The Aon Benfield Aggregate - Reinsurance Thought Leadership

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Source: Company reports, Aon Benfield Analytics. Major insurers and reinsurers generally maintained their solid operatin
Aon Benfield Analytics | Market Analysis

The Aon Benfield Aggregate Results for the six months ended June 30, 2014

Risk. Reinsurance. Human Resources.

Table of Contents Global Reinsurer Capital ...................................................................................................3 Executive Summary ..........................................................................................................4 ABA Capital ......................................................................................................................5 Capital Development ......................................................................................................... 5 Capital Management .......................................................................................................... 7 Premium Income ..............................................................................................................8 Earnings .........................................................................................................................12 Underwriting Performance ............................................................................................... 13 Investment Results ........................................................................................................... 15 Net Income ...................................................................................................................... 16 Return on Equity .............................................................................................................. 17 ABA Business Model Evolution ........................................................................................20 Who Are The New Investors? ........................................................................................... 20 How Is New Money Being Deployed? .............................................................................. 20 Implications for ‘Traditional’ Reinsurers ............................................................................ 20 Convergence in Action .................................................................................................... 20 ABA Valuation ................................................................................................................22 Financial Strength Ratings ..............................................................................................23 Appendix 1: ABA Data ....................................................................................................24

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The Aon Benfield Aggregate – Results for the six months ended June 30, 2014

Global Reinsurer Capital Aon Benfield estimates that global reinsurer capital totaled USD570 billion at June 30, 2014, an increase of 6% relative to the end of 2013. This calculation is a broad measure of capital available for insurers to trade risk with and includes both traditional and alternative forms of reinsurer capital. Exhibit 1: Global Reinsurer Capital 700

Traditional Capital Alternative Capital Global Reinsurer Capital

600

470

USD (billions)

500

410

385

400

400

340 6%

-17%

6%

455

7% 11%

-3% 18%

18%

300 200

570

540

505

447

428

466

490

511

368

388

17

22

19

22

24

28

39

50

59

FY 2006

FY 2007

FY 2008

FY 2009

FY 2010

FY 2011

FY 2012

FY 2013

1H 2014

321

378

100 0

Source: Company reports, Aon Benfield Analytics

Major insurers and reinsurers generally maintained their solid operating performance during the first half of 2014, aided by below average insured catastrophe losses, economic recovery in the United States, exposure growth in emerging markets and relatively stable capital market conditions. Retained earnings were bolstered by unrealized gains on bond portfolios, driven in particular by lower yields in the eurozone, providing a boost to reported capital positions. The involvement of capital market investors in the reinsurance sector through non-equity participations continues to expand. This is evidenced by record levels of catastrophe bond issuance in the first half of 2014 (exceeding the prior year period by almost 50%), growth in fully collateralized placements, the establishment of new sidecar vehicles and the exploration of alternative business models by hedge fund managers.

Aon Benfield Analytics | Market Analysis

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Executive Summary In the absence of significant catastrophe losses, industry capital continues to build. Aon Benfield estimates that global reinsurer capital rose by 6% to USD570 billion during the six months to June 30, 2014, driven by generally solid earnings, unrealized gains on bond portfolios and a continuing influx of new funds from capital markets investors. The reported shareholders’ funds of the 31 ABA companies stood at USD351 billion (62% of global reinsurer capital), an increase of 4%, driven by net income of USD18.6 billion and unrealized gains of USD9.4 billion. Convergence is driving risk transfer costs down and freeing-up equity capital. Net catastrophe exposures are reducing as ABA companies layoff increasing amounts of risk to the capital markets via sidecars, insurance-linked securities and more cost effective retrocession cover. Public dividends and share buybacks rose by 11% to USD12.4 billion in the first half of 2014. This was equivalent to 5.4% of opening capital, up from 5.0% previously. Most ABA companies continue to achieve premium growth, despite difficult market conditions. Property and casualty premiums written by the listed ABA (excluding NICO and Gen Re – see below) rose by 4% to USD109 billion in the first half of 2014, with growth split evenly between insurance and reinsurance business. The main drivers were acquisitions, diversification into new lines, expansion in emerging markets, a shift towards longertail proportional business and the impact of multi-year contracts.

Reactions to lower property catastrophe pricing varied, with some companies shrinking their books on both a gross and net basis and others leveraging third party capital to maintain or build their business positions. Increased competition is impacting underwriting margins. The combined ratio of the listed ABA rose by 0.4 percentage points to 90.3% in the first half of 2014, while P&C underwriting profit was unchanged at USD7.9 billion. Reported catastrophe losses declined relative to the prior year period and were well below the long-term average. Underlying fundamentals were negative. Weakening pricing and business mix changes impacted attritional loss and expense ratios and support from prior year reserve development was reduced. Low interest rates continue to depress underlying investment results. The listed ABA reported a 4% increase in ordinary investment income to USD13.4 billion, driven by underlying asset growth and portfolio repositioning. However the yield of 2.9% is down by a third relative to 2007. Headline return on equity remains resilient, but is declining on an underlying basis. Net income reported by the listed ABA rose by 12% to USD14.0 billion, an annualized return on average equity of 12.2%. This result was heavily influenced by realized and unrealized capital gains. Return on equity based on pre-tax operating profit stood at 10.3%.

Evolution of the ABA Aon Benfield Aggregate (ABA) reports are produced on a half-yearly basis and cover the reported results of 31 major reinsurers worldwide, with the aim of identifying the latest trends in the P&C reinsurance marketplace. The study comprises 29 publicly-listed holding companies (‘the listed ABA’) and two US-domiciled subsidiaries of Berkshire Hathaway, namely National Indemnity Company (NICO) and General Reinsurance Corporation (Gen Re). NICO entered into a significant intra-group reinsurance transaction with GEICO Group effective January 1, 2014, which has had a material impact on its reported results. To provide a more meaningful picture of the sector’s underlying performance, many of the charts and ratios used in this report focus on the listed ABA.

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The Aon Benfield Aggregate – Results for the six months ended June 30, 2014

ABA Capital The reported shareholders’ funds of the 31 ABA companies stood at USD351 billion at June 30, 2014, an increase of 4% or USD14 billion since the end of 2013. The total for the listed ABA was USD239 billion, an increase of 4% or USD10 billion. Exhibit 2: ABA Shareholders’ Funds 400

USD (billions)

283

278

300 226

201 200

242

4%

6% 12%

2% 15%

187 12%

351

337

317

29%

-17%

100

0 FY 2006

FY 2007

FY 2008

FY 2009

FY 2010

FY 2011

FY 2012

FY 2013

1H 2014

Source: Company reports, Aon Benfield Market Analysis

Capital Development The main drivers of the growth in ABA capital were net income of USD18.6 billion and unrealized investment gains of USD9.4 billion, partly offset by dividends of USD10.1 billion and share buybacks of USD4.2 billion. The most significant unrealized gains were reported by Munich Re (USD2.4 billion), Swiss Re (USD1.7 billion), NICO (USD1.2 billion), ACE (USD0.9 billion) and Mapfre (USD0.6 billion).

Exhibit 3: Year-to-Date ABA Shareholders’ Funds Development 375 9.4 18.6

0.6

-4.2 -10.1

USD (billions)

-1.1 350 337.5

351.3

0.5

325

300 FY 2013 Additional Net SHF capital income

FX

Investment Share Dividends gains buybacks

Other

1H 2014 SHF

Source: Company reports, Aon Benfield Market Analysis

Aon Benfield Analytics | Market Analysis

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Between them, NICO and Gen Re reported USD112 billion of shareholders’ funds at June 30, 2014, representing 32% of the ABA total. On a combined basis, Munich Re, Swiss Re and ACE contributed USD101 billion or 29%. More than half of the ABA companies (17) reported shareholders’ funds in excess of USD5 billion, while five remained below USD2 billion.

Exhibit 4: Reported Shareholders’ Funds at June 30, 2014 by ABA Constituent 100 90

USD (billions)

80 40 70 60 30 50 40 20 30 20 10 10 0 0

Source: Company reports, Aon Benfield Market Analysis

All but four ABA companies reported capital growth in the first half of 2014, generally driven by retained earnings and/or unrealized investment gains taken directly to equity. QBE also benefited from a USD250 million debt conversion and significant foreign exchange gains. The reductions in shareholders’ funds at Beazley, Hiscox and RenaissanceRe were driven by active capital management, as shown in Exhibit 6.

Exhibit 5: Year-to-Date Movement in Reported Shareholders’ Funds 14% 12%

ABA

10% 8% 6% 4% 2% 0% -2% -4% -6%

Source: Company reports, Aon Benfield Market Analysis

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The Aon Benfield Aggregate – Results for the six months ended June 30, 2014

4%

Capital Management Surplus equity is being returned to investors in growing amounts, partly reflecting increased interaction with third party capital structures. Capital repatriation by the listed ABA increased by 10.9% to USD12.4 billion in the first half of 2014. This was equivalent to 5.4% of opening shareholders’ funds, up from 5.0% in the prior year period. Dividend payments rose by 4% to USD8.2 billion, while share buybacks climbed by 26% to USD4.2 billion.

Exhibit 6: Dividends & Share Buybacks as a Percentage of Opening Shareholders’ Funds 16% 14%

Dividends Share buybacks

12% 10% 8% 6% 4% 2% 0%

Source: Company reports, Aon Benfield Market Analysis

Aon Benfield Analytics | Market Analysis

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Premium Income Total premiums written by the ABA rose by 13% to USD171 billion in the first half of 2014. The portion related to P&C business rose by 17% to USD128 billion, but was up by only 4% to USD109 billion excluding NICO and Gen Re. Exhibit 7: ABA P&C Gross Premiums Written 150

NICO & Gen Re

USD (billions)

97

Insurance 103

Reinsurance

Total

109

128 19

100

50

93

49

51

56

58

1H 2013

1H 2014

99

0 1H 2011

1H 2012

Source: Company reports, Aon Benfield Market Analysis

NICO reported a fourfold increase in gross premiums written, driven by a new 50% intra-group quota share reinsurance agreement with GEICO Group, effective January 1, 2014. P&C premium growth of 4% across the listed ABA was split evenly between insurance and reinsurance business. The main drivers were acquisition effects, diversification into new lines, expansion in emerging markets, a shift towards longer-tail proportional business and the impact of multi-year contracts. Exhibit 8 shows the splits of P&C premium between direct insurance and assumed reinsurance across the ABA in the first half of 2014, based on (sometimes inconsistent) company disclosure. Munich Re includes Risk Solutions business within its P&C Reinsurance segment (24% of revenues in 2013).

Exhibit 8: 1H 2014 P&C Gross Premiums Written by ABA Constituent 20 18 16 USD (billions)

14 12 10 8 6 4 2 0

Source: Company reports, Aon Benfield Market Analysis

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The Aon Benfield Aggregate – Results for the six months ended June 30, 2014

P&C Insurance P&C Reinsurance

Lancashire reported underlying growth of 5%, excluding USD0.2 billion of premium written via newlyacquired Cathedral at Lloyd’s. Markel’s top line development continues to reflect the consolidation of Alterra from May 1, 2013; underlying volumes were flat on a pro forma basis. At constant exchange rates, QBE reported a 7% reduction in gross premiums written, driven mainly by withdrawals from non-core and poorly-performing insurance business in Europe and North America.

Exhibit 9: Changes in P&C Gross Premiums Written 420% 380% 340% 60% 300% 50% 260% 40% 220% 180% 30% 140% 20% 100% 60% 10% 20% 0% -20% -10%

Listed ABA

4%

-20%

Source: Company reports, Aon Benfield Market Analysis

*P&C reinsurance segment only (as disclosed)

Exhibit 10 isolates the development of the assumed reinsurance books of the ABA constituents in the first half of 2014, where disclosed. Catlin reported growth of 15%, driven by diversification outside the London and Bermuda markets, a shift towards proportional business and multi-year contracts. Arch’s reinsurance book expanded by 14%, reflecting growth in accident and health, mortgage and casualty business. The main driver of the 11% increase at Everest Re was new property catastrophe and casualty business, often written on a customized basis. Reductions of 10% and 9% at Validus and RenaissanceRe were driven predominantly by lower volumes of property catastrophe business, while the 8% decline at Platinum was also influenced by contraction of the casualty excess book.

Exhibit 10: Changes in P&C Reinsurance Gross Premiums Written 20% 15% 10% 5% 0% -5% -10% -15%

Source: Company reports, Aon Benfield Market Analysis

*On a constant currency basis

Aon Benfield Analytics | Market Analysis

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Net P&C insurance and reinsurance premiums written by the ABA rose by 20% to USD110 billion in the first half of 2014. The listed ABA reported a 4% increase to USD92 billion, based on a virtually unchanged cession rate of 15.8%. Reinsurance utilisation rose most significantly at RenaissanceRe, Endurance and XL, while the biggest reductions were at Lancashire, Swiss Re and Amlin.

Exhibit 11: Ceded RI as a Percentage of 1H 2014 P&C Gross Premiums Written 35% Listed ABA

30% 25% 20%

16%

15% 10% 5% 0%

Source: Company reports, Aon Benfield Market Analysis

*P&C reinsurance segment only (as disclosed)

Net P&C insurance and reinsurance premiums earned by the ABA rose by 19% to USD97 billion in the first half of 2014. The listed ABA reported a 5% increase to USD82 billion, with the five largest constituents contributing USD43 billion, or 53% of the total.

Exhibit 12: 1H 2014 P&C Net Premiums Earned by ABA Constituent 16 14

USD (billions)

12 10 8 6 4 2 0

Source: Company reports, Aon Benfield Market Analysis

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The Aon Benfield Aggregate – Results for the six months ended June 30, 2014

*P&C reinsurance segment only (as disclosed)

Exhibit 13 shows the year-on-year movements in P&C net premiums earned across the ABA. Twothirds of the constituent companies reported growth in the first half of 2014.

Exhibit 13: Changes in P&C Net Premiums Earned 380% 330% 50% 280% 40% 230% 30% 180% 20% 130% 10% 80% 0% 30%

Listed ABA

5%

-10% -20% -20%

Source: Company reports, Aon Benfield Market Analysis

*P&C reinsurance segment only (as disclosed)

Aon Benfield Analytics | Market Analysis

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Earnings Relative to the prior year period, the ABA reported improved profitability in the first half of 2014, driven by lower catastrophe losses and significantly higher realized and unrealized investment gains. Underlying returns on equity are under pressure. Exhibit 14: Listed ABA Pre-Tax Profit 30

Capital gains/losses 15.4

USD (billions)

20

17.7

15.0

Investment income P&C underwriting result Pure life technical result Other

10 0.5 0 -10

Pre-tax profit -20 1H 2011

1H 2012

1H 2013

1H 2014

Source: Company reports, Aon Benfield Market Analysis

The listed ABA reported pre-tax profit of USD17.7 billion for the first half of 2014, an increase of 18% relative to the prior year period. P&C underwriting profit was unchanged at USD7.9 billion, with favourable prior year reserve development of USD2.8 billion contributing 35% of the total. Ordinary investment income rose by 4% to USD13.4 billion, driven by underlying asset growth and portfolio repositioning. Capital gains stood at USD5.2 billion, an increase of USD4.4 billion, driven by rising equity markets and higher bond values associated with declining interest rates. Exhibit 15 shows the distribution of reported pre-tax profits across the 31 ABA companies. The combined results of NICO, Munich Re and Swiss Re rose by 15% to USD9.9 billion, representing 43% of the total reported by the ABA. The only company to report a negative result was XL, driven by a loss of USD0.7 billion on the sale of its discontinued life reinsurance business.

Exhibit 15: 1H 2014 Pre-Tax Result by ABA Constituent 5.0 4.5 4.0

USD (billions)

3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 -0.5

Source: Company reports, Aon Benfield Market Analysis

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The Aon Benfield Aggregate – Results for the six months ended June 30, 2014

Underwriting Performance The combined ratio of the listed ABA rose by 0.4 percentage points to 90.3% in the first half of 2014. Reported catastrophe losses were significantly reduced relative to the prior year period and well below the long-term average. Underlying trends were negative, as weakening pricing and business mix changes, particularly a shift towards longer-tail proportional contracts, impacted attritional loss and expense ratios. In addition, the support from the favourable development of prior year reserves was reduced, partly influenced by deterioration of the Costa Concordia loss.

Exhibit 16: Listed ABA Combined Ratio Composition 140% 120% 100%

114.1% 29.1%

80% 60%

59.1%

91.1%

89.9%

90.3%

3.7%

5.4%

3.6%

59.6%

57.6%

58.8%

Total catastrophe losses Attritional loss ratio

Expense ratio

40% 20%

30.2%

30.7%

30.7%

31.4%

-4.2%

-2.9%

-3.8%

-3.5%

1H 2011

1H 2012

1H 2013

1H 2014

Prior year reserve adjustment

0% -20%

Source: Company reports, Aon Benfield Market Analysis

Exhibit 17 shows the distribution of reported combined ratios across the listed ABA for the first half of 2014. All of the constituents were profitable on a calendar year basis, although half of them reported weaker results.

Exhibit 17: 1H 2014 Calendar Year Combined Ratios 120%

Loss ratio

Expense ratio

Listed ABA combined ratio

100% 80%

90.3%

60% 40% 20% 0%

Source: Company reports, Aon Benfield Market Analysis

*P&C reinsurance segment only (as disclosed) **Excluding funds withheld

Aon Benfield Analytics | Market Analysis

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Exhibit 18 shows the P&C underwriting results reported by the listed ABA companies. On a combined basis, Swiss Re, ACE and Munich Re contributed USD2.6 billion, or 33% of the total.

Exhibit 18: 1H 2014 P&C Underwriting Result by ABA Constituent 1,200

USD (millions)

1,000 800 600 400 200 0

Source: Company reports, Aon Benfield Market Analysis

*P&C reinsurance segment only (as disclosed) **Excluding funds withheld

Exhibit 19 shows prior year reserve development as a percentage of net premiums earned by the listed ABA companies. Unchanged or modestly improved results were reported in 11 cases, while 14 companies reported lower releases, some of the reductions being material. Overall adverse reserve development was reported by QBE (Argentinian workers’ compensation), Hannover Re (Costa Concordia) and Lancashire (marine and energy).

Exhibit 19: Loss Reserve Adjustments as a Percentage of Net Premiums Earned 40% 35%

1H 2014

1H 2013

30% 25% 20% 15% 10% 5% 0% -5%

Source: Company reports, Aon Benfield Market Analysis

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The Aon Benfield Aggregate – Results for the six months ended June 30, 2014

*P&C reinsurance segment only (as disclosed) **No disclosure ***Excluding funds withheld

Exhibit 20 shows the reported accident year combined ratios of the listed ABA companies (excluding prior year reserve movements). Only Markel and PartnerRe were unprofitable on this basis.

Exhibit 20: 1H 2014 Accident Year Combined Ratios 120%

Listed ABA

100% 93.8%

80% 60% 40% 20% 0%

Source: Company reports, Aon Benfield Market Analysis

*P&C reinsurance segment only (as disclosed) **Excluding funds withheld

Investment Results The listed ABA reported cash and investments of USD939 billion at June 30, 2014, an increase of 2% relative to the end of 2013. Asset allocation was virtually unchanged and as follows: fixed-income 64%, cash and short-term 10%, loans 8%, deposits with cedants 6%, equities 5% and other 7%. The underlying and total investment yields reported through income statements since 2006 are captured in Exhibit 21. The former has fallen by a third since 2007, reflecting the impact of the low interest rate environment.

Exhibit 21: Listed ABA Investment Yield (1H 2014 Annualized) 6%

Total investment yield (incl. capital gains/losses)* 4.9%

5%

4.8%

Underlying investment yield* 4.2%

3.9% 4% 4.1%

3.7%

4.0%

3.9% 3.3%

4.3% 3.9%

3%

3.7% 3.3%

3.4% 3.0%

2%

2.9%

2.9%

FY 2013

1H 2014

1.9% 1% FY 2006

FY 2007

FY 2008

Source: Company reports, Aon Benfield Market Analysis

FY 2009

FY 2010

FY 2011

FY 2012

*Reported through income statements, excluding unit-linked and with-profit business

Aon Benfield Analytics | Market Analysis

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Exhibit 22 shows the annualized underlying and total investment yields reported by the ABA companies through their income statements in the first half of 2014. Investment classification varies and result comparison can therefore be misleading. Unrealized gains and losses are recognized in the income statements of some companies (e.g. PartnerRe, Fairfax and White Mountains), but in most other cases the majority are taken directly to equity.

Exhibit 22: Investment Yield by ABA Constituent (Annualized) 16%

Underlying investment yield*

14%

Total investment yield*

12% 10% 8% 6% 4% 2% 0%

Source: Company reports, Aon Benfield Market Analysis

*Reported through income statements, excluding unit-linked and with-profit business

Net Income The ABA companies reported net income attributable to common shareholders of USD18.4 billion for the first half of 2014, an increase of 15% relative to the prior year period. Net income across the listed ABA rose by 12% to USD14.0 billion.

Exhibit 23: ABA Common Net Income

USD (billions)

20

18.4

NICO & Gen Re Listed ABA

15.1

15

4.4

2.9

3.6

12.2

12.4

1H 2012

1H 2013

10

5

0

14.0

2.5 2.2 1H 2011

Source: Company reports, Aon Benfield Market Analysis

16

16.0

The Aon Benfield Aggregate – Results for the six months ended June 30, 2014

1H 2014

Exhibit 24 shows the distribution of net income attributable to common shareholders by ABA constituent. The combined results of NICO, Munich Re, Swiss Re and ACE rose by 10% to USD9.9 billion, representing 54% of the total. Investment classification varies and result comparison can therefore be misleading.

Exhibit 24: 1H 2014 Common Net Income / Loss by ABA Constituent 4.5 4.0 3.5

USD (billions)

3.0 2.5 2.0 1.5 1.0 0.5 0.0 -0.5

Source: Company reports, Aon Benfield Market Analysis

Return on Equity Exhibit 25 shows the development of net income attributable to common shareholders relative to average common shareholders’ funds across the ABA since 2006. Return on equity (ROE) across the listed ABA over this period (which encompasses both the financial crisis and the record year for insured catastrophe losses) averaged 11.3%.

Exhibit 25: ABA Common Net Income ROE (1H 2014 Annualized) 20%

15%

17.7%

Listed ABA

16.6%

ABA

14.1%

17.6% 15.3%

10.8%

10%

12.2%

11.4%

11.1%

10.1%

10.6%

10.8%

FY 2012

FY 2013

1H 2014

12.5% 10.7%

3.7%

5.4%

5% 4.4%

3.6%

0% FY 2006

FY 2007

FY 2008

FY 2009

FY 2010

FY 2011

Source: Company reports, Aon Benfield Market Analysis

Aon Benfield Analytics | Market Analysis

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Exhibit 26 shows ROE based on reported net income by ABA constituent for the first half of 2014. Investment classification varies and result comparison can therefore be misleading. The three companies with the strongest results all report unrealized gains through their income statements.

Exhibit 26: 1H 2014 Common Net Income ROE by ABA Constituent (Annualized) 30% Listed ABA 25% 20% 15%

12.2%

10% 5% 0% -5%

Source: Company reports, Aon Benfield Market Analysis

Pre-Tax Operating ROE The distortion caused by differing accounting treatment (and tax regimes) can be addressed by comparing pre-tax operating performance, eliminating realized and unrealized gains. On this basis, the ABA reported an annualized ROE of 9.0% for the first half of 2014, taking the average since 2006 to 11.8%. For the listed ABA, annualized ROE was 10.3% and the average since 2006 stood at 12.5%.

Exhibit 27: ABA Pre-Tax Operating ROE (1H 2014 Annualized) 20% 15%

18.2%

18.6%

16.8%

Listed ABA

15.9%

ABA

18.0% 16.0%

14.8%

15.4%

9.6%

9.8%

10.3%

10.3%

9.4%

9.6%

9.0%

FY 2012

FY 2013

1H 2014

10% 9.2%

4.9%

5% 3.4%

0% FY 2006

FY 2007

FY 2008

FY 2009

FY 2010

FY 2011

Source: Company reports, Aon Benfield Market Analysis

Only nine ABA constituents reported improved performance on this measure in the first half of 2014 (see data in Appendix 1).

18

The Aon Benfield Aggregate – Results for the six months ended June 30, 2014

Exhibit 28: 1H 2014 Pre-Tax Operating ROE by ABA Constituent (Annualized) 20%

Listed ABA

15%

10.3%

10% 5% 0% -5%

Source: Company reports, Aon Benfield Market Analysis

Total Comprehensive Income ROE Another way to eliminate the distortion caused by differing accounting treatment is to compare total comprehensive income, including all realized and unrealized gains (whether reported through income statements or taken directly to equity). On this basis, the ABA reported annualized ROE of 16.0% for the first half of 2014, taking the average since 2006 to 11.7%. For the listed ABA, annualized ROE was 18.4% and the average since 2006 stood at 11.0%.

Exhibit 29: ABA Total Comprehensive Income ROE (1H 2014 Annualized) 25%

22.1%

19.1%

15% 16.4%

11.3%

20.6% 6.7%

13.9%

13.4%

5%

18.4%

14.8%

14.7%

14.5%

16.0%

14.1%

6.6%

5.5%

-5%

Listed ABA ABA

-10.3% -12.9%

-15% FY 2006

FY 2007

FY 2008

FY 2009

FY 2010

FY 2011

FY 2012

FY 2013

1H 2014

Source: Company reports, Aon Benfield Market Analysis

Virtually all ABA constituents reported improved performance on this measure in the first half of 2014, as lower yields drove bond values higher.

Exhibit 30: 1H 2014 Total Comprehensive Income ROE (Annualized) 30% 25% 20%

Listed ABA 18.4%

15% 10% 5% 0%

Source: Company reports, Aon Benfield Market Analysis

Aon Benfield Analytics | Market Analysis

19

ABA Business Model Evolution A structural shift in the way capital is raised and

Implications for ‘Traditional’ Reinsurers

deployed to mitigate insurance risk is underway. The

New vehicles operating at a lower cost of capital are making inroads into higher-margin areas that remain a key driver of profits for ‘traditional’ reinsurers. These dynamics are forcing many ABA constituents to rethink their business models in the pursuit of differentiation and relevance in the market. In the catastrophe reinsurance space, this increasingly means being able to offer larger line sizes, a full product suite including collateralized limits and enhanced claims service. Companies that are successful in attracting and deploying third party capital will potentially be able to advance their client offering, reduce earnings volatility through fee income, lower their own risk transfer costs and manage their capital bases more effectively.

pool of potential investors is broadening and new money is flowing towards structures offering access to quality business at relatively low cost. These changes are forcing the ABA companies to re-evaluate their business models. Who Are The New Investors? Reinsurance as an asset class has performed relatively well in an environment of low interest rates and is viewed as having limited correlation with broader capital market movements. These attributes have attracted new investors such as pension funds, high net worth individuals and sovereign wealth funds, who typically: 

only enter the sector after extensive due diligence;



invest a small percentage of the substantial assets at their disposal as a diversifying strategy;



seek lower, more stable returns over longer timeframes than has historically been the case.

How Is New Money Being Deployed? Much of the new capital is being channelled to specialist fund managers, who then deploy it into the insurance-linked securities (ILS) sector via products such as catastrophe bonds and industry loss warranties, or other ‘alternative’ structures such as sidecars and collateralized reinsurance. The current focus is property catastrophe and retrocession business, particularly in the US market where exposures tend to be best understood, although diversification into other lines and territories is underway.

20

The Aon Benfield Aggregate – Results for the six months ended June 30, 2014

Convergence in Action A summary of recent convergence activity among the ABA companies is presented in Exhibit 31. Several are now actively involved in raising and managing third party capital. Others have invested in strategic partnerships with established independent specialist fund managers. Sidecar structures that allow sponsors to grow their footprint in the market without assuming additional balance sheet risk continue to be in vogue. The availability of lower cost capital has allowed most ABA companies to drive down their own risk transfer costs. Retrocession pricing has reduced and in some cases additional protection has been purchased, with consequent impact on disclosed modeled exposures. In addition, a number of catastrophe bond transactions have recently been brought to the market by ABA sponsors.

Exhibit 31: Recent Examples of Convergence Activity Company

Catastrophe Bonds

Third Party Capital Vehicles Altair Re II formed with $95m of capital to provide collateralized support for ACE Tempest Re (Jan 2014).

Other Around 20% of a restructured global cat reinsurance program incepting Jul 1 was placed on a fully collateralized basis, without a reinstatement.

Alleghany

Transatlantic ownership of Pillar Capital increased to 50% (Jun 2014). Operates an internal sidecar (Pangaea Re) and is exploring other facilities. TransRe Capital Partners under development.

Alleghany partnership with Ares Management effective Jul 2013. Investments in Pillar Capital and its managed funds totaled $220m at Jun 30.

Allied World

Partnership with Aeolus Capital effective Dec 2012. Reported to be working on a new reinsurance venture with Pine River Capital.

A restructured cat program provides global aggregate cover (1st event $150m xs $300m; 2nd event $100m xs $100m). The entire program is placed on fully collateralized basis. The largest 1-in-250 PML (US wind) now represents 15.9% of total capital, down from 18.2% in Q1.

In Jul 2014, Amlin agreed to increase its ownership of Leadenhall Capital from 40% to 75% by 2016. SPS 6106 (2009-2013).

The 2014 retro program incorporates the discontinued SPS and has been placed with lower retentions at reduced cost. Tail risk is said to have increased only marginally.

Co-sponsored Watford Re with asset manager Highbridge (Mar 2014). Arch conducts all the underwriting and invested $100m for an 11% stake in the holding company.

Watford Re wrote net premiums of $84m in 1H 2014, of which $69m was for Arch and $15m for third parties. Increased retro purchases reduced Arch's largest 250-year PML for a single event (North-East US wind) to 11% of common shareholders' equity at Jul 1.

Renewed property insurance & reinsurance sidecar Harambee Re (Jan 2014).

Formed ILS fronting partnership with Horseshoe Re (Mar 2014).

Sidecar Silverton Re formed with $65m of capital ($50m from third parties) to provide collateralized quota share support to Aspen Re's property cat book (Jan 2014).

Aspen Capital Markets now has $135m of third party funds under management and has allowed Aspen to grow its cat business on a gross basis, while maintaining similar net exposures.

AXIS Re Ventures formed with $50m of third party capital to cater for investors interested in deploying funds directly into the property cat and related short tail reinsurance business (Jan 2014).

Additional retro purchased on the cat reinsurance book in Jun 2014. The peak 1-in-250 PML has reduced from 17.6% to 15.8% of total shareholders' equity.

ACE

Amlin

Tramline Re II (Jun 2013)

Arch

Argo

Loma Re (Dec 2013)

Aspen

Axis

Northshore Re (Aug 2013)

Beazley

Catlin

SPS 6107 (since 2010). Galileo Re (Oct 2013)

A 'Portfolio Participation Vehicle' provides collateralized reinsurance support for non-syndicate entities (Jan 2014). SPSs 2088, 6111, 6112 and 6119.

Catlin benefits from $300m of third party capital support in 2014, generating fees and commissions of $25m in 1H 2014. An additional $40m of retro cover has been purchased for the Florida book, replacing $100m of expiring ILW cover. Net PMLs have reduced by an average of 40% over the last two years. Purchased $50m of additional global aggregate XL protection in Q2, taking total cover to $150m xs $100m. The peak 1-in-100 year PML reduced to 11.1% of shareholders' equity at Jul 1, 2014, from 12.8% a year earlier.

Endurance

Everest Re

Kilimanjaro Re (Apr 2014)

Permanent sidecar Mt. Logan Re (operating from Jul 2013) now provides around $400m of collateralized property cat capacity, third parties having injected a further $50m in Q2.

Everest Re is growing its property cat book, but has kept its net risk appetite stable in the past six months, by sponsoring its first cat bond (upscaled to $450m) and purchasing ILWs to hold its Florida PML steady.

Hannover Re

Multiple sponsor Structured Alamo Re obo TWIA (Jun 2014)

Multiple sidecar sponsor.

As part of its extended ILS activities, Hannover Re writes collateralized fronting arrangements, passing risks assumed from ceding companies on to institutional investors outside the group using structured entities. Hannover Re opened its internal ILS fund to third parties via Leine Investment from Jan 2013.

Hiscox

Reinsurance sidecar Kiskadee Re is collateralized by third party investors and began operating in Jun 2013. SPS 6104 (since 2008).

Kiskadee Investment Managers deployed $110m of third party capital at Jan 1 and began seeking investors for two new funds. Hiscox Re enjoys growing support from quota share business partners. Partnership with Third Point (Oct 2012).

Lancashire

Kinesis Re I Ltd (formed Jun 2013; Lancashire has a 10% equity interest) Kinesis Capital Management was formed in Jun 2013 to focus on the management of writes multi-class reinsurance business on a fully-collateralized basis, third party capital. Peak exposures have reduced across the board since Apr 2012. deploying ~$340m of limit in the year to Jul 1. Substantially more limit was purchased for risk and cat covers in 2014.

Markel

New Point Re VI commenced writing property retro business on a fully collateralized basis (Jan 2014), backed by $215m of capital.

Erik Manning (ex GC/Deutsche Bank) joined as Managing Director of Alternative Solutions at Markel Re in Jun 2014.

Montpelier Re

Collateralized property cat reinsurance via Blue Water Re and Blue Capital Re.

Blue Capital was launched in 2012 as an asset management platform offering a range of property cat-linked investment products to institutional and retail investors. GPW within the Collateralized Reinsurance segment rose by 71% in 1H 2014.

Munich Re

Multiple structurer Sidecar Eden Re provides $63m of fully collateralized capacity to and sponsor support the property cat book in 2014. Sidecar Lorenz Re formed with $75m of third party capital to provide additional capacity for a diversified portfolio of cat reinsurance treaties over a multi-year period on a fully collateralized basis (Mar 2013).

PartnerRe

Munich Re has operated an internal ILS fund for 6+ years. Third party ILS transactions doubled to $1.2bn in 2013. Increased retro purchases in 2013 and 2014. Property cat exposures have been cut significantly over the past two years. Net limits deployed in respect of natural cat risk totalled $1.4bn at Jun 30, 2014, compared with a Board-approved limit of $2.3bn. Purchased a $50m property cat aggregate cover in Q2, protecting the portfolio against higher return period events for all natural perils in the US, as well as Caribbean hurricanes, Japanese typhoons and Canadian earthquakes.

Platinum

QBE

VenTerra Re (Dec 2013)

RenRe

Mona Lisa Re (Jul 2013)

Upsilon Re renewed with $280m of capital, targeting structured aggregate reinsurance and retro worldwide (Jan 2014).

Internal ILS fund Medici opened to third parties (Jun 2013). Purchased $180m of additional retro to protect peak Florida exposures in Q2. Stake in DaVinci reduced to 26.5% in 1H 2014.

SCOR

Multiple sponsor

Sidecar Atlas X ($55m of capital) provides 3 years of collateralized QS capacity to SCOR Global P&C’s property cat book (Jan 2014).

Alternative Solutions unit created in May 2014, following the formation of Atropos in 2011. Four ILS funds are offered to third party investors (~$300m of AuM at YE 2013).

Swiss Re

Multiple structurer Sector Re sidecar series. and sponsor

No plans to open internal ILS fund to third parties.

Validus

Collateralized property cat and retro underwritten via AlphaCat Re sidecar series ($204m of limit fully deployed in Jan 2014). Top layer cat written via PaCRe (owned 10% by Validus).

White Mountains

Class 3 Bermudian insurer Alstead Re was formed to write collateralized Sirius Capital Markets, launched in May 2013, now operates from offices in Bermuda and reinsurance and retro business from Jan 2014. New York.

XL

Vector Re writes global property cat business on a collateralized basis from Jan 2014.

Source: Company reports, Aon Benfield Market Analysis

At Jun 30, AlphaCat had $1.5bn of AuM, split $0.3bn to Validus and $1.2bn to thirdparties ($165m in the AlphaCat sidecars, $450m in the AlphaCat ILS funds and $575m in PaCRe). Reinsurance was purchased for AlphaCat in Q2.

New Ocean Capital Management was established in partnership with Stone Point in Nov 2013. Vector Re's net assets were $89m at Jun 30. SPS = Special Purpose Syndicate; AuM = assets under management

Aon Benfield Analytics | Market Analysis

21

ABA Valuation The overall market capitalization of the ABA companies has fallen by 4% since the beginning of 2014. The trailing price-to-book ratio has deteriorated from 1.09x to 1.01x over the same period. Exhibit 32: ABA Market Capitalization

Exhibit 34: ABA Trailing Price-to-Book Ratio 1.3

140

1.2

120

1.1

100

1.0

80

0.9 0.8

60

0.7

40 Jan-08

Jan-10

Source: Bloomberg

Jan-12

Jan-14

Note: As of August 29, 2014, excluding Berkshire Hathaway

Jan-10

Source: Bloomberg

Jan-12

Jan-14

Note: As of August 29, 2014, excluding Berkshire Hathaway

Exhibit 33 shows the share price development of individual ABA companies since the beginning of 2014.

Exhibit 35 shows the evolution of the trailing price-to-book values of individual ABA companies since the beginning of 2014.

Exhibit 33: Year-to-Date Share Price Development

Exhibit 35: Trailing Price-to-Book Ratios Beazley Hiscox Amlin Lancashire Markel Arch QBE RenaissanceRe Fairfax Hannover Re ACE Argo Mapfre Everest Re Allied World Endurance Munich Re Montpelier Re Alleghany White Mountains Validus Axis Aspen Platinum PartnerRe XL Catlin Swiss Re SCOR

Fairfax Markel Argo Montpelier Re Alleghany XL PartnerRe RenaissanceRe White Mountains Everest Re Aspen ACE Platinum Swiss Re Axis Hannover Re QBE Endurance Beazley Allied World Amlin Validus Munich Re Arch Mapfre Hiscox Catlin SCOR Lancashire -30% Source: Bloomberg

22

0.6 Jan-08

-20%

-10%

0%

10%

20%

Note: As of August 29, 2014

The Aon Benfield Aggregate – Results for the six months ended June 30, 2014

January 1, 2014 August 29, 2014 0.0

Source: Bloomberg

0.5

1.0

1.5

2.0

Financial Strength Ratings Several ABA companies have benefited from positive rating actions in 2014, as shown in Exhibit 36. However, all four leading rating agencies now view the outlook for the reinsurance sector as negative, meaning that downgrades are more likely than upgrades over the medium-term. Exhibit 36: Financial Strength Ratings Main Operating Company

A.M. Best

Standard & Poor’s

ACE Tempest Reinsurance Ltd

A++

Stable

AA

Stable

Allied World Assurance Co Ltd

A

Stable

A

Stable

Amlin AG

A

Stable

A

Stable

Arch Reinsurance Ltd

A+

Stable

A+

Stable

Argo Re Ltd

A

Stable

-

-

Aspen Bermuda Ltd

A

Stable

A

Stable

AXIS Specialty Ltd

A+

Stable

A+

Stable

Beazley Insurance Company, Inc

A

Stable

-

-

Catlin Insurance Company Ltd

A

Stable

A

Stable

Endurance Specialty Insurance Ltd

A

Stable

A

Stable

Everest Reinsurance (Bermuda) Ltd

A+

Stable

A+

Stable

General Reinsurance Corporation

A++

Stable

AA+

Stable

Hannover Rück SE

A+

Stable

AA-

Stable

Hiscox Insurance Company (Bermuda) Ltd

A

Stable

-

-

Lancashire Insurance Company Ltd

A

Stable

A-

Stable

MAPFRE Re, Compania de Reaseguros SA

A

Stable

A

Stable

Markel Bermuda Ltd

A

Stable

A

Stable

Montpelier Reinsurance Ltd

A

Stable

A-

Stable

Munich Reinsurance Co

A+

Stable

AA-

Stable

National Indemnity Company

A++

Stable

AA+

Stable

Odyssey Reinsurance Company

A

Stable

A-

Stable

Partner Reinsurance Co Ltd

A+

Stable

A+

Stable

Platinum Underwriters Bermuda Ltd

A

Stable

A-

Stable

QBE Re (Europe) Ltd

A

Negative

A+

Negative

Renaissance Reinsurance Ltd

A+

Stable

AA-

Stable

SCOR Global P&C SE

A

Stable

A+

Positive

Sirius International Insurance Corp

A

Stable

A-

Stable

Swiss Reinsurance Co

A+

Stable

AA-

Stable

Transatlantic Reinsurance Co

A

Positive

A+

Stable

Validus Reinsurance Ltd

A

Stable

A

Stable

XL Re Ltd

A

Stable

A+

Stable

Source: A.M. Best, Standard & Poor’s

Upgrade / outlook raised since January 1, 2014

Downgrade / outlook lowered since January 1, 2014

Ratings as at September 2014

Aon Benfield Analytics | Market Analysis

23

Appendix 1: ABA Data Exhibit 37: Results for the six months ended June 30, 2014

Reporting Currency (millions)

Company

P&C Gross Premiums Written 1H 2013

P&C Gross Premiums Written 1H 2014

Change

P&C Net Premiums Earned 1H 2013

P&C Net Premiums Earned 1H 2014

Change

Listed Groups ACE

USD

9,953

10,332

4%

6,683

7,328

10%

Alleghany

USD

2,578

2,693

4%

2,143

2,153

0%

Allied World

USD

1,602

1,662

4%

970

1,068

10%

Amlin

GBP

1,839

1,891

3%

1,062

1,118

5%

Arch

USD

2,204

2,567

16%

1,512

1,767

17%

Argo

USD

980

983

0%

632

662

5%

Aspen

USD

1,461

1,635

12%

1,055

1,183

12%

Axis

USD

2,966

3,053

3%

1,820

1,946

7%

Beazley

USD

1,067

1,078

1%

759

805

6%

Catlin

USD

3,299

3,660

11%

1,913

2,038

7%

Endurance

USD

1,750

1,847

6%

963

878

-9%

Everest Re

USD

2,441

2,683

10%

2,240

2,417

8%

Fairfax

USD

3,597

3,837

7%

2,877

2,917

1%

Hannover Re

EUR

4,097

4,078

0%

3,404

3,370

-1%

Hiscox

GBP

1,018

979

-4%

629

643

2%

Lancashire

USD

424

635

50%

261

361

39%

Mapfre

EUR

8,665

8,623

0%

6,568

6,416

-2%

Markel

USD

1,844

2,703

47%

1,349

1,915

42%

USD

504

513

2%

299

319

7%

Munich Re

EUR

8,533

8,478

-1%

8,066

8,028

0%

PartnerRe

USD

2,607

2,719

4%

1,899

2,034

7%

Platinum

USD

283

261

-8%

270

251

-7%

QBE

USD

9,446

8,491

-10%

7,333

6,947

-5%

RenaissanceRe

USD

1,339

1,217

-9%

563

547

-3%

SCOR

EUR

2,378

2,400

1%

2,115

2,059

-3%

Swiss Re

USD

11,538

11,809

2%

8,003

9,044

13%

Validus

USD

1,807

1,668

-8%

1,079

949

-12%

White Mountains

USD

1,261

1,373

9%

993

997

0%

XL

USD

4,349

4,540

4%

2,953

2,851

-3%

ABA (Listed Sector)

USD

104,803

109,075

4%

77,644

81,562

5%

Gen Re

USD

485

578

19%

276

279

1%

NICO

USD

3,572

18,217

410%

3,129

14,753

372%

ABA (Total)

USD

108,860

127,871

17%

81,050

96,594

19%

Montpelier Re 1

Source: Company reports, Aon Benfield Market Analysis Figures in reporting currencies, but converted to USD (millions) for ABA lines

24

The Aon Benfield Aggregate – Results for the six months ended June 30, 2014

1

P&C reinsurance segment only (as disclosed)

Exhibit 37: Results for the six months ended June 30, 2014 (cont’d) Calendar Year Loss Ratio 1H 2013

Loss Ratio 1H 2014

Expense Ratio 1H 2013

ACE

58.0%

58.0%

30.1%

30.2%

88.1%

88.2%

0.2pp

Alleghany

56.8%

57.6%

31.0%

31.8%

87.9%

89.4%

1.5pp

Allied World

54.6%

55.3%

29.3%

29.8%

84.0%

85.1%

1.2pp

Amlin

53.1%

53.7%

31.9%

33.3%

85.0%

87.0%

2.1pp

Arch

54.1%

52.2%

31.9%

33.5%

86.0%

85.7%

-0.4pp

Argo

58.4%

55.5%

40.4%

40.1%

98.8%

95.7%

-3.2pp

Aspen

57.1%

52.9%

36.6%

36.0%

93.7%

88.8%

-4.9pp

Axis

59.4%

57.0%

33.3%

34.3%

92.7%

91.3%

-1.4pp

Beazley

52.0%

51.0%

37.0%

39.0%

89.0%

90.0%

1.0pp

Catlin

54.6%

50.6%

33.5%

34.4%

88.1%

85.0%

-3.2pp

Endurance

60.0%

49.7%

30.2%

35.4%

90.2%

85.0%

-5.2pp

Everest Re

58.2%

56.1%

26.0%

26.4%

84.2%

82.5%

-1.7pp

62.3%

60.5%

31.8%

32.3%

94.1%

92.8%

-1.2pp

68.6%

69.2%

26.0%

26.1%

94.6%

95.3%

0.7pp

Hiscox

37.5%

38.5%

37.2%

43.5%

74.7%

82.0%

7.3pp

Lancashire

23.5%

34.5%

35.3%

36.1%

58.8%

70.6%

11.8pp

Mapfre

67.2%

67.9%

27.9%

27.8%

95.1%

95.7%

0.6pp

Markel

54.1%

60.2%

43.9%

37.7%

98.0%

97.9%

-0.1pp

Company

Expense Ratio 1H 2014

Combined Ratio 1H 2013

Combined Ratio 1H 2014

Change

Listed Groups

Fairfax 1

Hannover Re 3

Montpelier Re

32.6%

29.4%

32.9%

34.4%

65.5%

63.8%

-1.7pp

Munich Re

62.9%

63.5%

29.6%

30.7%

92.5%

94.2%

1.7pp

PartnerRe

61.4%

57.3%

28.6%

30.5%

90.0%

87.8%

-2.2pp

Platinum

28.4%

30.8%

32.3%

32.7%

60.7%

63.5%

2.8pp

QBE

59.4%

63.1%

33.3%

33.4%

92.8%

96.5%

3.7pp

RenaissanceRe

23.3%

25.7%

25.8%

28.5%

49.1%

54.1%

5.0pp

SCOR

64.5%

60.4%

29.7%

30.5%

94.3%

90.9%

-3.4pp

Swiss Re

55.8%

56.4%

30.2%

31.2%

86.0%

87.6%

1.6pp

Validus

38.0%

33.9%

31.7%

34.6%

69.7%

68.5%

-1.2pp

White Mountains

52.3%

51.4%

34.0%

35.8%

86.3%

87.2%

0.9pp

XL

60.3%

58.2%

30.5%

30.8%

90.8%

89.0%

-1.7pp

59.2%

59.0%

30.7%

31.4%

89.9%

90.3%

0.5pp

53.9%

38.2%

41.0%

41.7%

94.9%

79.9%

-14.9pp

3

42.9%

84.0%

25.4%

13.1%

68.3%

97.1%

28.8pp

ABA (Total)

58.5%

62.7%

30.5%

28.6%

89.0%

91.4%

2.3pp

2

ABA (Listed Sector) 3

Gen Re NICO

Source: Company reports, Aon Benfield Market Analysis

1 Excluding funds withheld P&C reinsurance segment only (as disclosed) 3 As calculated by Aon Benfield Market Analysis 2

Aon Benfield Analytics | Market Analysis

25

Exhibit 37: Results for the six months ended June 30, 2014 (cont’d) Accident Year Prior Year Reserve Adjustment 1H 2013

Company

Prior Year Reserve Adjustment 1H 2014

Prior Year Reserve Adjustment as % of NPE 1H 2013

Prior Year Reserve Accident Year Accident Year Adjustment as Combined Combined % of NPE Ratio Ratio 1H 2014 1H 2013 1H 2014

Change

Listed Groups ACE

-198

-188

3.0%

2.6%

91.0%

90.8%

-0.2pp

Alleghany

-134

-102

6.2%

4.7%

94.1%

94.1%

0.0pp

-92

-94

9.5%

8.8%

93.5%

93.9%

0.4pp

Allied World Amlin

-61

-40

5.8%

3.6%

90.8%

90.6%

-0.1pp

Arch

-124

-176

8.2%

9.9%

94.2%

95.6%

1.4pp

Argo

-17

-23

2.7%

3.5%

101.6%

99.2%

-2.4pp

Aspen

-54

-60

5.1%

5.1%

98.8%

93.9%

-4.9pp

Axis

-97

-129

5.3%

6.6%

98.0%

98.0%

0.0pp

Beazley

-61

-73

8.0%

9.1%

97.0%

99.1%

2.1pp

Catlin

-56

-49

2.9%

2.4%

91.0%

87.4%

-3.7pp

Endurance

-113

-105

11.8%

11.9%

102.0%

96.9%

-5.1pp

Everest Re

-1

-3

0.0%

0.1%

84.3%

82.6%

-1.6pp

-142

-131

4.9%

4.5%

99.0%

97.3%

-1.7pp

0

33

0.0%

-1.0%

94.6%

94.3%

-0.3pp

-74

-90

11.7%

14.0%

86.4%

96.0%

9.6pp

Fairfax 1

Hannover Re Hiscox Lancashire

-7

2

2.8%

-0.5%

61.7%

70.1%

8.5pp

Mapfre

n.d.

n.d.

n.d.

n.d.

n.d.

n.d.

n.d.

Markel

-204

-167

15.1%

8.7%

113.1%

106.6%

-6.5pp

-66

-73

22.1%

22.8%

87.7%

86.6%

-1.1pp

Munich Re

-250

-320

3.1%

4.0%

95.6%

98.2%

2.6pp

PartnerRe

-310

-325

16.3%

16.0%

106.3%

103.7%

-2.6pp

Montpelier Re 2

Platinum

-99

-76

36.6%

30.1%

97.3%

93.6%

-3.7pp

QBE

178

131

-2.4%

-1.9%

90.3%

94.6%

4.3pp

RenaissanceRe

-64

-34

11.4%

6.2%

60.6%

60.3%

-0.3pp

SCOR

-31

0

1.5%

0.0%

95.7%

90.9%

-4.9pp

Swiss Re

-445

-296

5.6%

3.3%

91.6%

90.9%

-0.7pp

Validus

-107

-112

9.9%

11.8%

79.6%

80.3%

0.7pp

White Mountains XL ABA (Listed Sector) 3

Gen Re NICO

3

ABA (Total)

-14

-7

1.4%

0.7%

87.7%

87.9%

0.2pp

-150

-123

5.1%

4.3%

95.8%

93.4%

-2.5pp

-2,955

-2,822

3.8%

3.5%

93.7%

93.8%

0.1pp

-70

-60

25.5%

21.5%

120.3%

101.5%

-18.9pp

-652

-314

20.8%

2.1%

89.1%

99.3%

10.1pp

-3,677

-3,196

4.5%

3.3%

93.6%

94.7%

1.1pp

Source: Company reports, Aon Benfield Market Analysis Figures in reporting currencies, but converted to USD (millions) for ABA lines n.d. = not disclosed

26

The Aon Benfield Aggregate – Results for the six months ended June 30, 2014

1 Excluding funds withheld P&C reinsurance segment only (as disclosed) 3 As calculated by Aon Benfield Market Analysis 2

Exhibit 37: Results for the six months ended June 30, 2014 (cont’d)

Net Investment Income 1H 2013

Net Investment Income 1H 2014

Capital Gains / Losses 1H 2013

Capital Gains / Losses 1H 2014

Total Investment Return 1H 2013

Total Investment Return 1H 2014

Change

1,065

1,109

310

-177

1,375

932

-32%

219

225

37

132

256

357

39%

Allied World

71

84

-36

139

35

224

531%

Amlin

24

25

37

51

61

76

24%

Arch

159

152

53

56

212

208

-2%

Argo

53

44

21

30

74

74

0%

Company Listed Groups ACE Alleghany

Aspen

94

96

9

45

103

141

37%

192

198

43

57

235

254

8%

Beazley

29

27

-29

20

0

47

n.m.

Catlin

54

63

-45

79

9

142

n.m.

Endurance

82

80

16

6

98

86

-12%

Everest Re

295

254

161

80

455

335

-27%

Fairfax

258

254

-97

1,656

161

1,910

n.m.

Hannover Re

650

619

39

88

689

708

3%

Hiscox

21

20

1

9

22

29

33%

Lancashire

23

16

12

-4

35

12

-64%

Mapfre

768

1,013

41

58

809

1,071

32%

Markel

143

179

29

25

172

203

18%

Axis

Montpelier Re

33

25

-62

43

-29

68

n.m.

3,522

3,330

18

982

3,540

4,312

22%

PartnerRe

248

247

-276

308

-28

555

n.m.

Platinum

36

35

23

-1

59

34

-43%

330

339

29

89

359

428

19%

79

85

-55

42

24

127

435%

1

Munich Re

QBE RenaissanceRe SCOR

216

240

-7

48

209

288

38%

1,948

2,119

516

509

2,464

2,628

7%

Validus

55

51

-143

113

-88

163

n.m.

White Mountains

57

53

38

178

95

231

143%

558

498

77

100

635

598

-6%

12,921

13,441

809

5,235

13,730

18,676

36%

1

Swiss Re

XL ABA (Listed Sector) Gen Re NICO ABA (Total)

512

445

40

-35

552

410

-26%

2,967

2,996

-20

1,653

2,946

4,649

58%

16,399

16,882

829

6,853

17,228

23,735

38%

Source: Company reports, Aon Benfield Market Analysis Figures in reporting currencies, but converted to USD (millions) for ABA lines n.m. = not meaningful

1

Reported through income statements, excluding unit-linked and with-profit business

Aon Benfield Analytics | Market Analysis

27

Exhibit 37: Results for the six months ended June 30, 2014 (cont’d) Pre-Tax Result 1H 2013

Pre-Tax Result 1H 2014

Change

Pre-Tax Operating ROE* 1H 2013

Pre-Tax Operating ROE* 1H 2014

Change

2,081

1,739

-16%

12.9%

13.0%

0.0pp

Alleghany

400

471

18%

11.3%

9.4%

-1.8pp

Allied World

158

352

122%

11.6%

11.8%

0.2pp

Amlin

160

147

-9%

15.6%

11.4%

-4.2pp

Arch

443

402

-9%

15.0%

10.9%

-4.1pp

Argo

80

87

9%

8.0%

7.2%

-0.7pp

Aspen

139

261

88%

7.7%

12.6%

4.9pp

Axis

401

364

-9%

12.6%

10.4%

-2.2pp

82

133

61%

18.8%

17.3%

-1.4pp

Catlin

145

318

119%

10.9%

12.4%

1.5pp

Endurance

165

188

14%

10.9%

12.1%

1.2pp

Everest Re

792

717

-9%

18.9%

17.3%

-1.7pp

-195

1,643

n.m.

-2.3%

-0.3%

1.9pp

Hannover Re

630

635

1%

18.3%

16.1%

-2.2pp

Hiscox

181

125

-31%

26.1%

16.9%

-9.2pp

Lancashire

137

99

-28%

18.9%

13.9%

-5.0pp

Mapfre

866

942

9%

16.2%

17.2%

0.9pp

Markel

163

170

4%

5.2%

4.2%

-1.0pp

73

147

101%

16.4%

11.0%

-5.4pp

1,902

1,999

5%

14.2%

7.5%

-6.6pp

PartnerRe

23

716

n.m.

9.0%

11.9%

2.9pp

Platinum

146

106

-27%

13.5%

12.2%

-1.3pp

QBE

585

487

-17%

9.8%

7.3%

-2.5pp

RenaissanceRe

272

362

33%

14.6%

13.0%

-1.7pp

SCOR

237

336

42%

10.2%

11.4%

1.1pp

2,600

2,486

-4%

13.0%

11.9%

-1.1pp

Validus

183

443

142%

15.2%

15.2%

-0.1pp

White Mountains

155

221

42%

5.6%

1.9%

-3.6pp

Company Listed Groups ACE

Beazley

Fairfax

Montpelier Re Munich Re

Swiss Re

XL ABA (Listed Sector) Gen Re NICO ABA (Total)

671

-29

n.m.

10.3%

-2.3%

-12.6pp

15,002

17,699

18%

12.5%

10.3%

-2.2pp

568

468

-18%

10.2%

8.5%

-1.6pp

3,445

4,633

34%

8.3%

6.1%

-2.3pp

19,015

22,799

20%

11.3%

9.0%

-2.3pp

Source: Company reports, Aon Benfield Market Analysis Figures in reporting currencies, but converted to USD (millions) for ABA lines n.m. = not meaningful

28

The Aon Benfield Aggregate – Results for the six months ended June 30, 2014

*Calculated by excluding the impact of net realized and unrealized investment gains/losses reported through income statements

Exhibit 37: Results for the six months ended June 30, 2014 (cont’d) Common Net Income 1H 2013

Common Net Income 1H 2014

Change

Return on Equity* 1H 2013

Return on Equity* 1H 2014

Change

1,844

1,513

-18%

13.5%

10.2%

-3.2pp

Alleghany

310

354

14%

9.6%

9.9%

0.3pp

Allied World

157

329

109%

9.4%

18.3%

8.9pp

Amlin

140

136

-3%

17.8%

16.3%

-1.6pp

Arch

422

380

-10%

17.3%

13.5%

-3.8pp

Argo

64

79

22%

8.6%

9.9%

1.3pp

Aspen

115

232

101%

8.1%

16.2%

8.1pp

Axis

375

328

-13%

14.7%

12.5%

-2.2pp

72

114

58%

12.2%

17.5%

5.3pp

Catlin

118

273

131%

8.1%

16.7%

8.5pp

Endurance

145

171

18%

12.6%

13.3%

0.7pp

Everest Re

660

584

-11%

19.8%

16.3%

-3.4pp

Fairfax

-27

1,119

n.m.

-0.7%

29.1%

29.8pp

Hannover Re

423

444

5%

14.6%

14.5%

-0.1pp

Hiscox

158

120

-24%

23.0%

17.5%

-5.5pp

Lancashire

134

105

-22%

20.2%

14.2%

-6.1pp

Mapfre

456

458

0%

11.6%

11.2%

-0.4pp

Markel

117

128

10%

4.6%

3.7%

-0.9pp

65

127

96%

8.9%

16.9%

7.9pp

1,491

1,684

13%

11.3%

12.6%

1.3pp

PartnerRe

20

553

2643%

0.7%

18.6%

17.9pp

Platinum

136

100

-27%

15.0%

11.3%

-3.6pp

QBE

477

392

-18%

8.5%

7.3%

-1.2pp

RenaissanceRe

217

272

25%

13.9%

15.7%

1.8pp

SCOR

189

256

35%

8.0%

10.2%

2.2pp

2,166

2,028

-6%

13.5%

12.2%

-1.3pp

Validus

254

316

24%

13.3%

16.9%

3.6pp

White Mountains

147

191

30%

7.9%

9.5%

1.6pp

Company Listed Groups ACE

Beazley

Montpelier Re Munich Re

Swiss Re

XL ABA (Listed Sector) Gen Re NICO ABA (Total)

623

-24

n.m.

12.2%

-0.5%

-12.7pp

12,435

13,988

12.5%

11.6%

12.2%

0.6pp

539

355

-34%

10.4%

6.0%

-4.3pp

3,029

4,060

34%

7.3%

8.2%

0.9pp

16,004

18,403

15%

10.4%

10.8%

0.5pp

Source: Company reports, Aon Benfield Market Analysis Figures in reporting currencies, but converted to USD (millions) for ABA lines n.m. = not meaningful

*Common net income as a percentage of average common equity

Aon Benfield Analytics | Market Analysis

29

Exhibit 37: Results for the six months ended June 30, 2014 (cont’d) Cash and Investments FY 2013

Cash and Investments 1H 2014

Change

Shareholders’ Funds FY 2013

Shareholders’ Funds 1H 2014

Change

ACE

61,977

64,684

4%

28,825

30,325

5%

Alleghany

19,490

19,683

1%

6,924

7,398

7%

Allied World

9,026

9,205

2%

3,520

3,683

5%

Amlin

4,510

4,401

-2%

1,678

1,670

0%

Arch

14,050

16,111

15%

5,647

6,229

10%

Argo

4,237

4,184

-1%

1,563

1,633

4%

Aspen

8,300

8,653

4%

3,300

3,554

8%

14,768

15,678

6%

5,818

5,956

2%

Beazley

4,430

4,387

-1%

1,339

1,262

-6%

Catlin

9,209

9,286

1%

3,783

3,954

5%

Company Listed Groups

Axis

Endurance

6,575

6,755

3%

2,887

3,116

8%

Everest Re

16,824

17,868

6%

6,968

7,323

5%

Fairfax

24,893

26,413

6%

8,353

9,361

12%

Hannover Re

46,149

47,080

2%

5,888

6,412

9%

Hiscox

3,157

3,026

-4%

1,409

1,332

-6%

Lancashire

2,484

2,529

2%

1,460

1,504

3%

Mapfre

40,133

43,637

9%

7,834

8,485

8%

Markel

17,612

18,236

4%

6,674

7,143

7%

3,306

3,426

4%

1,642

1,668

2%

Munich Re

203,556

211,000

4%

25,983

27,422

6%

PartnerRe

18,274

18,326

0%

6,710

6,910

3%

Platinum

3,612

3,517

-3%

1,747

1,778

2%

30,632

31,373

2%

10,356

11,228

8%

7,230

7,001

-3%

3,904

3,836

-2%

23,755

23,776

0%

4,940

5,110

3%

143,332

145,392

1%

32,952

33,628

2%

Validus

8,110

8,135

0%

3,704

3,777

2%

White Mountains

8,003

8,001

0%

3,906

4,106

5%

Montpelier Re 1

QBE RenaissanceRe SCOR 1

Swiss Re

XL ABA (Listed Sector) Gen Re NICO ABA (Total)

36,192

31,896

-12%

9,998

10,034

0%

917,848

939,108

2%

228,672

239,480

5%

15,810

16,085

2%

11,562

12,020

4%

148,939

161,943

9%

97,226

99,765

3%

1,082,597

1,117,137

3%

337,460

351,264

4%

Source: Company reports, Aon Benfield Market Analysis Figures in reporting currencies, but converted to USD (millions) for ABA lines

30

The Aon Benfield Aggregate – Results for the six months ended June 30, 2014

1

Excluding unit-linked and with-profit business

Contacts Mike Van Slooten

Jonny Eggins

Head of Market Analysis - International Aon Benfield Analytics +44.207.7522.8106 [email protected]

Analyst Market Analysis - International Aon Benfield Analytics +44.207.7522.3898 [email protected]

Mike McClane Head of Market Analysis - Americas Aon Benfield Analytics +1.215.751.1596 [email protected]

Marie Teissier Analyst Market Analysis - International Aon Benfield Analytics +44.207.7522.3951 [email protected]

Eleanore Obst Analyst Market Analysis - International Aon Benfield Analytics +44.207.7522.3823 [email protected]

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Aon Benfield Analytics | Market Analysis

31

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