Trends, Challenges & Opportunities in the P/C Insurance Industry:

2014 and BeyondGuy Carpenter Mutual Company Conference

Philadelphia, PAJune 4, 2014

Download at www.iii.org/presentationsRobert P. Hartwig, Ph.D., CPCU, President & Economist

Insurance Information Institute 110 William Street New York, NY 10038Tel: 212.346.5520 Cell: 917.453.1885 bobh@iii.org www.iii.org

2

P/C Insurance Industry Financial Overview

2013: Best Year in the Post-Crisis Era

Performance Improved with Lower CATs, Strong Markets

2

P/C Net Income After Taxes1991–2013 ($ Millions)

2005 ROE*= 9.6% 2006 ROE = 12.7% 2007 ROE = 10.9% 2008 ROE = 0.1% 2009 ROE = 5.0% 2010 ROE = 6.6% 2011 ROAS1 = 3.5% 2012 ROAS1 = 6.1% 2013 ROAS1 = 10.3%

• ROE figures are GAAP; 1Return on avg. surplus. Excluding Mortgage & Financial Guaranty insurers yields a 9.8% ROAS in 2013, 6.3% ROAS in 2012, 4.7% ROAS for 2011, 7.6% for 2010 and 7.4% for 2009.

Sources: A.M. Best, ISO, Insurance Information Institute

$14,

178

$5,8

40

$19,

316

$10,

870 $20,

598

$24,

404 $3

6,81

9

$30,

773

$21,

865

$3,0

46

$30,

029

$62,

496

$3,0

43

$35,

204

$19,

456

$35,

074

$63,

784

$28,

672

-$6,970

$65,

777

$44,

155

$20,

559

$38,

501

-$10,000

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

2013 ROAS was 10.3%

Net income in 2013 was up substantially

(+81.9%) from 2012

-5%

0%

5%

10%

15%

20%

25%

75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

Profitability Peaks & Troughs in the P/C Insurance Industry, 1975 – 2013*

*Profitability = P/C insurer ROEs. 2011-13 figures are estimates based on ROAS data. Note: Data for 2008-2013 exclude mortgage and financial guaranty insurers.Source: Insurance Information Institute; NAIC, ISO, A.M. Best.

1977:19.0% 1987:17.3%

1997:11.6%2006:12.7%

1984: 1.8% 1992: 4.5% 2001: -1.2%

10 Years

10 Years9 Years

2011: 4.7%

ROE

1975: 2.4%

2013: 9.8 %

A 100 Combined Ratio Isn’t What ItOnce Was: Investment Impact on ROEsCombined Ratio / ROE

* 2008 -2013 figures are return on average surplus and exclude mortgage and financial guaranty insurers. 2013 combined ratio including M&FG insurers is 96.1; 2012 =103.2, 2011 = 108.1, ROAS = 3.5%. Source: Insurance Information Institute from A.M. Best and ISO Verisk Analytics data.

97.5100.6 100.1 100.8

92.7

101.299.5

101.0

96.7

102.4

106.5

95.7

14.3%15.9%

12.7%10.9%

7.4% 7.9%

4.7%6.2%9.6%8.8%

4.3%

9.8%

80

85

90

95

100

105

110

1978 1979 2003 2005 2006 2007 2008 2009 2010 2011 2012 20130%

3%

6%

9%

12%

15%

18%

Combined Ratio ROE*

Combined Ratios Must Be Lower in Today’s DepressedInvestment Environment to Generate Risk Appropriate ROEs

A combined ratio of about 100 generates an ROE of ~7.0% in 2012, ~7.5% ROE in 2009/10,

10% in 2005 and 16% in 1979

Lower CATs helped ROEs

in 2013

6

ROE: Property/Casualty Insurance vs. Fortune 500, 1987–2013E*

* Excludes Mortgage & Financial Guarantee in 2008 – 2013. 2013 Fortune 500 figure is I.I.I. estimate. Sources: ISO, Fortune; Insurance Information Institute.

-5%

0%

5%

10%

15%

20%

87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13E

P/C Profitability Is Both by Cyclicality and Ordinary Volatility

Hugo

Andrew

Northridge

Lowest CAT Losses in 15 Years

Sept. 11

Katrina, Rita, Wilma

4 Hurricanes

Financial Crisis*

(Percent)

Record Tornado Losses

Sandy

Low CATs

RNW for Major P/C Lines,2003-2012 Average

18.9%

12.1%9.8% 9.0%

7.6% 7.1% 7.1%6.0%

1.1%

26.5%

13.3%

7.9%

0%

5%

10%

15%

20%

25%

30%

Fire InlandMarine

AllOther

MedMal

CommAuto

CMP AllLines

PPAuto

WC OtherLiab

HO Allied

Source: NAIC; Insurance Information Institute

10-year returns for some lines are excellent, though homeowners is a major

laggard, largely due to major catastrophes. WC returns slipped.

9

RNW All Lines by State, 2003-2012 Average:Highest 25 States

21.0

17.7

15.1

14.8

13.4

13.3

13.1

12.6

12.0

11.7

11.4

11.4

11.4

11.1

11.0

11.0

11.0

10.9

10.9

10.7

10.7

10.5

10.3

10.3

9.9

9.4

02468

1012141618202224

HI AK ND ME WY UT VT ID WA NH IA NE SC DC MA OR VA NC RI CA CT OH NM SD WV MT

Source: NAIC.

The most profitable states over the past decade are

widely distributed geographically, though none

are in the Gulf region

10

9.2

9.1

8.9

8.9

8.6

8.5

8.3

8.1

7.9

7.7

7.7

7.6

7.4

6.5

6.5

6.1

6.1

5.5

5.2

4.9

4.9

4.2

3.2

2.0

-6.5

-9.4

-14-12-10-8-6-4-202468

10

KS MD CO WI FL MN TX IN US AR PA IL AZ MO NV KY NJ GA NY MI TN DE OK AL MS LA

RNW All Lines by State, 2003-2012 Average: Lowest 25 States

Source: NAIC.

Some of the least profitable states over the past decade were hit hard

by catastrophes

11

-5%

0%

5%

10%

15%

20%

25%

71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Net Premium Growth: Annual Change, 1971—2014F(Percent)

1975-78 1984-87 2000-03

Shaded areas denote “hard market” periodsSources: A.M. Best (historical and forecast), ISO, Insurance Information Institute.

Net Written Premiums Fell 0.7% in 2007 (First Decline

Since 1943) by 2.0% in 2008, and 4.2% in 2009, the First 3-Year Decline Since 1930-33.

2014F: 4.0%2013: 4.6%

2012: +4.3%

12

4.0%

7.2%

9.0%

5.4%4.2% 4.1%

5.0%

0.6%

4.6%

0%1%2%3%4%5%6%7%8%9%

10%

PersonalAuto

Home OtherLiability*

WC CMP Fire & Allied

Comm. Auto

All OtherLines

Total P/C

Growth by Major P/C Line, 2013

Other Liability and Homeowners were the fastest growing

lines in 2013

*Includes Products Liability.Source: Annual Statement data for by line statistics; NCCI for WC; ISO for Total P/C; Insurance Information Institute.

13

Average Commercial Rate Change,All Lines, (1Q:2004–1Q:2014)

-3.2

%-5

.9%

-7.0

%-9

.4%

-9.7

%-8

.2%

-4.6

% -2.7

%-3

.0%

-5.3

%-9

.6%

-11.

3%-1

1.8%

-13.

3%-1

2.0%

-13.

5%-1

2.9% -11.

0%-6

.4%

-5.1

%-4

.9%

-5.8

%-5

.6%

-5.3

%-6

.4%

-5.2

%-5

.4% -2

.9%

2.7% 4.

4%4.

3%3.

9% 5.0%

5.2%

4.3%

3.4%

2.1%

1.5%

-0.1

% 0.9%

-0.1

%

-16%

-11%

-6%

-1%

4%

9%

1Q04

2Q04

3Q04

4Q04

1Q05

2Q05

3Q05

4Q05

1Q06

2Q06

3Q06

4Q06

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

Note: CIAB data cited here are based on a survey. Rate changes earned by individual insurers can and do vary, potentially substantially.

Source: Council of Insurance Agents & Brokers; Insurance Information Institute

KRW Effect

Pricing as of Q1:2014 was positive for the 11th

consecutive quarter.

(Percent)

Q2 2011 marked the last of 30th

consecutive quarter of price declines

14

Change in Commercial Rate Renewals, by Line: 2014:Q1

Source: Council of Insurance Agents and Brokers; Insurance Information Institute.

Major Commercial Lines Renewed Generally Upward in Q4:2014 for the 11th Consecutive Quarter; D&O, Employment Practices and Workers Comp Leading

the Way; Lower Cat Losses and Falling Reinsurance Prices Have Pressured Property Coverages Lower; Low Interest Rates Still Exert Upward Rate Pressure

Percentage Change (%)

3.3%

4.1%4.9% 5.2%

0.0%0.7% 0.9%

1.5% 1.7% 2.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Com

mer

cial

Pro

perty

Bus

ines

sIn

terru

ptio

n

Sur

ety

Gen

eral

Liab

ility

Um

brel

la

Con

stru

ctio

n

Com

mer

cial

Aut

o

Wor

kers

Com

p

EP

L

D&

O

D&O increases are large than any other line,

followed by EPL and Workers Comp

Note: CIAB data cited here are based on a survey. Rate changes earned by individual insurers can and do vary, potentially substantially.

15

Growth Analysis by State and Business Segment

Post-Crisis Paradox? Premium Growth Rates Vary

Tremendously by State15

16

Direct Premiums Written: Total P/CPercent Change by State, 2007-2013

74.6

36.9

31.9

27.4

25.2

24.9

22.5

22.2

16.6

15.9

15.7

14.5

14.5

14.3

12.6

11.9

11.8

11.2

10.5

10.3

9.9

9.8

9.3

9.1

9.0

8.6

0

1020

30

40

5060

70

80

ND SD OK NE

KS IA VT TX WY

TN MN AR

AK IN WI

CO MI

KY

OH NJ LA SC VA AL

MO

NM

Pece

nt c

hang

e (%

)

Sources: SNL Financial LC.; Insurance Information Institute.

Top 25 States

North Dakota was the country’s growth leader over the past 6 years with premiums written

expanding by 74.6%

17

Direct Premiums Written: Total P/CPercent Change by State, 2007-2013

8.5

8.2

7.9

7.8

7.6

7.3

7.0

6.9

6.2

5.9

5.6

5.3

4.2

4.1

3.5

1.6

1.0

0.4

-0.7

-1.7

-1.9

-4.1

-5.7

-6.7

-12.

6

-15.

3

-20

-15

-10

-5

0

5

10

MS

CT

US

NC GA

NY

MD

MA

UT

WA

PA IL RI

NH ID MT

ME

OR CA FL DC AZ

WV HI

NV

DE

Pece

nt c

hang

e (%

)

Bottom 25 States

Sources: SNL Financial LC.; Insurance Information Institute.

Growth was negative in 7 states and DC between

2007 and 2013

18

Direct Premiums Written: PP AutoPercent Change by State, 2007-2013

34.1

26.7

25.8

24.0

19.7

18.7

16.8

15.5

14.9

14.6

14.4

14.3

14.2

14.1

13.8

13.7

13.6

13.5

13.5

12.3

11.4

10.9

10.7

10.6

10.5

10.4

0

510

1520

25

3035

40

ND TX MI

OK SD NE NJ

TN CO KS FL IA KY WI

DE

UT VA SC NY LA AR

US

MT

MO

WY AL

Pece

nt c

hang

e (%

)

Sources: SNL Financial LC.; Insurance Information Institute.

Top 25 States

19

Direct Premiums Written: PP AutoPercent Change by State, 2007-2013

10.3

10.3

10.1

9.7

9.4

9.0

8.9

8.8

8.6

7.4

6.5

6.1

6.1

6.1

5.8

5.3

5.1

5.0

4.6

2.0

0.8

-0.2

-0.3

-0.9

-3.7

-6.0

-8-6-4-202468

1012

AK

DC

NC

OR

MN IN GA

MD

WV

OH

MS

MA

NM CT

WA

PA IL RI

ID VT CA

NV

NH AZ HI

ME

Pece

nt c

hang

e (%

)

Bottom 25 States

Sources: SNL Financial LC.; Insurance Information Institute.

Advertising Expenditures by P/C Insurance Industry, 1999-2013

$1.736 $1.737 $1.803 $1.708

$3.426

$4.102$4.354

$4.103

$5.079

$5.883$6.088 $6.175

$2.975

$2.111$1.882

$1.5$2.0$2.5$3.0$3.5$4.0$4.5$5.0$5.5$6.0$6.5

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

Source: Insurance Information Institute from consolidated P/C Annual Statement data, Insurance Expense Exhibit (Part I).

$ Billions P/C ad spend hit an all time record high of $6.175 billion in 2013, up 1.5% over 2012.

The pace of growth has slowed from 15.8% in 2011

and 23.8% in 2010

P/C ad spending has more than tripled since 2002

(up 256% from 2002-2013)

21

Direct Premiums Written: HomeownersPercent Change by State, 2007-2013

60.5

53.3

50.7

50.7

50.5

49.2

46.3

45.4

45.4

44.7

44.0

43.5

42.9

42.5

42.1

41.9

40.3

38.1

37.1

37.1

35.7

34.9

34.1

33.6

33.0

32.6

0

10

20

30

40

50

60

70

OK

ND

MN AR

TN SD MO

CO KY

KS WI

WY

NE IA GA

MT TX NM OH IN AL IL SC DE

UT ID

Pece

nt c

hang

e (%

)

Sources: SNL Financial LLC.; Insurance Information Institute.

Top 25 States

22

Direct Premiums Written: HomeownersPercent Change by State, 2007-2013

32.6

32.5

31.4

30.6

30.4

30.3

29.8

29.6

27.5

27.2

26.8

26.4

25.3

24.6

22.5

22.3

20.8

19.7

19.2

17.2

16.1

15.4

8.3

8.0

2.1

0.5

0

5

10

1520

25

30

35

40

MS

NC VA NJ

CT RI

LA PA WV

WA

US

NH

ME

MD NY

OR

MA

AK

DC AZ

VT MI

HI

CA FL NV

Pece

nt c

hang

e (%

)

Bottom 25 States

Sources: SNL Financial LLC.; Insurance Information Institute.

23

Direct Premiums Written: Comm. LinesPercent Change by State, 2007-2013

91.1

42.1

41.4

33.7

26.3

25.8

23.6

19.1

15.6

14.0

11.3

10.0

9.8

6.8

6.7

6.5

4.1

3.2

3.1

3.0

2.7

2.2

2.0

1.7

1.3

0.6

0102030405060708090

100

ND

OK SD VT NE IA KS ID AK

TX WY

MN IN AR

TN WI

OH

MA

CT

NM LA MS NJ

NY

US

MO

Pece

nt c

hang

e (%

)

Sources: SNL Financial LLC.; Insurance Information Institute.

Top 25 States

Only 30 states showed any commercial lines growth from 2007 through 2013

24

Direct Premiums Written: Comm. LinesPercent Change by State, 2007-2013

0.5

0.4

0.2

0.1

-0.5

-0.8

-0.9

-1.0

-1.1

-1.1

-1.9

-2.0

-2.1

-2.7

-3.3

-3.7

-4.3

-4.9

-10.

7

-11.

4

-11.

7

-12.

6

-12.

7

-13.

6

-22.

4

-25.

1

-30

-25

-20

-15

-10

-5

0

5

MD

NH PA CO IL WA VA KY

NC

ME RI

MI

SC AL

GA

CA

UT

DC

OR

MT HI

DE FL AZ

WV

NV

Pece

nt c

hang

e (%

)

Bottom 25 States

Sources: SNL Financial LLC.; Insurance Information Institute.

States with the poorest performing economies also produced the most negative net change in premiums of

the past 6 years

Nearly half the states have yet to see commercial lines premium

volume return to pre-crisis levels

25

Direct Premiums Written: Workers’ CompPercent Change by State, 2007-2013*

32.9

30.8

24.3

21.5

13.4

11.5

11.0

10.6

8.1

4.8

4.5

3.0

1.5

-0.3

-0.6

-1.0

-2.3

-2.4

-2.9

-3.0

-3.7

-4.1

-5.7

-5.8

-8.0

-15-10-505

101520253035

OK IA SD NY CA

CT NJ

KS

NE IN MI

VT MN

DC WI IL N

H US

NM TX PA VA MD TN AR

Pece

nt c

hang

e (%

)

*Excludes monopolistic fund states: ND, OH, WA, WY as well as WV, which transitioned to a competitive structure during this period.Sources: SNL Financial LC.; Insurance Information Institute.

Top 25 States

Only 13 states have seen works comp premium volume

return to pre-crisis levels

26

Direct Premiums Written: Worker’s CompPercent Change by State, 2007-2013*

-8.1

-8.4

-8.7

-8.8

-11.

1

-11.

3

-12.

0

-14.

7

-15.

3

-15.

4

-16.

0

-16.

3

-17.

1

-22.

1

-23.

0

-26.

5

-27.

5

-32.

5

-33.

3

-33.

5

-43.

8

-71.

0

-80-75-70-65-60-55-50-45-40-35-30-25-20-15-10-50

MS

MA RI

GA

NC AK ID CO LA ME AZ

MO SC AL

KY

UT FL OR DE HI

NV

MT

Pece

nt c

hang

e (%

)

Bottom 25 States

*Excludes monopolistic fund states: ND, OH, WA, WY as well as WV, which transitioned to a competitive structure during this period.Sources: SNL Financial LC.; Insurance Information Institute.

States with the poorest performing economies also produced some of the most

negative net change in premiums of the past 6 years

The Strength of the Economy Will Influence P/C Insurer

Growth Opportunities

27

Growth Will Expand Insurer Exposure Base Across Most Lines

27

28

US Real GDP Growth*

* Estimates/Forecasts from Blue Chip Economic Indicators.Source: US Department of Commerce, Blue Economic Indicators 4/14; Insurance Information Institute.

2.7%

0.5%

3.6%

3.0%

1.7%

-1.8

%1.

3%-3

.7%

-5.3

%-0

.3%

1.4%

5.0%

2.3%

2.2% 2.6%

2.4%

0.1%

2.5%

1.3%

4.1%

2.0%

1.3%

3.1%

1.1% 2.

5%4.

1%2.

4%-1

.0%

3.0%

3.0%

3.1%

3.0%

3.0%

3.0%

2.9%

0.4%

-8.9%

4.1%

1.1% 1.

8% 2.5% 3.

6%3.

1%

-9%

-7%

-5%

-3%

-1%

1%

3%

5%

7%

   20

00   

   20

01   

   20

02   

   20

03   

   20

04   

   20

05   

   20

06   

07:1

Q07

:2Q

07:3

Q07

:4Q

08:1

Q08

:2Q

08:3

Q08

:4Q

09:1

Q09

:2Q

09:3

Q09

:4Q

10:1

Q10

:2Q

10:3

Q10

:4Q

11:1

Q11

:2Q

11:3

Q11

:4Q

12:1

Q12

:2Q

12:3

Q12

:4Q

13:1

Q13

:2Q

13:3

Q13

:4Q

14:1

Q14

:2Q

14:3

Q14

:4Q

15:1

Q15

:2Q

15:3

Q15

:4Q

Demand for Insurance Should Increase in 2014/15 as GDP Growth Accelerates Modestly and Gradually Benefits the Economy Broadly

Real GDP Growth (%)

Recession began in Dec. 2007. Economic toll of credit crunch, housing slump, labor

market contraction was severe

The Q4:2008 decline was the steepest since the Q1:1982 drop of 6.8%

2014/15 are expected to see a

modest acceleration in growth

29

Real GDP by State Percent Change, 2012:Highest 25 States

13.4

4.8

3.9

3.6

3.5

3.5

3.4

3.3

3.3

3.3

2.7

2.7

2.6

2.4

2.4

2.4

2.4

2.2

2.2

2.2

2.2

2.1

2.1

2.1

2.1

2.0

0

2

4

6

8

10

12

14

ND TX OR WA CA MN UT IN TN WV NC SC AZ FL IA MD MS MA MI OH US CO GA MT OK MO

Perc

ent C

hang

e (%

)

Sources: US Bureau of Labor Statistics; Insurance Information Institute.

North Dakota was the economic growth juggernaut of the US

in 2012—by far

Only 10 states experienced growth in excess of 3%, which is what we would see nationally in

a more typical recovery

30

1.9

1.7

1.6

1.5

1.5

1.5

1.5

1.4

1.4

1.4

1.3

1.3

1.3

1.2

1.2

1.1

1.1

0.7

0.5

0.5

0.4

0.2

0.2

0.2

0.2

-0.1

-0.4-0.20.00.20.40.60.81.01.21.41.61.82.0

IL PA HI LA NE NV WI KS KY RI AR NJ NY AL VT AK VA DC ME NH ID DE NM SD WY CT

Perc

ent C

hang

e (%

)Real GDP by State Percent Change, 2012: Lowest 25 States

Sources: US Bureau of Labor Statistics; Insurance Information Institute.

Connecticut was the only state to shrink in 2012

Growth rates in 8 states (and DC) were still below

1% in 2012

74.4

73.6

73.6

72.2 73.6 76

67.8 68.9

68.2

67.7 71

.6 74.5

74.2 77

.567

.5 69.8

74.3

71.5

63.7

55.7 59

.5 60.9 64

.169

.975

.075

.376

.276

.4 79.3

73.2

72.3 74

.382

.682

.774

.573

.8 77.6 78.6

84.5

84.1

85.1

82.1

77.5

73.2 75

.182

.581

.281

.680

.0 84.1

81.9

76.4

40

45

50

55

60

65

70

75

80

85

90

Jan-

10Fe

b-10

Mar

-10

Apr

-10

May

-10

Jun-

10Ju

l-10

Aug

-10

Sep

-10

Oct

-10

Nov

-10

Dec

-10

Jan-

11Fe

b-11

Mar

-11

Apr

-11

May

-11

Jun-

11Ju

l-11

Aug

-11

Sep

-11

Oct

-11

Nov

-11

Dec

-11

Jan-

12Fe

b-12

Mar

-12

Apr

-12

May

-12

Jun-

12Ju

l-12

Aug

-12

Oct

-12

Nov

-12

Dec

-12

Jan-

13Fe

b-13

Mar

-13

Apr

-13

May

-13

Jun-

13Ju

l-13

Aug

-13

Sep

-13

Oct

-13

Nov

-13

Dec

-13

Jan-

14Fe

b-14

Mar

-14

Apr

-14

May

-14

Consumer Sentiment Survey (1966 = 100)

January 2010 through May 2014

Consumer confidence has been low for years amid high unemployment, falling home prices and other factors adversely impact consumers, but improved substantially over the past 2+ years, though

uncertainty in Washington sometimes takes a toll.Source: University of Michigan; Insurance Information Institute

Optimism among consumers improved in the first part of 2014

32

Impact of 2011 budget impasse

NFIB Small Business Optimism Index

January 1985 through April 2014

Source: National Federation of Independent Business at http://www.advisorperspectives.com/dshort/charts/indicators/Sentiment.html?NFIB-optimism-index.gif ; Insurance Information Institute. 33

Small business optimism in April exceeded for the first

time its level when the crisis began in Dec. 2007.

36

16.9

16.5

16.1

13.2

10.4

11.6

12.7

14.4

15.5 16

.0 16.4

16.2

16.2

16.2

16.216

.9

16.617

.117.517.8

17.4

91011121314

1516171819

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14F 15F 16F 17F18F 19F

(Millions of Units)

Auto/Light Truck Sales, 1999-2019F

Source: U.S. Department of Commerce; Blue Chip Economic Indicators (5/14 and 3/13); Insurance Information Institute.

Car/Light Truck Sales Will Continue to Recover from the 2009 Low Point, Bolstering the Auto Insurer Growth and the Manufacturing Sector Along

With Workers Comp Exposures

New auto/light truck sales fell to the lowest level since the late 1960s. Forecast for 2014-15 is

still below 1999-2007 average of 17 million units, but a robust recovery is well underway.

Job growth and improved credit market conditions will boost auto sales in

2014 and beyond

Truck purchases by contractors are especially strong

39

Monthly Change* in Auto Insurance Prices, 1991–2014*

*Percentage change from same month in prior year; through April 2014; seasonally adjustedNote: Recessions indicated by gray shaded columns.Sources: US Bureau of Labor Statistics; National Bureau of Economic Research (recession dates); Insurance Information Institutes.

-2%

0%

2%

4%

6%

8%

10%

'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

Cyclical peaks in PP Auto tend to occur roughly every 10 years (early

1990s, early 2000s and likely the early 2010s)

“Hard” markets tend to occur

during recessionary

periods

Pricing peak occurred in late

2010 at 5.3%, falling to 2.8% by Mar. 2012

The Apr. 2014 reading of 4.4% is

up from 4.2%a year earlier

44

Average Expenditures on Auto Insurance

$651$668

$691$705

$726

$786

$830$842$831$816

$795$789$787$791$803$832

$857

$690$685$703

$600

$650

$700

$750

$800

$850

$900

$950

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11* 12* 13F

803

Countrywide Auto Insurance Expenditures Decreased by 0.8% in 2008 and 0.5% in 2009 and Increased 0.5% in 2010, 1.5% in 2011 (est.), 2.0% in 2012 and

2.2% in 2013 (forecast)* Insurance Information Institute Estimates/Forecasts

Source: NAIC, Insurance Information Institute estimate for 2011-2013 based on CPI and other data.

The average expenditure on auto insurance is lower today than it was in 2004

45

(Millions of Units)

New Private Housing Starts, 1990-2019F

1.48

1.47 1.

62 1.64

1.57 1.60 1.

71 1.85 1.

96 2.07

1.80

1.36

0.91

0.55 0.59 0.61

0.78 0.

92 1.05

1.27

1.44 1.

501.

511.

50

1.351.

461.

291.

201.

011.

19

0.3

0.5

0.7

0.9

1.1

1.3

1.5

1.7

1.9

2.1

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14F15F16F17F18F19F

Source: U.S. Department of Commerce; Blue Chip Economic Indicators (5/14 and 3/13); Insurance Information Institute.

Insurers Are Continue to See Meaningful Exposure Growth in the Wake of the “Great Recession” Associated with Home Construction: Construction Risk

Exposure, Surety, Commercial Auto; Potent Driver of Workers Comp Exposure

New home starts plunged 72% from 2005-2009; A net

annual decline of 1.49 million units, lowest since records began

in 1959

Job growth, low inventories of existing homes, low mortgage rates and demographics should continue to stimulate new home construction

for several more years

46

Average Premium forHome Insurance Policies**

* Insurance Information Institute Estimates/Forecasts **Excludes state-run insurers.Source: NAIC, Insurance Information Institute estimates for 2011-2013 based on CPI data and other data.

$508$536

$593

$668

$822 $830$880

$909$945

$983$1,022

$804$764

$729

$400

$500

$600

$700

$800

$900

$1,000

$1,100

00 01 02 03 04 05 06 07 08 09 10 11* 12* 13*

Countrywide Home Insurance Expenditures Increased by an Estimated 4.0% in 2011-2013

CONSTRUCTION, MANUFACTURING & ENERGY

OUTLOOK

52

Key Sectors Critical to the Economy and the P/C

Insurance Industry52

53

Value of New Private Construction: Residential & Nonresidential, 2003-2014*

Billions of Dollars

$0$100$200$300$400$500$600$700$800$900

$1,000

03 04 05 06 07 08 09 10 11 12 13 14*

Non ResidentialResidential

Private Construction Activity Is Moving in a Positive Direction though Remains Well Below Pre-Crisis Peak; Residential Dominates

$298.1

$15.0

$613.7

New Construction peaks at $911.8. in 2006

Trough in 2010 at $500.6B,

after plunging 55.1% ($411.2B)

2014: Value of new pvt. construction hits $686.5B as of Apr. 2014, up 37%

from the 2010 trough but still 25% below 2006 peak

53

$261.8

$238.8

$308.0

$378.5

*2014 figure is a seasonally adjusted annual rate as of April.Sources: US Department of Commerce; Insurance Information Institute.

54

Value of Private Construction Put in Place, by Segment, April 2014 vs. April 2013*

8.1%

-3.5% -4.1% -5.2%

12.2%

21.4%

-3.9%

7.3%

15.9%11.7%

17.2%

5.6%

17.2%

25.6%

-10%-5%0%5%

10%15%20%25%30%

Tota

l Priv

ate

Cons

truct

ion

Resi

dent

ial

Tota

lNo

nres

iden

tial

Lodg

ing

Offi

ce

Com

mer

cial

Heal

th C

are

Educ

atio

nal

Relig

ious

Amus

emen

t &Re

c.

Tran

spor

tatio

n

Com

mun

icat

ion

Pow

er

Man

ufac

turin

g

Private Construction Activity is Up in Many Segments, Including the Key Residential Construction Sector; Bodes Well for the Remainder of 2014

Growth (%) Led by the Residential Construction, Lodging and Communication segments, Private

sector construction activity is rising after plunging during the “Great Recession.”

*seasonally adjustedSource: U.S. Census Bureau, http://www.census.gov/construction/c30/c30index.html ; Insurance Information Institute.

55

$314.9 $304.0$286.4 $279.0 $271.4 $267.0

$216.1 $220.2$234.2

$255.4

$289.1$308.7

$0

$50

$100

$150

$200

$250

$300

$350

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*

($ Billions)

Government Construction Spending Peaked in 2009, Helped by Stimulus Spending, but Continues to Contract As State/Local Governments

Grapple with Deficits and Federal Sequestration Takes Hold

Value of New Federal, State and Local Government Construction: 2003-2014*

*2014 figure is a seasonally adjusted annual rate as of April; http://www.census.gov/construction/c30/historical_data.html Sources: US Department of Commerce; Insurance Information Institute.

Construction across all levels of government

peaked at $314.9B in 2009

Austerity Reigns Govt. construction is still shrinking, down $47.9B or

15.2% since 2009 peak

56

Construction Employment,Jan. 2010—April 2014*

*Seasonally adjusted.Sources: US Bureau of Labor Statistics at http://data.bls.gov; Insurance Information Institute.

5,58

15,

522

5,54

25,

554

5,52

75,

512

5,49

75,

519

5,49

95,

501

5,49

75,

468

5,43

5 5,47

85,

485

5,49

75,

524

5,53

05,

547

5,54

65,

583

5,57

65,

577

5,61

25,

629

5,64

45,

640

5,63

65,

615

5,62

25,

627

5,63

05,

633

5,64

95,

673

5,71

15,

735 5,78

35,

799

5,79

25,

791

5,80

15,

804

5,80

55,

822

5,83

05,

849

5,87

6 5,92

75,

927 5,96

86,

000

5,400

5,500

5,600

5,700

5,800

5,900

6,000

6,100

Jan-

10Fe

b-10

Mar

-10

Apr

-10

May

-10

Jun-

10Ju

l-10

Aug

-10

Sep

-10

Oct

-10

Nov

-10

Dec

-10

Jan-

11Fe

b-11

Mar

-11

Apr

-11

May

-11

Jun-

11Ju

l-11

Aug

-11

Sep

-11

Oct

-11

Nov

-11

Dec

-11

Jan-

122/

30/2

Mar

-12

Apr

-12

May

-12

Jun-

12Ju

l-12

Aug

-12

Sep

-12

Oct

-12

Nov

-12

Dec

-12

Jan-

13Fe

b-13

Mar

-13

Apr

-13

May

-13

Jun-

13Ju

l-13

Aug

-13

Sep

-12

Oct

-13

Nov

-13

Dec

-13

Jan-

14Fe

b-14

Mar

-14

Apr

-14

Construction employment is +565,000 above

Jan. 2011 (+10.4%) trough

(Thousands)

Construction and manufacturing employment constitute 1/3 of all payroll exposure.

58

MANUFACTURING SECTOR

A Potent Driver of Jobs and Commercial Lines Exposure

America’s Manufacturing Renaissance58

59

Manufacturing Employment,Jan. 2010—April 2014*

11,4

6011

,460

11,4

6611

,497

11,5

3111

,539

11,5

5811

,548

11,5

5411

,555

11,5

7711

,590

11,6

2411

,662

11,6

8211

,707

11,7

1511

,724

11,7

4711

,760

11,7

6211

,770

11,7

6911

,797

11,8

4111

,870

11,9

1011

,920

11,9

2611

,935

11,9

5711

,943

11,9

2511

,931

11,9

3811

,951

11,9

6511

,988

11,9

8411

,977

11,9

7211

,965

11,9

4811

,963

11,9

9312

,011

12,0

4612

,053

12,0

6112

,081

12,0

8812

,100

11,250

11,500

11,750

12,000

12,250Ja

n-10

Feb-

10M

ar-1

0A

pr-1

0M

ay-1

0Ju

n-10

Jul-1

0A

ug-1

0S

ep-1

0O

ct-1

0N

ov-1

0D

ec-1

0Ja

n-11

Feb-

11M

ar-1

1A

pr-1

1M

ay-1

1Ju

n-11

Jul-1

1A

ug-1

1S

ep-1

1O

ct-1

1N

ov-1

1D

ec-1

1Ja

n-12

2/30

/2M

ar-1

2A

pr-1

2M

ay-1

2Ju

n-12

Jul-1

2A

ug-1

2S

ep-1

2O

ct-1

2N

ov-1

2D

ec-1

2Ja

n-13

Feb-

13M

ar-1

3A

pr-1

3M

ay-1

3Ju

n-13

Jul-1

3A

ug-1

3S

ep-1

3O

ct-1

3N

ov-1

3D

ec-1

3Ja

n-14

Feb-

14M

ar-1

44/

31/2

Manufacturing employment is a surprising source of strength in the economy. Employment in the sector is at a multi-year high.

*Seasonally adjusted. Sources: US Bureau of Labor Statistics at http://data.bls.gov; Insurance Information Institute.

(Thousands) Since Jan 2010, manufacturing employment

is up (+640,000 or +5.6%)and still growing.

60

$200,000

$300,000

$400,000

$500,000

Dollar Value* of Manufacturers’ Shipments Monthly, Jan. 1992—Apr. 2014

* Seasonally adjusted; Data published June 3, 2014.Source: U.S. Census Bureau, Full Report on Manufacturers’ Shipments, Inventories, and Orders, http://www.census.gov/manufacturing/m3/

Monthly shipments in Apr. 2014 exceeded the pre-crisis (July 2008) peak. Manufacturing is energy-intensive and growth leads to gains in many commercial

exposures: WC, Commercial Auto, Marine, Property, and various Liability Coverages.

$ Millions

60

The value of Manufacturing Shipments in Apr. 2014 was $497.6B—a new record high.

63

2.5%

4.9%

6.3%

7.8%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

2013 2014F 2015F 2016F

Business Investment: Expected to Accelerate, Fueling Commercial Exposure Growth

Accelerating business investment will be a potent driver of

commercial property and liability insurance exposures and should drive employment and WC payroll

exposures as well (with a lag)

Source: IHS Global Insights as of Jan. 13, 2014; Insurance Information Institute.

64

12 Industries for the Next 10 Years: Insurance Solutions Needed

Export-Oriented Industries

Health Sciences

Health Care

Energy (Traditional)

Alternative Energy

Petrochemical

Agriculture

Natural Resources

Technology (incl. Biotechnology)

Light Manufacturing

Insourced Manufacturing

Many industries are

poised for growth, though

insurers’ ability to

capitalize on these

industries varies widely

Shipping (Rail, Marine, Trucking, Pipelines)

65

ENERGY SECTOR

America’s Energy Boom Is Potentially the Most Transformative Economic

Force in the Country TodayCommercial Insurers Will Generate Billions in Premiums as Exposures

Mushroom65

66

Oil & Gas Extraction Employment,Jan. 2010—April 2014*

*Seasonally adjustedSources: US Bureau of Labor Statistics at http://data.bls.gov; Insurance Information Institute.

156.

415

6.4

156.

715

7.6

158.

715

7.8

158.

015

9.5

160.

016

1.5

161.

216

1.2

163.

116

4.4

166.

616

9.3

170.

117

1.0

172.

517

3.6

176.

317

8.2

178.

518

0.9

181.

918

3.1

184.

818

5.2

185.

718

6.8

187.

618

8.0

188.

018

8.2

190.

019

1.7

191.

919

3.4

192.

419

2.6

193.

119

3.3

195.

019

6.5 199.

720

0.6

203.

020

4.1

205.

320

7.8

207.

820

8.9

150

160

170

180

190

200

210

220

Jan-

10Fe

b-10

Mar

-10

Apr

-10

May

-10

Jun-

10Ju

l-10

Aug

-10

Sep

-10

Oct

-10

Nov

-10

Dec

-10

Jan-

11Fe

b-11

Mar

-11

Apr

-11

May

-11

Jun-

11Ju

l-11

Aug

-11

Sep

-11

Oct

-11

Nov

-11

Dec

-11

Jan-

122/

30/2

Mar

-12

Apr

-12

May

-12

Jun-

12Ju

l-12

Aug

-12

Sep

-12

Oct

-12

Nov

-12

Dec

-12

Jan-

13Fe

b-13

Mar

-13

Apr

-13

May

-13

Jun-

13Ju

l-13

Aug

-13

Sep

-13

Oct

-13

Nov

-13

Dec

-13

Jan-

14Fe

b-14

Mar

-14

Apr

-14

Oil and gas extraction employment is up 33.6% since Jan. 2010 as the energy sector booms. Domestic energy production is essential to any robust economic recovery in

the US.

(Thousands) Highest since Aug.

1986

20.2 19.9 20.0 19.5 18.9 19.420.2

21.1 21.622.4

24.025.3 25.6

20.6

10

12

14

16

18

20

22

24

26

28

00 01 02 03 04 05 06 07 08 09 10 11 12 13

U.S. Natural Gas Production, 2000-2013

Source: Energy Information Administration, Short-Term Energy Outlook (April 8, 2014) , Insurance Information Institute.

Trillions of Cubic Ft. per Year

The U.S. is already the world’s largest natural gas producer—

recently overtaking Russia. This is a potent driver of commercial

insurance exposures

80

Labor Market Trends

Massive Job Losses Sapped the Economy and Commercial/Personal

Lines Exposure, But Trend is Improving

80

81

Unemployment and Underemployment Rates: Still Too High, But Falling

2

4

6

8

10

12

14

16

18

Jan00

Jan01

Jan02

Jan03

Jan04

Jan05

Jan06

Jan07

Jan08

Jan09

Jan10

Jan11

Jan12

Jan13

Jan14

"Headline" Unemployment Rate U-3

Unemployment + Underemployment RateU-6

“Headline” unemployment

was 6.3% in April 2014. 4% to 6% is

“normal.”

Source: US Bureau of Labor Statistics; Insurance Information Institute.

U-6 went from 8.0% in March

2007 to 17.5% in October 2009; Stood at 12.3%

in Apr. 2014.8% to 10% is

“normal.”

January 2000 through April 2014, Seasonally Adjusted (%)

Stubbornly high unemployment and underemployment constrain overall economic growth, but the job market is now clearly improving.

81

82

US Unemployment Rate Forecast4.

5%4.

5% 4.6% 4.8% 4.9% 5.

4%6.

1%6.

9%8.

1%9.

3% 9.6% 10

.0%

9.7%

9.6%

9.6%

8.9% 9.1%

9.1%

8.7%

8.3%

8.2%

8.0%

7.8%

7.7%

7.6%

7.3%

7.0%

6.7%

6.4%

6.3%

6.1%

6.0%

5.9%

5.8%

5.7%

9.6%

4%

5%

6%

7%

8%

9%

10%

11%

07:Q

107

:Q2

07:Q

307

:Q4

08:Q

108

:Q2

08:Q

308

:Q4

09:Q

109

:Q2

09:Q

309

:Q4

10:Q

110

:Q2

10:Q

310

:Q4

11:Q

111

:Q2

11:Q

311

:Q4

12:Q

112

:Q2

12:Q

312

:Q4

13:Q

113

:Q2

13:Q

313

:Q4

14:Q

114

:Q2

14:Q

314

:Q4

15:Q

115

:Q2

15:Q

315

:Q4

Rising unemployment

eroded payrolls

and WC’s exposure base.Unemployment peaked at 10%

in late 2009.

* = actual; = forecastsSources: US Bureau of Labor Statistics; Blue Chip Economic Indicators (5/14 edition); Insurance Information Institute.

2007:Q1 to 2015:Q4F*

Unemployment forecasts have been revised slightly

downwards. Optimistic scenarios put the

unemployment as low as 6.9% by Q4 of this year.

Jobless figures have been revised

slightly downwards for 2014/15

231

5217

052

126

573

-71

32 64 81 553

-115

-106

-221

-215

-206

-261

-258

-422

-486

-776 -6

93-8

21-6

98-8

10-8

01-2

94-4

26-2

72 -232

-141

-271

-15

-232

20-3

819

294 11

012

011

710

7 199

149

94 7222

323

1 320

166

186 21

912

526

817

719

1 222

364

228

246

102 131

7517

213

615

9 255

211

215

219 26

316

4 188 22

220

117

018

015

3 247 272

8616

6 201

202 27

3

113

(1,000)

(800)

(600)

(400)

(200)

0

200

400

600

Jan-

07Fe

b-07

Mar

-07

Apr

-07

May

-07

Jun-

07Ju

l-07

Aug

-07

Sep

-07

Oct

-07

Nov

-07

Dec

-07

Jan-

08Fe

b-08

Mar

-08

Apr

-08

May

-08

Jun-

08Ju

l-08

Aug

-08

Sep

-08

Oct

-08

Nov

-08

Dec

-08

Jan-

09Fe

b-09

Mar

-09

Apr

-09

May

-09

Jun-

09Ju

l-09

Aug

-09

Sep

-09

Oct

-09

Nov

-09

Dec

-09

Jan-

10Fe

b-10

Mar

-10

Apr

-10

May

-10

Jun-

10Ju

l-10

Aug

-10

Sep

-10

Oct

-10

Nov

-10

Dec

-10

Jan-

11Fe

b-11

Mar

-11

Apr

-11

May

-11

Jun-

11Ju

l-11

Aug

-11

Sep

-11

Oct

-11

Nov

-11

Dec

-11

Jan-

12Fe

b-12

Mar

-12

Apr

-12

May

-12

Jun-

12Ju

l-12

Aug

-12

Sep

-12

Oct

-12

Nov

-12

Dec

-12

Jan-

13Fe

b-13

Mar

-13

Apr

-13

May

-13

Jun-

13Ju

l-13

Aug

-13

Sep

-13

Oct

-13

Nov

-13

Dec

-13

Jan-

14Fe

b-14

Mar

-14

Apr

-14

Monthly Change in Private Employment

January 2007 through April 2014 (Thousands, Seasonally Adjusted)

Private Employers Added 9.18 million Jobs Since Jan. 2010 After Having Shed 5.01 Million Jobs in 2009 and 3.76 Million in 2008 (State and Local Governments Have Shed Hundreds of Thousands of Jobs)

Source: US Bureau of Labor Statistics: http://www.bls.gov/ces/home.htm; Insurance Information Institute

Monthly losses in Dec. 08–Mar. 09

were the largest in the

post-WW II period

273,000 private sector jobs were

created in April. In March 2014, the last of the jobs lost

in the Great Recession were

recovered

83

Jobs Created2013: 2.368 Mill2012: 2.294 Mill2011: 2.400 Mill2010: 1.277 Mill

842,000 jobs created so far

in 2014

88

Unemployment Rates by State, April 2014:Highest 25 States*

8.3

8.0

7.9

7.8

7.7

7.5

7.5

7.4

7.0

6.9

6.9

6.9

6.9

6.9

6.8

6.7

6.6

6.6

6.4

6.3

6.3

6.2

6.2

6.1

6.0

6.0

6.0

0

2

4

6

8

10

RI NV IL CA KY DC MS MIGA AL AZ

CT NJ OR NM NY ARMO AK TN US FL NC WA CO MA WV

Une

mpl

oym

ent R

ate

(%)

*Provisional figures for April 2014, seasonally adjusted.Sources: US Bureau of Labor Statistics; Insurance Information Institute.

In April, 43 states had over-the-month unemployment rate decreases, 2

states had increases, and 5 states and the District of Columbia had no

change.

89

5.8

5.8

5.7

5.7

5.7

5.7

5.5

5.3

5.2

5.0

4.9

4.8

4.8

4.7

4.6

4.5

4.4

4.4

4.3

3.8

3.8

3.7

3.6

3.3

2.6

0

1

2

3

4

5

6

7

DE WI IN ME OH PA MD SC TX ID VA KS MT MN OK LA HI NH IA SD UT WY NE VT ND

Une

mpl

oym

ent R

ate

(%)

Unemployment Rates by State, April 2014: Lowest 25 States*

*Provisional figures for April 2014, seasonally adjusted.Sources: US Bureau of Labor Statistics; Insurance Information Institute.

In April, 43 states had over-the-month unemployment rate decreases, 2

states had increases, and 5 states and the District of Columbia had no

change.

90

U.S. Insured Catastrophe Loss Update

2013 Was a Welcome Respite from the High Catastrophe Losses in Recent Years

90

91

$12.

6

$11.

0$3

.8$1

4.3

$11.

6$6

.1

$34.

7$7

.6 $16.

3$3

3.7

$73.

4

$10.

5$7

.5

$29.

2$1

1.5

$14.

4$3

3.6

$35.

0$1

2.9

$14.

0

$4.8 $8

.0

$37.

8$8

.8

$26.

4

$0

$10

$20

$30

$40

$50

$60

$70

$80

89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13*

U.S. Insured Catastrophe Losses

*Through 12/31/13.Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01 ($25.9B 2011 dollars). Includes only business and personal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B ($15.6B in 2011 dollars.) Sources: Property Claims Service/ISO; Insurance Information Institute.

2012 Was the 3rd Highest Year on Record for Insured Losses in U.S. History on an Inflation-Adj. Basis. 2011 Losses Were the 6th Highest. YTD 2013 Running Well

Below 2011 and 2012 YTD Totals.

2012 was the third most expensive year ever for insured CAT

losses

Record tornado losses caused

2011 CAT losses to surge

($ Billions, $ 2012)

91

92

Combined Ratio Points Associated with Catastrophe Losses: 1960 – 2013*

*2010s represent 2010-2013.Notes: Private carrier losses only. Excludes loss adjustment expenses and reinsurance reinstatement premiums. Figures are adjusted for losses ultimately paid by foreign insurers and reinsurers.Source: ISO (1960-2011); A.M. Best (2012E) Insurance Information Institute.

0.4

1.2

0.4 0.

8 1.3

0.3 0.4 0.

71.

51.

00.

40.

4 0.7

1.8

1.1

0.6

1.4 2.

01.

3 2.0

0.5

0.5 0.7

3.0

1.2

2.1

8.8

2.3

5.9

3.3

2.8

1.0

3.6

2.9

1.6

5.4

1.6

3.3

3.3

8.1

2.7

1.6

5.0

2.6

3.4

8.7 8.9

3.43.6

0.9

0.1

1.1

1.1

0.8

0123456789

10

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

The Catastrophe Loss Component of Private Insurer Losses Has Increased Sharply in Recent Decades

Avg. CAT Loss Component of the Combined Ratio

by Decade

1960s: 1.04 1970s: 0.85 1980s: 1.31 1990s: 3.39 2000s: 3.52 2010s: 6.1E*

Combined Ratio Points Catastrophe losses as a share of all losses reached

a record high in 2012

93

Top 10 States for InsuredCatastrophe Losses, 2013

$1,995

$1,509

$1,190

$909 $907$805 $773 $762

$677$593

0200400600800

1,0001,2001,4001,6001,8002,000

Oklahoma

Texas

Illinois

Minnesota

Colorado

Mississ

ippi

Nebras

ka

Georg

ia

Indiana

Louisiana

Source: The Property Claim Services (PCS) unit of ISO, a Verisk Analytics company.

$ Millions

Oklahoma had the highest CAT losses

in the US in 2013

96

Top States by Inflation-Adjusted Insured Catastrophe Losses, 1983–2012

9.0%

10.4%

14.3%66.3%

Source: PCS unit of ISO, Verisk Company.; Insurance Information Institute.

Over the Past 30 Years Florida Has Accounted for the Largest Share of Catastrophe Losses in the U.S., Followed by Texas and Louisiana

Rest of the U.S.$309.9BFlorida

$66.7B

Texas$48.8B

Louisiana$42.0B

Total: $467.5 Billion, an average of

$16.6B per year or $1.3B per month

TX is the 2nd costliest state for CATs, with nearly $50B in insured losses

over the past 30 years

97

Inflation Adjusted U.S. Catastrophe Losses by Cause of Loss, 1993–20121

0.1%

1.7%

3.8%4.7%

6.3%

7.1%

36.0%

40.4%

1. Catastrophes are defined as events causing direct insured losses to property of $25 million or more in 2012 dollars.2. Excludes snow.3. Does not include NFIP flood losses4. Includes wildland fires5. Includes civil disorders, water damage, utility disruptions and non-property losses such as those covered by workers compensation.Source: ISO’s Property Claim Services Unit.

Hurricanes & Tropical Storms, $158.2

Fires (4), $6.5

Tornadoes (2), $140.9

Winter Storms, $27.8

Terrorism, $24.8

Geological Events, $18.4

Wind/Hail/Flood (3), $14.9

Other (5), $0.2

Wind losses are by far cause the most catastrophe losses,

even if hurricanes/TS are excluded.

Tornado share of CAT losses is

rising

Insured cat losses from 1993-2012

totaled $391.7B, an average of $19.6B per year or $1.6B

per month

99Sources: Munich Re NatCatSERVICE; Insurance Information Institute.

Winter Storm and Winter Damage Events in the US and Canada, 1980-2013 (2013 US$)

Three of the four most costly years ever for insured losses from

winter storms and damage occurred in the 1990s, led by the “Storm of the Century” in 1993.

Insured losses from

severe winter events

totaled $2 billion in

2013.

Insured winter storm and damage losses in Jan. 2014 already totaled $1.5 billion. Continued severe weather since then makes it likely that

2014 will become one of the top 5 costliest winters since 1980.

Insured Losses (Millions, $ 2013)

5-year running average

100

Top 16 Most Costly Disastersin U.S. History

(Insured Losses, 2012 Dollars, $ Billions)

$7.8 $8.7 $9.2 $11.1 $13.4$18.8

$23.9 $24.6$25.6

$48.7

$7.5$7.1$6.7$5.6$5.6$4.4

$0

$10

$20

$30

$40

$50

$60

Irene (2011) Jeanne(2004)

Frances(2004)

Rita (2005)

Tornadoes/T-Storms

(2011)

Tornadoes/T-Storms

(2011)

Hugo (1989)

Ivan (2004)

Charley(2004)

Wilma(2005)

Ike (2008)

Sandy*(2012)

Northridge(1994)

9/11 Attack(2001)

Andrew(1992)

Katrina(2005)

Hurricane Sandy became the 5th

costliest event in US insurance history

Hurricane Irene became the 12th most expense hurricane

in US history in 2011

Includes Tuscaloosa, AL,

tornado

Includes Joplin, MO, tornado

12 of the 16 Most Expensive Events in US History Have

Occurred Over the Past Decade*PCS estimate as of 4/12/13.Sources: PCS; Insurance Information Institute inflation adjustments to 2012 dollars using the CPI.

Num

ber

Geophysical (earthquake, tsunami, volcanic activity)

Climatological (temperature extremes, drought, wildfire)

Meteorological (storm)

Hydrological (flood, mass movement)

Natural Disasters in the United States, 1980 – 2013Number of Events (Annual Totals 1980 – 2013)

Source: MR NatCatSERVICE 102

22

19

81

6

50

100

150

200

250

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

There were 128 natural disaster events in 2013

Losses Due to Natural Disasters in the US, 1980–2013

103

Overall losses (in 2012 values) Insured losses (in 2013 values)

Source: MR NatCatSERVICE

(2013 Dollars, $ Billions) (Overall and Insured Losses)

50

100

150

200

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

2013 CAT LossesOverall : $21.8BInsured: $12.8B

Indicates a great deal of losses are uninsured (~40%-50% in the US) =

Growth Opportunity

2013 losses were far below 2011 and 2012 and were 44% lower

than the average from 2000-2012

109

Total Value of Insured Coastal Exposure in 2012(2012, $ Billions)

Source: AIR Worldwide

$293.5$239.3

$182.3$164.6$163.5

$118.2$106.7$81.9$64.0$60.6$58.3

$17.3

$567.8$713.9

$849.6$1,175.3

$2,862.3$2,923.1

$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500

New YorkFloridaTexas

MassachusettsNew JerseyConnecticut

LouisianaS. Carolina

VirginiaMaine

North CarolinaAlabamaGeorgia

DelawareNew Hampshire

MississippiRhode Island

Maryland

In 2012, New York Ranked as the #1 Most Exposed State to Hurricane Loss, Overtaking Florida with $2.862 Trillion. Texas is very exposed too, and

ranked #3 with $1.175 Trillionin insured coastal exposure

The Insured Value of All Coastal Property Was $10.6 Trillion in 2012 , Up 20% from $8.9 Trillion in 2007 and

Up 48% from $7.2 Trillion in 2004

The value of insured coastal exposure in FL and

NY is close to $3 trillion

U.S. Thunderstorm Insured Loss Trends, 1980 – 2013

117Source: Property Claims Service, MR NatCatSERVICE

Thunderstorm losses in 2013 totaled $10.3 billion, the 6th

highest on record

Average thunderstorm

losses are up 7 fold since the early

1980s. The 5-year running average

loss is up sharply

Hurricanes get all the headlines, but thunderstorms are consistent

producers of large scale loss. 2008-2013 are the most expensive

years on record.

Convective Loss Events in the U.S. Overall and insured losses 1980 – 2012 and First Half 2013

Overall losses (in 2013 values) Insured losses (in 2013 values)

Analysis contains: straight-line winds, tornadoes, hail, heavy precipitation, flash floods, lightning.

119Source: Geo Risks Research, NatCatSERVICE.

10

20

30

40

50

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Convective events are those caused by straight-line winds,

tornadoes, hail, heavy precipitation,

flash floods and lightning

The insured and total economic cost of

convective events has rising tremendously

over the past 30+ years

(Bill. US$)

Homeowners Insurance Combined Ratio: 1990–2013P

113.

0

117.

7

158.

4

113.

6

101.

0 109.

4

108.

2

111.

4 121.

7

109.

3

98.2

94.4 10

0.3

89.0 95

.7

116.

9

105.

8

106.

7

122.

2

104.

1

90.0

118.

4

112.

7 121.

7

80

90

100

110

120

130

140

150

160

170

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13P

1

Low Cat Losses Led to 2013 Improvement. Homeowners Performance in 2011/12 Impacted by Large Cat Losses.

Extreme Regional Variation Can Be Expected Due to Local Catastrophe Loss Activity

Sources: A.M. Best (1990-2012);NCCI (2013P); Insurance Information Institute. 122

Hurricane Ike

Hurricane Sandy

Record tornado activity

Hurricane Andrew

127

Outlook for the 2014 Atlantic Hurricane Season

Somewhat Below Average Activity, Fewer Landfalls

Expected

Outlook for 2014 Hurricane Season: 30% Less Active Than Typical Year

Median* 2005(Katrina Year)

2014F

Named Storms 12.0 28 10

Named Storm Days 60.1 115.5 40

Hurricanes 6.5 14 4Hurricane Days 21.3 47.5 15Major Hurricanes 2.0 7 1

Major Hurricane Days 3.9 7 3

Accumulated Cyclone Energy 92.0 NA 65

Net Tropical Cyclone Activity 103% 275% 70%

*Over the period 1981-2010.Source: Dr. Philip Klotzbach and Dr. William Gray, Colorado State University, June 2, 2014.

Probability of Major Hurricane Landfall (CAT 3, 4, 5) in 2014

Average* 2014F

Entire US Coast 52% 40%

US East Coast Including Florida Peninsula

31% 22%

Gulf Coast from FL Panhandle to Brownsville, TX

30% 23%

ALSO…Above-Average Major HurricaneLandfall Risk in Caribbean for 2011 (32% vs. 42%)

*Average over the past century.Source: Dr. Philip Klotzbach and Dr. William Gray, Colorado State University, June 2, 2014.

134

SEVERE WEATHER REPORT UPDATE: 2014

Damage from Tornadoes, Large Hail and High Winds Keep Insurers Busy

134

Severe Weather Reports: 2014*

139

*Through May 27.Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2014_annual_summary.html#

Severe weather reports are

concentrated east of the Rockies

There were 5,017 severe

weather reports so far in 2014; including 415

tornadoes; 2,077 “Large Hail” reports

and 2,524 high wind events

U.S. Tornado Count, 2005-2014*

140*Through June 2, 2014.Source: http://www.spc.noaa.gov/wcm/.

The YTD tornado count in 2014 is

well below average

2013 count was the

lowest in a decade

There were 1,897 tornadoes in the U.S. in 2011 far

above average, but well below 2008’s record

Terrorism Update

147

TRIA’s SuccessConsequences of Expiration

Download III’s Terrorism Insurance Report at: http://www.iii.org/white_papers/terrorism-risk-a-constant-threat-2014.html

147

Life$1.2 (3%)

Aviation Liability

$4.3 (11%)

Other Liability

$4.9 (12%)

Biz Interruption $13.5 (33%)

Property -WTC 1 & 2*$4.4 (11%) Property -

Other$7.4 (19%)

Aviation Hull$0.6 (2%)

Event Cancellation

$1.2 (3%)Workers Comp

$2.2 (6%)

Total Insured Losses Estimate: $42.9B***Loss total does not include March 2010 New York City settlement of up to $657.5 million to compensate approximately 10,000 Ground Zero workers or any subsequent settlements.**$32.5 billion in 2001 dollars.Source: Insurance Information Institute.

Loss Distribution by Type of Insurancefrom Sept. 11 Terrorist Attack ($ 2013)

($ Billions)

149

Terrorism Insurance Take-up Rates,By Year, 2003-2013

Source: Marsh Global Analytics, 2014 Terrorism Risk Insurance Report, April 2014 and earlier editions.

27%

49%

58% 59% 59% 57%61% 62% 64% 62% 62%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

In 2003, the first year TRIA was in effect, the terrorism take-up rate was 27 percent. Since then, it has increased steadily, remaining in the

low 60 percent range since 2009.

TRIA’s high take-up rates, availability and affordability have benefitted businesses,

workers and the entire US economy since the program’s enactment

150

*Data for 27 states with sufficient data.Source: Marsh 2014 Terrorism Risk Insurance Report; Insurance Information Institute.

The overall US take-up rate for terrorism coverage was 62% in 2013 and ranged from

a lows of 41% in Michigan to a high of

84% in Massachusetts (where demand likely increased due to the

April 2013 Boston Marathon bombing)

Terrorism Insurance Take-Up Rates by State for 2013*

153

Summary of President’s Working Group Report on TRIA (April 2014)

Insurance for terrorism risk is available and affordable Availability/affordability have has not changed appreciably since 2010

Prices for terrorism risk insurance vary considerably depending on the policyholder’s industry and location of risk

Prices have declined since TRIA was enacted Currently ~3% to 5% of commercial property insurance premiums

Take-up rates have improved since adoption of TRIA Overall take-up rate is steady at ~60% (62% in 2013 per Marsh)

Market capacity is currently tightening given uncertainty over TRIA reauthorization

The private market does not have the capacity to provide reinsurance for terror risk to the extent currently provided by TRIA

In the absence of TRIA, terrorism risk insurance would likely be less available. Coverage that would be available likely would be more costly and/or limited in scope

Source: Report of the President’s Working Group on Financial Markets,The Long-Term Availability and Affordability of Insurance for Terrorism Risk,April 2014.

CAT OF THE FUTURE?CYBER RISK

154

Cyber Risk is a Rapidly Emerging Exposure for Businesses Large

and Small in Every IndustryNEW III White Paper:

http://www.iii.org/assets/docs/pdf/paper_CyberRisk_2013.pdf

154

Data Breaches 2005-2013, by Number of Breaches and Records Exposed# Data Breaches/Millions of Records Exposed

* 2013 figures as of Jan. 1, 2014 from the ITRC updated to an additional 30 million records breached (Target) as disclosed in Jan. 2014.Source: Identity Theft Resource Center.

157

321

446

656

498

419447

619662

87.9

17.322.9

35.7

19.1

66.9

222.5

16.2

127.7

100

200

300

400

500

600

700

2005 2006 2007 2008 2009 2010 2011 2012 2013*020406080100120140160180200220

# Data Breaches # Records Exposed (Millions)

The Total Number of Data Breaches (+38%) and Number of Records Exposed (+408%) in 2013 Soared

Millions

The BIG Question:Where Is the Market Heading?

163

Catastrophes and Other Factors Are Pressuring Insurance Markets

163

New Factor: Record Low Interest Rates Are Contributing to

Underwriting and Pricing Pressures

Property/Casualty Insurance Industry Investment Income: 2000–20131

$38.9$37.1 $36.7

$38.7

$54.6

$51.2

$47.1 $47.6$49.2

$48.0 $47.4

$39.6

$49.5$52.3

$30

$40

$50

$60

00 01 02 03 04 05 06 07 08 09 10 11 12 13

Investment Income Fell in 2012 and 2013 Due to Persistently Low Interest Rates, Putting Additional Pressure on (Re) Insurance Pricing

1 Investment gains consist primarily of interest and stock dividends...Sources: ISO; Insurance Information Institute.

($ Billions)

Investment earnings are running below their 2007

pre-crisis peak

168

-1.8

%

-1.8

%

-2.0

%

-3.6

%

-3.3

%

-3.3

%

-3.7

%

-4.3

%

-5.2

%

-5.7

%

-7.3%

-1.9

%

-2.1

%

-3.1

%

-8%-7%-6%-5%-4%-3%-2%-1%0%

Persona

l Line

s

Pvt Pass

Auto

Pers P

rop

Commerc

ial

Comml A

uto

Credit

Comm P

rop

Comm C

as

Fidelity

/Sure

ty

Warra

nty

Surplus

Line

s

Med M

al

WC

Reinsu

rance

**

Lower Investment Earnings Place a Greater Burden on Underwriting and Pricing Discipline

*Based on 2008 Invested Assets and Earned Premiums**US domestic reinsurance onlySource: A.M. Best; Insurance Information Institute.

Reduction in Combined Ratio Necessary to Offset 1% Decline in Investment Yield to Maintain Constant ROE, by Line*

168

170

U.S. Treasury Security Yields:A Long Downward Trend, 1990–2014*

*Monthly, constant maturity, nominal rates, through May 2014.Sources: Federal Reserve Bank at http://www.federalreserve.gov/releases/h15/data.htm. National Bureau of Economic Research (recession dates); Insurance Information Institute.

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

Recession2-Yr Yield10-Yr Yield

Yields on 10-Year U.S. Treasury Notes have been essentially below 5% for a full decade.

Since roughly 80% of P/C bond/cash investments are in 10-year or shorter durations, most P/C insurer portfolios will have low-yielding bonds for years to come.

U.S. Treasury yields plunged to historic lows in 2013. Longer-

term yields have rebounded a bit.

170

P/C UNDERWRITING

177

Underwriting Losses in 2013 Much Improved After High

Catastrophe Losses in 2011/12177

178

P/C Insurance Industry Combined Ratio, 2001–2013*

* Excludes Mortgage & Financial Guaranty insurers 2008--2012. Including M&FG, 2008=105.1, 2009=100.7, 2010=102.4, 2011=108.1; 2012:=103.2; 2013: = 96.1. Sources: A.M. Best, ISO.

95.7

99.3100.8

106.3

102.4

96.7

101.0

92.6

100.898.4

100.1

107.5

115.8

90

100

110

120

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Best Combined

Ratio Since 1949 (87.6)

As Recently as 2001, Insurers Paid Out

Nearly $1.16 for Every $1 in Earned

Premiums

Relatively Low CAT Losses, Reserve Releases

Heavy Use of Reinsurance Lowered Net

Losses

Relatively Low CAT Losses, Reserve Releases

Avg. CAT Losses,

More Reserve Releases

Higher CAT

Losses, Shrinking Reserve

Releases, Toll of Soft

Market

Cyclical Deterioration

Sandy Impacts

Lower CAT

Losses

180

Combined Ratios by Predominant Business Segment, 2013 vs. 2012*

*Excludes mortgage and financial guaranty insurers.Source: ISO/PCI; Insurance Information Institute

102.3101.1

102.3

104.8

96.797.6

94.3

98.7

90

92

94

96

98

100

102

104

106

All Lines Personal LinesPredominating

Commercial LinesPredominating

Diversified Insurers

2012 2013

(Percent)

The combined ratios for both personal and

commercial lines improved substantially in 2013

Underwriting Gain (Loss)1975–2013*

* Includes mortgage and financial guaranty insurers in all years.Sources: A.M. Best, ISO; Insurance Information Institute.

Large Underwriting Losses Are NOT Sustainable in Current Investment Environment

-$55

-$45

-$35

-$25

-$15

-$5

$5

$15

$25

$35

75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

Cumulative underwriting deficit from 1975 through

2012 is $510B

($ Billions) Underwriting profit in 2013

totaled $15.5B

High cat losses in 2011 led to the highest

underwriting loss since 2002

182

2

(2)

(8)

(3)(7)

(10)(10)

(4)(0)

11

24

1512 10

(4)(9)

(13)(12)(10)(14)

(11)(10)(7) (7)

-$20

-$15

-$10

-$5

$0

$5

$10

$15

$20

$25

$3092 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

13E

14E

15E

Prio

r Yr.

Res

erve

Rel

ease

($B

)

-6

-4

-2

0

2

4

6

8 Impact on C

ombined R

atio (Points)

Prior Yr. ReserveDevelopment ($B)

Impact onCombined Ratio(Points)

P/C Reserve Development, 1992–2015E

Note: 2005 reserve development excludes a $6 billion loss portfolio transfer between American Re and Munich Re. Including this transaction, total prior year adverse development in 2005 was $7 billion. The data from 2000 and subsequent years excludes development from financial guaranty and mortgage insurance. Sources: A.M. Best, ISO, Barclays Research (estimates for 2013-2015).

194

P/C Insurer Impairment Frequency vs. Combined Ratio, 1969-2012

90

95

100

105

110

115

12069 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

Com

bine

d R

atio

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

Impairm

ent Rate

Combined Ratio after Div P/C Impairment Frequency

Source: A.M. Best; Insurance Information Institute

2012 impairment rate was 0.69%, down from 1.11% in 2011; the rate is lower than the 0.82% average since 1969

Impairment Rates Are Highly Correlated With Underwriting Performance and Reached Record Lows in 2007; Recent Increase Was Associated

Primarily With Mortgage and Financial Guaranty Insurers and Not Representative of the Industry Overall

SURPLUS/CAPITAL/CAPACITY

211

2013 Recorded Yet Another Record High in the Primary and Reinsurance Sectors

211

212

Policyholder Surplus, 2006:Q4–2013:Q4

Sources: ISO, A.M .Best.

($ Billions)

$487.1$496.6

$512.8$521.8

$478.5

$455.6$437.1

$463.0

$490.8

$511.5

$540.7$530.5

$544.8$559.2 $559.1

$538.6$550.3

$567.8$583.5$586.9

$607.7$614.0$624.4

$653.3

$570.7$566.5

$505.0$515.6$517.9

$400

$450

$500

$550

$600

$650

$700

06:Q

4

07:Q

1

07:Q

2

07:Q

3

07:Q

4

08:Q

1

08:Q

2

08:Q

3

08:Q

4

09:Q

1

09:Q

2

09:Q

3

09:Q

4

10:Q

1

10:Q

2

10:Q

3

10:Q

4

11:Q

1

11:Q

2

11:Q

3

11:Q

4

12:Q

1

12:Q

2

12:Q

3

12:Q

4

13:Q

1

13:Q

2

13:Q

3

13:Q

4

2007:Q3Pre-Crisis Peak

Surplus as of 12/31/13 stood at a record high $653.3B

2010:Q1 data includes $22.5B of paid-in capital from a holding company parent for one insurer’s investment in a non-insurance business .

The industry now has $1 of surplus for every $0.73 of NPW,close to the strongest claims-paying status in its history.

Drop due to near-record 2011 CAT losses

The P/C insurance industry entered 2014in very strong financial condition.

215

U.S. INSURANCE MERGERS AND ACQUISITIONS,P/C SECTOR, 2002-2013 (1)

$486

$20,353

$425

$9,264

$35,221

$13,615$16,294

$3,507

$6,419

$12,458

$4,651 $4,397

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2012

Tran

sact

ion

valu

es

0

10

20

30

40

50

60

70

80

90

Num

ber of transactions

($ Millions)

(1) Includes transactions where a U.S. company was the acquirer and/or the target.

Source: Conning proprietary database.

M&A activity in the P/C sector remains below

pre-crisis levels.

217

REINSURANCE MARKET CONDITIONS

Ample Capacity as Alternative Capital is

Transforming the Market—And Pushing Down

Prices217

Global Reinsurance Capital (Traditional and Alternative), 2007 - 2013

Source: Aon Benfield Reinsurance Market Outlook, April 1, 2014; Insurance Information Institute.

Total reinsurance capital reached a record $540B in 2013, up 58.8% from 2008. Of that, $50B (9.3%) is alternative capacity, up 163% from

$19B since 2008

Reinsurance Pricing: Rate-on-Line Index by Region, 1990 – 2014*

*As of Jan. 1.Source: Guy Carpenter

Lower CATs and a flood of new

capital has pushed reinsurance pricing

down in most regions, including

the US

Catastrophe Bonds: Issuance and Outstanding, 1997- 2014:Q1*Risk Capital Amount ($ Millions)

*Through Jan. 31, 2014.Source: Guy Carpenter; Insurance Information Institute.

633.

0

846.

1

984.

8

1,13

0.0

966.

9 2,72

9.2

3,39

1.7

4,60

0.3

4,10

8.8

5,85

2.9

7,08

3.0

1,41

0.0

1,991.11,142.8

1,729.8

6,99

6.3

4,69

3.4

1,219.5

$3,4

50.0

$4,0

40.4

$4,9

04.2 $8

,541

.6

$14,

024.

2

$12,

043.

6

$12,

508.

8

$12,

185.

0

$12,

139.

1

$14,

835.

7 $18,

516.

7

$2,9

50.0

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14:Q1Risk Capital IssuedRisk Capital Outstandng at Year End

Catastrophe Bond Issuance Is Approaching Pre-Crisis Levels While Risk Capital Outstanding Stands at an All-Time Record

CAT bond issuance reached a record high in 2013

Risk capital outstanding

reached a record high in 2013

Financial crisis depressed issuance

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254