Sony Pictures Entertainment Inc.March 21, 2013 D-R-A-F-T 10

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MISSION STATEMENT

PROTECT THE ASSETS OF SONY PICTURES ENTERTAINMENT

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RISK MANAGEMENT STRUCTURE

Janel ClausenVice President,

Risk Management

Aaron AuCoordinatorWork Comp

Claims &Admin Support

for Dept.

Douglas Hastings Claims Manager

GL, Auto, Property & Production

Claims

Dawn Luehrs Director

Global Production Risks

Donna TetzlaffDirectorGlobal

Corporate Risks including

Distribution Activities Britianey Barnes

AdministratorGlobal Production Risk

Support, Bonds & Notary

Kate Calabrese Claims/Systems,

AdministratorMedia Liab. Claims,

EPL Claims, Dept. Budget & Risk Mgmt Systems Mgr.

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Key Risk Management Functions

Risk Identification• Understanding SPE and identifying its unique risk characteristics • Assessing Film & TV Production and Distribution Risks

Risk Treatment Working with Internal and External Partners• Developing a policy on risk to optimize risk retention/transfer methods (Finance)• Negotiating and implementing insurance risk transfer program (Insurance Companies)• Fixed asset protection and catastrophic risk assessment (Finance & Administration)• Liability and litigation control (Legal)• Employee and public safety, security & crime control (SEHS)

Risk Administration• Claims Management for Sony Pictures Global Operations• Maintain insurable asset inventory and exposure data• Allocate risk costs to Studio, each Production and all other groups• Management Reports

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Contract reviews• Corporate (200)• Productions Domestic and Foreign(1,500 per year)

Coverage Requests (600 per year)• Scope, limits, extensions, amendments

Ongoing Cross-Team communication

Outgoing Certificates Issued and Reviewed (3,000 per year)• Same Day Issuance• Notice of Cancellation Compliance

Incoming Certificates Reviewed (600)

Special Endorsements (2,000 per year)

Policy Renewals• Gather and transmit renewal data to insurer for negotiations• Policies reviewed to verify terms and conditions match quotations received• Policies summarized updated and maintained

SPE Risk Management: The Day-To-Day

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Production Risk Management – A Dynamic Process

•RM notified of new

Pre-Production

Initial Production Notice to Risk Management – Weekly Production & Business Affairs Meetings, Online Publications, Phone Calls

Script Review, Exposure and Location Analysis – Domestic/International determination

Cast declarations, medicals, stop dates and cast multi-production utilization

Budgeting –Finalize Insurance line, Identify special insurance extensions – cast (age, medical etc.), marine, aviation, railroad, automobile, stunting, international, disability, duration of production

SEHS Coordination

Post-Production

Additional Filming and Re-Shoots

Claims Finalization

Annual Production Renewal Process

Production

Adapt to changes in pre-production schedule

Location changes

Contract Review – Standard SPE/Non-Standard, Vendor, Supplier and amendments to Insurance Policies and Insurance Certificates as needed

Claim activities

Special Hazard Identification and Insurance treatment

• Watercraft• Aviation• Stunting• Railroad• Automobile

SEHS Coordination

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Corporate Risk Management – A Dynamic Process

Global Insurance Renewal Process

Activities begin 120 days before renewal and varies by coverage (Property, Casualty, E&O, D&O, Marine, Aviation, etc.)

Collect exposure data from SPE entities (values, payrolls, productions costs, sales, vehicles)

Update claim summaries/status by line of coverage

Partner with broker to finalize submission and renewal program design and negotiation strategy

Meet with insurers as necessary

Monitor renewal progress and respond to insurer requests

Analyze insurer proposals and make recommendations to SPE management

Implement renewal and coordinate certificate issuance, reviews and approves insurers’ premium invoices for payment.

Manage ongoing relationships with brokers and insurers until subsequent renewal cycle (e.g. Tokio Marine – major strategic partner)

Risk Management Analysis and Administration

Identify corporate global risk exposures• Review contracts, leases, agreements• Monitor changes to locations, human

resources, inventory and warehouses• Assess impact of insurance laws and

requirements by country of operation• Due diligence for mergers & acquisitions

Analyze insurance solutions for new/changing exposures

• International• Media• Terrorism• Cyber Risk• Surety Bonds

Respond to internal SPE inquiries (e.g. clearance procedures, claims, INFOSEC, legal, SEHS)

Coordinate insurance responses for promotions, sales, marketing, distribution, studio operations, digital, the internet

Ongoing claim management

Manage annual insurance budget

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Annual Total Property & Casualty Premium/Retained Losses vs. Total Annual Revenues – 2006 thru 2012

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Annual Premium

10794858.6666667

15200836.7666667

13347348.6666667

13939807 13105103 14840956

Retained Losses

10316872 25270899 4347458 7818441 8965623 4443217

Revenues (in 000)

8000000 7500000 7700000 7500000 7000000 7900000

$2,500,000

$7,500,000

$12,500,000

$17,500,000

$22,500,000

$27,500,000

$32,500,000

$37,500,000

$42,500,000

$6,500,000

$6,700,000

$6,900,000

$7,100,000

$7,300,000

$7,500,000

$7,700,000

$7,900,000

$8,100,000

Sony Pictures Entertainment IncAnnual Total Premium & Retained Losses vs. Revenues

2006 thru 2012

Fiscal Year Pre

miu

m &

Lo

sse

s

An

nu

al R

ev

en

ue

s

(in

00

0)

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Annual Workers’ Comp Premium/Retained Losses vs. US Headcount – 2006 thru 2012

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

PREMIUMS

722005 627875 662681 431715 407982 426164

RETAINED LOSSES

1142000 1199000 1340000 1344000 1289000 1367000

HEADCOUNT

5222 5677 4788 4626 4507 4568

$250,000

$750,000

$1,250,000

$1,750,000

$2,250,000

500

1,500

2,500

3,500

4,500

5,500

Sony Pictures Entertainment Inc.Annual Workers' Comp Premium and Retained Losses vs. Domestic

Headcount2006 thru 2012

Fiscal Year Tota

l P

rem

ium

& R

eta

ined L

osses

Headcount

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Annual Global Property/B&M/Terrorism Premium/Retained Losses vs. Property Values – 2006 thru 2012

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

GLOBAL PROP/B&M/TERR PREM

3977379 4590306.1 3680890 3695921 3950880 4330010

RETAINED LOSSES

150000 150000 50000 50000 0 50000

PROPERTY VALUES (in 000)

1753896 1831736 1921700 1918542 1981686 1926487

$500,000

$1,500,000

$2,500,000

$3,500,000

$4,500,000

$1,625,000

$1,675,000

$1,725,000

$1,775,000

$1,825,000

$1,875,000

$1,925,000

$1,975,000

$2,025,000

Sony Pictures Entertainment IncProperty Premiums & Retained Loss vs Total Values

2006 thru 2012

Fiscal YearAn

nu

al

Pro

perty

Prem

ium

s &

Lo

sses

Pro

pert

y V

alu

es (

in 0

00s)

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Annual Production Package Premium/Retained Losses vs. Net Insurable Production Costs – 2006 thru 2012

2006-2007

2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

2006-2007

2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

PACKAGE PREMIUM

1719086

5401540

4453435

5342573

4358758

5277797

RETAINED LOSSES

1202357

2741860

1201288

4211947

2825819

1809762

PRODUCTION COST

238814444

992143112

721306940

1149266874

541189554

792148117

$1,000,000

$3,000,000

$5,000,000

$7,000,000

$9,000,000

$11,000,000

$100,000,000$300,000,000$500,000,000$700,000,000$900,000,000$1,100,000,000$1,300,000,000

Sony Pictures Entertainment IncTotal Annual Production Package Premium & Retained Losses

vs. Insured Production Cost

Fiscal Year

Productio

n P

ackage P

rem

um

&

R

etain

ed Loss

Productio

n C

ost

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Risk and Insurance Strategy: SPE Risk Management Achievements

Casualty, Property and Executive Risk

Financial• Collateral reduction of $900,000 in 2012• Implemented International Master Control Program 2010-2013; savings of $243,000• Workers’ Compensation program moved from ACE to Tokio Marine in 2010• Work Comp Medical Bill Review pricing shifted from percentage (25%) of savings to per bill ($12.50).

Estimated cost savings in excess $100,000

Major Insurance Claim Settlements• Marvel - $3,000,000• SPE Cyber Attack - $400,000• Grouper - $15,000,000• Pinewood - $15,000,000• Crime and Employment Claims –$1,400,000

Program Enhancements• Lowered Workers’ Compensation deductible from $750,000 to $500,000

• Expanded CA Earthquake Coverage from $70,000,000 to $100,000,000

• Increased Property Program Loss Limit from $400,000,000 to $500,000,000

• Cyber Liability program was separated from the Multimedia/Technology program and now has a separate $20,000,000 limit with expanded coverage

• Cyber Liability amended to provide coverage for the care, custody and control of Third Party Intellectual Property Assets

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Risk and Insurance Strategy: Sampling of SPE Risk Management Achievements

Program Enhancements (cont.)

• Terrorism Coverage - Expanded Policy Form to include Coverage For Political Violence; Secured Coverage For $193,000,000 International Office Schedule at No Charge; Expanded Policy To Provide $1,000,000 in Coverage For Previously Excluded Territories

• Regular testing of Broker Offerings with RFP's in 2007 and 2011• Maintaining experienced staff while developing new staff assuring quality service continuity with regular

staff evaluations and goal setting• Unique claim settlements (Pinewood property claim, certain E&O claims, 9/11 Civil Authority)• Implementation of Risk Management Information System (RMIS)• Reduction of Cost of Risk over the last few years despite upward cost pressure from insurers• Production Program

Redesign in 2011 reduced overall costs by $1,000,000 by going to a guaranteed cost program               Cast clearance extensions negotiated for higher risks                   

Anna Nicole Smith                     Grown Ups 2                       London Calling Michael J. Fox Project One Direction         

Increased coverage for Ingress/ Egress (relevant for Hurricane Sandy claims est. $300,000)                 2013 renewal enhancements:                    

Additional premium savings of $600,000                      Increased sub- limits                        Increased covered artists from 20 to 25

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SPE Business Partners & Resources

Procurement Legal/Litigation

Business Affairs Studio Operations & Facilities

Real Estate Corporate Safety/Security & Environmental Affairs

Information Security Compliance

Corporate Communications Information Technology

EIS Infrastructure Marketing & Publicity for MPG/TV and HE

Digital Group – SPI, SPII, SPA, SP Technology Production Acquisitions for Sony Pictures Classics, Worldwide

Corporate Acquisitions and Mergers Corporate Events

SCA/SEL/SME Risk Management Finance

Medical Department People & Organization

Transportation Tax

Labor Relations Home Entertainment

Post Production International Groups

INTERNAL

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SPE Business Partners & Resources

Adjusters Artists

Business Managers Attorneys

Physicians/Nurses Studio Risk Managers

Insurance Brokers & Carriers Appraisers

Vendors/Contractors/Consultants Investigators

Muni/Government Agencies Finance Companies

EXTERNAL

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SPE - A Specialized Risk Profile

Studio Property Assets• Fire and Earthquake• Business Interruption

 Off-Site Production Risks• International • Marine• Aviation

 Intellectual Property Risks• Media• Cyber/Technology

 Mergers, Acquisitions & Divestitures• Claim legacy (e.g. Grouper)

 Employee and Third Party Safety

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Risk and Insurance Total Cost of Risk – Fiscal Year 2014

Premiums: $18,000,000

(includes all U.S./Canada and Master International)

Retained Losses: $5,200,000 - $6,700,000 Estimated (?)

(includes: auto, general liability, workers compensation, errors & omissions/media and cyber, production)

Exposures • Revenue: $9,000,000,000• Property Assets (Total Insured Values): $1,920,000,000

(Replacement Cost inc. Bus. Intrp + Extra Exp.)• Workers Compensation Payroll (subject payroll): $722,300,000 (Head Count 6,000+)• Production Cost: $900,000,000+

(TV, MP, Home Entertainment, Digital and Studio)

Protection• 18 Major Lines of Coverage• Over 50 Underwriters providing over 70 Policies plus numerous local and international policies for non-

US production offices

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Program Structure – Major Coverage Limits

$80M

$10M

Program Structure – Major Coverage Limits

Umbrella & Excess Liability

Up to $150m xs of Primary

$1M $1M GL $2MAL $3M

$1M

$2M $10M P $50KEQ 5% $50K $50K $50K

$5M$15M

$10M

$15M

Various

$150M

$5K

$50M

P$

50

0M

$20M

$250KGL $100K 500KAL $25K

CA

EQ

$ 7

0M

$100M

$150M

SIR/Deductible

$75K

$10M

$1M$25M $5K

$50M

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SPE Risk ManagementPartner with Insurance Broker Risk Assessment – conduct annual review of SPE’s risk profile, highlighting changes which could impact coverage

requirements.

Quantitative Analysis – assess recent and historical loss trends. Emphasize improvements which can result in deductible / structure improvements

Marketing – annual marketing is undertaken to identify best-in-class insurers capable of responding to the SPE Risk Management Standards.

Program Negotiation – negotiate optimal program structure with cost effective balance between deductibles and premiums. Program must provide the most comprehensive coverage with the flexibility to respond quickly to SPE’s inherent and contractual exposures.

Day-to-Day Administration – timely and accurate responses to SPE’s unique day to day requirements.

Review, analyze and negotiate claim service pricing and agreements with Third Party Administrator and carriers

Assist Productions in claim reporting and in resolving difficult or unusual claims

Coordinate bi-annual claims review with ESIS and with Tokio Marine

Review statistical loss runs and claim status on legacy CNA and current Chartis Insurance Services programs

Review claim reserves and evaluate the accuracy of reserve levels on casualty programs

Procure annual claim data files for actuary utilization and loss forecasting

Monitor claim status and disposition plans on legacy programs

Evaluate bi-annual Workers' Compensation Trend & Loss Analysis reports

Review carrier position on any denied claims for challenge to coverage applications

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SPE Risk Management Insurance Company Relationships Identify insurance company partners that will provide long term stability

Production Package market is limited and Fireman’s Fund has been identified as a preferred partner

Tokio Marine has been a preferred partner since the Sony acquisition and participates on major portions of the property & casualty programs

Hiscox has emerged as a strategic partner for the specialized Media Liability risks of SPE

Insurance Company providers are continually assessed for their financial stability and a long term commitment to the Entertainment Industry

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MARKETING SPE’s: Property, Casualty, Executive/Professional Risks

Working with our Risk Management Partners, establish desired program options, limits, retentions, structure, pricing and terms

Assess market relations and leverage existing partnerships and facilitate new competitive alliances

Establish a Renewal Timeline

Build the SPE Marketing and Risk Story

Deliver a best-in-class submission

Drive the market through knowledge, leverage and competition

Direct interaction with underwriters to tell “The SPE Story”

Update Insurer Security Status

Risk Management Insurance Program Development

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Risk Management and Insurance Strategy

Central to our role as SPE’s Risk Management Department is the rigorous process utilized to assess SPE’s exposure to risk on a long term strategic basis and day-to-day project basis.

Inherent to anticipating and proactively addressing SPE’s risk exposures, we:

• Understand SPE’s objectives in designing and implementing a superior insurance program, using specialized professional resources as needed, in formulating cost efficient risk management and insurance solutions.

• Formulate action plans to leverage SPE’s strengths and opportunities of SPE’s risk techniques relative to overall financial and operational conditions, the business environment as well as insurance market conditions.

• In partnership with External Risk Management Professionals, we continually identify / evaluate opportunities and threats which arise and implement processes and procedures to address them.