The material contained in this presentation has been prepared solely for informational purposes by General Re-New England Asset Management, Inc. (“GR-NEAM”), and is not to be distributed outside of the organization to which it is presented. The material is based on sources believed to be reliable and/or from proprietary data developed by GR-NEAM, but we do not represent as to its accuracy or its completeness. This is not an offer to buy or sell any security or financial instrument. Certain assumptions, including tax assumptions, may have been made which have resulted in any returns detailed herein. Past performance results are not necessarily indicative of future performance. Changes to the assumptions, including valuations or cash flows of any instrument, may have a material impact on any results. Please consult with your tax experts before relying on this material. Additional information is available upon request. This document and its contents are proprietary to GR-NEAM. They were prepared for the exclusive use of your company. Neither this document nor its contents are to be given or discussed with anyone other than employees, directors, trustees or auditors of your company without our prior written consent.

Presented by Jerry Lynch

Life After Stimulus:

When Reflation Meets Deleveraging

2Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

3Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Conclusions

Deleveraging

Recession

Policy Response

Global

4Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

U.S. Real Economic

Growth

Fiscal/ Monetary Stimulus

Global Forces

Secular Cyclical

Stimulus

5Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Where Are We Now?

6Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Real GDP Growth

7Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Unemployment Rate vs. Broader Total Unemployed*

8Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Source: www.calculatedriskblog.com

New Home Sales and Recessions

9Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

U.S. Real Consumer Spending

Y/Y % Dec. – 1.7%

Source: ISI

10Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Source: Federal Reserve Board, Merrill Lynch

Capital Utilization

Manufacturing (SIC) SA, % of Capacity

11Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

World Industrial Production

Source: Big Picture.com

12Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Sources of Remittances by Recipient Regions, 2008

Source: Global Economic Prospects 2006: Economic Implications of Remittances and Migration (World Bank). World Development Indicators 2007 and Global Development Finance 2007

13Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Classic Non-Classic

Recession

14Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Classic RecessionCharacterized by:

• Inventory cycle• 80% of decline in GDP due to de-stocking in manufacturing sector• Traditional stimulus almost always works to absorb excess by stimulating demand• Lasts 18 months

Non-Classic Recession

Characterized by:

• Balance sheet compression• Deleveraging• Debt elimination• Rising saving rates• Expansion of government’s balance sheet to offset contraction in private sector• 3 years or more

15Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Job Losses in Recent Recessions

Current RecessionCurrent Recession

Source: www.calculatedriskblog.com

16Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Job Losses* in Post WWII Recessions

Current Recession

Source: www.calculatedriskblog.com

17Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Job Losses in Post WWII Recessions

CurrentRecession

Source: www.calculatedriskblog.com

18Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Confidence New BankingSystem

Low Interest RatesLiquidity

LeverageLeverage

Leverage

19Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Claims of Banks on East European Countries, as % of GDP

Source: Big Picture.com

20Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Leverage

Deleveraging

Deleveraging is a process not an event.

Deleveraging

21Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Components of GDP

Consumption 70% +

Investment 16% +

Net Exports <1>% +

Government 15%

Source: BLS, GR-NEAM Analytics

=GDP 100%

22Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Total U.S. Debt

23Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

The Leveraging of America

Source: Federal Reserve, via Haver Analytics The New York Times April 4, 2009

24Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Leverage

25Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Consumer

Source: NY Times

26Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Consumer

27Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

GDP Growth: With and Without Mortgage Equity Withdrawal

GDP Growth

28Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Record Wealth Implosion

Source: Federal Reserve Board, Merrill Lynch

Households & Nonprofit Organizations: New Worth Difference – Year to Year NSA, Bil$

29Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Market Cap

30Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Stimulus

31Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Summary

(in billions)

Disbursements or Committed Funding

Potential

Federal Reserve 1,238 4,316

Treasury 332 3,912

Other Agencies 1 2,207

1,571 10,435

(in billions)

MEMO: U.S. Nominal GDP, Estimated 2008 $14,500 Billion

32Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

GDP in U.S. Dollars

$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

UnitedStates

Japan China Germany France UnitedKingdom

Italy Russia U.S.BudgetDeficit

Spain

'09

GD

P U

.S. $

(in

bill

ion

s)

Source: www.ritholtz.com

GDP in U.S. Dollars

33Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Mean Reverting Process

It’s a Non-Classic Recession

34Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

PCE as a % of GDP & Population Demographics

35Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Personal Consumption Expenditures (PCE) & Household Debt

36Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Savings Rate Must Rise, And It Will

Source: Bureau of Economic Analysis, Merrill Lynch

Personal Saving Rate SAAR, %

37Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

U.S. Homeownership Rate From 1965-2008

60

61

62

63

64

65

66

67

68

69

70

1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009

Annual Home Ow nership Percentage Average Home Ow nership Percentage from 1965 to 2008

Source: GR-NEAM Analytics

38Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Source: Federal Reserve Board, Merrill Lynch

Total Household & Business Credit/GDP: Ratio

39Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Ability of Policymakers to:• Recreate Credit Cycle • Reinflate Asset Values • Ignite a Consumer Led Recovery

Conclusion

Inhibited by Secular Change in Attitudes Toward:•Savings•Credit•Discretionary Spending•Homeownership

40Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

New Normal

Global Economic Drivers

China

41Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Chinese Banks’ New Loans

(200)

0

200

400

600

800

1,000

1,200

1,400

1,600

Apr 04 Sep 04 Feb 05 Jul 05 Dec 05 Jun 06 Nov 06 Apr 07 Sep 07 Mar 08 Aug 08 Jan 09

(bn yuan)

Source: CLSA

42Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Capital Markets

43Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Worst Decade Yet

44Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Growth in Total U.S. Credit Market After-Tax U.S. Corporate Profits

45Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

10yr U.S. Corporate A vs. 10yr U.S. Gov’t on the Run

Source: GR-NEAM Analytics

46Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Growth Story

Currency

Foreign Sales Trade

Inflation

Energy

Theme CyclicalSecular

Collapse in Demand

Deflation

Domestic

United States $

United StatesDeveloping Economies=

Restrained Capacity=

Higher Inflation=

International=

???=

=

Source: ISI

47Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

48Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Major Foreign Holders of U.S. Treasuries

49Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Foreign Exchange Reserves

2000

($ in Trillions) percent

$1.94 100%

0.78 40

1.16 60

2007(3rd Quarter)

($ in Trillions) percent

$6.0 100%

1.44 24

4.56 76

Total

Industrial Countries

Developing Countries

Source: IMF

50Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Composition of Foreign Exchange Reserves (Allocated)

2000 2007 2000 2007 2000 2007

U.S. Dollars 71% 63.8% 72% 69.7% 69.7% 60%

Pounds Sterling 3 4.7 2 3 3.5 6

YEN 6 2.7 6.1 3.1 5.8 2.5

Swiss France 0.5 0.2 0.2 0.2 0.3 0.1

Euro's 18 26 18 22 19.4 29

Other 1.5 2.1 1.7 1.6 1.3 2.5

Total Industrial Developing

Source: IMF

51Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Dollar Dominated

Note: Currencies have not been identified for another $2,536 trillion in foreign-exchange reserves

Source: International Monetary Fund

What currencies nations of the world keep their reserves in

52Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Source: International Monetary Fund

Note: Currencies have not been identified for another $2.67 billion in industrialized countries’ foreign-exchange reserves and another $2.533 trillion in developing countries’

reserves.

The Haves & The Have Moresforeign-exchange reserves, in trillions; quarterly data

53Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Total Workforce (LHS) /Total Employed (LHS)vs. Civilian Non-institutional Population (RHS)

54Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

55Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

56Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

57Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

58Proprietary & Confidential. © 2009 General Re–New England Asset Management, Inc.

Source: Chinese Central BankThe New York Times April 13, 2009

Cutting Back

Quarterly growth in China’s foreign reserves, mainly invested in Treasuries and other American bonds, has slowed significantly

China’s quarterly change in foreign reserves