The P/C Insurance Industry in 2018: Leader or Laggard?

Transcription

1 The P/C Insurance Industry in 2018: Leader or Laggard? CATs, Trends, Challenges and Trump GenRe Annual Executive Forum Bonita Springs, FL January 17, 2018 Robert P. Hartwig, Ph.D., CPCU Clinical Associate Professor of Finance, Risk Management & Insurance Darla Moore School of Business University of South Carolina

2 The Case for Growth (and a Correction?) in the P/C Insurance Industry: 2018 and Beyond P/C Insurers: Strengthening Growth Opportunities in 2018 Drivers of Growth: Personal and Commercial Lines Price Exposure Role of the Economy and Shifting Demographics Pressure from Record Catastrophe Activity Industry Financial Performance Pricing and capacity implications Financial Market Pressures Impacts of Recent Tax Reform Legislation 2

3 P/C Insurance Growth Overview and Outlook Drivers of Growth in 2018 Economic Growth Fuels Exposure & Record CAT Losses Are Pressuring Rates Price Competition Remains Rational 3

4 Net Premium Growth (All P/C Lines): Annual Change, F (Percent) % 20% 15% 10% Outlook 2017E: 4.1% 2018F: 4.5% 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 F: 4.5% 2017:Q3: 4.1% 2016: 2.7% 2015: 3.5% 2014: : 4.4% 2012: +4.2% 5% 0% -5% E 18F *Q3:2017 over Q3:2016. Shaded areas denote hard market periods Sources: A.M. Best ( ), ISO ( ). 4

5 Y-o-Y Growth Rates, Direct Premiums Written, Commercial vs. Personal Lines, 2012:Q4-2017:Q3 7% 6% 5% 4% 3% Personal Lines growth is more than 3 times that of Commercial Lines Personal Lines Commercial Lines 2% 1% 0% 12:Q1 12:Q2 12:Q3 12:Q4 13:Q1 13:Q2 13:Q3 13:Q4 14:Q1 14:Q2 14:Q3 14:Q4 15:Q1 15:Q2 15:Q3 15:Q4 16:Q1 16:Q2 16:Q3 16:Q4 17:Q1 17:Q2 17:Q3 Since 2014, personal lines Direct Premiums Written have generally grown faster than commercial lines DPW, and that growth has been less volatile. Sources: NAIC, via SNL Financial; ISO; Insurance Information Institute calculations.

6 Growth in Net Written Premium: Personal vs. Commercial, E Annual Change in NWP 7% 6% 5% 4% 3% 2% 1% 6.6% 5.7% 5.3% 3.3% 3.1% 2.7% Commercial lines growth has been exceedingly weak but may be improving 1.5% 1.8% * 4.1% 3.5% 2.7% 0% -1% -2% Personal Lines Predominating Diversified -1.4% Commercial Lines Predominating All Insurers The divergence in growth between personal and commercial lines is large and has been expanding rapidly *2017 is an estimate based on actual data through Q3:2017. Source: ISO. 6

7 2016: Components of Commercial DWP Growth 5.0% 4.0% 3.0% EXPOSURE, 4.1% DWP, 3.1% Direct Written Premium (DWP) in US lines covered by ISO MarketStance grew 3.1 percent in % 1.0% 0.0% -1.0% -2.0% RATE, -1.0% Commercial Market EXPOSURE RATE DWP Soft market conditions counteracted moderate 4.1 percent exposure growth Anecdotal evidence: insureds spent rate reductions on new/broader coverages (CIAB, 2017). Source: Verisk Insurance Solutions.

8 M&A Trends Consolidation Among P&C (Re)Insurers and Within Distribution Channels Will Likely Continue at a Modest Pace 10

9 U.S. INSURANCE MERGERS AND ACQUISITIONS, P/C SECTOR, (1) ($ Millions) $60,000 $50,000 $55,825 M&A activity in the P/C sector in 2015 totaled $39.6B, its highest level since 2000, but fell sharply in 2016 in dollar terms Transaction values $40,000 $30,000 $20,000 $10,000 $0 $5,100 $11,534 $8,059 $30,873 $19,118 $40,032 $1,249 $486 $20,353 $425 $9, $35,221 $13,615 $16,294 $3,507 $6,419 $12,458 $4,685 $4,393 $6,723 $40,006 $8, Number of transactions (1) Includes transactions where a U.S. company was the acquirer and/or the target. Source: Conning proprietary database. 11

10 THE ECONOMY The Strength of the Economy Will Greatly Influence Growth in Insurers Exposure Base Across Most Lines How Is Trumponomics Impacting the Industry? 14

11 Awakening America s Animal Spirits Economic Policy and the Insurance Industry Consumer and Business Confidence Are Key 15

12 Animal Spirits: Unleashed from the Oval Office? Source: 16

13 Animal Spirits: Unleashed from the Oval Office? Source: 17

14 US Real GDP Growth* Real GDP Growth (%) 7% 5% 3% 1% -1% -3% -5% -7% -9% 4.1% 1.1% 1.8% 2.5% 3.6% 3.1% 2.7% 1.8% Recession began in Dec, % 1.3% -3.7% The Q4:2008 decline was the steepest since the Q1:1982 drop of 6.8% -5.3% -8.9% -0.3% 5.0% 1.4% 2.3% 2.2% 2.6% 2.4% 0.1% 2.5% 1.3% 4.1% 2.0% 1.3% 3.1% 0.4% 2.7% 1.8% 4.5% 3.5% -0.9% 4.6% 4.3% 2.1% 2.0% 2.6% 2.0% 0.9% 0.8% 1.4%3.5% First consecutive quarters of 3%+ GDP growth since % 1.2% 3.1% 3.2% 2.7% 2.5% 2.8% 2.6% 2.5% 2.3% 2.3% 2.0% 2.1% 2018 GDP forecasts were revised upwards by ~0.2% due to tax reform :1Q 08:2Q 08:3Q 08:4Q 09:1Q 09:2Q 09:3Q 09:4Q 10:1Q 10:2Q 10:3Q 10:4Q 11:1Q 11:2Q 11:3Q 11:4Q 12:1Q 12:2Q 12:3Q 12:4Q 13:1Q 13:2Q 13:3Q 13:4Q 14:1Q 14:2Q 14:3Q 14:4Q 15:1Q 15:2Q 15:3Q 15:4Q 16:1Q 16:2Q 16:3Q 16:4Q 17:1Q 17:2Q 17:3Q 17:4Q 18:1Q 18:2Q 18:3Q 18:4Q 19:1Q 19:2Q 19:3Q 19:4Q Demand for Insurance Should Increase in as GDP Growth Continues at a Steady and Perhaps Accelerating Pace and Gradually Benefits the Economy Broadly * Estimates/Forecasts from Blue Chip Economic Indicators. Source: US Department of Commerce, Blue Economic Indicators 1/18; Insurance Information Institute. 18

15 The Economy Drives P/C Insurance Industry Premiums: 2006:Q1 2017:Q2 Direct Premium Growth (All P/C Lines) vs. Nominal GDP: Quarterly Y-o-Y Pct. Change 12% 9% DWP y-o-y change y-o-y nominal GDP growth 6% 3% 0% -3% -6% 2017:Q1 2016:Q3 2016:Q1 2015:Q3 2015:Q1 2014:Q3 2014:Q1 2013:Q3 2013:Q1 2012:Q3 2012:Q1 2011:Q3 2011:Q1 2010:Q3 2010:Q1 2009:Q3 2009:Q1 2008:Q3 2008:Q1 2007:Q3 2007:Q1 2006:Q3 2006:Q1 Direct Written Premiums track Nominal GDP not quarter by quarter but overall fairly well. Sources: SNL Financial; U.S. Commerce Dept., Bureau of Economic Analysis; I.I.I.

16 Consumer Confidence Index: Jan Dec The Conference Board s Consumer Confidence Index stood at in Dec., close to its post-recession high Outlook: Consumers are optimistic about the future, which is consistent with expectations for stronger economic growth (consumers account for nearly 70% of all spending in the economy). Should positively influence business investment. Source: The Conference Board; Wells Fargo Research. 20

17 NFIB Small Business Optimism Index: Jan December 2017 The NFIB s Index of Small Business Optimism hit a record high in December. Tax reform, reduced regulations and strong sales will drive investment, hiring and exposures Outlook: Small businesses are much more optimistic about the future Source: National Federal of Independent Business; Wells Fargo Research. 21

18 Small Business Capital Spending, Jan November 2017 Small business capital spending is close to post-crisis highs; Tax cuts and accelerated depreciation could push capital spending higher and commercial insurance exposures along with it Small business optimism is translating into more capital spending which will increase insurable commercial exposures Source: National Federal of Independent Business; Wells Fargo Research. 22

19 Manufacturing: ISM Manufacturing Composite & Industrial Production, Jan Nov (>50 implies expansion) Manufacturing activity remains near its cyclical high, which bodes well for commercial exposures Source: Institute for Supply Management (ISM); Wells Fargo Securities. 23

20 Auto/Light Truck Sales, F (Millions of Units) New auto/light truck sales fell to the lowest level since the late 1960s. Forecast for is still below average of 17 million units, but a robust recovery is well underway. Job growth and improved credit market conditions boosted auto sales to near record levels in recent years Sales have returned to precrisis levels F 19F 20F21F 22F 22F Truck, SUV purchases remain strong but have slumped a bit Yearly car/light truck sales are slowing slightly, as demand tapers following the recovery from the recession. PP Auto premium might grow by 3.5% - 5%. Source: U.S. Department of Commerce; Blue Chip Economic Indicators (1/18 for ; 10/17 for F; Insurance Information Institute. 24

21 Construction Spending: Jan Oct ($ Bill) Private (but not public) construction spending remains relatively strong. Public construction spending could benefit from a boost in infrastructure investment Source: US Dept. of Commerce; Wells Fargo Securities. 25

22 New Private Housing Starts, F (Millions of Units) New home starts plunged 72% from ; A net annual decline of 1.49 million units, lowest since records began in Job growth, low inventories of existing homes, still-low mortgage rates and demographics should continue to stimulate new home construction for several more years F19F20F21F22F23F 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 Source: U.S. Department of Commerce; Blue Chip Economic Indicators (1/18 for ; 10/17 for F; Insurance Information Institute. 26

23 Economic Outlook: Labor Market Focus Labor Markets Are Healthy: Favorable Implications for Workers Comp and Many Other Lines 27

24 US Unemployment Rate Forecast 2007:Q1 to 2019:Q4F* 11% 10% 9% 8% 7% 6% 5% 4% 4.5% 4.5% 4.6% 4.8% 4.9% 5.4%6.1% 8.1% 9.3% 9.6% 10.0% 9.7% 9.6% 9.6% 9.6% Rising unemployment eroded payrolls and WC s exposure base. Unemployment peaked at 10% in late % 9.1% 9.1% 8.7% 8.3% 8.2% 8.0% 7.8% 7.7% 7.6% 7.3% 7.0% 6.6% 6.2% 6.1% 5.7% 5.6% 5.4% 5.2% 5.0% 4.9% 4.9% 4.9% 4.7% 4.7% 4.4% 4.3% 4.1% 4.0% 4.0% Unemployment forecasts have been revised modestly downwards. Optimistic scenarios put the unemployment as low as 3.6 by Q The Nov/Dec unemployment rate was 4.1%, a 17-year low Jobless figures have been revised downwards for 2018/19 3.9% 3.8% 3.8% 3.8% 3.8% 3.7% 07:Q1 07:Q2 07:Q3 07:Q4 08:Q1 08:Q2 08:Q3 08:Q4 09:Q1 09:Q2 09:Q3 09:Q4 10:Q1 10:Q2 10:Q3 10:Q4 11:Q1 11:Q2 11:Q3 11:Q4 12:Q1 12:Q2 12:Q3 12:Q4 13:Q1 13:Q2 13:Q3 13:Q4 14:Q1 14:Q2 14:Q3 14:Q4 15:Q1 15:Q2 15:Q3 15:Q4 16:Q1 16:Q2 16:Q3 16:Q4 17:Q1 17:Q2 17:Q3 17:Q4 18:Q1 18:Q2 18:Q3 18:Q4 19:Q1 19:Q2 19:Q3 19:Q4 * = actual; = forecasts Sources: US Bureau of Labor Statistics; Blue Chip Economic Indicators (1/18 edition); Insurance Information Institute. 28

25 Average Hourly Earnings: 2007:Q1 Oct. 2017:Q4 (% Growth) Hourly earnings growth was soft in late 2017 but should accelerate in Total compensation continues to rise. Source: US Bureau of Labor Statistics; Wells Fargo Research. 29

26 Wages Are Responding to Tight Labor Market Conditions in More Cities Workers in cities with unemployment rates below the national average are seeing accelerating wage gains WC insurers will benefit as well Source: US Bureau of Labor Statistics; Wall Street Journal. 18 states increased their minimum wage as of Jan. 1,

27 Catastrophe Loss Update: Major Driver of Rate Pressure 2017 Was One of the Costliest Years Ever for US Insurers Hurricanes Harvey, Irma and Maria, California Wildfires Exact a Huge Toll 31

28 Global Insured Catastrophe Losses, E ($ Billions, $ 2017) 2017 was one of the top 3 costliest years ever for insurers on a global scale $160 $140 $136 $137 $135 $120 $100 $80 $60 $40 $20 $18 $52 $23 $28 $63 $21 $35 $60 $30 $55 $76 $46 $37 $38 $55 $ * *Estimate Sources: Swiss Re, RMS, Barclays Research. 32

29 U.S. Insured Catastrophe Losses, YTD* ($ Billions, $ 2015) $80 $70 $ is likely to become the second costliest year ever for insured CAT losses in the US $71.8 $60 $50 $40 $30 $20 $10 $0 $14.4 $5.0 $8.2 $38.9 $9.1 $27.2 $13.0 $11.3 $3.9 $14.8 $11.9 $6.3 $35.8 $7.8 $16.8 $34.7 $10.9 $7.7 $30.1 $11.8 $14.9 $34.6 $36.1 $13.1 $15.5 $15.2 $ * *As of Nov. 14, Stated in 2017 dollars. Excludes NFIP losses. 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. 33

30 Top 10 US Catastrophe Losses of 2017, by Insured Loss (Insured Losses, 2017 Dollars, $ Billions)* $25 $20 $15 $10 Not all insured losses in 2017 were due to hurricanes. More than $15B in other losses occurred from coast-to-coast. YTD insured CAT losses in the US totaled $72 billion by late 2017, the second costliest year on record, led by Hurricanes Maria, Irma and Harvey $7.3 $15.9 $18.0 $21.9 $5 $0 $1.0 $1.3 $1.4 June Hailstorm March Storms February Storms $1.5 $1.6 $1.9 March Storms March Storms May Colorado Storm California Wildfires Hurricane Harvey Hurricane Irma Hurricane Maria *As of Nov. 14, Sources: PCS; Insurance Insider: 34

31 Top 18 Most Costly Disasters in U.S. History Katrina Still Ranks #1 (Insured Losses, 2017 Dollars, $ Billions)* $60 $50 $40 $30 $20 $10 $5.9 Includes Tuscaloosa, AL, tornado $6.0 $7.1 $7.5 Includes Joplin, MO, tornado $7.9 $8.3 $9.3 $9.7 Harvey, Irma and Maria combined caused an estimated $55B in privately insured losses in the US $11.7 $14.2 $15.9 $18.0 $19.8 $21.9 $25.3 $26.0 $27.1 $51.6 $0 Jeanne (2004) Frances (2004) Rita (2005) Tornadoe Tornadoe s/t- s/t- Storms Storms (2011) (2011) Hugo (1989) Ivan (2004) Charley (2004) Wilma (2005) Ike (2008) Harvey (2017) Irma (2017) Sandy (2012) Maria Northridge 9/11 (2017) (1994) (2001) 15 of the 18 Most Expensive Insurance Events in US History Have Occurred Since of those in 2017 Andrew (1992) Katrina (2005) *2017 values are as of Nov. 14, Sources: PCS, RMS, Karen Clark & Co; USC Center for Risk and Uncertainty Management adjustments to 2017 dollars using the CPI. 35

32 Inflation Adjusted U.S. Catastrophe Losses by Cause of Loss, Winter storm losses were much above average in 2014/15 pushing this share up Winter Storms, $28.2 Tornado share of CAT losses is rising Other Wind/Hail/Flood (3), $29.7 Terrorism, $ % Events Involving Tornadoes (2), $ % 7.0% 39.9% 0.2% 2.0% Fires (4), $8.4 Other (5), $ % Insured cat losses from totaled $421.2B, an average of $21.1B per year or $1.76B per month Hurricanes & Tropical Storms, $161.1 Wind losses, by far, cause the most catastrophe losses, even if hurricanes/ts are excluded. 1. Catastrophes are defined as events causing direct insured losses to property of $25 million or more in 2016 dollars. 2. Excludes snow. 3. Does not include NFIP flood losses 4. Includes wildland fires 5. 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. 36

33 Origins of Pricing Pressure Arising from (Near) Record CAT Activity +10% to +20%* Non-Loss Affected: +5% Loss-Affected: +10% to +15%** Retrocessional Reinsurance markets (reinsurance for reinsurance companies) are pushing pressure through the reinsurance markets and into both commercial and personal lines 0% to +5% *Some programs above and below this range. **Higher end of range applies to loss-affected accounts. Sources: Adapted from Barclay s Capital research. 37

34 US Property Catastrophe Rate-on-Line Index: * (Percent) Post Katrina, Rita, Wilma period Near-Record CATs in 2017 will likely lead US reinsurance prices in 2018 to increase Post-Andrew surge Post-9/11 Adjustment Post-Ike adjustment Adjustment following record tornado losses in 2011 and Sandy in * US Reinsurance Pricing Is Sensitive to CAT Activity and Ultimately Impacts Primary Insurance Pricing, Terms and Conditions *As of January 1 each year is a full-year estimate (Barclay s Capital). Source: Guy Carpenter; Artimes.bm accessed at: 38

35 Catastrophe Claims and Hard Markets Year CAT claims over $35 billion ($2016, billions) Growth of (NWP-GDP) in following year Hard Market? 1992 $ % No 2001 $ % Yes 2004 $ % No 2005 $ % No 2011 $ % No 2012 $ % No 2017 $75+?? Contrary to conventional wisdom, heavy CAT activity does not generally precipitate a hard market Source: Insurance Information Institute.

36 Policyholder Surplus (Capacity) and Hard Markets Year Surplus decline Growth of (NWP-GDP) in following year Hard Market? % 14.6% Yes % -1.5% No % 5.1% Yes % 12.0% Yes % -2.2% No % 0.2% No 2017 >0%??? Declines in surplus (capacity) are a less reliable predictor of hard markets Source: Insurance Information Institute.

37 P/C Insurance Industry ROE and Hard Markets Year P/C Industry ROE less than 4% Growth of (NWP-GDP) in following year Hard Market? % 10.7% Yes % 14.6% Yes % 12.0% Yes % 5.1% Yes 2017 ~4%?? Depressed ROEs are a historically reliable predictor of hard markets Source: Insurance Information Institute.

38 Hard Markets: Conclusion & Implications for 2018 Low ROE is the best predictor of a hard market (likely around 4% in 2017), but does this mean a hard market is a sure thing? No but some correction is possible Surplus in 2017 was nearly flat to slightly up Capacity remains generally abundant and seems likely to grow not drop due to asset value growth, implying that a true hard market is unlikely to develop as a result of depleted capacity CAT Losses: 2017 was one of the worst years on record for cat losses implying a hard market but this predictor does not appear to be an accurate one, at least in isolation Greatest impacts are driven through property cat reinsurance and retro markets on loss impacted areas and accounts

39 P/C Insurance Industry Financial Overview CATS, Non-CAT Underwriting Losses Impacted Insurer Balance Sheets Industry Remains Strong, But Only Risk-Appropriate Premiums Can Ensure Long-Term Strength 43

40 P/C Industry Net Income After Taxes E $ Millions $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 $14, ROE*= 9.6% 2006 ROE = 12.7% 2007 ROE = 10.9% 2008 ROE = 0.1% 2009 ROE = 5.0% 2010 ROE = 6.6% 2011 ROAS 1 = 3.5% 2012 ROAS 1 = 5.9% 2013 ROAS 1 = 10.2% 2014 ROAS 1 = 8.4% 2015 ROAS = 8.4% 2016 ROAS = 6.2% 2017E ROAS =4.2%* $5,840 $19,316 $10,870 $20,598 $24,404 $36,819 $30,773 $21,865 $20,559 $3,046 $30,029 $38,501 $44,155 $65,777 $62,496 Net income fell sharply in 2017 as high CAT losses took their toll $3,043 $28,672 $35,204 $19,456 $33,522 $63,784 $55,870 $56,826 $42,609 $29,803 -$10,000 -$6, ROE figures are GAAP; 1 Return on avg. surplus. Excluding Mortgage & Financial Guaranty insurers yields a 8.2% ROAS in 2014, 9.8% ROAS in 2013, 6.2% ROAS in 2012, 4.7% ROAS for 2011, 7.6% for 2010 and 7.4% for 2009; 2016E is annualized figure based actual figure through Q3 of $31.8B. Sources: A.M. Best, ISO; USC RUM Center estimate (2017 based on actual NIAT of $ though Q3 and ROAS of 4.2%) E

41 Profitability Peaks & Troughs in the P/C Insurance Industry, :Q3 ROE 25% 20% 1977:19.0% 1987:17.3% ROEs in 2017 plunged to their lowest levels since 2001 and 9/11. This creates extreme pricing pressure. 1997:11.6% 2006:12.7% 15% 9 Years % 2015: 8.4% 10% 5% 0% -5% 1975: 2.4% 1984: 1.8% 1992: 4.5% 2001: -1.2% % * *Est. for 2017 based on actual ROAS of 4.45 through Q2; Profitability = P/C insurer ROEs figures are estimates based on ROAS data. Note: Data for exclude mortgage and financial guaranty insurers. Source: NAIC, ISO, A.M. Best, Conning, USC RUM Center estimates. 2017E 4.2%

42 ROE: Property/Casualty Insurance by Major Event, E (Percent) 20% 15% P/C Profitability Is Influenced Both by Cyclicality and Volatility Katrina, Rita, Wilma Low CATs Harvey, Irma, Maria, CA Wildfires 10% Sept. 11 5% 0% -5% Hugo Andrew, Iniki Northridge Lowest CAT Losses in 15 Years 4 Hurricanes Financial Crisis* Sandy Record Tornado Losses * *2017 Estimate based on actual ROAS through Q3 of 4.2% with USC Center for Risk and Uncertainty Management estimate for the full year. Excludes Mortgage & Financial Guarantee in Sources: ISO, Fortune; USC RUM Center. 46

43 P/C Insurance Industry Combined Ratio, :Q3* As Recently as 2001, Insurers Paid Out Nearly $1.16 for Every $1 in Earned Premiums Heavy Use of Reinsurance Lowered Net Losses Best Combined Ratio Since 1949 (87.6) 92.6 Relatively Low CAT Losses, Reserve Releases Relatively Low CAT Losses, Reserve Releases Cyclical Deterioration Avg. CAT Losses, More Reserve Releases Higher CAT Losses, Shrinking Reserve Releases, Toll of Soft Market Sandy Impacts 96.4 Lower CAT Losses Sharply higher CATs are driving large underwriting losses and pricing pressure E * Excludes Mortgage & Financial Guaranty insurers Including M&FG, 2008=105.1, 2009=100.7, 2010=102.4, 2011=108.1; 2012:=103.2; 2013: = 96.1; 2014: = 97.0.; 2017 (est.) based on actual through Q3 (Q3 combined ratio alone was 110.7). Sources: A.M. Best, ISO ( ); Figure for is from A.M. Best P&C Review and Preview, Feb. 16,

44 Personal Lines Combined Ratio: E E Personal Lines Underwriting Losses Rose in 2017 Due to Record CATs and Adverse Auto Severity Source: A.M. Best ( ); USC RUM (2017E using actual 9 mo. YTD combined ratio of 102.8). 48

45 Commercial Lines Combined Ratio, F* Commercial lines underwriting performance deteriorated materially in 2017 as record CATs. Commercial Lines Combined Ratio diminishing prior year reserves, rising loss cost trends and pricing pressure in some lines are pushing combined ratios higher * , 2017 figures exclude mortgage and financial guaranty segments. 17E = actual 9 mo. YTD figure of Source: A.M. Best ( ); ISO (2017E) E 49

46 Policyholder Surplus, 2006:Q4 2017:Q3 ($ Billions) $700 $650 $600 $550 $500 $450 $487.1 $496.6 $512.8 $521.8 $517.9 $515.6 $505.0 $478.5 Financial Crisis $455.6 $437.1 $463.0 $490.8 $511.5 $540.7 Drop due to near-record 2011 CAT losses $530.5 $544.8 $559.2 $566.5 $559.1 $538.6 $550.3 $570.7 $567.8 $583.5 $586.9 $607.7 $614.0 $624.4 $653.4 $662.0 $671.6 $673.9 $675.2 $674.2 $673.7 $676.3 Surplus (Capacity) as of 9/30/17 reached a new record of $719.4B despite record CAT losses $700.9 $717.0 $719.4 $400 06:Q4 07:Q1 07:Q2 07:Q3 07:Q4 08:Q1 08:Q2 08:Q3 08:Q4 09:Q1 09:Q2 09:Q3 09:Q4 10:Q1 10:Q2 10:Q3 10:Q4 11:Q1 11:Q2 11:Q3 11:Q4 12:Q1 12:Q2 12:Q3 12:Q4 13:Q1 13:Q2 13:Q3 13:Q4 14:Q1 14:Q2 14:Q3 14:Q4 15:Q2 15:Q4 16:Q1 16:Q4 17:Q2 17:Q4 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. Capacity/Capital shocks typically do not on their own drive a sustained firming of the pricing environment Sources: ISO, A.M.Best; 2018 estimate from the Center for Risk and Uncertainty Management, University of South Carolina. 50

47 INVESTMENTS: THE NEW REALITY Investment Performance is a Key Driver of Insurer Profitability The Trump Bump Has Lifted Stock Markets and Interest Rates Will the Gains Help Insurers? 51

48 S&P 500 Index Returns, * Annual Return 60% 50% 40% Stock markets rose sharply following the 2016 election and continued to rise throughout Trump Bump: Sharp surge in stock post-election 30% 20% 10% 0% -10% -20% -30% Fed Raises Rate Tech Bubble Implosion 2016: +9.5% 2017: 19.4% -40% -50% Energy Crisis Financial Crisis *Through Dec. 31, Source: NYU Stern School of Business: Ins. Info. Inst.

49 Property/Casualty Insurance Industry Investment Income: E* ($ Billions) Investment earnings in 2017E were still ~14% below their 2007 pre-crisis peak $60 $50 $54.6 $52.3 $51.2 $49.5 $47.1 $47.6 $49.2 $48.0 $47.3 $47.2 $47.2 $46.4 $46.3 $40 $38.9 $39.6 $38.7 $37.1 $36.7 $ E* Due to persistently low interest rates, investment income fell in 2012, 2013 and 2014 but showed a small (1.7%) increase in 2015 though 2016 experienced another decline. Up ~2% in Investment gains consist primarily of interest and stock dividends. Sources: ISO; Insurance Information Institute. *2017 estimate based on annualized $35.4B actual figure through Q

50 U.S. Treasury Security Yields: A Long Downward Trend, * 9% 8% Yields on 10-Year U.S. Treasury Notes have been essentially below 5% for more than a decade. 7% 6% 5% Late 2016 Trump Bump in the aftermath of the 2016 election shrank in % 3% 2% 1% 0% Recession 2-Yr Yield 10-Yr Yield '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 '15 '16 '17 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. *Monthly, constant maturity, nominal rates, through Dec Sources: Federal Reserve Bank at National Bureau of Economic Research (recession dates); Insurance Information Institute. 54

51 Net Investment Yield on Property/ Casualty Insurance Invested Assets, E* (Percent) Investment yield in 2017 were down about 160 BP from pre-crisis levels E The yield on invested assets remains low relative to pre-crisis yields. Fed rate increases beginning in late 2015 have pushed up some yields, albeit quite modestly. Shrinking of Fed s balance sheet should help too in 2018 and beyond. Sources: NAIC data, sourced from S&P Global Market Intelligence; 2017estimate is based on ISO data through Q

52 Commercial Lines Growth, Underwriting Performance & Pricing Cyclicality Cyclicality in Growth, Price Are the Norm Rising Rates Are a Normal Part of Adjustment Process 57

53 Commercial Lines NPW Premium Growth: E ROE 35% 30% 25% 20% 15% 10% Economic Shocks, Inflation: 1976: 22.2% Tort Crisis 1986: 30.5% Post-Hurricane Andrew Bump: 1993: 6.3% Commercial lines is prone to far more cyclical volatility that personal lines : Period of inter-cycle stability Post-9/ : 22.4% Post Katrina Bump: 2006: 7.7% Commercial lines premium growth has been sluggish for years, reflecting weak pricing environment. Large underwriting losses will necessarily pressure rates upward in % 0% -5% -10% -15% 75 Recessions: 1982: 1.1% Great Recession: 2009: -9.0% : -1.3% : +1.8% 17E Note: Data include state funds beginning in Source: A.M. Best; Insurance Information Institute estimate: Univ. of South Carolina Center for Risk and Uncertainty Management, ISO.

54 CIAB: Average Commercial Rate Change, All Lines, 2011:Q1 2017:Q3*, 2018F (Percent) 9% 4% -1% -6% -11% -16% -2.9% -0.1% 0.9% 2.7% 4.4% 4.3% 3.9% 5.0% Renewals turned positive in late 2011 in the wake of record tornado losses and Hurricane Sandy 5.2% 4.3% 3.4% 2.1% 1.5% -0.5% 0.1% Smallest Decrease in 11 Quarters Commercial programs have generally renewed downwards since late 2014, but will need to move to positive renewals in 2018, just as they did following large CAT losses in % -2.3% -3.3% -3.1% -2.8% -3.7% -3.9% -3.2% -3.3% -2.5% -2.8% -1.3% 1.0% 2017 s results may exert enough pressure on markets to push overall rates up by 1+% in Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q F *Latest available. 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; Center for Risk and Uncertainty Management, Univ. of South Carolina. 59

55 Change in Commercial Rate Renewals, by Line: 2017:Q3 Percentage Change (%) 8.0% 6.0% 4.0% Commercial Property, Business Interruption will need to reflect record CAT losses and pressure from reinsurance markets Commercial Auto was only major line with materially positive renewals in % 2.0% 0.0% -2.0% -4.0% -2.3% Workers Comp -0.8% -0.7% -0.4% General Liability Cyber Umbrella 0.1% 0.1% Surety Business Interruption 0.4% 0.4% 0.7% 0.9% Construction D&O EPL Commercial Property Commercial Auto 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 and Brokers; USC Center for Risk and Uncertainty Management. 60

56 Commercial Auto Combined Ratio: F F17F Commercial Auto Results Are Challenged as Rate Gains Have Yet to Fully Offset Adverse Frequency and Severity Trends Sources: A.M. Best ( ); Insurance Information Institute. (2015E-2017F). 63

57 Direct Premiums Written: Commercial Auto Percent Change by State, Top 25 States ND s energy boom has fueled growth in every line ND TX NE DC MI KS OK IL NY IA AR MT CA CO MN WA US GA MO FL TN PA LA WI KY Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.

58 Direct Premiums Written: Commercial Auto Percent Change by State, Bottom 25 States ID NJ MS OH OR ME NV MA VA UT CT SC MD NC NM WY NH WV RI AZ VT AL AK HI SD Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.

59 Workers Comp Spotlight Underwriting Results Remain Strong Exposure Outlook Is Outstanding as Job Growth Continues and Wage Gains Accelerate 67

60 Workers Compensation Combined Ratio: P WC results have improved markedly since P Workers Comp Is an Example of a Line that Was Recently Restored to Health Through the Return of Rate Adequacy Sources: A.M. Best ( ); NCCI ( P) and are for private carriers only.. 68

61 Workers Compensation Premium: Flat in 2016 After 5 Years of Increase $ Billions Net Written Premium State Funds ($ B) Private Carriers ($ B) Pvt. Carrier NWP growth was 0% in 2016, +2.9% in 2015, +4.3% in 2014, +5.1% in 2013 and 8.7% in p Preliminary Calendar Year Source: NCCI from Annual Statement Data. Includes state insurance fund data for the following states: AZ, CA, CO, HI, ID, KY, LA, MD, MO, MT, NM, OK, OR, RI, TX, UT. Each calendar year total for State Funds includes all funds operating as a state fund that year.

62 2016 Workers Compensation Direct Written Premium Growth, by State* PRIVATE CARRIERS: Overall 2016 Growth = +1.0% While growth rates varied widely, overall growth for private carriers was up very slightly in 2016 *Excludes monopolistic fund states (in gray): OH, ND, WA and WY. Source: NCCI. 70

63 Personal Lines Growth Drivers Rate and Exposure are Both Presently Important Growth Drivers 74

64 Top Growth Factors: Personal Lines Rate: Favorable rate trends in both auto and home Record CAT losses in 2017 will further pressure property lines Adverse severity trends are pressuring personal auto Economic Strength: Economic growth, supported by low unemployment and rising consumer confidence are supporting strength in new auto sales and new home construction Household Formation: Millennials are finally becoming home and car buyers in larger numbers, driving exposures upward High Net Worth Consumers: This segment has seen consistent (and profitable) growth as the wealth effect grows Tax Cuts: Will tax reform fuel additional growth? Market Discipline: Major personal lines insurers remain generally price disciplined 75

65 Monthly Change in Auto Insurance Prices, * 10% 8% Cyclical peaks in PP Auto tend to occur roughly every 7-10 years (early 1990s, early 2000s, early and late 2010s) Last pricing peak occurred in late 2010 at 5.3%, falling to 2.8% by Mar % 4% 2% 0% Hard markets often tend to occur during recessionary periods Nov reading of 8.0% is up from 6.7% a year earlier. Current rate trend is strongest since % '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 '15 '16 '17 *Percentage change from same month in prior year; through Nov. 2017; seasonally adjusted Note: Recessions indicated by gray shaded columns. Sources: US Bureau of Labor Statistics; National Bureau of Economic Research (recession dates); Insurance Information Institutes. 76

66 Private Passenger Auto Insurance Net Written Premium, F $ Billion $260 $240 $220 $200 $180 $160 $140 $120 $100 $119.7 $128.0 PP Auto premiums written continue to recover from a period of flat growth attributable to the weak economy impacting new vehicle sales, car choice, and increased price sensitivity among consumers $139.7 $151.2 $157.3 $159.6 $160.3 $159.6 $158.5 $157.2 $160.1 $163.3 PPA will generate $10B - $14B in new premiums annually through E 18F $168.1 $174.9 $183.5 $192.5 PPA NWP volume in 2017 was up an estimated $62.8B or 39.9% since the 2009 trough; By 2017 the gain is expected to be $76.8B or 48.9% $206.6 $220.0 $234.0 Sources: A.M. Best ( ); USC RUM (2017F-2018F). 77

67 Direct Premiums Written: Pvt. Passenger Auto Percent Change by State, Top 25 States TX CO ND MI OK SC GA UT SD FL NE TN OR WI LA AL IA US MO KY DE KS NC NY ID IN Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.

68 Direct Premiums Written: Pvt. Passenger Auto Percent Change by State, Bottom 25 States VA AR MT DC WA NJ RI MN MD MS CA OH WY IL NV MA AZ NM CT PA NH VT AK WV ME Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.

69 Homeowners Insurance Net Written Premium, F $ Billions Homeowners insurance NWP continues to rise (up 152% E) despite very little unit growth during the real estate crash. Reasons include rate increases, especially in coastal $100 $95 $90 $85 $80 $75 $70 $65 $60 $55 $50 $45 $40 $35 $30 $35.2 $32.4 zones, ITV endorsements (e.g., inflation guards ), compulsory for mortgaged properties and resumption of home building activity $40.0 $49.5 $52.2 $54.8 $57.5 $55.2 $56.2 $45.8 $79.5 $80.2 $81.5 $82.7 $77.0 $71.9 $66.9 $61.1 $63.5 The Homeowners line will generate about $1.5B in new premiums annually through E 18F Sources: A.M. Best; USC RUM Center. 80

70 To Rent or to Buy? Millions of renteroccupied housing units Renter-occupied Owner-occupied Millions of owner-occupied housing units The number of owneroccupied homes is finally starting to rise and renting declines :Q1 91:Q1 92:Q1 93:Q1 94:Q1 95:Q1 96:Q1 97:Q1 98:Q1 99:Q1 00:Q1 01:Q1 02:Q1 03:Q1 04:Q1 05:Q1 06:Q1 07:Q1 08:Q1 09:Q1 10:Q1 11:Q1 12:Q1 13:Q1 14:Q1 15:Q1 16:Q1 16:Q3 17:Q3 58 Since 2004 the number of renter-occupied housing units has grown by about 10.5 million units (+34%), but there has been no growth in the number of owner-occupied housing units in 12 years. Did this streak end in 2017? Sources: U.S. Census Bureau at Table 8; Insurance Information Institute.

71 Direct Premiums Written: Homeowners MP Percent Change by State, Top 25 States SD OK CO NE ND WY MT MN TN GA KS MO AR TX IA KY WI DE ID NM IN UT OH SC NC Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.

72 Direct Premiums Written: Homeowners MP Percent Change by State, Bottom 25 States CT RI VA ME NJ AL MS WA MD MA US NH PA WV OR LA AZ NY DC AK MI VT CA HI NV Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.

73 State of the Personal Lines Market Auto Frequency and Severity Are an Immediate Challenge Homeowners Majorly Impacted by CATs in

74 Return on Net Worth: All P-C Lines vs. Homeowners & Pvt. Pass. Auto, * (Percent) 25% 20% 15% 10% 5% 0% Average RNW: * All P-C Lines: 7.7% PP Auto: 7.6% Homeowners: 4.9%** US All Lines US Home US PP Auto -5% -10% Excluding 1992 s Hurricane Andrew Homeowners is Now Outperforming Pvt.Pass. Auto and P-C Industry as a Whole. HO Volatility is Associated Primarily With Coastal Exposure Issues *Latest available. **Excludes 1992, the year of Hurricane Andrew. If 1992 is included the resulting homeowners RNW is 2.2% Sources: NAIC; Insurance Information Institute. 85

75 Homeowners Insurance Combined Ratio: E Hurricane Andrew Hurricane Ike Record tornado activity Hurricane Sandy Hurricanes Harvey, Irma, Maria, CA Wildfires E Homeowners Performance Had Improved Markedly Since 2011/12 s Large Cat Losses until 2017 s Record Catastrophe Loss Activity. Sources: A.M. Best ( ); USC RUM Center (2017E). 86

76 Private Passenger Auto Combined Ratio: E E Private Passenger Auto Underwriting Performance Is Showing the Strains of Rising Frequency (and Severity) Trends in Many States Sources: A.M. Best ( ); USC RUM Center (2017E). 87

77 Claim Trends in Private Passenger Auto Insurance Rising Frequencies and Severities in Many Coverages Will that Pattern Be Sustained? 88

78 Collision Coverage: Severity & Frequency Trends Are Both Higher in 2017* Annual Change, 2005 through 2017* 8% 6% 4% 2% 0% -2% -4% -6% Severity 3.9% 3.1% -1.8% -3.6% Frequency 2.5% 0.1% 0.5% -0.1% -1.4% -0.5% -2.4%-2.3% 2.8% 0.9% 1.3% -1.8% 4.2% 2.3% 1.4% 5.7% 5.1% 4.4% 2.1% 2.2% 1.2% 1.2% * The Recession, High Fuel Prices Helped Temper Frequency and Severity, But this Trend Has Clearly Reversed, Consistent with Experience from Past Recoveries *Four quarters ending with 2017 Q2. Source: ISO/PCI Fast Track data; Insurance Information Institute 89

79 Collision Loss Ratio Trending Upward: Private Passenger Auto, * Loss Ratio 78% 76.7% 76.9% 76% 74.9% 74% 73.5% 73.8% 72% 70% 68% 66% 64% 67.7% 69.3% 69.4% 62% * Collision Loss Ratios Were Trending Steadily Upward Until Early 2017 *2017 figure is for the 4 quarters ending in 2017:Q2 Source: ISO/PCI Fast Track data; Insurance Information Institute 90

80 Bodily Injury: Severity Trend Is Up, Frequency Decline Has Ended Rising? Annual Change, 2005 through 2017* Severity Frequency 10% 7.7% 8% 5.7% 5.9% 5.6% 6% 4.7% 4.3% 3.6% 4% 2.9% 3.0% 3.4% 2.0% 2.1% 1.7% 1.8% 2% 1.1% 0.0% 0.0% 0.0% 0.0% 0% -2% -1.1% -1.1% -2.2% -4% -3.8% -4.0% -4.2% -6% -5.4% -8% * BI Severity Trend is a Major Cost Driver *2017 figure is for the 4 quarters ending 2017:Q2. Source: ISO/PCI Fast Track data; Insurance Information Institute 91

81 Property Damage Liability: Severity and Frequency Are Up Annual Change, 2005 through 2017* Severity Frequency 8% 6.3% 6.0% 6% 4% 4.1% 4.2% 3.5% 2.9% 3.6% 2% 2.0% 2.0% 1.8% 1.9% 1.4% 1.4% 0.9% 0.6% 0.4% 1.2% 0.6% 0.8% 0.3% 0.6% 0% -0.4% -0.3% -2% -1.6% -4% -3.5% -3.4% * Severity/Frequency Trends Have Been Volatile, But Rising Severity since 2011 Is a Concern *2017 figure is for the 4 quarters ending 2017:Q2. Source: ISO/PCI Fast Track data; Insurance Information Institute 92

82 Comprehensive Coverage: Frequency and Severity Trends Are Volatile Annual Change, 2005 through 2017* 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% Severity 15.5% Frequency -1.4% -1.5% -3.1% -6.3% -9.8% 12.6% 1.8% 1.3% 5.8% 15.4% 15.3% 6.2% Severe weather is a principal cause of the spikes in both frequency and severity -14.6% 6.5% 2.1% -1.3% -5.6% -8.1% -5.9% -2.1% -8.9% 21.6% 3.5% 11.1% -1.1% * Weather Creates Volatility for Comprehensive Coverage. Enormous Comprehensive Losses Are Expected in Q3:2017 Due to Hurricanes Harvey and Irma *2017 figure is for the 4 quarters ending with 2017:Q2. Source: ISO/PCI Fast Track data; Insurance Information Institute 93

83 A Few Factors Driving Adverse Private Passenger Auto Loss Trends More Jobs, Better Economy, More People Driving, Lower Gas Prices, More Expensive Cars, Higher Speed Limits 94

84 America is Driving More Again: Percent Change, Miles Driven* 3.5% 2.5% 2.5% 2.1% 1.8% 2.5% 3.5% 2.8% 1.5% 1.2% 1.3% 0.5% 0.8% 0.8% 0.6% 0.4% 0.6% 0.6% -0.5% -1.5% -2.5% -1.8% -0.7% -0.5% Fastest Growth Since Tremendous Growth In Miles Driven. The More People Drive, The More Frequently They Get Into Accidents. * : Moving 12-month total vs. prior year data through Dec. 2016, the latest available, vs. Dec Sources: Federal Highway Administration; National Bureau of Economic Research (recession dates); Insurance Information Institute.

85 More Miles Driven More Collisions, :Q3 Billions of miles driven in prior year 3,250 Miles driven Collision claim frequency Overall Collision Claims Per 100 Insured Vehicles Overall collision claims per 100 insured vehicles Recession 6.2 3,200 Recession 6.1 3, , , , , , :Q1 06:Q3 07:Q1 07:Q3 08:Q1 08:Q3 09:Q1 09:Q3 10:Q1 10:Q3 11:Q1 11:Q3 12:Q1 12:Q3 13:Q1 13:Q3 14:Q1 14:Q3 15:Q1 15:Q3 16:Q1 16:Q3 17:Q1 The correlation between miles driven and collision claim frequency is very tight. Will technology weaken this correlation in the years ahead? Sources: Federal Highway Administration; Rolling four-quarter average frequency from Fast Track Monitoring System; Insurance Institute for Highway Safety; Insurance Information Institute.

86 Trumponomics, Insurance and Politics How Might the Trump Presidency Impact the Insurance Industry? 97

87 Trumponomics: The Essential Elements 5 Elements Tax Reform Deregulation Infrastructure Investment Healthcare Fair Trade Immigration Reform/Enforcement Most of these have direct impacts for insurers 98

88 Tax Reform and More Tax Reform Could Have Could Favorably Impact the Insurance Industry 99

89 Tax Reform Implications for P/C Insurers and Reinsurers Reduction of Corporate Tax Rate from 35% to 21%... All Insurers Benefit But Not Equally Companies generating most of their profits from underwriting income previously taxed at 35% benefit the most Companies generating proportionately more of their Net Investment Income from (taxable) Corporate Bonds benefit more than companies with heavier muni holdings In P/C industry, insurers with underwriting losses tend to hold proportionately more in corporates Leveling the Playing Field: Domestic (re)insurers previously taxed at 35% will benefit relative to (re)insurers domiciled in Bermuda, etc. Diminished advantage for foreign-owned insurers that cede premium offshore 100

90 Tax Reform Implications for Select Industries All Industries Reduction in corporate income tax rate from 35% to 21% is an unambiguous boost to virtually US corporations, including insurers Financial Services Tax bill is generally favorable Amplifies lightening of regulatory burden with scaling back of Dodd-Frank, FSOC SIFI designations, CFPB, Fiduciary Rule Manufacturing Immediate expensing of capital investments for next 5 years Energy: House bill repeals some energy tax credits, including on renewables; Senate preserves most energy credits 101

91 Tax Reform Implications for Select Industries Healthcare Hospitals and others upset about repeal of the ACA s individual mandate requirement CBO estimates that 15 million fewer people will be insured over time Providers argue they ll be stuck with the tab for uncompensated care for people who drop coverage but still seek care House bill would reduce the ability of many hospitals to float in tax-advantaged debt (Advanced Refunding Bonds) 102

92 Trump Administration: Likely Issues Impacting Insurers Infrastructure Spending Insurance industry could benefit from stepped-up infrastructure spending as promised by Trump Competition for federal dollars will be fierce Privatization of government infrastructure could provide growth opportunity for commercial insurers If infrastructure spending materializes, will benefit all major commercial lines: WC Commercial Property Commercial Liability Surety Commercial Auto 104

93 INSURANCE TECHNOLOGY: FIN TECH ZEROES IN Number and Value of Deals Is Increasing An Industry that Has Always Been Accepting of Change and Innovation 112

94 InsurTech Annual Financing, Value of Deals ($ Millions) $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 28 $ $350 2 out of every 3 InsurTech deals in 2016 was at the early stage! Insurance tech deals reached a new record in 2016 but funding was higher in $ $870 $2, $1, Value of Deals Number of Deals No. of Deals Source: CB Insights at

95 Top 25 P/C Insurers by Direct Written Premium, 2015 Are large P/C insurers more likely to invest in InsurTech start-ups? Sources: NAIC from CB Insights at 114

96 Start-Up InsurTech Investments by Top 25 P/C Insurers, * 10 of the Top 25 P/C insurers have made InsureTech startup investments since but there is little correlation between size and number of investments within this group USAA and AmFam lead in P/C InsurTech investment *As of June 23, Sources: NAIC from CB Insights at 115

97 Thank you for your time and your attention! Twitter: twitter.com/bob_hartwig For a copy of this presentation, me at robert.hartwig@moore.sc.edu 116