled back the use of their audit firm for non-audit
consulting services.

“The survey demonstrates that companies acknowledge
the urgent need for improved disclosures externally as well as changes to key internal
business practices,” stated Jack Gibson, the Life Insurance and Financial Services
Sector Leader for Tillinghast – Towers Perrin in North America. “Yet there are
substantial differences in the manner in which companies are making changes. Ultimately,
wise company managers will pay close attention to the needs of the investment community
and rating agencies.”

Examining Financial Reporting Methodologies

The survey also revealed a disconnect in financial
reporting: While a large majority of participants responded that GAAP is the most
important methodology for reporting results externally (72%) and for tracking business
results internally (83%), almost half (48%) of respondents believe that economic
value-related measures best track the change in company value over time, compared to 37% for GAAP.

“This study confirms our view that North American life
insurance companies are ready to consider using economic value more extensively as a
superior measure for tracking company performance over time,” said Hubert Mueller,
survey sponsor and Leader of Tillinghast – Towers Perrin’s Financial Management practice
in the Americas. “Among the multinationals, this concept is already accepted for
reporting financial performance to outside audiences such as financial analysts. While we
do not expect GAAP to be replaced as the primary measure for reporting financial results
in the near term, the recent fallout in the industry and the continuing volatility of
capital markets highlight the need for an improved performance measure.”

Optimism About Second-Quarter Results

Despite the recent economic turmoil and mixed results to
date, respondents expect second quarter results to be better than for the same quarter
last year. Over 90% of participants expect new life and annuity premiums to increase year
over year, while 80% of participants believe revenues will increase year over year.
Approximately 70% of participants expect that net income will increase year over year.

These results reflect CFOs’ outlook at the time they
completed the survey and may or may not reflect actual company performance. CFOs’ views on
future financial results for the industry will be a regular feature of the quarterly
Tillinghast – Towers Perrin Life Insurance CFO survey and will allow Tillinghast to track
the direction of the industry over time.

About the Tillinghast North America Life Insurance CFO Survey

The Web-based survey, which was conducted in May of this
year, is the first in a series of Tillinghast pulse surveys that will explore issues
important to the North American life insurance industry and its CFOs. The first survey had
a response rate of 73% out of 63 survey registrants. Respondents primarily included CFOs
from large and midsize North American life insurance companies: 65% were stock companies;
66% had premium income of more than $1 billion; 22% were multinationals. The second CFO
survey, to be launched next month, will focus on risk and capital management practices.
For more information on the North American Life Insurance CFO program, please contact Paul
Ludwig, program leader, at 212-309-3851.

About Tillinghast – Towers Perrin

Tillinghast – Towers Perrin provides actuarial and
management consulting to financial services companies worldwide. We are the premier
actuarial advisor to the financial services industry, with over 250 qualified actuaries
and 225 other professionals. Our major clients include most of the world’s top insurance
organizations. Tillinghast operates globally as a single firm through a network of 43
offices in 20 countries. Tillinghast is part of Towers Perrin, one of the world’s largest
management and human resource consulting firms, with over 9,000 employees. Towers Perrin
helps organizations manage their investment in people to achieve measurable performance
improvements. More information about Tillinghast is available at