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FIRST MONETARY MUTUAL LIMITED

FIRST MONETARY MUTUAL LIMITED. TWENTY FIFTH ANNUAL. SHAREHOLDER’S MEETING. RISK PERSPECTIVE. Risk Management Process Identify Assess Comprehensive Portfolio Risk Matrix. Mitigate Internal Policies, Practices, Procedures and Limits Underwriting – Financial Reinsurance

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FIRST MONETARY MUTUAL LIMITED

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  1. FIRST MONETARYMUTUAL LIMITED TWENTY FIFTH ANNUAL SHAREHOLDER’S MEETING

  2. RISK PERSPECTIVE • Risk Management Process • Identify • Assess • Comprehensive Portfolio • Risk Matrix • Mitigate • Internal Policies, Practices, Procedures and Limits • Underwriting – Financial • Reinsurance • Internal Controls • MIS – E-Board • Governance • Monitor • Modify FIRST MONETARY MUTUAL LIMITED

  3. BLACK SWAN RISK PYRAMID Less Control More Control FIRST MONETARY MUTUAL LIMITED

  4. RISK MANAGEMENT:CREDIT | MARKET | LIQUIDITY • Credit risk is related to market changes or performance of a financial asset • Market risk, is risk resulting from adverse movements in market rates or prices • Liquidity risk is the potential that an institution will be unable to meet obligations as they come, due to inability to liquidate assets or obtain adequate funding FIRST MONETARY MUTUAL LIMITED

  5. RISK INVESTMENT & MITIGATION • Investment Risk Management • Performance, Returns, Liquidity, and Portfolio Structure • 70% of assets are cash: Insured CD’s • 20% trust invested in Government Securities • No losses in program: EVER! • Risk Mitigation • Policies: Limits • Internal Controls • MIS: E-Board • Governance FIRST MONETARY MUTUAL LIMITED

  6. CONCENTRATION RISK MANAGEMENT • Concentration risk management is risk resulting from the exposure to losses due to a concentration by business/product lines and geographic area • Financial Services Sector: Community Banking • 15% of net income (after reinsurance expenses) first investments • 25% of net income (after reinsurance expenses) from D&O product line • 60% of net income (after reinsurance expenses) from PMI product line FIRST MONETARY MUTUAL LIMITED

  7. RISK MITIGATION Multiple States: Spread risk of loss in both PMI and D&O lines Reinsurance: Risk Transfer Second Position D&O Contracts: Risk avoidance/Limitations Policies, Practices, and Procedures: Loss Control Internal Controls: Reduce/Avoid Errors MIS: E-Board | Governance: Reporting/Oversight FIRST MONETARY MUTUAL LIMITED

  8. D&O UNDERWRITING RISK A WHO’S WHO OF GROUPS THAT SUE: REGULATORY AGENCIES SHAREHOLDERS CUSTOMERS COMPETITORS EMPLOYEES SPECIAL INTEREST GROUPS Underwriting risk is risk that insurance prices won’t cover the corresponding level of insurance claims FIRST MONETARY MUTUAL LIMITED

  9. D&O UNDERWRITING CONTINUED • Financial Institutions: Hedge Funds, Broker Dealers, Large Banks, and Community Banks • D&O Rates have been driven by public company shareholder claims FIRST MONETARY MUTUAL LIMITED

  10. CAF INDEX FIRST MONETARY MUTUAL LIMITED

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