The purpose of this letter is to advise you that OSFI will be amending the MCT Guideline that was released in November 2002 so that assets currently subject to a 100% capital factor will be deducted from Capital Available, rather than included in Capital Required. The amendment corrects an unintended result, i.e., in the calculation of the ratio of Capital Available to Capital Required, more than 100% would have to be held against these assets, effectively understating the MCT ratio. MCT results can vary materially, depending on the proportion of these assets that companies hold. The deduction treatment is consistent with the approach used in the capital rules for federally regulated life insurers and banks.

OSFI will revise the MCT Guideline and reporting forms, and the PwC software will be updated, in time for 2003 second quarter reporting. The book value of all assets will continue to be reported on page 30.71, but the capital requirement cell for assets subject to the 100% factor will be shaded. A line will be added to the Capital Available section of page 30.70 for the deduction of these assets.

Since first quarter 2003 returns have already been filed, OSFI will make the necessary adjustments to the calculations within our system. OSFI Relationship Managers will provide the revised MCT results to affected companies. The Insurance Bureau of Canada recently agreed to continue the same level of P&C; data disclosure under the MCT as existed under the MAT. Please be assured that OSFI will post only the revised MCT results on its website.

If you have any questions about this change please contact your Relationship Manager. Alternatively, you may contact Jeff Bee at (613) 990-6036 or Brian Ludlow at (613) 990-7827.