Aon Risk Solution Seminar -AGCS perspective Axel Theis, CEO Allianz Global Corporate & Specialty September 16, 010
Content 1 Corporate & Specialty Market: Snapshot and Outlook 3 What drives the outlook and market development? AGCS developments
Despite write downs the insurance industry remains in a reasonable good shape Global write downs in financial sector (EUR bn) Source: Bloomberg as of Feb 16, 010 3
Snapshot Corporate & Specialty market 8 global peers dominate the market with GPW 1 EUR 39bn Local competitors complement the landscape UW discipline key driver for operating profit in 009 Economic slowdown with limited impact on capitalization of carriers Increasing impact on 010 premium levels (e.g., due to turnover-based premiums, lower construction activities) Despite 009 market downturn, AGCS improved ranking and GPW significantly 008 GPW 1 (EUR mn) 009 GPW 1 (EUR mn) 1 3 4 5 6 7 8 AIG / Chartis ACE P/C Zurich Global Corp. XL P/C Insurance FM Global AGCS Global AXA Corp. Solutions Mapfre Global Risks 7,881 5,668 3,815 3,05,859 1,970 777 AGCS with consistent strong ratings Company AGCS Mapfre AXA Zurich ACE Chartis XL S&P (outlook) AA (stable) AA (negative) AA-(stable) AA- (stable) A+ (positive) A+ (negative) A (negative) 15,64 1 3 4 5 6 7 8 AM Best (outlook) A+ (stable) A+ (negative) n/a A (stable) A+ (stable) A (negative) A (stable) AIG / Chartis ACE P/C Zurich Global Corp. AGCS Global FM Global XL P/C Insurance AXA Corp. Solutions Mapfre Global Risks 1,806 7,518 5,98 3,806 3,8,964 1,945 838 1) Gross premiums written; only commercial P&C considered for respective competitors ) As of June 010 Source: AGCS internal research, S&P, AM Best 4
AGCS An overview 009: GPW by region FC 010 GWP ~ EUR 4bn expected; CoR 94-95% [Total EUR 3.8bn] North America 9% Germany 4% UK 15% France 18% Rest of Europe 10% Asia-Pacific 3% Rest of World 1% Net Asset Value of EUR 3.8bn, invested assets 010 Q EUR 9.1bn; strong solvency position (>00%) Continuously strong rating (AA stable S&P, A+ stable A.M.Best) Conservative investment approach and asset allocation 009: GPW by LoB [Total EUR 3.8bn] Source: AGCS Property 8% Marine 1% Liability 18% Aviation 16% Engineering 11% Energy 3% Financial Lines 4% Global diversified portfolio allowing largest net capacity in all markets Excellent underwriting and risk management; ~ 70 risk engineers worldwide More than 1,00 International Insurance Programs (IIP) ~3 000 employees serving over 70% of the Fortune 500 clients 5
First half in 010 was under significant pressure Significantly lower production, trade and construction activities put pressure on the overall insurance market Natural catastrophes (e.g. Chile, Xynthia, Floods, Hailstrom) and the Deepwater Horizon accident challenging the bottom line of insurance carriers Clients are increasingly trying to cut cost even at the risk of underinsurance Q3 / Q4 signs: Still lot s of uncertainty Economy is slightly recovering Some banks produce robust results Lower growth / high unemployment US Strong export to China Competitive pricing pressure persists in 1H 010 Source: AGCS internal research 6
Positive mid-term outlook despite challenging market conditions 010/11 Mid-term price trend by LoB (market) Property Liability Engineering Key indicators Real GDP growth (in %) 8 3 0 5-3 1 6 Industrialized countries Emerging markets 6 6 Financial Lines 007 008 009 010e 011e 01e- 016e Marine AGCS Global: Price change (in %) 1 Aviation 0 1 Energy -1 ART 1) Historical and assumed price changes for AGCS globally across all LoBs Source: AZ Economic Research & Corporate Development (May 11, 010), AGCS internal research -3-4 007 008 009 010e 011e 01e 013e 7
What drives the market outlook and development? The New Normal -Ongoing challenges and financial insecurities The world is changing Emerging markets and new products Contingencies Transparency is key Climate change NatCat event frequency increases Source: AGCS internal research 8
The New Normal Ongoing challenges and financial insecurities Strong capital base and solvency becomes even more crucial Capital/Investment risks Stock Market Development 005-010 Government Bond Yields 005-010 Exchange Rate Development 005-010 Volatility of markets & prices Low investment yields Inflation risks Exchange rate risks Solvency II Sovereign debt crisis Source: Allianz Economic Research & Corporate Development 9
The world is changing Emerging market strategies and new products getting more important Growth rates in main economic regions GDP, real % change over previous year 11 9 7 5 3 1-1 -3-5 -7 006 007 008 009 010 011 Asia Latin America Central & Eastern Europe Industrialized countries Industry impact Specific market strategies for less liberalized and capitalized markets required Brazil and Russia fastest growing entry markets for whole Latin America and CEE Magnitude and complexity of risks in Emerging Markets increasing Mature markets under pressure; market size deteriorating and profitable growth difficult New product drivers Ash cloud Terrorism Piracy CO reduction Financial crises Reputational risks Globalization NatCat Industry impact Demand on new products e.g. Kidnap & ransom, non physical BI, environmental coverage International program solutions increasingly important to cover the new markets Increasing demand on traditional and nontraditional solutions on Cat covers (ILM, ILW, Cat Bonds) Source: Allianz Economic Research & Corporate Development 10
Contingencies Transparency is key Contingent commissions in the focus Clients demanding full disclosure Costs of doing business rising Lower margins increasing pressure (increasing claims frequency, lower investment yields) AGCS proposal Source: AGCS internal research 11
Climate change NatCat event frequency increases, re-insurance premiums raise Worldwide Natural Disasters trend continuously goes upwards Number of Events; 010 Jan-June 440 Global warming sets new records NatCat events increasing Chile quake to change risk models Re-insurance rates increasing US Catastrophe Reinsurance Rates According to Amlin Index, 000=100 New underwriting approaches required Increasing exposure in coastal areas Green technologies require new solutions Insurance industry to adapt Source: MunichRe NatCat Service, Citigroup Global Markets, Lloyds 360 Climate Change Report, AGCS internal research 1
AGCS is prepared to cope with the challenging market conditions 010-013 Our goal: AGCS footprint Growth and market opportunities Client profitability & service Global Platform Expansion in Asia, South America and Eastern European Countries Focus on opportunities in growth markets and specific LoBs Increasing share of long-tail lines Launching new innovative products Focus on UW principles Tailor-made risk solutions for client and specific industry sectors Improve International Insurance Solutions capabilities Finalize transformation into a global organization with harmonized front-, middleand back-office systems and global processes To be the leading global provider of corporate and specialty risk solutions, fulfilling clients individual needs with our employees unequalled industry expertise and knowledge. Source: AGCS 13
Disclaimer These assessments are, as always, subject to the disclaimer provided below. Cautionary Note Regarding Forward-Looking Statements The statements contained herein may include statements of future expectations and other forward-looking statements that are based on management s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. In addition to statements which are forward-looking by reason of context, the words "may", "will", "should", "expects", "plans", "intends", "anticipates", "believes", "estimates", "predicts", "potential", or "continue" and similar expressions identify forward-looking statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (i) general economic conditions, including in particular economic conditions in the Allianz Group s core business and core markets, (ii) performance of financial markets, including emerging markets, and including market volatility, liquidity and credit events (iii) the frequency and severity of insured loss events, including from natural catastrophes and including the development of loss expenses, (iv) mortality and morbidity levels and trends, (v) persistency levels, (vi) the extent of credit defaults, (vii) interest rate levels, (viii) currency exchange rates including the Euro/U.S. Dollar exchange rate, (ix) changing levels of competition, (x) changes in laws and regulations, including monetary convergence and the European Monetary Union, (xi) changes in the policies of central banks and/or foreign governments, (xii) the impact of acquisitions, including related integration issues, (xiii) reorganization measures, and (xiv) general competitive factors, in each case on a local, regional, national and/or global basis. Many of these factors may be more likely to occur, or more pronounced, as a result of terrorist activities and their consequences. The company assumes no obligation to update any forward-looking statement. No duty to update The company assumes no obligation to update any information contained herein. 14