2014 St. George s Limited Page 1 of 6

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1 St. George s Limited Summary Guide To Bermuda Segregated Accounts Introduc)on This memorandum summarizes key provisions of Bermuda s segregated accounts law and how St. George s Limited ( SGL ) uses segregated accounts to protect the interests of its policyholders. Corporate Structure SGL holds a Class C long- term insurance license issued by the Bermuda Monetary Authority. From a corporate perspec,ve, SGL is structured as a segregated accounts company ( SAC ) pursuant to Bermuda s Segregated Accounts Companies Act 2000 (the SAC Act ). Segrega&on of Assets and Liabili&es A SAC is authorized by the SAC Act to create and operate segregated accounts 1 in order to legally segregate the assets and liabili.es associated with a specific segregated account from the assets and liabili(es associated with other segregated accounts and the assets and liabili(es of the SAC s general account. A segregated account is not a separate legal en.ty but a record or collec.on of records detailing transac'ons rela'ng to or linked to each other. Nevertheless, a segregated account has many of the a&ributes of a separate legal person, including the ability to enter into contracts and sue or be sued. The assets linked 2 to a segregated account are held exclusively for the benefit of the segregated account s owners and counterpar.es, and are available solely for the benefit of that segregated account s owners and creditors. Furthermore, the SAC Act s1pulates that any asset linked to a segregated account (a) shall be held in a separate fund which is (i) not part of the general account and shall be held exclusively for the benefit of the account owners of the segregated account and any counterparty to a transac-on linked to that segregated account, and (ii) available only to meet liabili,es of the account owners and creditors of that segregated account; and (b) shall not be available or used to meet liabili3es to, and shall be absolutely and for 1 Segregated account means a separate and dis3nct account (comprising or including entries recording data, assets, rights, contribu1ons, liabili1es, and obliga1ons linked to such account) of a segregated accounts company pertaining to an iden1fied or iden1fiable pool of assets of such segregated accounts company which are segregated or dis2nguished from other assets and liabili2es of the segregated accounts company for the purposes of this Act. SAC Act, s. 2(1). 2 The SAC Act provides that an asset, right, contribu7on, liability or obliga7on that belongs or pertains to a segregated account of a SAC must be linked to that segregated account by one of the following: (1) an instrument in wri+ng including a governing instrument or contract; (2) an entry or other nota+on made in respect of a transac,on in the records of a segregated accounts company; or (3) an unwri9en but conclusive indica-on. SAC Act, s. 2(1) St. George s Limited Page 1 of 6

2 all purposes protected from, the general shareholders and from the creditors of the company who are not creditors with claims linked to the segregated accounts.3 Accordingly, the only assets available to meet the liabili/es of the SAC that are not linked to a segregated account are the assets held in the SAC s general account. In SGL s case, each annuity or life insurance contract it issues is linked to its own segregated account. Thus, each contract issued by SGL benefits from the statutory firewall created by the SAC Act. Governing Instruments and Contracts The SAC Act requires a governing instrument for each segregated account that describes the rela%onship between the SAC and the segregated account owners, se#ng forth the rights, interests, and obliga/ons of the account owners. In addi'on, the rights, interests, and obliga'ons of all counterpar'es to transac'ons entered into for and on behalf of any segregated account must be evidenced in contracts. Among other things, the governing instrument will usually detail the requirements for becoming an account owner, vo-ng rights (if any) that may be exercised by the account owner, the manner in which the segregated account will be managed, the mechanics for the payment of profits, and the distribu+on of assets upon the winding up of the segregated account. The SAC Act requires that governing instruments be governed by Bermuda law, and the par*es submit to the jurisdic(on of the Bermuda courts. Unless otherwise expressly agreed in wri/ng by the par/es, any contract pertaining to a transac'on linked to a segregated account shall be deemed to contain a statement that the rights of the counterparty shall not extend to, and the counterparty will not have recourse to, the assets that are linked to any other segregated account or to the general account of the Company. Any provision of a governing instrument or contract rela4ng to the segrega4on of assets or liabili%es of a segregated account shall be governed by and construed in accordance with the SAC Act, and the par/es may not contract otherwise. In SGL s case, each policy s contract is the governing instrument. The contract incorporates specific provisions that create the segregated account, describes the rights and obliga.ons of the par$es, and sets forth how the segregated account shall operate. The contract includes specific language that confirms the segrega0on of the assets and liabili0es of the segregated account from any other segregated account established by SGL, as well as SGL s general account: Each Segregated Account is separate, dis4nct and iden4fiable from the other segregated accounts of the Company and the general account of the Company. The assets allocated to the Segregated Account are not chargeable with the liabili/es arising out of the other business of the Company, including any other segregated account or general account of 3 SAC Act, s. 17(2) St. George s Limited Page 2 of 6

3 the Company. No claim shall be made under any Contract on the assets of any segregated account other than the one linked to such Contract. 4 Segregated Account Representa1ve A SAC must appoint a segregated account representa.ve ( SAR ) in Bermuda who must be approved by the Minister of Finance, and whose details must be included in the register of officers and directors of the SAC. The SAR func%ons as an internal watchdog with the statutory duty to con$nuously monitor the segregated accounts and report to the Registrar when he becomes aware of a reasonable likelihood that the general account or a segregated account has become insolvent or that it is in breach of certain provisions of the SAC Act. Kane (Bermuda) Limited 5 is SGL s SAR. Internal Transac,ons A SAC that is not a mutual fund may appor(on an asset or liability among two or more segregated accounts and the general account of the SAC. Where a SAC has appor-oned an asset or liability, the extent to which the asset or liability is linked to a segregated account shall be clearly indicated in the contract or governing instrument effec$ng the appor#onment. If not otherwise prohibited, a segregated account within a SAC may contract with one or more other segregated accounts of the SAC (subject to some restric7ons designed to protect creditors from improper transac.ons made between different accounts). In addi.on, a SAC ac.ng on behalf of its general account may enter into transac3ons with one or more other segregated accounts operated by the SAC. Transfers from the general account to a segregated account are only allowed if, on the date the transfer is to take place, and taking into account such transfer, the general account is solvent and all the shareholders and creditors of the general account on that date have given their wri3en consent to the transfer. In the event the transfer breaches these provisions, any person adversely impacted by the transfer can pe11on the court to void the transfer. In SGL s case, the policy form states: We may invest and deal with the assets, investment income, and other property recorded, allocated, or credited to the Segregated Account in accordance with the terms of this Contract. We may commingle all or any part of the property in the Segregated Account belonging to, or in the control of, the Company or for which the Company is 4 GlobalFlex policy form. 5 Kane (Bermuda) Limited is part of Kane Group, the world s largest independent insurance manager, a leading provider of third party administra3on services to the life, pensions, investments, and insurance industry, and a provider of various risk consul4ng services. The Group operates from offices in Bermuda, the Cayman Islands, Guernsey, Malta, the United Arab Emirates, the United Kingdom, and the United States St. George s Limited Page 3 of 6

4 responsible (whether rela#ng to other segregated accounts or not) and may invest proceeds with affiliated companies. We shall always maintain proper records that allow iden%fica%on of the property (or the interest in the mixed fund or combined or converted property) represen+ng the property (or its proceeds or property or alloca2ons or credits or por%ons of property) among all the segregated accounts formed by the Company. 6 Record Keeping A SAC is required to maintain detailed financial records that clearly iden%fy the assets, liabili*es, income, and expenses that are linked to each segregated account. In addi7on, the SAC must maintain a record of each transac/on entered into by the SAC and maintain a general account which records all of the assets and liabili1es of the SAC which are not linked to a segregated account and which discloses any assets intended by the par3es to be applied to a risk of any nature, and which exposes such assets to liability or loss. In SGL s case, each segregated account has its own separate ledger that records transac.ons rela%ng specifically and exclusively to that segregated account in accordance with generally accepted accoun+ng principals used in connec+on with the prepara+on of SGL s financial statements. In addi,on, all assets linked to each segregated account are held in a specific custodial account designated as St. George s Limited in favor of its Segregated Accounts. For example, when an annuity contract is purchased from SGL, a segregated account is created in respect of that contract. 7 The contract s premium is contributed to SGL s investment por7olio in exchange for a like amount of the company s investment por7olio on a pro rata basis (thus benefi%ng from diversifica2on) that is linked to the segregated account and recorded in that segregated account s ledger. If the assets of the segregated account are insufficient to sa5sfy the guaranteed elements of the contract at any 2me, the general account shall be available to cover any deficiency, subject to the claims paying ability of the company. The records maintained with respect to any segregated account may be inspected by that account s owner but that owner has no right to inspect the records pertaining to any other segregated account or the general account of the SAC. Unless waived in wri-ng by the account owner, the SAC is required to prepare financial statements in respect of each segregated account that shall be audited and presented to the members in an annual mee,ng. A copy of the financial statements of a segregated account shall be made available to the account owner at such intervals and for such periods as may be agreed by the SAC and the account owner, such period not to be less than once in each financial year. SGL s contracts contain the following provision regarding financial statements: 6 GlobalFlex policy form. 7 In addi'on to crea$ng a segregated account for each contract that is issued and unrelated to the opera&on of the segregated account, SGL issues its contracts to a Bermuda trust specifically formed to own the policy on behalf of the client. Appleby Services (Bermuda) Ltd. is the trustee of this trust St. George s Limited Page 4 of 6

5 The Owner hereby waives the right to have laid before a general mee6ng, or otherwise be provided with, any financial statements or auditor s report thereon in respect of this Contract and the Segregated Account. This waiver will remain in place for an indefinite period but is revocable at the op1on of the Owner on wri6en no1fica1on to Us. The SAC is also required to maintain a register of account owners se8ng out their respec:ve interests in any segregated account. This register is not open to public inspec5on, thus maintaining the privacy of the account owners. Offenses Under the SAC Act The SAC Act creates several offenses, the commission of which can expose the SAC and its officers to fines, sanc-ons, or both. First, the SAC Act makes it an offense to make a false statement for any purpose under the SAC Act. It is also an offense to fail to comply with the condi&ons imposed upon registra&on of a company under the SAC Act or to fail to inform third par$es that they are dealing with a SAC. A SAR also commits an offense if he breaches his duty to provide a report in certain circumstances, including his coming to the view that the SAC is insolvent. Account Owner Protec-ons Except where specifically excluded, there shall be implied in every contract and governing instrument entered into by a SAC a term that: No party shall seek, by any means, to establish an interest in or recourse against any asset linked to any segregated account to sa1sfy a claim or liability not linked to that segregated account; If any party succeeds in establishing an interest in or recourse against any asset linked to any segregated account of the SAC in respect of a liability not linked to that segregated account, that party shall be liable to the SAC to pay a sum equal to the value of the benefit thereby obtained by him; and If any party shall succeed in seizing or a+aching or otherwise levying execu5on against any assets linked to any segregated account of the SAC in respect of a liability not linked to that segregated account, that party shall hold those assets or their proceeds on trust for the SAC and shall keep those assets or proceeds separate and iden/fiable as such trust property. In the event that any assets a+ributable to a segregated account are taken in execu7on in respect of a liability not a/ributable to that segregated account and in so far as those assets cannot otherwise be restored to the segregated account affected, the SAC shall procure that its auditor shall cer$fy the value of those assets lost and, in priority to all other claims against the account, transfer or pay out of the account for which the liability was a2ributable sufficient assets or sums to restore to the affected segregated account the value of the assets lost St. George s Limited Page 5 of 6

6 Insolvency When winding up a SAC, the liquidator is required to deal with the assets and liabili6es which are linked to each segregated account only in accordance with the SAC Act and he shall ensure that the assets linked to one segregated account are not applied to the liabili3es linked to any other segregated account or to the general account, unless and asset or liability is linked to more than one segregated account, in which case he shall deal with the asset or liability in accordance with the terms of any relevant governing instrument or contract. Legal Tests The SAC Act has been subject to a number of legal challenges that have been decided by the Bermuda courts. These decisions indicate that the courts will protect the segregated accounts upon insolvency and will ensure that the assets of an individual segregated account are only available for the creditors and account owners of that par1cular segregated account. Conclusion In many respects, Bermuda s segregated accounts are similar to separate accounts found in the US life insurance industry. However, several features of the SAC Act notably its explicit language that creates a statutory firewall, the nature of the governing instrument, the detailed accoun&ng and repor&ng requirements, and the con$nuous oversight provided by the SAR provide more robust policyholder protec2ons than those found in the US separate accounts regime. December 2014 DISCLAIMER The informa(on contained herein is of a general nature and is not comprehensive, and is subject to change without no0ce. Although we endeavor to provide accurate and %mely informa%on, there can be no guarantee that such informa%on is accurate as of the date it is received or that it will con1nue to be accurate in the future, and we accept no liability for any errors. St. George s Limited does not provide legal or tax advice, and no one should act on such informa2on without appropriate professional advice. This communica,on is not an offer to sell or a solicita,on to buy any insurance or investment product St. George s Limited Page 6 of 6