Question-and-Answer Session
Operator
(Operator instructions) The first question comes from the line of Ed Spehar – Bank of America/Merrill Lynch.
Ed Spehar – Bank of America/Merrill Lynch
I have a question on the Japan business. I think a lot of us have been trying to figure out why you took as much of the TARP as you did and I think some speculation has been around the fact that Japan was not hedged. I am wondering, you talk about the additional benefit from increased macro hedging in the U.S. and I am wondering if you could update us on what your thoughts are surrounding hedging in Japan.
Liz Zlatkus
I would look at Japan in two ways. First, we reinsure over 50% of the risk to the U.S. and so our macro hedging does help cover that risk. So when we look at the capital requirements you see in slide seven you can see we have more than enough capital and our hedging results do help the Japan risk.
In terms of what is left in Japan we do have some risk that is left in Japan. The amount of capital we have there is very positioned. In fact if you look at kind of a global equity market decline it would be consistent with S&P falling down to 700 we would still have more than sufficient capital in Japan to cover that. So all in I think we are managing this in terms of hedging on a macro hedge side which does cover a lot of the spanned risk as well as having the excess capital that we have.
Ed Spehar – Bank of America/Merrill Lynch
If you chose to fully hedge, given the fact that you have decided to exit Japan if you chose to fully hedge as best you could the risk in Japan how much additional, what would be the additional expenditure. Could you give us any sense?
Liz Zlatkus
I would say we look at that all the time and what we think is we have the right balance. As you know overall cost of hedging while it declined from the highest levels are still very expensive so I would say we think it is prudent in terms of the amount of hedges we have on the books as well as the excess capital that we have.
Ed Spehar – Bank of America/Merrill Lynch
More expense than keeping as much of the government money as you have now?
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