PMI Group (PMI)

Currency exchange risk

We analyze the sensitivity of fluctuations in foreign currency exchange rates on investments in our foreign subsidiaries denominated in currencies other than the U.S. dollar. This estimate is calculated using the spot exchange rates as of December 31, 2008 and respective current period end investment balances in our foreign subsidiaries in the applicable foreign currencies. The following table summarizes the estimated changes in the investments in our foreign subsidiaries based upon specified hypothetical percentage changes in foreign currency exchange rates as of December 31, 2008, with all other factors remaining constant:

The changes in the foreign currency exchange rates from 2007 to 2008 negatively affected our investments in our foreign subsidiaries by $7.8 million. This foreign currency translation impact is calculated by applying the period over period change in the period end spot exchange rates to the current period end investment balance of our foreign subsidiaries.

As of December 31, 2008, $0.2 billion, including cash and cash equivalents of our invested assets, was held by PMI Europe and was denominated primarily in Euros. As of December 31, 2008, $20.0 million, including cash and cash equivalents of our invested assets, was held by PMI Canada and was denominated primarily in the Canadian dollar. The above table shows the exchange rate of the U.S. dollar relative to the Euro and Canadian dollar as of December 31, 2008 and 2007. The value of the Euro and Canadian dollar weakened relative to the U.S. dollar as of December 31, 2008 compared to December 31, 2007.

Currency exchange risk

We analyze the sensitivity of fluctuations in foreign currency exchange rates on investments in our foreign subsidiaries denominated in currencies
other than the U.S. dollar. This estimate is calculated using the spot exchange rates as of December 31, 2008 and respective current period end investment balances in our foreign subsidiaries in the applicable foreign currencies. The
following table summarizes the estimated changes in the investments in our foreign subsidiaries based upon specified hypothetical percentage changes in foreign currency exchange rates as of December 31, 2008, with all other factors remaining
constant:

The changes in the
foreign currency exchange rates from 2007 to 2008 negatively affected our investments in our foreign subsidiaries by $7.8 million. This foreign currency translation impact is calculated by applying the period over period change in the period end
spot exchange rates to the current period end investment balance of our foreign subsidiaries.

FACE="Times New Roman" SIZE="2">As of December 31, 2008, $0.2 billion, including cash and cash equivalents of our invested assets, was held by PMI Europe and was denominated primarily in Euros. As of December 31, 2008, $20.0 million,
including cash and cash equivalents of our invested assets, was held by PMI Canada and was denominated primarily in the Canadian dollar. The above table shows the exchange rate of the U.S. dollar relative to the Euro and Canadian dollar as of
December 31, 2008 and 2007. The value of the Euro and Canadian dollar weakened relative to the U.S. dollar as of December 31, 2008 compared to December 31, 2007.

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