THE AON BENFIELD AGGREGATE

Transcription

1 THE AON BENFIELD AGGREGATE Glass Half Full 1H 2009 redefining Capital Access Advocacy Innovation

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3 AON BENFIELD Contents Glass Half Full 4 Balance Sheet 5 Shareholders Funds 5 Invested Assets 8 Income 11 Premium Income 11 Premium Distribution 12 Pricing and Outlook 13 Earnings 14 Technical Performance 15 Investment Income 17 Financial Strength Ratings 18 Appendix 1 19 Aon Benfield Aggregate 19 3

4 THE AON BENFIELD AGGREGATE - 1H 2009 GLASS HALF FULL Glass Half Full In the first half of 2009, the ABA s depleted capital base improved by 7%, increasing total shareholders funds to USD135bn, and thus recovering some of the 18% of capital lost during the course of Aon Benfield views this redefining of the ABA group as a positive for our clients, who will likely benefit from the potential increase in capacity as a result of the ABA s stronger capital position when it comes to renewing their reinsurance programs. Net income of USD7.8bn was the main contributor to the rise and there was a net increase in unrealized capital gains. USD2.7bn was repatriated to shareholders in dividends and share repurchases. Capitalization was perceived to be tight at the start of the year, and is now at a more comfortable level. Premium income was USD65.6bn. A 5% fall overall masked a wide range of results from a 36% increase to a 25% fall. Strong growth at Max Capital and Flagstone was boosted by recently acquired Lloyd s operations which did not feature last year, while adverse exchange rates were a negative factor in other cases. Companies expressed some disappointment with price increases in lines other than peak zone exposures. There were differing opinions on pricing and conditions in some segments such as casualty. Windstorm Klaus, Air France Flight 447 and the Italian earthquake in early April were the largest insured loss events in what was otherwise a relatively benign first half. Despite the low frequency of large catastrophe losses the loss ratio ticked up 0.1 percentage points (pp) against the comparative period, indicating an increase of attritional loss costs. The aggregate combined ratio improved by 0.9pp to 91.9% and all members came in below 100%. Reserve releases flattered the combined ratio by 3.0pp. Lower invested assets and restructuring of the investment portfolio to less risky investments impacted investment income, which fell by 21% compared with 1H Investment results were up 13% in the second quarter compared with the first quarter as conditions in financial markets improved. The financial market recovery meant that the drag from investment losses was massively reduced, falling from USD16.7bn to USD1.5bn. Above the line capital losses more than halved to USD2.6bn. Unrealized balance sheet gains contributed USD1bn to ABA shareholders funds in 1H 2009, in contrast to the USD11.5bn of below the line losses recorded for 1H Pre-tax profits fell 15% to USD9.3bn as better underwriting performance and reduced capital losses could not offset the fall in investment income. 4

5 AON BENFIELD Balance Sheet Shareholders funds (SHF) recovered 7% in 1H 2009 to USD135bn. Net income, (un)realized gains and foreign exchange (FX) movements were positive contributors. USD2.7bn was repatriated to shareholders in the form of dividends and share buybacks. The invested assets split remained broadly stable compared to FY Shareholders Funds ABA shareholders funds grew 7% in the first half of 2009 to USD135bn, as shown in Chart 1. Net income was the largest component of the increase contributing USD7.8bn. Rallying markets and the tightening of credit spreads aided the recovery of impaired securities in the second quarter, turning the reported unrealized loss of USD3.3bn in 1Q 2009 into an unrealized gain of USD1bn for 1H In comparison, the ABA companies reported an unrealized loss of USD11.5bn for 1H The weakening of the US dollar in the second quarter served to generate a positive foreign exchange contribution of USD0.8bn. XL Capital s share issuance and Swiss Re s maturing mandatory convertible securities accounted for some USD1.1bn of additional capital posted by ABA members. A number of ABA members continued to repurchase shares in the period. Platinum, Munich Re and Odyssey Re s repurchases were the most significant, returning a combined total of USD242mn to shareholders. Chart 1 Aon Benfield Aggregate Development of 1H 2009 Shareholders Funds USD bn Dec Additional 2008 SHF capital Net income Dividends FX Investment gains Share buybacks Other 30 Jun 2009 SHF 5

6 THE AON BENFIELD AGGREGATE - 1H 2009 GLASS HALF FULL The development of SHF in 1H 2008 is shown for comparative purposes in Chart 2. Net income of USD8.8bn (which included USD5.2bn of unrealized losses), and an FX gain of USD3.5bn, were the largest positive components of the comparative period. USD11.5bn of unrealized losses was the largest negative. From a perspective of perceived overcapitalization at the start of the year, extensive share buybacks and dividends paid further reduced capital, contributing to the 6% decline in ABA SHF during 1H Chart 2 1H 2008 Development of Shareholders Funds USD bn Dec Additional 2007 SHF capital Net income Dividends FX Investment losses Share buybacks Other 30 Jun 2008 SHF Chart 3 shows the total investment gains and losses from 1H 2009 as a percentage of shareholders funds at 31 December. Swiss Re reported net investment losses totalling CHF4bn, equivalent to 19% of opening SHF, of which CHF2.6bn were realized through the income statement. One third of the latter occurred in the life segment, and were largely for the account of life insurance policyholders. Other than temporary impairments and losses in the other investments category (which include unit-linked and with-profit business), contributed losses of CHF1.4bn and CHF1.3bn respectively. Strong unrealized gains masked realized losses for both Arch and Odyssey, allowing them to report investment gains for the period equivalent to 8% of opening SHF. The ABA recorded total investment losses of 1.2% of opening SHF. Excluding Swiss Re, investment gains were equivalent to 2% of opening SHF. 6

7 AON BENFIELD Chart 3 Total Investment Gains / Losses as % of 2008 Shareholders Funds Odyssey Arch Capital PartnerRe Montpelier Re White Mountains Platinum Everest Re Transatlantic Axis Capital ACE IPC Holdings Validus Endurance Specialty Flagstone Re Aspen RenaissanceRe Paris Re Max Capital Munich Re XL Capital ABA* SCOR Hannover Re Allied World Swiss Re *Aon Benfield Aggregate (USD) -20% -15% -10% -5% 0% 5% 10% Realized & Unrealized Gains/Losses as % FY 2008 SHF (Reporting Currency) The SHF growth for selected ABA companies during 1H 2009 is shown in Chart 4. XL Capital recorded the strongest growth, with an increase of 22% for the period. Net unrealized gains of USD301mn, a share issuance, net income and positive FX gains more than offset dividends paid. Montpelier Re and Arch were once again, as in the first quarter, among the top performers, posting increases in shareholders funds of 18% and 17% respectively. A net loss and unrealized losses of CHF1.3bn were offset by positive FX contributions and a share issue, as Swiss Re posted a marginally increased SHF. Year to date unrealized gains of USD271mn (1Q 2009: loss of USD87mn), along with a net income of USD123mn helped to flip Odyssey s 1Q 4% decline in SHF into an 11% increase for the first half. Odyssey has recorded year-on-year SHF growth of 17% to USD3.1bn, making it the largest increase of the ABA members. The ABA shareholders funds grew 7% in the first half, but remained 8% lower than at 30 June Paris Re was the only member to report a reduction in shareholders funds as a capital repayment more than offset net income. 7

8 THE AON BENFIELD AGGREGATE - 1H 2009 GLASS HALF FULL Chart 4 1H 2009 Shareholders Funds, % Change XL Capital Montpelier Re Arch Capital ACE PartnerRe ABA* Max Capital SCOR Swiss Re Munich Re Paris Re *Aon Benfield Aggregate (USD) -5% 0% 5% 10% 15% 20% 25% % Change in Shareholders' Funds (Reporting Currency) Invested Assets Total invested assets were down 7% year-on-year at USD711bn, but up 2% since 31 December The asset mix has changed quite substantially from a year ago. The proportion held in fixed income securities and cash increased from 70% and 6% to 73% and 7% respectively while equity investments declined from 8% to 4%, as companies sought to reduce volatility and risk in the wake of the financial crisis. The composition of invested assets at 30 June 2009 was broadly similar to that at the end of Chart 5 Aon Benfield Aggregate 1H 2009 Invested Asset Split 16% Total Invested Assets 30 June 2009 USD711bn 4% Fixed interest investments 6% Cash and cash equivalents Other investments Equity investments 74% 8

9 AON BENFIELD The gearing of investments to shareholders funds has been of greater interest. At 9.7x, Swiss Re had the highest gearing, reflecting the company s relatively high funds held asset, its significant life and annuity business and its use of subordinated debt capital (which is not included in shareholders funds for this measure). IPC Holdings had the lowest gearing at 1.2x. Chart 6 1H 2009 Invested Asset Leverage Swiss Re Hannover Re Munich Re SCOR XL Capital ABA* Validus Montpelier Re RenaissanceRe Flagstone Re IPC Holdings *Aon Benfield Aggregate (USD) Invested Asset Leverage (Reporting Currency) Munich Re had the highest gearing of corporate bonds to shareholders funds (163%), reflecting the company s substantial primary life insurance operations. Odyssey Re was the least exposed to corporate bonds at 27% of shareholders funds, an increase of 23pp from 31 December Chart 7 1H 2009 Corporate Bond Exposure Munich Re Hannover Re XL Capital Max Capital Swiss Re Montpelier Re Validus Platinum Flagstone Re Odyssey Re 0% 20% 40% 60% 80% 100% 120% 140% 160% 180% Corporates as % SHF (Reporting Currency) 9

10 THE AON BENFIELD AGGREGATE - 1H 2009 GLASS HALF FULL Chart 8 1H 2009 MBS / ABS Exposure XL Capital Allied World Hannover Re Endurance Specialty Swiss Re Flagstone Re IPC Holdings Paris Re Odyssey Re Munich Re 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% MBS & ABS as % SHF (Reporting Currency) XL Capital had the highest gearing of mortgage-backed securities (MBS) and asset-backed securities (ABS) to shareholders funds. The average credit rating of the company s fixed income portfolio was AA. 10

11 AON BENFIELD Income Gross premiums written (GPW) declined 5% overall reflecting a combination of a generally weak pricing environment, some reduction in coverage bought, and adverse currency movements. Reinsurance premium income was also affected by continued restructuring in favour of excess of loss (XoL) cover. Premium Income 1H 2009 ABA GPW for Property and Casualty (P&C) business was 5% lower than in the comparative period in The range for individual companies in reporting currency was wide, spanning from a contraction of 25% to an increase of 36% as shown in Chart 9. The weakening of the US dollar during the second quarter had a negative impact on GPW, coloring the results of a number of ABA members. Max Capital and Flagstone continued to top the table of GPW growth, mainly due to the first-time inclusion of the recently acquired Lloyd s vehicles which contributed substantial premium income. Excluding premium income from Lloyd s vehicles, both companies would have still posted GPW growth of 18% and 20% respectively. RenaissanceRe reported a 9% increase in GPW. A key driver of the increase was growth of the reinsurance segment s catastrophe unit, from which premium contributions grew from USD829mn to just over USD1bn (23% increase). The growth of the segment was attributed to improved market conditions, the inception of several new programs and additional premium written by Timicuan Re II, a newly established sidecar. Reported growth would have been higher were it not for the contraction in GPW in the individual risk segment, which decreased by 8% to USD364mn. XL Capital s premium income declined 25%, the largest for the ABA group. This reflected a contraction in all lines of primary and reinsurance business. The most noticeable reduction was in the primary casualty business, where premiums declined 25% from USD1.5bn to USD1.1bn in the period. Hannover Re s P&C GPW increased 16% from EUR2.7bn to EUR3.1bn; at constant exchange rates the increase would have amounted to 12%. Hannover Re scaled back exposures in a number of segments, including property catastrophe business in Japan and the US, which did not achieve adequate results. Worldwide credit and surety business was one of the segments in which Hannover Re expanded its presence, to take advantage of what it perceived as attractive pricing. Contrary to Hannover Re s view, Paris Re reduced its exposure to this class as it considered that it faced challenging market conditions, and this was a strong influence on the company s 13% fall in premium income. 11

12 THE AON BENFIELD AGGREGATE - 1H 2009 GLASS HALF FULL Chart 9 1H 2009 P&C Gross Premiums Written, % Change Max Capital Flagstone Re IPC Holdings Hannover Re Allied World ABA* Odyssey PartnerRe Paris Re Platinum XL Capital *Aon Benfield Aggregate (USD) -30% -20% -10% 0% 10% 20% 30% 40% % Change in P&C Gross Premiums Written (Reporting Currency) Premium Distribution Chart 10 shows the distribution for total P&C GPW by the ABA group in the first half, including both insurance and reinsurance business. Based on their current market shares, the pro-forma combination of Paris Re and PartnerRe would have a market share of 4.4%, making it the sixth largest contributor of GPW in the group. The combined entity of Validus and IPC, again based on current shares, would assume a 2.2% portion. The recent contraction of XL Capital s P&C GPW and Hannover s expansion has seen the two companies swap places in the distribution chart compared to 1H 2008, with Hannover now the fourth largest contributor of premium. Chart 10 Aon Benfield Aggregate 1H 2009 Total P&C Gross Premiums Written Split 1H 2009 P&C GPW USD66bn Munich Re 21.7% Swiss Re 14.6% ACE 13.6% Hannover Re 6.3% XL Capital 5.2% SCOR 3.5% Axis Capital 3.4% Transatlantic 3.4% White Mountains 3.2% Arch Capital 3.0% Everest Re 3.0% PartnerRe 2.9% RenaissanceRe 2.2% Endurance 2.0% Aspen Insurance 1.8% Odyssey 1.6% Validus 1.6% Allied World 1.5% Paris Re 1.5% Max Capital 1.2% Flagstone Re 1.1% Montpelier Re 0.7% Platinum 0.7% IPC Holdings 0.6% 12

13 AON BENFIELD Pricing and Outlook Trends observed at the 1 January renewals were mostly maintained through the first half, but some prices fell short of the companies more optimistic expectations. The biggest price increases were in US catastrophe-exposed lossaffected lines. There were reports of price increases of an average of 15% for Florida wind, and significant increases for Gulf of Mexico exposures. Arch Capital commented that a number of offshore Gulf of Mexico rates had increased by triple digits. Companies also pointed to average international price increases of between 5% and 10%, with Everest Re reporting rate increases in Japan for both wind and quake exposures of 7%. Primary rates lagged behind the reinsurance led improvement, with a diverse outcome across the different classes. Some prices were up, some flat and others down, although those which were down continued at a slower pace. According to XL, the continued global general economic conditions, as well as the competitive environment were responsible for the selective hardening of the insurance market. Casualty pricing continued to remain very competitive, with rates ranging from stable to +5%. The general consensus was that primary rate recovery, as with catastrophe-exposed lines, lagged behind the reinsurance led trend. Strong first half earnings and recovering capital markets have helped to replenish the balance sheets of (re)insurers. This, coupled with the possibility of a below average intensity and severity hurricane season (recently adjusted forecast), could lead to increased pressure on reinsurance rates in the upcoming renewal season. 13

14 THE AON BENFIELD AGGREGATE - 1H 2009 GLASS HALF FULL Earnings Pre-tax profits for the ABA were down 15% year-on-year to USD9.3bn. An improved underwriting result, which increased USD0.8bn and a USD2.7bn decrease in capital losses went someway to offsetting a 21% decline in investment income. Chart 11 Aon Benfield Aggregate 1H 2009/08 Pre-Tax Profit Pre-tax profit USDbn H H 2009 Investment income Non-life underwriting result Life underwriting result Capital gains/losses Other Pre-tax profit Investment income was the largest component of pre-tax profits, but this item fell 21% in 1H Non-Life underwriting contribution rose 9% on improved expense ratios. Realized and unrealized capital losses halved to USD2.6bn. Overall, pre-tax profits for the ABA were down 15% from the prior year comparative period. Paris Re reversed a loss of USD11mn to report a profit of USD142mn. A USD194mn swing in FX to a gain of USD44mn was a key contributor to Paris Re s reversal. Swiss Re was the only company to report a loss (CHF211mn), which was mainly attributable to an accounting asymmetry whereby a fall in the value of its corporate bond hedging was charged to the income statement, and the corresponding recovery in value of the underlying bonds passed directly to the balance sheet. 14

15 AON BENFIELD Chart 12 1H 2009 Pre-Tax Profit, % Change Paris Re PartnerRe White Mountains Montpelier Re Everest Re Validus Hannover Re IPC Holdings Flagstone Re Allied World RenaissanceRe Endurance Max Capital Aspen ACE Transatlantic Munich Re Platinum ABA* Arch Capital Axis Capital SCOR Odyssey XL Capital Swiss Re 1402% 685% 607% 363% *Aon Benfield Aggregate (USD) -150% -100% -50% 0% 50% 100% 150% % Change in 1H 2009/08 Pre-Tax Profit (Reporting Currency) Technical Performance The combined ratio for the ABA was 91.9%, compared to 92.8% in 1H Reserve releases featured in both periods, but at 3.0pp, releases were marginally lower in Excluding reserve releases, the loss ratio ticked up 0.1pp to 66.3%, despite the low frequency of large individual losses for the period. The expense ratio reduced by 1.2pp. Chart 13 shows the development of the ABA combined ratio for 1H 2009 and the comparative prior year period. 15

16 THE AON BENFIELD AGGREGATE - 1H 2009 GLASS HALF FULL Chart 13 Aon Benfield Aggregate Development of 1H 2009 Combined Ratio 110% 90% 92.8% -3.0% 91.9% 70% 50% 66.2% 66.3% 30% 10% 29.7% 28.5% -10% -3.1% 1H 2008 COR Expense ratio Loss ratio Prior year reserve adj 1H 2009 COR Combined ratios of the ABA members all remained below 100% in the first half, and a selection of the highest and lowest is shown in Chart 14, together with the ABA. Chart 14 1H 2009 Combined Ratios White Mountains Munich Re Hannover Re Odyssey SCOR ABA* Flagstone Re Validus Montpelier Re RenaissanceRe IPC Holdings *Aon Benfield Aggregate (USD) 40% 50% 60% 70% 80% 90% 100% Combined Ratio (Reporting Currency) Air France Flight 447, which crashed into the Atlantic Ocean on 1 June 2009 and the Italian earthquake on 6 April were the largest losses of the second quarter, incurring estimated total insured losses of USD680mn and USD260mn respectively. Windstorm Klaus in the first quarter generated a market loss of between EUR1.5bn and EUR2bn. Despite the relatively benign nature of the year to date, the loss ratio for the ABA has increased marginally by 0.1pp, indicating that attritional loss ratios are slightly higher in 2009 as pricing fails to keeping up with loss cost / trends. 16

17 AON BENFIELD The European members of the ABA all reported relatively high loss ratios. Hannover Re s was the highest loss ratio, which at 73.8% was 4.1pp greater than that of the nearest competitor. IPC reported the lowest combined ratio within the ABA group, which at 49.2% was marginally less than RenaissanceRe s 49.4%. IPC s combined ratio would have been lower, were it not for the expense ratio, which ran 15.8pp higher than in the comparative period due to administration costs incurred through numerous merger propositions in 1H IPC also reported the lowest loss ratio at 15.7% for the first half of 2009, reflecting the comparative absence of large natural catastrophes and negligible reserve releases. White Mountains combined ratio was the highest of the ABA group, improving from 107.9% in 1H 2008 to 99.0% in 1H Despite reporting a loss ratio of 59.2% for the period (ABA: 63.3%), the expense ratio continued to adversely affect the technical performance of White Mountains, and at 39.7% was well above the ABA (28.5%). The most substantial release of prior year reserves was by PartnerRe, whose release of USD242mn flattered the combined ratio by 17pp. Excluding reserve releases PartnerRe s loss ratio would have stood at 71.8%, which is 5.7pp higher than that of the ABA. Everest was the only member of the ABA to increase prior year reserves, adding 1.6pp of net premiums earned for the period. With the exception of Paris Re, no reserve movements were reported by the European members of the ABA as these tend to occur at year-end. Chart 15 1H 2009 Prior Year Reserve Adjustments PartnerRe Allied World RenaissanceRe Axis Capital Montpelier Re ABA* Swiss Re SCOR Munich Re Hannover Re Everest Re -4% 0% 4% 8% 12% 16% 20% Prior Year Reserve Adj as % NPE (Reporting Currency) *Aon Benfield Aggregate (USD) Investment Income 18 of the 24 members of the ABA reported a reduction in net investment income, reflecting lower yields. Investment income for the ABA fell by 21% to just over USD12.9bn. The largest increase was at RenaissanceRe whose investment income jumped 72% from USD91mn to USD156mn which was largely attributable to tighter credit spreads on its holding of senior bank loans funds and fixed income securities. Realized and unrealized losses were down by 51% from USD5.2bn to USD2.6bn, as companies benefitted from the improving capital markets. The use of different reporting methods limits company comparison, as some companies show realized and unrealized gains through the income statement, whereas others continue to report asset value movements below the line in other comprehensive income. 17

18 THE AON BENFIELD AGGREGATE - 1H 2009 GLASS HALF FULL Financial Strength Ratings Due to recent M&A activity there have been several changes to rating outlooks since the publication of the last ABA report, and, most notably, the downgrade of IPCRe s financial strength rating (FSR) by A.M. Best. In reaction to the definitive agreement announced on 9 July 2009 between IPC and Validus Holdings Ltd, A.M. Best downgraded IPCRe s FSR from A to A-. The rating remains under review with negative implications. A.M. Best also placed the A- FSR of Validus Reinsurance Ltd under review with negative implications. Following the announcement on 5 July 2009 of PartnerRe s proposed acquisition of Paris Re, A.M. Best and S&P have taken action on both groups FSRs. This is a common reaction by the rating agencies for a transaction of this type. S&P placed a positive outlook on Paris Re s A- FSR, and a negative outlook on PartnerRe s AA- FSR. A.M. Best placed its A- FSR of Paris Re under review with positive implications. A.M. Best also commented on the acquisition announcement and indicated that PartnerRe s ratings remain unchanged with stable outlook, recognizing the group s balance sheet strength, and that the transaction will further deepen PartnerRe's geographic scope and operating scale. Since the last ABA report, additional outlook changes during the period include Arch Capital Group subsidiaries ratings receiving a positive outlook from S&P; and Hannover Re s A.M. Best rating outlooks being revised to stable from positive. Table 1 Financial Strength Ratings Company A.M. Best Fitch Moody's S&P ACE Bermuda Insurance Ltd A+ AA- Aa3 A+ Allied World Assurance Co Ltd A NR A2 A- Arch Reinsurance Ltd A A+ A2 A Aspen Insurance Ltd A NR A2 A AXIS Specialty Ltd A NR A2 A+ Endurance Specialty Insurance Ltd A A A2 A Everest Reinsurance (Bermuda) Ltd A+ AA- Aa3 A+ Flagstone Reassurance Suisse SA A- A- A3 NR Hannover Rückversicherungs AG A A+ NR AA- IPCRe Ltd A- NR NR A- Max Bermuda Ltd A- A A3 NR Montpelier Reinsurance Ltd A- A- NR A- Munich Reinsurance Co A+ AA- Aa3 AA- Odyssey America Reinsurance Corp A A- A3 A- Paris RE A- NR NR A- Partner Reinsurance Co Ltd A+ AA Aa3 AA- Platinum Underwriters Bermuda Ltd A A NR NR Renaissance Reinsurance Ltd A+ A A2 AA- SCOR SE A- A A2 A Swiss Reinsurance Co A NR A1 A+ Transatlantic Reinsurance Co A NR Aa3 A+ Validus Reinsurance Ltd A- NR A3 NR White Mountains Re Bermuda Ltd A- A NR A- XL Re Ltd A A A2 A Source: A.M. Best, Standard & Poor s, SNL 18

19 AON BENFIELD Appendix 1 Aon Benfield Aggregate Table 2 Aon Benfield Aggregate 1H 2009 Results Company Reporting Currency mn P&C GPW 1H 2008 P&C GPW 1H 2009 Change % Loss Ratio 1H 2009 COR 1H 2008 COR 1H 2009 COR Change pp ACE USD 9,170 8,883-3% 58.9% 86.2% 87.6% 1.4pp Allied World USD % 49.6% 85.7% 79.3% -6.4pp Arch Capital USD 1,940 1,937 0% 57.1% 87.9% 87.1% -0.8pp Aspen USD 1,125 1,171 4% 55.4% 81.7% 86.0% 4.3pp Axis Capital USD 2,138 2,238 5% 55.8% 81.2% 83.4% 2.2pp Endurance Specialty USD 1,387 1,342-3% 60.4% 86.9% 90.8% 3.9pp Everest Re USD 1,783 1,972 11% 60.2% 91.8% 88.8% -3.0pp Flagstone Re USD % 37.3% 71.5% 74.3% 2.8pp Hannover Re EUR 2,656 3,081 16% 73.8% 98.9% 97.7% -1.2pp IPC Holdings USD % 15.7% 17.0% 49.2% 32.2pp Max Capital USD % 65.4% 84.0% 90.3% 6.3pp Montpelier Re USD % 28.9% 75.0% 67.6% -7.4pp Munich Re EUR 10,603 10,665 1% 69.7% 110.3% 97.8% -12.4pp Odyssey USD 1,144 1,066-7% 67.3% 98.5% 96.5% -2.0pp Paris Re USD 1, % 66.0% 90.8% 91.5% 0.8pp PartnerRe USD 2,083 1,901-9% 54.8% 89.0% 85.3% -3.8pp Platinum USD % 56.1% 74.5% 78.6% 4.1pp RenaissanceRe USD 1,335 1,453 9% 22.5% 52.5% 49.4% -3.1pp SCOR EUR 1,488 1,699 14% 68.6% 99.3% 95.3% -4.0pp Swiss Re CHF 10,552 10,805 2% 68.4% 95.9% 94.6% -1.3pp Transatlantic Holdings USD 2,196 2,201 0% 67.5% 94.0% 94.3% 0.3pp Validus USD 902 1,035 15% 39.7% 76.5% 73.4% -3.1pp White Mountains USD 2,204 2,103-5% 59.2% 107.9% 99.0% -8.9pp XL Capital USD 4,487 3,379-25% 60.3% 93.0% 92.6% -0.4pp ABA* USD 68,834 65,556-5% 63.3% 92.8% 91.9% -0.9pp Reporting Currency mn *Aon Benfield Aggregate 19

20 THE AON BENFIELD AGGREGATE - 1H 2009 GLASS HALF FULL Table 2 Aon Benfield Aggregate 1H 2009 Results (cont d) Company Prior Year Reserve (Release) Strengthen 1H 2008 Prior Year Reserve (Release) Strengthen 1H 2009 Prior Year Reserve Adj as % NPE 1H 2009 Net Investment Income 1H 2008 Net Investment Income 1H 2009 Change % ACE % 1,021 1,008-1% Allied World % % Arch Capital % % Aspen % % Axis Capital % % Endurance Specialty % % Everest Re % % Flagstone Re % % Hannover Re % % IPC Holdings % % Max Capital % % Montpelier Re % % Munich Re % 4,071 3,519-14% Odyssey % % Paris Re % % PartnerRe % % Platinum % % RenaissanceRe % % SCOR % % Swiss Re % 4,666 3,514-25% Transatlantic Holdings % % Validus % % White Mountains % % XL Capital % % ABA* -1,599-1, % 16,427 12,915-21% Reporting Currency mn *Aon Benfield Aggregate (USDmn) 20

21 AON BENFIELD Table 2 Aon Benfield Aggregate 1H 2009 Results (cont d) Company Pre-tax Profit 1H 2008 Pre-tax Profit 1H 2009 Change % SHF 31/12/2008 SHF 30/6/2009 Change % Pre-tax Operating ROE 1H 2008 Pre-tax Operating ROE 1H 2009 ACE 1,413 1,328-6% 14,446 16,561 15% 23% 22% Allied World % 2,417 2,741 13% 18% 21% Arch Capital % 3,433 4,030 17% 19% 18% Aspen % 2,779 2,973 7% 17% 17% Axis Capital % 4,461 4,909 10% 18% 16% Endurance Specialty % 2,207 2,476 12% 16% 20% Everest Re % 4,960 5,545 12% 15% 16% Flagstone Re % 986 1,095 11% 15% 16% Hannover Re % 2,830 3,171 12% 22% 29% IPC Holdings % 1,851 2,014 9% 18% 15% Max Capital % 1,280 1,363 6% 9% 8% Montpelier Re % 1,358 1,597 18% 12% 15% Munich Re 1,993 1,695-15% 20,966 21,009 0% 19% 16% Odyssey % 2,828 3,138 11% 9% 13% Paris Re % 2,172 2,159-1% -1% 13% PartnerRe % 4,199 4,768 14% 17% 18% Platinum % 1,809 1,953 8% 22% 17% RenaissanceRe % 3,033 3,404 12% 19% 23% SCOR % 3,410 3,629 6% 13% 13% Swiss Re 1, % 20,453 20,791 2% 37% 23% Transatlantic Holdings % 3,198 3,549 11% 19% 18% Validus % 1,939 2,152 11% 13% 19% White Mountains % 2,899 3,204 11% 4% 9% XL Capital % 6,115 7,471 22% 14% 14% ABA* 10,923 9,326-15% 126, ,322 7% 21% 18% Reporting Currency mn *Aon Benfield Aggregate (USDmn) 21

22 THE AON BENFIELD AGGREGATE - 1H 2009 GLASS HALF FULL Table 2 Aon Benfield Aggregate 1H 2009 Results (cont d) Company Total Investments 31/12/2008 Total Investments 30/6/2009 Invested Asset Leverage 31/12/2008 Invested Asset Leverage 30/6/2009 Total Gains/ Losses 1H 2009 Total Gains/ Losses as % FY 2008 SHF ACE 42,255 45, % Allied World 7,097 7, % Arch Capital 10,800 11, % Aspen 5,839 6, % Axis Capital 10,925 11, % Endurance Specialty 5,502 5, % Everest Re 14,195 14, % Flagstone Re 1,723 1, % Hannover Re 30,080 32, % IPC Holdings 2,263 2, % Max Capital 5,410 5, % Montpelier Re 2,379 2, % Munich Re 174, , % Odyssey 8,088 8, % Paris Re 5,061 5, % PartnerRe 13,022 13, % Platinum 4,425 4, % RenaissanceRe 6,244 6, % SCOR 18,480 17, % Swiss Re 193, , ,963-19% Transatlantic Holdings 10,660 11, % Validus 3,401 3, % White Mountains 9,863 9, % XL Capital 32,641 32, % ABA* 696, , ,560-1% Reporting Currency mn *Aon Benfield Aggregate (USDmn) 22

23 AON BENFIELD Table 3 Aon Benfield Aggregate Balance Sheet as at 30 June 2009 Invested Asset Split as % SHF Company Reporting Currency mn Fixed Income Securities Equities Cash Other Total SHF Invested Assets ACE USD 237% 3% 4% 29% 16,561 45,105 Allied World USD 238% 0% 17% 9% 2,741 7,244 Arch Capital USD 222% 0% 8% 58% 4,030 11,614 Aspen USD 166% 0% 24% 14% 2,973 6,090 Axis Capital USD 181% 2% 28% 19% 4,909 11,289 Endurance Specialty USD 164% 0% 50% 26% 2,476 5,935 Everest Re USD 214% 3% 9% 41% 5,545 14,743 Flagstone Re USD 82% 0% 29% 30% 1,307 1,850 Hannover Re EUR 508% 1% 11% 374% 3,673 32,819 IPC Holdings USD 85% 16% 14% 1% 2,014 2,329 Max Capital USD 270% 0% 74% 36% 1,363 5,171 Montpelier Re USD 131% 11% 16% 5% 1,597 2,598 Munich Re EUR 724% 27% 11% 63% 21, ,399 Odyssey Re USD 142% 66% 27% 29% 3,138 8,301 Paris Re USD 208% 0% 18% 14% 2,159 5,181 PartnerRe USD 226% 11% 13% 25% 4,768 13,083 Platinum USD 207% 0% 18% 8% 1,953 4,553 RenaissanceRe USD 103% 0% 5% 46% 4,104 6,323 SCOR EUR 185% 19% 54% 229% 3,635 17,726 Swiss Re CHF 460% 76% 112% 200% 23, ,642 Transatlantic Holdings USD 278% 14% 9% 21% 3,549 11,444 Validus USD 131% 0% 18% 24% 2,152 3,717 White Mountains USD 154% 7% 11% 79% 3,851 9,630 XL Capital USD 343% 1% 53% 41% 7,473 32,762 Reporting Currency mn 23

24 THE AON BENFIELD AGGREGATE - 1H 2009 GLASS HALF FULL Table 3 Aon Benfield Aggregate Balance Sheet as at 30 June 2009 (cont d) Fixed Income Split as % SHF MBS & ABS as % SHF Fixed Income Split by Rating Category Below Inv Grade Unrated Company Govt Corp Municipal / State Other Other Total Fixed Income AAA AA A BBB ACE 84% 70% 13% 70% 0% 39,232 55% 9% 15% 11% 10% Allied World 50% 72% 21% 93% 0% 9,503 75% 10% 8% 3% 4% Arch Capital 49% 70% 0% 47% 0% 4,944 n.a. 79% n.a. n.a. n.a. Aspen 69% 78% 13% 78% 0% 6,520 71% 7% 18% 4% 0% Axis Capital 42% 55% 12% 72% 0% 8,873 68% 8% 14% 9% 1% Endurance Specialty 37% 41% 4% 82% 0% 4,059 87% 3% 6% 1% 4% Everest Re 52% 42% 69% 51% 0% 11,852 50% 19% 18% 10% 2% Flagstone Re 41% 33% 0% 9% 0% 1,077 74% 7% 14% 6% 0% Hannover Re 151% 128% 131% 87% 12% 18,705 56% 18% 18% 5% 3% IPC Holdings 14% 54% 0% 5% 12% 1,706 62% 23% 15% 1% 0% Max Capital 77% 111% 3% 79% 0% 3,679 63% 10% 21% 4% 3% Montpelier Re 42% 39% 2% 48% 0% 2,087 64% 5% 14% 11% 6% Munich Re 334% 163% 0% 0% 223% 153,260 55% 20% 13% 5% 7% Odyssey Re 34% 27% 78% 3% 0% 4,452 69% n.a. n.a. n.a. 12% Paris Re 78% 89% 35% 5% 1% 4,489 59% 12% 23% 5% 1% PartnerRe 84% 81% 0% 61% 0% 10,757 58% 6% 21% 12% 3% Platinum 62% 36% 33% 74% 1% 4,049 65% 13% 16% 4% 2% RenaissanceRe 26% 41% 0% 35% 0% 4,230 83% 8% 5% 2% 2% SCOR 81% 79% 0% 25% 0% 6,721 67% 5% 19% 7% 2% Swiss Re 249% 101% 0% 80% 29% 109,409 75% 4% 6% 12% 2% Transatlantic Holdings 8% 61% 195% 14% 0% 9,875 39% 42% 17% 1% 1% Validus 53% 37% 0% 40% 1% 2,817 70% 5% 21% 1% 4% White Mountains 39% 62% 0% 51% 2% 5,930 n.a. n.a. n.a. n.a. n.a. XL Capital 109% 125% 7% 95% 8% 25,661 57% 15% 17% 8% 4% n.a. = segmented data not available Reporting Currency mn 24

25 AON BENFIELD About Aon Benfield As the industry leader in treaty, facultative and capital markets, Aon Benfield is redefining the role of the reinsurance intermediary and capital advisor. Through our unmatched talent and industry-leading proprietary tools and products, we help our clients to redefine themselves and their success. Aon Benfield offers unbiased capital advice and customized access to more reinsurance and capital markets than anyone else. As a trusted advocate, we provide local reach to the world s markets, an unparalleled investment in innovative analytics, including catastrophe management, actuarial, and rating agency advisory, and the right professionals to advise clients in making the optimal capital choice for their business. With an international network of more than 4,000 professionals in 50 countries, our worldwide client base is able to access the broadest portfolio of integrated capital solutions and services. Learn more at aonbenfield.com. 25

26 THE AON BENFIELD AGGREGATE - 1H 2009 GLASS HALF FULL Contacts Should you have questions about this report, please do not hesitate to contact a member of the Aon Benfield Analytics team, including: Jonathan Eggins Jonathan.Eggins@aonbenfield.com T: +44 (0) Lewis Phillips Lewis.Phillips@aonbenfield.com T: +44 (0) Aon Benfield Research AonBenfieldResearch@aonbenfield.com T: +44 (0)

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