Insurance Roadshow Paris, 22 January, 2014

Transcription

1 Insurance Roadshow 2014 Paris, 22 January, 2014

2 2014 The Year Ahead for Fitch s Insurance Group Chris Waterman, Head of EMEA Insurance Paris, 22 January 2014

3 Agenda Rating Trends in 2014 Key Risks Facing European Insurers Fitch Initiatives for 2014

4 Agenda Rating Trends in 2014 Key Risks Facing European Insurers Fitch Initiatives for 2014

5 European Market Outlooks Rating Outlook Sector Outlook French Life Dec 13 Negative Negative French Non-Life Dec 13 Negative Stable German Life German Non-Life Dec 13 Dec 13 Stable Stable Negative Stable Italian Life Nov 13 Negative Negative Italian Non-Life Nov 13 Negative Negative Netherlands Life Dec 13 Negative Stable Netherlands Non-Life Dec 13 Negative Stable UK Life Nov 13 Stable Stable UK Non-Life (London Market) Dec 13 Stable Stable UK Non-Life (Regional Market) Dec 13 Stable Negative Reinsurance Aug 13 Stable Source: Fitch

6 Insurer Outlooks Mostly Stable Dec 2012 Dec % 4% 28% 4% 67% 68% Stable Negative Positive Source: Fitch

7 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 Rating Affirmations Dominate Net Upgrades Less Downgrades (No.) Rating Stability Credit Crunch Eurozone Crisis Source: Fitch

8 Financially Strong Industry (%) Dec 12 Dec AAA AA A BBB BB B 6 Insurer Financial Strength (IFS) Ratings Source: Fitch

9 Agenda Rating Trends in 2014 Key Risks Facing European Insurers Fitch Initiatives for 2014

10 European Insurance Risk Radar Impact Unfavorable Impact Favorable Impact Unfavorable Impact Favorable Steady Rebound in Interest Rates Search for Yield Sales Scandals Large Int Rate Spike Weak Economy/ Low Int Rates Eurozone Uncertainty Equity and/ or Bond Correction Regulatory risk High Urgency Low Urgency Source: Fitch

11 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 Peripheral Eurozone Sentiment Improving Peripheral Eurozone 10 Year Bond Yields (%) Greece Ireland Italy Portugal Spain Source: Fitch

12 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 Search For Yield Continues Non-Peripheral 10 Year Bond Yields (%) France Germany Netherlands UK Source: Fitch

13 Agenda Rating Trends in 2014 Key Risks Facing European Insurers Fitch Initiatives for 2014

14 Prism FBM Timeline to Implementation Model development Beta test closed 31st Dec 2013 Initial validation Implementation complete Q EMEA testing Beta test open 1st Oct 2013 Finalise model Q Source: Fitch

15 Prism FBM: Model Resources Available to Issuers Model definition document a Public Model definition document a Model engine User guide a Exposure Draft Source: Fitch

16 Prism FBM A Significant Step Forward More sophisticated approach to capital assessment Main tool to assess capital adequacy in EMEA and APAC Single framework for different regions and accounting standards Rating agency model not an economic capital model Simplicity and increased transparency Single spreadsheet No hidden calculations No macros Expect further communication from Fitch after model finalisation

17 Increased Transparency and Timeliness of Research Updated Insurance Rating Methodology Sector credit factors (SCFs) Clear communication of rating sensitivities Increased use of quantitative rating triggers 100% of rating reports less than 12 months old Publication of more topical special reports Increase in presentations and teleconferences

18 People in pursuit of answers

19 Disclaimer Fitch Ratings credit ratings rely on factual information received from issuers and other sources. Fitch Ratings cannot ensure that all such information will be accurate and complete. Further, ratings are inherently forward-looking, embody assumptions and predictions that by their nature cannot be verified as facts, and can be affected by future events or conditions that were not anticipated at the time a rating was issued or affirmed. The information in this presentation is provided as is without any representation or warranty. A Fitch Ratings credit rating is an opinion as to the creditworthiness of a security and does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. A Fitch Ratings report is not a substitute for information provided to investors by the issuer and its agents in connection with a sale of securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch Ratings. The agency does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS AND THE TERMS OF USE OF SUCH RATINGS AT

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21 Behind our Ratings: Fitch s Rating Process & Insurance Methodology Harish Gohil, Managing Director Paris, 22 January 2014

22 Agenda Rating Process Insurance Ratings Methodology Criteria Key Rating Factors Peer Comparison Summary Q&A

23 Steps in the Rating Process Ongoing dialogue and surveillance 10 Rating Initiated Lead and backup analyst assigned Ratings published; full rating report available to subscribers 9 Review of public and non-public information 2 Questions sent to issuer 3 1 Company sends accounts, other info Dates for meeting Preparation of final rating report and press release 8 Management meeting 4 Replies in advance of management meeting Rating committee review and decision 7 Rating committee presentation 6 Further analysis 5

24 Fitch Rating Criteria Criteria Updated & Enhanced One-stop shop for Key credit factors Hybrid securities Group rating methodology Notching methodology Start-up and run-off companies Short-term ratings Recovery analysis Captive insurance companies Separate ILS criteria

25 Fitch Sector Credit Factors Increased Transparency Supplementary reports describing the key credit factors used to analyse the European life and non-life insurance sectors Including various median financial ratios by rating category, as well as charts that demonstrate how key qualitative factors can affect a typical rating range

26 Key Credit Factors for (Re)Insurance Ratings Key Qualitative Factors Sovereign and country-related constraints Industry profile and operating environment Market position and size/scale Ownership Corporate governance and management Key Quantitative Factors Capitalisation and leverage Debt service capabilities and financial flexibility Financial performance and earnings Investment and asset risk Asset/Liability and liquidity management Reserve adequacy Reinsurance, risk mitigation, catastrophe risk Source: Fitch - Insurance Rating Methodology, 13th November 2013

27 Key Credit Factors for (Re)Insurance Ratings Key Qualitative Factors Sovereign and country-related constraints Industry profile and operating environment Market position and size/scale Ownership Corporate governance and management Key Quantitative Factors Capitalisation and leverage Debt service capabilities and financial flexibility Financial performance and earnings Investment and asset risk Asset/Liability and liquidity management Reserve adequacy Reinsurance, risk mitigation, catastrophe risk Source: Fitch - Insurance Rating Methodology, 13th November 2013

28 Industry Profile & Operating Environment Ratings Range Based on Industry Profile/Operating Environment IFS rating category AAA AA A BBB <BBB Non-Life Reinsurance Lines Composite Life/Annuity Source: Fitch

29 Market Position and Size/Scale Ratings Range Based on Market Position and Size/Scale IFS rating category AAA AA A BBB <BBB Large market position and size/scale Medium market position and size/scale Small market position and size/scale Source: Fitch Size guidelines for Medium category: Non-Life: EUR3bn GWP EUR1bn Life: EUR40bn Assets EUR10bn Life: EUR4bn Equity EUR1bn

30 Capitalisation and Leverage Median Capital Adequacy Ratio Guidelines AAA AA A BBB Net premiums written/equity (non-life) (x) Net leverage (non-life) (x) Gross leverage (non-life) (x) EU solvency I ratio (%) Financial leverage (%) Fitch Prism Factor Based Model Score

31 Debt Service Capabilities & Financial Flexibility Median Fixed Charge Coverage Ratio Guidelines AAA AA A BBB IFRS/Local GAAP Fixed Charge Coverage Ratio (x) Financial Flexibility IFS rating category AAA AA A BBB <BBB Effective Generally Effective, but Some Weaknesses Noted Weak

32 Financial Performance and Earnings Median Financial Performance Ratio Guidelines AAA AA A BBB Combined ratio (Non-life) 85% 95% 103% 110% Operating ratio (Non-life) 75% 85% 93% 100% Return on equity 16% 12% 8% 4% Return on assets (Life) 1.4% 1.1% 0.9% 0.4%

33 Weighting of Key Credit Factors No formal quantitative mechanism Rating committee judgement

34 Peer Group Comparison Example IFS rating of Combined Combined Shareholders operating Total NPW ratio 5-year ratio 5-year NPW/ equity Company entities (USDm) avg. RI (%) avg. (%) equity (USDm) ACE Ltd AA/Stable 16, ,531 Berkshire Hathaway AA+/Stable 35, ,588 Everest Re AA-/Stable 4, ,733 Munich Re AA-/Stable 64, ,938 Partner Re AA-/Stable 4, ,933 Hannover Re A+/Positive 15, ,799 Lloyd s of London A+/Positive 30, ,121 SCOR A+/Stable 10, ,300 Swiss Re A+/Stable 25, ,026 Source: Fitch

35 Key Rating Factors Example Rating factor Forward trend Score Relative weighting Industry profile and operating environment AA/A Moderate Market position and size/scale A High Capitalisation and leverage Stable AA High Debt service capabilities/financial flexibility Favourable BBB Moderate Financial Performance and earnings Stable A Moderate Investment and Asset risk Unfavourable A Moderate Asset/liability and liquidity management Stable AA Low Reserve adequacy Stable A Moderate Reinsurance/risk mitigation/catastrophe Stable A Low Corporate governance and management Ownership Sovereign/country-related constraints Final Implied Ratings Category Effective Neutral n.a. A

36 Summary Rigorous rating process Key credit factors qualitative and quantitative Ratings range tables median guidelines by rating category No formal quantitative weightings committee judgement Transparency in published research 35

37 Related Research All relevant Fitch research can be found on the Insurance page via our website Insurance Rating Methodology Amended, November 2013 Non-Life Insurance (Europe) Sector Credit Factors May 2013 Life Insurance (Europe) Sector Credit Factors May 2013 Reinsurance (Global) Sector Credit Factors August 2013 Prism Factor-Based Capital Model: Exposure Draft Model definition document October

38 Disclaimer Fitch Ratings credit ratings rely on factual information received from issuers and other sources. Fitch Ratings cannot ensure that all such information will be accurate and complete. Further, ratings are inherently forward-looking, embody assumptions and predictions that by their nature cannot be verified as facts, and can be affected by future events or conditions that were not anticipated at the time a rating was issued or affirmed. The information in this presentation is provided as is without any representation or warranty. A Fitch Ratings credit rating is an opinion as to the creditworthiness of a security and does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. A Fitch Ratings report is not a substitute for information provided to investors by the issuer and its agents in connection with a sale of securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch Ratings. The agency does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS AND THE TERMS OF USE OF SUCH RATINGS AT

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40 French Insurance Under Contrasted Trends Marc-Philippe Juilliard, Senior Director Paris, 22 January 2014

41 Agenda: Life Market Retrospective Review Slowing Down of Growth Competition Landscape Market Trends Profitability Prospective Review Business Outlook Evolution of Solvency Rating Outlook

42 Agenda: Life Market Retrospective Review Slowing Down of Growth Competition Landscape Market Trends Profitability Prospective Review Business Outlook Evolution of Solvency Rating Outlook

43 Historic Growth Life Insurance in France: A Mature Market Life technical reserves at 31 December (LHS) Life premium income (RHS) (EURbn) Source: FFSA-GEMA

44 Top 10 French Life Insurers Premium written in 2012 (EURbn) Total market (%) CNP Crédit Agricole Assurance (Predica) BNP Paribas Assurance AXA France Groupe des Assurances du Crédit Mutuel Société Générale Insurance Generali France Allianz France AG2R La Mondiale Aviva France Total Source: FFSA/Fitch estimates

45 Market Trends Moderate demand for euro-denominated products due to low return Both short-term and long-term interest rates remain lower than life insurance expected return offered in 2013 Recycling is resuming but not to the same extent as during the past decade Banks still need on balance-sheet savings products Bancassurers are impacted Moderate appetite for unit-linked policies due to market volatility Rising premiums amid recovering equity markets Offensive marketing campaigns and product innovation hardly compensate for volatility risk Sales of variable annuities remain symbolic Increase in lapses Lapse rate durably at high level volatile net collections General trend due to ageing population and poor economic environment

46 E Profitability Yield Offered by Euro-Denominated Life Insurance Policies and Livret A Average rate of return on traditional policies Investment income/actuarial reserves (%) Return for Livret A Source: FFSA-GEMA, Fitch

47 Agenda: Life Market Retrospective Review Slowing Down of Growth Competition Landscape Market Trends Profitability Prospective Review Business Outlook Evolution of Solvency Rating Outlook

48 Business Outlook Volatile growth in new business volume forecast for life insurance Less free cash flow to be invested due to economic challenges Low bonus rates make the euro product less attractive Banks push for liquidity Change in risk-free perception fly to tangibility Unit-linked products unlikely to escape their vicious circle Volatile impact on both life insurer s solvency and profitability Benefits payments expected to remain at high level 40% of total life premiums during the 1990s >60% every year since 2007 (93% in 2011, >100% in 2012, ~ 90% in 2013)

49 Business Outlook (cont.) After two decades of strong growth, the life insurance market gradually reaches maturity More than two thirds of life technical reserves related to old contracts (more than 8 years) in 2013 Management of lapses is a challenge for traditional insurers Some developments would likely accelerate the distrust for life insurance in the coming years: Any further government project to reduce tax advantages, especially if implementation involves existing policies Although unlikely in the short term, sharp increase in interest rates could have a negative impact, even more than in 2008, as both premiums and lapses could be affected at the same time Reduced incentive granted to policyholders to buy protection and pension products sold by private insurance organisations

50 Evolution of Solvency Changes in Solvency Margins (%) 20 Shareholder's equity/actuarial reserves Shareholder's equity and unrealised capital gains or losses/actuarial reserves Source: FFSA-GEMA

51 Rating Outlook Fitch rating and sector outlooks for the French life industry remain negative Unfavourable trends could lead to further rating downgrades Pressure on profitability expected to be strong due to: Low interest rate environment More conservative asset allocation with very little equities and no reinvestment in Southern European sovereign debt Competition on bonus rates Volatile impact from unit-linked product sales Capital adequacy is unlikely to recover promptly Solvency 1 ratios artificially boosted by low interest rates on government bonds But profitability is increasingly under pressure Capital intensive business mix

52 Agenda: Non-Life Market Retrospective Review Historic Growth Competition Landscape Bancassurance Profitability Prospective Review New Sources of Growth Tariffs Solvency Rating Outlook

53 Agenda: Non-Life Market Retrospective Review Historic Growth Competition Landscape Bancassurance Profitability Prospective Review New Sources of Growth Tariffs Solvency Rating Outlook

54 Historic Growth The Slow Growth of Non-Life Insurance in France (EURbn) Non-life premiums Acccident & health premiums Source: FFSA-GEMA

55 Top 10 French Non-Life Insurers Premium written in 2012 (EURm) Total market (%) Covéa (MAAF, MMA, GMF) 9, Groupama 8, Sferen (MACIF, MAIF, MATMUT) 7, AXA France 6, Allianz France 5, Generali France 4, Crédit Agricole Assurances 2, Groupe des Assurances du Crédit Mutuel 2, CNP 1, Aviva France 1, Total Source: FFSA and Fitch estimates

56 Bancassurance Increasing success of bancassurance in non-life 4% market share in % market share in 2012 Privileged position to distribute simple non-life insurance policies packaged with financial products or on a standalone basis Still below average retention rate but improving gradually Two market leaders: Credit Agricole Assurance and Groupe des Assurances du Crédit Mutuel two thirds of non-life premiums collected by subsidiaries of banks in 2012 Most players posted above market average growth in JV between La Banque Postale and Groupama has successfully started to operate All non-life bancassurers display very ambitious goal for the coming years in individual lines

57 Profitability Evolution of Net Combined Ratio: Close to 100%, limited room for improvement (%) Source: FFSA-GEMA, Fitch estimates

58 Agenda: Non-Life Market Retrospective Review Historic Growth Competition Landscape Bancassurance Profitability Prospective Review New Sources of Growth Tariffs Solvency Rating Outlook

59 New Sources of Growth Difficult to Tap Increase in the number and severity of natural disasters Cost of natural perils in France exceeded EUR34bn over the past 20 years for non-life insurers Fast growing risk adversity = rising demand for insurance, but Not all risks can be priced using actuarial methods Cost of insurance must be acceptable to policyholders Lower flexibility for tariff increases Long-term care insurance market: Government s proposals again expected in 2014 Involvement of private insurers is unclear

60 The Particular Case of Healthcare Insurance Changes in Health Expenses (EURm) Health expenses (LHS) Growth rate (RHS) (%) Source: FFSA-GEMA, Fitch estimates

61 Impact of Tariffs Increases Is Visible Tariffs increased further on all lines in No material natural catastrophe event since H Yet, attritional claims remain at high level, supported by challenging economic environment and mid-size climatic events Drop in asset returns expected due to low interest rate environment and more conservative asset allocation Further increases in tariffs increasingly difficult to implement due to poor economic environment Stabilization in tariffs likely occur as of 2014 unless material natural catastrophes occur

62 Solvency Evolution Compared to life insurers, non-life insurers tend to have: Absence of investment guarantees offered Still higher allocation to investments in equities Solvency in 2014 should be: Positively impacted by the satisfactory profitability and the still low interest rates environment leading to high unrealised capital gains on bonds Negatively impacted if equity markets were to deteriorate by year-end or if any significant winter period natural catastrophe was to occur The prospect of Solvency II has encouraged insurers to gradually de-risk their investment portfolios as new rules should penalise insurers who take risks on their asset side

63 Rating Outlook Fitch Ratings sector outlook for the French non-life industry remains stable Operating profitability should plateau in Impact of tariff increases Moderately benign claims environment so far However, pressure remains on top line and attritional claims Operational performance not expected to be materially boosted by investment results in the near future Credit quality of French non-life insurers reflects the limited growth and profit improvement potential of the market

64 Related Research All relevant Fitch research can be found on the Insurance page via our website 2014 Outlook: French Life Insurance Low Interest Rates Dragging Down Profitability - 12 December Outlook: French Non-Life Insurance Weak Growth but Resilient Performance - 12 December 2013

65 Disclaimer Fitch Ratings credit ratings rely on factual information received from issuers and other sources. Fitch Ratings cannot ensure that all such information will be accurate and complete. Further, ratings are inherently forward-looking, embody assumptions and predictions that by their nature cannot be verified as facts, and can be affected by future events or conditions that were not anticipated at the time a rating was issued or affirmed. The information in this presentation is provided as is without any representation or warranty. A Fitch Ratings credit rating is an opinion as to the creditworthiness of a security and does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. A Fitch Ratings report is not a substitute for information provided to investors by the issuer and its agents in connection with a sale of securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch Ratings. The agency does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS AND THE TERMS OF USE OF SUCH RATINGS AT

66 New York One State Street Plaza New York, NY London 30 North Colonnade Canary Wharf London E14 5GN

67 Coffee Break

68 Global Reinsurance Bond Yields and Softening Prices Set to Test Management Strategy Martyn Street, Director Paris, 22 January 2014

69 Agenda Renewal Expectations and Observations Alternative Reinsurance Rating Outlook

70 Recent Reinsurance Renewal Pricing Trends Renewal Season Pricing Developments January 2014 US wind loss-hit: -10% to +5% US loss-free: -10% to -20% International property loss-hit: Flat to +5% Casualty no loss emergence: Flat to -20% June/July 2013 US property loss-hit: -5% to +5% US property loss-free: -10% to -20% Florida property loss-free: -15% to -25% Casualty no loss emergence: Flat to declining April 2013 Japanese property loss-hit: Flat to +10% Japan wind and flood loss-free: Flat to down 2.5% US property loss-free: -5% to -10% Source: Company and broker reports

71 2013 Sees Reduced Natural Catastrophe Losses Month Event Location Economic Loss (USDbn) Insured Loss (USDbn) July Hailstorms Germany May / June Floods Central Europe May Tornadoes US March Severe storms US June Floods Canada Overall 2013 Total Total Total Source: Munich Re NatCatService

72 Platinum (N/R) Fairfax (A-) Aspen (N/R) Swiss Re (A+) XL (Ap) PartnerRe (AA-) Munich Re (AA-) Validus (A) Hannover Re (A+p) Everest (AA-) Axis (A+) White Mount. (A) Ace (AA) SCOR (A+) Allied World (A+) Montpelier (A) Endurance (N/R) Alleghany (A+) Arch (A+) RenRe (A+) Berkshire (AA+) Uneven Capital Development Change Q313 Equity Reinsurers (%) Note: IFS Ratings, N/R - Not Rated, p - Positive Outlook Source: Fitch

73 Invested Asset Allocation Major Asset Classes 2012 Fixed-income remains major class Other invested assets 5% Shares 4% Mortgages 2% Real estate 1% Conservative risk appetite Deposits with cedents 9% Loans 11% Cash & bank deposits 11% Bonds 57% Key focus for 2014 Duration management Increasing risk appetite Note: Combined composition for Hannover Re, Lloyd s of London, Munich Re, SCOR & Swiss Re Source: Fitch

74 Operating ROE Declines in Recent Years Average Operating ROE (%) Source: Fitch

75 Hannover Re Munich Re Ace Limited Allied World W.R. Berkley Arch Capital Lloyd's RenRe Validus Axis Swiss Re SCOR Everest Re Endurance XL Aspen Platinum Berkshire Hathaway PartnerRe Montpelier Re Alleghany White Mountains Fairfax Significant Variation in ROE Group Operating ROE Average (%) Median = 8.5% 0-5 Source: Fitch

76 Median = 10.9% Reinsurance Combined Ratio Volatility (Average combined ratio, ) SCOR Munich Re Fairfax Everest PartnerRe Endurance Hannover Berkshire XL Swiss Re White Mount AXIS Aspen Lloyd's Montpellier Platinum Median = 93.8% (Standard deviation, ) Size of bubble denotes NWP Source: Fitch, companies Arch Ace Validus RenRe

77 Continued Favourable Reserve Development (%) 10 Actual Expected Q313 Source: Fitch analysis of reserving data of 17 North American reinsurers

78 Endurance Fairfax W.R. Berkley XL Axis Hannover Re Arch Capital Allied World Aspen White Mountains Alleghany SCOR Ace Everest Re Berkshire Lloyd's Munich Re PartnerRe Validus Swiss Re Montpelier Re Platinum RenRe Prior Year Development Remains in Surplus 2012 Calendar and Accident Year Combined Ratio (%) Calendar Accident Source: Fitch

79 Valuation Multiples Remain Below Pre-Financial Crisis Reinsurer Market Price/Tangible Book Value (x) 1,2 1,1 1,0 0,9 0,8 0,7 0,6 0, Q313 Source: SNL Financial

80 Alternative Capital: Threat or Opportunity? We may well be seeing a fundamental shift in the way risk is capitalised, John Nelson, Chairman Lloyd s of London How sustainable is it (ILS)? It hasn t been tested so we don t know, Torsten Jeworrek, Chairman of Reinsurance Committee, Munich Re Reinsurers will have to adapt, Alex Moczarski, CEO Guy Carpenter It will go from being a competitive threat to being part of traditional reinsurers business plans, Bryon Ehrhart, Chief Strategy Officer, Aon Benfield

81 Alternative Market Capacity Continues to Grow Alternative Capacity as a % of Global Property Catastrophe Reinsurance Limit (%) YE 2008 YE 2009 YE 2010 YE 2011 YE 2012 YE2013 (Projected) Source: Guy Carpenter Estimates

82 Catastrophe Bond Market Reaches Record Size Catastrophe Bonds (Non-Life) (USDbn) Outstanding Issued ,1 3,6 3,7 0,8 1,4 1,1 20,3 15,2 14,1 11,8 12,3 12,4 12,7 8,4 7,2 7,5 5,9 4,6 4,8 4, ,7 3, Source: Willis Capital Markets & Advisory, Aon Benfield Securities Inc.

83 ILS Capacity Providers Investor by Category 2013 Hedge fund 2% Mutual fund 12% Institutional 41% Reinsurer 2% CAT fund 43% Institutional and mutual fund provision grows Majority of capital continues to come from U.S. Opinion divided on what is driving growth Note: Year ending June 30 Source: Aon Benfield Securities

84 Rating Outlook Stable Last revised from Negative in November 2009 Majority of ratings expected to be affirmed in next months Supporting factors: Strong capitalisation and continued profitability Challenges: Price softening and continued low investment yield

85 Related Research Fitch research can be accessed via /insurance Bermuda 2014 Market Update (January 2014) Global Reinsurance Guide 2014 (September 2013) Alternative Reinsurance 2013 Market Update (September 2013) 2014 Outlook: Global Reinsurance (August 2013) Global Reinsurers Mid-Year 2013 Financial Results (August 2013) Reinsurance (Global) Sector Credit Factors (August 2013)

86 Disclaimer Fitch Ratings credit ratings rely on factual information received from issuers and other sources. Fitch Ratings cannot ensure that all such information will be accurate and complete. Further, ratings are inherently forward-looking, embody assumptions and predictions that by their nature cannot be verified as facts, and can be affected by future events or conditions that were not anticipated at the time a rating was issued or affirmed. The information in this presentation is provided as is without any representation or warranty. A Fitch Ratings credit rating is an opinion as to the creditworthiness of a security and does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. A Fitch Ratings report is not a substitute for information provided to investors by the issuer and its agents in connection with a sale of securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch Ratings. The agency does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS AND THE TERMS OF USE OF SUCH RATINGS AT

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88 Bernard Spitz Président de la Fédération Française des Sociétés d Assurance

89 Disclaimer Fitch Ratings credit ratings rely on factual information received from issuers and other sources. Fitch Ratings cannot ensure that all such information will be accurate and complete. Further, ratings are inherently forward-looking, embody assumptions and predictions that by their nature cannot be verified as facts, and can be affected by future events or conditions that were not anticipated at the time a rating was issued or affirmed. The information in this presentation is provided as is without any representation or warranty. A Fitch Ratings credit rating is an opinion as to the creditworthiness of a security and does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. A Fitch Ratings report is not a substitute for information provided to investors by the issuer and its agents in connection with a sale of securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch Ratings. The agency does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS AND THE TERMS OF USE OF SUCH RATINGS AT

90 New York One State Street Plaza New York, NY London 30 North Colonnade Canary Wharf London E14 5GN