Overview & Outlook for the Commercial P/C Insurance Industry in 2016 & Beyond

Overview & Outlook for the Commercial P/C Insurance Industry in 2016 & Beyond Trends, Challenges & Opportunities Insurance Information Institute September 15, 2016 Robert P. Hartwig, Ph.D., CPCU, Special Consultant Insurance Information Institute 110 William Street New York, NY 10038 Tel: 917.453.1885 bobh@iii.org www.iii.org

Insurance Industry: Financial Update & Outlook 2015 Was a Reasonably Good Year and Similar to 2014 2016: Could Be Similar to 2015 2

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:Q1 $5,840 $3,046 $3,043 $14,178 $10,870 $19,316 $20,598 $24,404 $21,865 $20,559 $19,456 $13,916 $36,819 $30,773 $30,029 $28,672 $38,501 $35,204 $33,522 $44,155 $62,496 $55,870 $63,784 $56,622 $65,777 $ Millions $80,000 $70,000 $60,000 $50,000 $40,000 P/C Industry Net Income After Taxes 1991 2016:Q1 2005 ROE*= 9.6% 2006 ROE = 12.7% 2007 ROE = 10.9% 2008 ROE = 0.1% 2009 ROE = 5.0% 2010 ROE = 6.6% 2011 ROAS 1 = 3.5% 2012 ROAS 1 = 5.9% 2013 ROAS 1 = 10.2% 2014 ROAS 1 = 8.4% 2015 ROAS = 8.4% Net income in Q1:2016 on an annualized basis was on track to match full-year 2015 $30,000 $20,000 $10,000 $0 -$10,000 -$6,970 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; 2015E is annualized figure based actual figure through Q3 of $44.0 Sources: A.M. Best, ISO; Insurance Information Institute

Profitability Peaks & Troughs in the P/C Insurance Industry, 1975 2015 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 ROE 25% 1977:19.0% 1987:17.3% History suggests next ROE peak will be in 2016-2017 20% 1997:11.6% 2006:12.7% 15% 9 Years 2013 9.8% 2015: 8.4% 10% 5% 0% 1975: 2.4% 1984: 1.8% 1992: 4.5% 2001: -1.2% 2014 8.4% -5% *Profitability = P/C insurer ROEs. 2011-15 figures are estimates based on ROAS data. Note: Data for 2008-2014 exclude mortgage and financial guaranty insurers. Source: Insurance Information Institute; NAIC, ISO, A.M. Best, Conning

ROE: Property/Casualty Insurance by Major Event, 1987 2015 (Percent) 20% P/C Profitability Is Both by Cyclicality and Ordinary Volatility Katrina, Rita, Wilma Modestly higher CATs 15% Low CATs 10% Sept. 11 5% 0% -5% Hugo Andrew, Iniki Northridge Lowest CAT Losses in 15 Years 4 Hurricanes Financial Crisis* Record Tornado Losses Sandy 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 * Excludes Mortgage & Financial Guarantee in 2008 2014. Sources: ISO, Fortune; Insurance Information Institute. 5

P/C Insurance Industry ROE: Magnitude of Cyclicality, Volatility Changes Over Time, 1950-2015 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 25% 20% 1950-1970 Low Volatility 1971-1992 Extreme Volatility 1993-2008 Moderate Volatility 2009 - Present Modest Volatility 15% 10% 5% 0% -5%. Source: Insurance Information Institute

Return on Equity by Financial Services Sector vs. Fortune 500, 2004-2015* (Percent) Fortune 500 P/C Insurers Life Insurers Commercial Banks 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% Average: 2004-2014 Fortune 500: 13.9% Commercial Banks: 9.8% Life: 8.2% P/C: 7.1% 04 05 06 07 08 09 10 11 12 13 14 15E Banks and Insurers Have Substantially Underperformed the Fortune 500 Since the Financial Crisis *GAAP basis. Sources: ISO, Fortune; Insurance Information Institute. 7

8.9 8.9 8.8 8.3 11.9 11.7 11.7 11.5 11.3 11.1 11.0 10.9 10.8 10.6 10.6 10.5 10.3 10.0 9.9 9.6 14.0 13.3 13.2 13.0 19.9 19.0 RNW All Lines, 2005-2014 Average: Highest 25 States (Percent) 22 20 18 16 14 12 10 8 6 4 2 0 The most profitable states over the past decade are widely distributed geographically, though none are in the Gulf region Profitability Benchmark: All P/C US: 7.7% HI AK VT ME ND FL WY NH VA ID UT NC WA MA SC OH WV OR DC CA RI CT MD NM SD MT Source: NAIC; Insurance Information Institute. 8

-9.4-7.4 1.7 3.4 7.8 7.8 7.7 7.5 7.5 7.4 7.3 7.3 7.1 7.1 7.0 6.9 6.8 6.5 6.3 6.2 6.1 5.5 5.1 5.1 4.7 4.1 RNW All Lines, 2005-2014 Average: Lowest 25 States (Percent) 9 7 5 3 1-1 -3-5 -7-9 -11 Some of the least profitable states over the past decade were hit hard by catastrophes PA WI US IL TX IA KS MN AR NE IN CO AZ KY MO TN NV NJ GA NY DE AL MI OK MS LA Source: NAIC; Insurance Information Institute. 9

RNW Commercial Auto, 2005-2014 Average: Highest 25 States 23.9 22.6 19.2 15.8 19.0 14.7 14.6 14.3 18.0 13.3 13.3 12.5 11.9 11.7 11.6 14.0 11.4 11.4 10.8 10.8 10.4 10.2 10.1 9.9 9.6 9.6 (Percent) 30 25 20 15 10 5 0 AK DC HI VT OR NH ME OH RI ID MA MN WI MD IA WY CO NC CT VA ND KS NM WA SD UT Sources: NAIC; Insurance Information Institute 10

RNW Commercial Auto, 2005-2014 Average: Lowest 25 States 9.4 8.0 9.3 9.1 8.9 8.8 8.8 8.4 8.3 6.0 8.2 8.1 7.2 6.8 6.3 6.3 6.2 5.2 5.2 4.9 4.9 4.6 3.9 3.3-2.3-2.4 (Percent) 10 8 6 4 2 0-2 -4 NE IN WV AZ IL CA SC PA AR TN MO US OK KY MT TX NY GA MI DE MS NJ FL AL NV LA Sources: NAIC; Insurance Information Institute 11

RNW Workers Compensation, 2005-2014 Average: Highest 25 States 13.0 12.6 12.4 11.6 19.0 10.9 10.8 9.7 9.6 9.3 7.9 7.9 7.7 7.7 7.7 14.0 7.5 7.4 7.4 7.3 7.2 7.2 7.1 (Percent) 14 12 10 8 6 4 2 0 AR AK NV HI DC TX OH FL MI MO AL CA IN MS NE KS VT MA WV VA TN UT LA Sources: NAIC; Insurance Information Institute 12

RNW Workers Compensation, 2005-2014 Average: Lowest 25 States 7.1 8.0 6.9 6.8 6.8 6.7 6.6 6.6 6.5 6.0 5.9 5.1 4.7 4.7 4.7 4.5 4.5 4.4 4.3 4.1 4.0 3.4 3.0 2.9 2.4 2.1 (Percent) 8 7 6 5 4 3 2 1 0 NH KY RI MN US ME NM PA MT SD OR NC CT GA NY AZ MD NJ CO SC IA IL WI ID DE OK Sources: NAIC; Insurance Information Institute 13

P/C Insurance Industry Combined Ratio, 2001 2016:Q1* As Recently as 2001, Insurers Paid Out Nearly $1.16 for Every $1 in Earned Premiums 120 110 100 115.8 107.5 100.1 98.4 Heavy Use of Reinsurance Lowered Net Losses 100.8 92.6 Relatively Low CAT Losses, Reserve Releases Best Combined Ratio Since 1949 (87.6) 95.7 101.0 99.3 Relatively Low CAT Losses, Reserve Releases Cyclical Deterioration 101.1 Avg. CAT Losses, More Reserve Releases 106.5 102.5 Higher CAT Losses, Shrinking Reserve Releases, Toll of Soft Market Sandy Impacts Lower CAT Losses 3 Consecutive Years of U/W Profits: First Time Since 1971-73 Elevated CATs 96.4 97.0 97.8 97.3 90 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16:Q1 * Excludes Mortgage & Financial Guaranty insurers 2008--2014. Including M&FG, 2008=105.1, 2009=100.7, 2010=102.4, 2011=108.1; 2012:=103.2; 2013: = 96.1; 2014: = 97.0. Sources: A.M. Best, ISO (2014-2015); Figure for 2010-2013 is from A.M. Best P&C Review and Preview, Feb. 16, 2016. 14

P/C Insurance Loss Reserve Development, 1992 2017E* Reserve Change Reserve releases are expected to gradually taper off slowly, but will continue to benefit the bottom line and combined ratio through at least 2017 Source: A.M. Best; Barclays research for estimates.

NPW Premium Growth: Peaks & Troughs in the P/C Insurance Industry, 1926 2015 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 ROE 30% 25% 20% 15% 10% Start of WW II 1941: 15.8% Post WW II Peak: 1947: 26.2% Economic Shocks, Inflation: 1976: 22.0% 1970-90: Peak premium growth was much higher in this period while troughs were comparable. Rapid inflation, economic volatility, high interest rates, tort environment all played roles Tort Crisis 1985/86: 22.2% 1988-2000: Period of inter-cycle stability Post-9/11 2002:15.3% 2015 3.4% 5% 0% -5% -10% -15% -20% Great Depression 1932: -15.9% max drop 1950-70: Extended period of stability in growth and profitability. Low interest rates, low inflation, Bureau rate regulation all played a role Twin Recessions; Interest Rate Hikes 1987: 3.7% Great Recession: 2010: -4.9% 2010-20XX? Postrecession period of stable growth? Note: Data through 1934 are based on stock companies only. Data include state funds beginning in 1998. Source: A.M. Best; Insurance Information Institute.

Policyholder Surplus, 2006:Q4 2016:Q1 $487.1 06:Q4 $496.6 07:Q1 $512.8 07:Q2 $521.8 07:Q3 $517.9 07:Q4 $515.6 08:Q1 $505.0 08:Q2 $478.5 08:Q3 $455.6 08:Q4 $437.1 09:Q1 $463.0 09:Q2 $490.8 09:Q3 $511.5 09:Q4 $540.7 10:Q1 $530.5 10:Q2 $544.8 10:Q3 $559.2 $566.5 10:Q4 11:Q1 $559.1 11:Q2 $538.6 11:Q3 $550.3 $570.7 11:Q4 12:Q1 $567.8 12:Q2 $583.5 12:Q3 $586.9 12:Q4 $607.7 13:Q1 $614.0 13:Q2 $624.4 13:Q3 $653.4 13:Q4 $662.0 14:Q1 $671.6 14:Q2 $673.9 14:Q3 $675.2 14:Q4 $672.4 15:Q2 $673.7 15:Q4 $676.3 16:Q1 ($ Billions) $700 $650 2007:Q3 Pre-Crisis Peak Drop due to near-record 2011 CAT losses $600 $550 $500 $450 Surplus as of 3/31/16 stood at a record high $676.3B $400 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. Sources: ISO, A.M.Best. The industry now has $1 of surplus for every $0.76 of NPW, close to the strongest claims-paying status in its history. The P/C insurance industry entered 2016 in very strong financial condition. 17

Profitability & Politics How Is Profitability Affected by the President s Political Party? 18

P/C Insurance Industry ROE by Presidential Administration, 1950-2015* Carter Reagan II Nixon Obama II Clinton I G.H.W. Bush G.W. Bush II Clinton II Reagan I Nixon/Ford Truman Eisenhower I Eisenhower II G.W. Bush I Obama I Johnson Kennedy/Johnson 5.43% 5.03% 4.83% 4.68% 4.43% 3.55% 6.98% 6.97% 8.93% 8.80% 8.65% 8.35% 8.33% 7.98% 7.68% 15.10% 16.43% OVERALL RECORD: 1950-2015* Democrats 7.72% Republicans 7.85% Party of President has marginal bearing on profitability of P/C insurance industry 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% *Truman administration ROE of 6.97% based on 3 years only, 1950-52;. Source: Insurance Information Institute

P/C insurance Industry ROE by Presidential Party Affiliation, 1950-2015* 50 52 Truman 54 56 58 Eisenhower 60 62 64 Kennedy/ Johnson 66 68 70 72 74 76 78 80 82 Carter 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 25% BLUE = Democratic President RED = Republican President Nixon/Ford Reagan/Bush I Clinton Bush II Obama 20% 15% 10% 5% 0% -5%. *2015 data is through Q3. Source: Insurance Information Institute

Trump vs. Clinton: Issues that Matter to P/C Insurers Issue Trump Clinton Economy Interest Rates Taxes International Trade Tort System Supply Side-Like Philosophy: Lower taxes Faster real GDP growth; Deficits likely grow as tax cuts are combined with targeted increased spending on Homeland Security, Defense, etc. May trend higher with larger deficits; Shift from monetary policy to fiscal focus (tax cuts, government spending) Favors lower tax rates for corporate and personal income tax rates; Tax code overhaul? Protectionist Tendencies (appeal primarily to manufacturing sector) Doesn t like trial lawyers but seems to like filing lawsuits Keynesian Philosophy: More government spending on infrastructure, education, social services; Deficits likely increase as tax increases likely difficult to pass Status quo at the Fed; Net impact on interest rates unclear Unlikely to reduce taxes or embark on major overhaul of tax code Has criticized Trans-Pacific Partnership but is a realist on international matters Status Quo Energy Laissez-faire; Less green Status Quo 21

2015 Property and Casualty Insurance Regulatory Report Card AK AL = A = B = C = D = F = NG D C HI OR CA D WA C B NV B+ Not Graded: District of Columbia B ID UT MT D WY B+ ND SD C NE B+ CO C+ B KS MO A B B A TN A- OK AZ NM AR C Source: James Madison Institute, February B 2008. MS AL B B D+ C TX D A- MN A C+ IA LA D WI B IL IN C MI C+ KY B OH C C GA WV F SC PA A A- FL VA NC A NY C MD D D VT NH MA CT NJ DE B ME B B B RI C+ C- B C Source: R Street Insurance Regulation Report Card, December 2015

INVESTMENTS: THE NEW REALITY Investment Performance is a Key Driver of Profitability Depressed Yields Will Necessarily Influence Underwriting & Pricing 23

Property/Casualty Insurance Industry Investment Income: 2000 2016:Q1 1 ($ Billions) $60 Investment earnings are still below their 2007 pre-crisis peak $50 $49.5 $52.3 $54.6 $51.2 $47.1 $47.6 $49.2 $48.0 $47.3 $46.4 $43.6 $40 $38.9 $37.1 $36.7 $38.7 $39.6 $30 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 16* Due to persistently low interest rates, investment income fell in 2012, 2013 and 2014 but showed a small (1.9%) increase in 2015 another drop in 2016 seems likely. *Annualized figure based on actual Q1:2016 net investment income earned of $10.893B. 1 Investment gains consist primarily of interest and stock dividends. Sources: ISO; Insurance Information Institute.

U.S. Treasury Security Yields: A Long Downward Trend, 1990 2016* 9% 8% 7% 6% 5% 4% 3% Yields on 10-Year U.S. Treasury Notes have been essentially below 5% for more than a decade. Despite the Fed s December 2015 rate hike, yields remain low though shortterm yields have seen some gains; Yield curve is flattening. 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 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 August 2016. Sources: Federal Reserve Bank at http://www.federalreserve.gov/releases/h15/data.htm. National Bureau of Economic Research (recession dates); Insurance Information Institute. 25

Net Investment Yield on Property/ Casualty Insurance Invested Assets, 2007 2016P* (Percent) 4.6 4.4 4.2 4.0 3.8 3.6 3.4 3.2 4.5 4.2 4.0 3.8 3.7 3.8 3.6 Estimated book yield in 2016 is down about 140 BP from pre-crisis levels 3.4 3.6 3.1 3.0 07 08 09 10 11 12 13 14 15E 16P The yield on invested assets remains low relative to pre-crisis yields. The Fed s plan to raise interest rates in late 2015 has pushed up some yields, albeit quite modestly. Sources: A.M. Best; 2015E-2016P figures from A.M. Best P/C Review and Preview, Feb. 2016; Insurance Information Institute

Interest Rate Forecasts: 2016 2021F Yield (%) 5% 3-Month Treasury 10-Year Treasury 4% 3% 2.3% 2.7% 2.9% 3.0% 2.2% 2.2% 3.4% 3.7% 3.8% 3.9% 2% 1.7% 1% 0% 0.1% 0.3% 0.9% 10-year yields are actually down in 2016 15 16F 17F 18F 19F 20F 21F 15 16F 17F 18F 19F 20F 21F A full normalization of interest rates is unlikely until 2019, more than a decade after the onset of the financial crisis. Sources: Blue Chip Economic Indicators (9/16 for 2016 and 2017; for 2018-2021 3/16 issue); Insurance Info. Institute. 27

Treasury Yield Curves: Pre-Crisis (July 2007) vs. April 2016* 6% 5% 4% 3% 2% 1% 0% 4.82% 4.96% 5.04% 4.96% 4.82% 4.82% 4.88% 5.00% 4.93% 5.00% 5.19% Treasury yield curve remains near its most depressed level in at least 45 years. Investment income is depressed as a result. Fed began to raise rates in Dec. 2015, but yields unlikely to return to pre-crisis levels anytime soon 0.18% 0.22% 0.36% 0.54% 0.80% 0.96% 1.31% 1.61% 1.84% 2.24% 2.65% April 2016 Yield Curve Pre-Crisis (July 2007) 1M 3M 6M 1Y 2Y 3Y 5Y 7Y 10Y 20Y 30Y The Fed Began to Raise Rates in Dec. 2015 but Market Volatility and Weakness Abroad Have Made Additional Hikes Difficult *As of April 22, 2016. Source: Federal Reserve Board of Governors: http://www.federalreserve.gov/releases/h15/data.htm; Insurance Information Institute. 28

Annual Inflation Rates, (CPI-U, %), 1990 2017F Annual Inflation Rates (%) 6.0 5.0 4.0 3.0 2.0 5.1 4.9 3.0 3.2 2.9 2.4 2.8 2.6 Inflation peaked at 5.6% in August 2008 on high energy and commodity crisis. The recession and the collapse of the commodity bubble reduced inflationary pressures in 2009/10 1.9 1.5 3.3 3.4 1.3 2.5 2.3 3.0 3.8 2.8 3.8 1.6 3.2 2.1 Inflationary expectations have slipped (due in part to falling energy costs) allowing the Fed to maintain low interest rates 1.5 1.6 1.3 2.3 1.0 0.0 0.1-1.0 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 16F17F Slack in the U.S. economy and falling energy prices suggests that inflationary pressures should remain subdued for an extended period of times -0.4 Sources: US Bureau of Labor Statistics; Blue Chip Economic Indicators, 4/16 (forecasts). 29

P/C Insurer Net Realized Capital Gains/Losses, 1990-2015 $2.88 $4.81 $9.89 $9.82 $1.66 $6.00 $9.24 $10.81 $18.02 $13.02 $16.21 $6.63 -$1.21 $6.61 $9.13 $9.70 $3.52 $8.92 -$19.81 -$7.90 $5.85 $7.04 $6.18 $11.37 $10.28 $9.41 ($ Billions) $20 Realized capital gains rose sharply as equity markets rallied in 2013-14 $15 $10 $5 $0 -$5 -$10 -$15 -$20 -$25 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 Insurers Posted Net Realized Capital Gains in 2010-2015 Following Two Years of Realized Losses During the Financial Crisis. Realized Capital Losses Were a Primary Cause of 2008/2009 s Large Drop in Profits and ROE. Sources: A.M. Best, ISO; Insurance Information Institute. 30

Property/Casualty Insurance Industry Investment Gain: 1994 2015 1 ($ Billions) $70 $60 $50 $40 $30 $35.4 $58.0 $56.9 $52.3 $51.9 $47.2 $42.8 $44.4 $36.0 $45.3 $48.9 $59.4 $55.7 $64.0 $31.7 $39.2 $53.4 $56.2 $58.7 $54.2 $56.6 $56.6 $20 $10 $0 Investment gains in 2015 were unchanged from 2014 and still well below the pre-crisis highs 94 95 96 97 98 99 00 01 02 03 04 05* 06 07 08 09 10 11 12 13 14 15* Total Investment Gains Were Flat in 2015 as Investment Income Rose Marginally and Realized Capital Gains Fell Slightly 1 Investment gains consist primarily of interest, stock dividends and realized capital gains and losses. * 2005 figure includes special one-time dividend of $3.2B; 2015 figure is through Q3 2015. Sources: ISO, SNL; Insurance Information Institute.

Reduction in Combined Ratio Necessary to Offset 1% Decline in Investment Yield to Maintain Constant ROE, by Line* -1.8% -1.8% -2.0% -3.6% -1.9% -2.1% -3.1% -3.3% -3.3% -3.7% -4.3% -5.2% -5.7% Personal Lines Pvt Pass Auto Pers Prop Commercial Comml Auto Credit Comm Prop Comm Cas Fidelity/Surety Warranty Surplus Lines Med Mal WC Reinsurance** 0% -1% -2% -3% -4% -5% -6% -7% -8% -7.3% Lower Investment Earnings Place a Greater Burden on Underwriting and Pricing Discipline *Based on 2008 Invested Assets and Earned Premiums **US domestic reinsurance only Source: A.M. Best; Insurance Information Institute. 32

CAPITAL/CAPACITY Capital Accumulation Has Multiple Impacts Alternative Capital Impacts? 33

US Policyholder Surplus: 1975 2015* ($ Billions) $750 $700 $650 $600 $550 $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 Surplus as of 12/31/15 was a near-record $673.7, down 0.2% from $675.2 of 12/31/14, and up 54.1% ($236.6B) from the crisis trough of $437.1B at 3/31/09 Surplus is a measure of underwriting capacity. It is analogous to Owners Equity or Net Worth in noninsurance organizations 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 The Premium-to-Surplus Ratio Stood at $0.76:$1 as of 12/31/15, a Near Record Low (at Least in Recent History) * As of 12/31/15. Source: A.M. Best, ISO, Insurance Information Institute.

Alternative Capital New Investors Continue to Change the Reinsurance Landscape First I.I.I. White Paper on Issue Was Released in March 2015 36

Global Reinsurance Capital (Traditional and Alternative), 2006-2014 Total reinsurance capital reached a record $570B in 2013, up 68% from 2008. But alternative capacity has grown 210% since 2008, to $50B. It has more than doubled in the past three years. 2014 data is as of June 30, 2014. Source: Aon Benfield Analytics; Insurance Information Institute.

Alternative Capital as a Percentage of Traditional Global Reinsurance Capital 12% 10% 8% 6% 4% 10.2% 8.4% 6.5% 5.7% 5.9% 5.8% 5.4% 4.6% 11.5% 2% 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 Alternative Capital s Share of Global Reinsurance Capital Has More Than Doubled Since 2010. 2014 data is as of June 30, 2014. Source: Aon Benfield Analytics; Insurance Information Institute.

Catastrophe Bond Issuance and Outstanding: 1997-2015 Risk Capital Amount ($ Millions) 30,000 25,000 20,000 15,000 10,000 5,000 0 5,085.0 4,289.0 1,499.0 1,142.8 1,988.2 989.5 966.9 1,142.0 1,062.5 874.2 948.2 7,677.0 4,614.7 13,416.4 7,187.0 12,342.8 12,195.7 12,508.2 12,538.6 4,107.1 4,599.9 3,396.0 3,009.9 25,960.5 7,898.2 22,867.8 8,026.7 18,576.9 7,083.0 14,839.3 5,855.3 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 New Issuance Outstanding Cat Bond Issuance Declined Slightly in 2015 from 2014 s Record Pace. Lower Yields on Bonds Explain Some of the Contraction. Source: Guy Carpenter, Artemis accessed at http://www.artemis.bm/deal_directory/cat_bonds_ils_issued_outstanding.html. 39

US Property CAT Rate on Line Index & Global Reinsurance ROE US Property CAT ROL Global Reinsurance ROE Record traditional capacity, alternative capital and low CAT activity have pressured reinsurance prices; ROEs are own only very modestly Source: Barclays PLC from Guy Carpenter; Insurance Information Institute. 40

GLOBAL M&A UPDATE: A PATH TO GROWTH? Are Capital Accumulation, Drive for Growth and Scale Stimulating M&A Activity? 41

$1,249 $486 $425 $5,100 $3,507 $8,059 $11,534 $9,264 $6,419 $4,651 $4,397 $6,723 $13,615 $19,118 $16,294 $12,458 Transaction values $20,353 $30,873 $35,221 $40,032 $39,607 Number of transactions U.S. INSURANCE MERGERS AND ACQUISITIONS, P/C SECTOR, 1994-2015 (1) ($ 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 140 120 $40,000 100 80 $30,000 60 $20,000 40 $10,000 20 $0 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 0 (1) Includes transactions where a U.S. company was the acquirer and/or the target. Source: Conning proprietary database. 42

Huge Shift from Domestic M&A Activity to Cross-Border The share of M&A deal volume that was cross-border more than doubled in 2015 Ṡource: Thomson Reuters as of Oct. 2015 from Geneva Association Newsletter Insurance and Finance, Jan. 2016, presentation Facts vs. Sentiment: Deals in the Insurance Sector, by Aviva CEO Mark Wilson. 43

M&A Activity Has Shifted Away from Europe and Towards Asia and N. America Asian, N. American deal volumes were up sharply in 2015 Ṡource: Thomson Reuters as of Oct. 2015 from Geneva Association Newsletter Insurance and Finance, Jan. 2016, presentation Facts vs. Sentiment: Deals in the Insurance Sector, by Aviva CEO Mark Wilson. 44

Growth Premium Growth Rates Vary Tremendously by State and Over Time, But 45

Net Premium Growth (All P/C Lines): Annual Change, 1971 2016:Q1 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 (Percent) 25% 20% 15% 10% 1975-78 1984-87 2000-03 Net Written Premiums Fell 0.7% in 2007 (First Decline Since 1943) by 2.0% in 2008, and 4.2% in 2009, the First 3- Year Decline Since 1930-33. Outlook 2016F: 3.2% 2017F: 3.0% 2016 Q1: 3.2% 2015: 3.4% 2014: 4.2 2013: 4.4% 2012: +4.2% 5% 0% -5% Shaded areas denote hard market periods Sources: A.M. Best (1971-2013), ISO (2014-16). 46

Pecent change (%) Direct Premiums Written: Total P/C Percent Change by State, 2007-2014 70.7 ND 36.7 OK 36.2 SD 30.3 TX 29.4 NE 26.8 KS 24.7 IA 23.7 VT 21.6 WY 20.7 CO 19.2 MN 19.2 IN 18.6 MI 18.1 TN 18.0 AR 17.0 WI 15.2 GA 15.1 SC 15.0 NJ 14.9 OH 14.8 AK 14.7 KY 14.4 VA 14.2 LA 13.8 CT 13.5 MT 80 70 60 Top 25 States North Dakota was the country s growth leader over the past 7 years with premiums written expanding by 70.7%, fueled by the state s energy boom 50 40 Growth Benchmarks: Total P/C US: 13.0% 30 20 10 0 Sources: SNL Financial LC.; Insurance Information Institute. 48

Pecent change (%) Direct Premiums Written: Total P/C Percent Change by State, 2007-2014 13.4 MO 13.1 NY 13.1 UT 13.0 US 13.0 NM 12.9 MS 12.4 MA 12.2 AL 11.7 NC 11.0 MD 10.5 WA 9.4 RI 9.4 NH 9.2 IL 9.1 PA 8.2 ID 6.3 ME 6.0 CA 4.7 OR 2.2 FL 1.3 AZ -0.8 DC -1.6 HI -4.3 WV -7.3 NV DE -12.9 Bottom 25 States 15 10 5 0-5 -10 Growth was negative in 4 states and DC between 2007 and 2014-15 Sources: SNL Financial LC.; Insurance Information Institute. 49

Commercial Lines Growth and Pricing Trends Survey Results Suggest Commercial Pricing Has Flattened Out, with Impacts on Growth 50

Commercial Lines NPW Premium Growth: 1975 2015E 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15E ROE 35% 30% 25% 20% Economic Shocks, Inflation: 1976: 22.2% Tort Crisis 1986: 30.5% Commercial lines is prone to more cyclical volatility that personal lines. Recently, growth has stabilized in the 4% to 5% range. Post-9/11 2002: 22.4% 15% 10% Post-Hurricane Andrew Bump: 1993: 6.3% 1988-2000: Period of inter-cycle stability Post Katrina Bump: 2006: 7.7% 2015E 3.3% 5% 0% -5% -10% -15% Recessions: 1982: 1.1% Great Recession: 2009: -9.0% 2010-20XX? Postrecession period of stable growth? Note: Data include state funds beginning in 1998. Source: A.M. Best; Insurance Information Institute.

Pecent change (%) Direct Premiums Written: Comm. Lines Percent Change by State, 2007-2015 75.5 ND 36.5 SD 30.1 VT 26.8 NE 26.6 OK 24.0 IA 22.2 TX 21.5 KS 17.0 MN 16.7 IN 15.4 WI 14.7 WY 14.4 CO 12.8 MA 12.0 NY 11.5 CT 10.3 ME 10.2 NJ 9.9 CA 9.8 NM 9.8 UT 9.2 AR 9.2 ID 9.1 RI 9.0 US 8.8 IL Top 25 States 80 70 60 50 40 30 20 10 0 44 states showed commercial lines growth from 2007 through 2015 Growth Benchmarks: Commercial US: 9.0% Sources: NAIC via SNL Financial; Insurance Information Institute. 52

Pecent change (%) Direct Premiums Written: Comm. Lines Percent Change by State, 2007-2015 8.4 WA 7.8 OH 7.7 GA 7.3 MT 7.2 TN 7.1 MO 6.9 NH 6.8 MS 6.6 PA 6.5 MI 6.3 VA 6.3 MD 6.2 AK 5.6 KY 5.5 SC 5.3 NC 4.7 LA 1.6 AL -1.2 DC -2.4 OR -4.1 DE -4.7 AZ -5.1 HI -6.8 FL -17.5 NV WV -21.6 Bottom 25 States 10 5 0-5 -10-15 -20 Eight states write less commercial business than they did in 2007-25 Sources: NAIC via SNL Financial; Insurance Information Institute. 53

Commercial Auto Insurance Net Written Premium, 2000 2015F $ Billion $29 $27 $25 In contrast to positive PP Auto NPW growth, Commercial Auto premiums fell 21.3% between 2005 and 2011 due to soft market conditions in commercial lines and negative exposure trends, though growth resumed in 2012 $25.4 $24.6 $26.6 $26.7 $26.7 $25.8 $23.8 $24.0 $25.7 $28.0 $23 $21 $19 $17 $19.5 $21.8 $22.1 $22.1 $21.2 $21.2 $15 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15E Sources: A.M. Best (2000-2014); Conning (2015F); Insurance Information Institute. 54

Change in Commercial Rate Renewals, by Account Size: 1999:Q4 to 2016:Q1 Percentage Change (%) Peak = 2001:Q4 +28.5% Pricing Turned Negative in Early 2004 and Remained that way for 7 ½ years Pricing turned positive in Q3:2011, the first inrease in nearly 8 years; Q1:2015 renewals were down 2.8%; Some insurers posted stronger numbers. Trough = 2007:Q3-13.6% KRW : No Lasting Impact 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; Barclay s Capital; Insurance Information Institute. 55

Cumulative Qtrly. Commercial Rate Changes, by Account Size: 1999:Q4 to 2016:Q1 1999:Q4 = 100 Pricing for smaller accounts has been more stable than for larger accounts 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; Barclay s Capital; Insurance Information Institute. 56

CIAB: Average Commercial Rate Change, All Lines, (1Q:2004 2Q:2016) 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16-0.1% -2.7% -3.0% -5.3% -5.1% -4.9% -5.8% -5.6% -5.3% -6.4% -5.2% -5.4% -2.9% 2.7% 4.4% 4.3% 3.9% 5.0% 5.2% 4.3% 3.4% 2.1% 1.5% -0.7% -2.3% -3.3% -3.1% -2.8% -3.7% -3.9% (Percent) 9% 4% -1% -6% -11% -16% -3.2% -5.9% -7.0% -9.4% -9.7% -8.2% -4.6% KRW Effect Q2 2011 marked the last of 30 th consecutive quarter of price declines -9.6% -11.3% -11.8% -13.3% -12.0% -13.5% -12.9% -11.0% -6.4% -0.1% 0.9% -0.5% 0.1% Pricing as of Q2:2016 remained somewhat negative Note: CIAB data cited here are based on a survey. Rate changes earned by individual insurers can and do vary, potentially substantially. Source: Council of Insurance Agents & Brokers; Insurance Information Institute 57

Change in Commercial Rate Renewals, by Line: 2016:Q2 Commercial Property Workers Comp General Liab Business Interruption Umbrella Construction Surety D&O EPL Commercial Auto Percentage Change (%) 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% -5.0% -6.0% -7.0% -6.0% -4.3% Commercial Auto rate increases are larger than any other line, followed by EPL -3.6% -3.0% -2.8% -2.5% -0.4% -0.3% 0.8% 2.4% Major Commercial Lines Renewals Were Mixed to Down in Q2:2016; EPL and Commercial Auto Saw Gains 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; Insurance Information Institute. 58

Underwriting Performance 59

Commercial Lines Combined Ratio Commercial Lines Combined Ratio, 1990-2017F* 109.4 90 110.2 91 118.8 92 109.5 93 112.5 94 110.2 95 107.6 96 104.1 97 109.7 98 112.3 99 00 111.1 01 122.3 110.2 02 102.0 03 102.5 04 105.4 05 91.1 06 93.6 07 104.2 08 98.9 09 102.4 10 107.9 11 103.5 12 94.8 13 94.3 14 95.2 15E 99.0 16F 100.1 17F 125 120 Commercial lines underwriting performance improved in 2013/14 but higher cats, diminishing prior year reserves and rising loss cost trends in some lines could push combined ratios higher 115 110 105 100 95 90 *2007-2012 figures exclude mortgage and financial guaranty segments. Source: A.M. Best (1990-2014); Conning (2015E-17F) Insurance Information Institute. 60

Commercial Property Combined Ratio: 2007 2017F 72.4 105.8 83.3 86.5 106.5 105.8 82.7 85.8 88.1 90.5 91.7 110 105 100 95 90 85 80 75 70 07 08 09 10 11 12 13 14 15F 16F 17F Commercial Property Underwriting Performance Has Improved in Recent Years, Largely Due to Diminished CAT Activity Source: Conning Research and Consulting. 61

General Liability Combined Ratio: 2005 2017F 112.9 95.1 99.0 94.2 107.1 110.8 99.6 104.1 99.7 101.6 103.7 103.5 104.0 115 110 105 100 95 90 85 80 05 06 07 08 09 10 11 12 13 14 15F 16F 17F Commercial General Liability Underwriting Performance Has Been Volatile in Recent Years Source: Conning Research and Consulting. 62

Commercial Auto Combined Ratio: 1993 2017F 112.1 112.0 113.0 115.9 118.1 115.7 116.2 102.7 95.2 92.9 92.1 92.4 94.1 96.8 99.1 97.8 103.4 106.8 106.7 103.4 106.2 107.6 108.6 125 120 115 110 105 100 95 90 85 80 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15E16F17F Commercial Auto Results Are Challenged as Rate Gains Barely Have Yet to Offset Adverse Frequency and Severity Trends Sources: A.M. Best (1990-2014);Conning (2015E-2017F); Insurance Information Institute. 63

Commercial Multi-Peril Combined Ratio: 1995 2017F 119.0 100.7 119.8 116.8 108.5 113.6 125.0 115.3 113.1 122.4 115.0 115.0 121.0 117.0 116.2 97.3 116.1 89.0 104.9 97.7 101.9 93.8 105.5 83.8 95.4 89.8 97.6 108.4 94.2 98.7 96.1 102.5 102.1 120.1 94.1 111.9 103.0 94.4 103.5 96.7 96.9 101.8 102.3 CMP-Liability CMP-Non-Liability 130 125 120 115 110 105 100 95 90 85 80 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15E16F17F Commercial Multi-Peril Underwriting Performance is Expected to Deteriorate Slightly in the 2015-2017 Period Assuming Normal Catastrophe Loss Activity *2015E-2017F figures are Conning figures for the combined liability and non-liability components. Sources: A.M. Best; Conning; Insurance Information Institute. 64

Inland Marine Combined Ratio: 2004 2017F 82.5 89.9 77.3 79.5 93.3 89.3 86.2 97.1 96.1 83.7 83.3 82.2 83.2 83.7 100 95 90 85 80 75 70 04 05 06 07 08 09 10 11 12 13 14 15F 16F 17F Inland Marine Underwriting Performance Has Been Consistently Strong for Many Years Source: A.M. Best (2004-2014); Conning Research and Consulting (2015F-2017F). 65

91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15F 16F 77.9 84.4 85.4 82.0 91 88.0 89.5 96.4 93.3 99.8 103.7 100.9 108.0 106.6 107.9 103.7 103.7 103.5 104 110.9 115.7 127.9 130.4 136.0 137.3 142.3 154.7 Medical Malpractice Combined Ratio vs. All Lines Combined Ratio, 1991-2017F 170 MPL insurers in 2015 paid out an estimated $1.04 in loss and expense for every $1 they earned in premiums 160 150 140 The dramatic improvement over the past decade has restored MPL s viability, though some deterioration has occurred and is expected to continue 130 120 110 100 90 80 In 2001, med mal insurers paid out $1.55 for every dollar earned 70 Source: AM Best (1991-2014); Conning (2015-17F) Insurance Information Institute. 66

Workers Compensation Combined Ratio: 1994 2016F 102.0 97.0 100.0 101.0 107.0 115.3 118.2 121.7 112.6 108.6 105.1 102.7 98.5 103.5 104.5 110.6 115.0 115.0 108.0 101.0 98.0 98.5 99.5 130 125 120 115 110 105 100 95 90 85 80 WC results have improved markedly since 2011 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14P15F16F Workers Comp Results Began to Improve in 2012. Underwriting Results Deteriorated Markedly from 2007-2010/11 and Were the Worst They Had Been in a Decade. Sources: A.M. Best (1994-2009); NCCI (2010-2014P) and are for private carriers only; Insurance Information Institute (2015-16F). 67

Workers Compensation Operating Environment Workers Comp Results Have Improved Substantially in Recent Years 68

Workers Compensation Premium: Fifth Consecutive Year of Increase $ Billions 50 40 30 Net Written Premium State Funds ($ B) Private Carriers ($ B) 35.3 35.7 34.3 35.4 33.6 30.1 28.5 26.9 25.9 25.0 28.6 32.1 37.7 42.3 46.5 47.8 46.5 44.3 39.3 34.6 33.8 36.4 44.2 45.5 41.8 39.5 20 10 0 31.0 31.3 29.8 30.5 29.1 26.3 25.2 24.2 23.3 22.3 25.0 26.1 29.2 31.1 34.7 37.8 38.6 37.6 33.8 35.1 36.9 38.5 39.7 32.3 30.3 29.9 Pvt. Carrier NWP growth was +2.9% in 2015, +4.3% in 2014, +5.1% in 2013 and 8.7% in 2012 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 15p 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.

2015 Workers Compensation Direct Written Premium Growth, by State* PRIVATE CARRIERS: Overall 2015 Growth = +4.3% While growth rates varied widely, most states experienced modest positive growth in 2015 *Excludes monopolistic fund states (in gray): OH, ND, WA and WY. Source: NCCI. 70

2014 Workers Compensation Direct Written Premium Growth, by State* PRIVATE CARRIERS: Overall 2014 Growth = +4.6% While growth rates varied widely, most states experienced positive growth in 2014 *Excludes monopolistic fund states (in gray): OH, ND, WA and WY. Source: NCCI. 71

Workers Compensation Components of Written Premium Change, 2014 to 2015 Written Premium Change from 2014 to 2015 Net Written Premium Countrywide +2.9% Direct Written Premium Countrywide +4.3% Direct Written Premium NCCI States +2.5% Components of DWP Change for NCCI States Change in Carrier Estimated Payroll +4.5% Change in Bureau Loss Costs and Mix -4.0% Change in Carrier Discounting -0.3% Change in Other Factors +2.2% Combined Effect +2.5% Growth is now almost entirely payroll driven Sources: Countrywide: Annual Statement data. NCCI States: Annual Statement Statutory Page 14 for all states where NCCI provides ratemaking services. Components: NCCI Policy data. 72

Workers Comp Approved Changes in Bureau Premium Level, 2000-2016p Percent 12 10 8 6 4 2 0-2 -4-6 -8-10 0.6-1.2-0.5 2.5 Cumulative Change = 20.1% (1994 2016p) 0.4-0.2-0.3-3.0-3.8-5.1-2.6-1.3 2.1-0.2 Indicated Adjusted* 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16p -1.4-4.5-3.4 Accident Year Note: Bureau premium level charges reflect approved changes in advisory rates, loss costs, assigned risk rates relative to those approved in NCCI states only IN and NC are filed in cooperation with state rating bureaus. 2016p: Preliminary based on data valued as of 4/15/2015. Source: NCCI 73

WC Approved or Filed and Pending Change in NCCI Premium Level by State* Latest Change for Voluntary Market Many states have seen rates rates drop recently *As of 4/15/16. Excludes monopolistic fund states (in gray): OH, ND, WA and WY. Source: NCCI. 74

WC Approved Changes in Bureau Premium Level (Rates/Loss Costs) Percent By Effective Date for Total Market 15 12.1 Cumulative 2000 2003 +17.1% Cumulative 2011 2014 +11.8% 10 5 0 7.4 10.0 Cumulative 1994 1999-27.8% 2.9 3.5 1.2 4.9 6.6 Cumulative 2004 2011-30.8% 0.4 8.4 2.2 0.5-5 -10 Cumulative 1990 1993-3.2-2.6-2.1-1.2-3.2 +36.3% -5.4-6.4-6.0-6.0-6.5-8.0-7.8 Calendar Year -8.8 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 15p -2.2 Approved rates/loss costs are down for the first time since 2010 *States approved through 4/24/15. Note: Bureau premium level changes are countrywide approved changes in advisory rates, loss costs and assigned risk rates as filed by applicable rating organization, relative to those previously approved. Source: NCCI.

Workers Compensation Lost-Time Claim Frequency Declined in 2015 Percent 12 10 8 6 4 2 0-2 -4-6 -8-10 0.3-6.5-4.5 0.5 Average Annual Change = 3.6% (1994 2014) -3.9-2.3-4.5-6.9-4.5-4.1-3.7-9.2 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15p -6.6-4.5-2.2-4.3-4.9 10.6 3.6-0.9-3.9 Indicated Adjusted* -5.4-3 -1.7-3.0 Accident Year *Adjustments primarily due to significant audit activity. 2015p: Preliminary based on data valued as of 12/31/2015. Source: NCCI Financial Call data, developed to ultimate and adjusted to current wage an voluntary loss cost level; Excludes high deductible policies; 1994-2014: Based on data through 12/31/14. Data for all states where NCCI provides ratemaking services, excluding WV. Frequency is the number of lost-time claims per $1M pure premium at current wage and voluntary loss cost level 76

$23.5 $23.2 $22.9 $22.2 $22.2 $22.1 $22.6 $22.4 $20.8 $19.3 $18.2 $17.6 $17.5 $16.7 $16.2 $14.8 $13.5 $12.2 $11.2 $10.4 $9.8 $9.7 $9.2 $9.5 $9.8 +1.0% -3.1% -2.8% +4.9% +1.7% +5.9% +7.7% +9.0% +10.1% +10.1% +9.2% +3.1% +4.6% +1.0% +3.1% +5.9% +6.6% +9.3% +0.6% -2.2% +0.9% -0.1% +2.9% +1.5% +1% Workers Comp Indemnity Claim Costs: Slight Increase in 2015 Indemnity Claim Cost ($ 000s) 25 Average Indemnity Cost per Lost-Time Claim Average indemnity costs per claim were up 1% in 2015 to $23,500 23 21 19 Cumulative Change = 140% (1991-2015p) 17 15 13 11 9 7 5 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14p 15p Accident Year 2014p: Preliminary based on data valued as of 12/31/2014.

WC Indemnity Severity vs. Wage Inflation, 1995-2015p 12% 10% 8% 6% 4% 2% 0% -2% -4% 3.6% 1.7% 5.9% 4.2% Change in CPS Wage 7.7% 9.0% 10.1% 5.2% 5.6% 4.7% 10.1% 6.3% 9.2% 2.3% Annual Change 1994 2014 Indemnity Claim Sev.: +4.6 US Avg. Weekly Wage: +3.4% 3.1% 1.1% 4.6% 2.7% 6.6% 5.9% 3.1% 4.7% 4.3% 4.6% 1.0% Change in Indemnity Cost per Lost-Time Claim 3.5% WC indemnity severity turned positive again in 2011 9.3% 2.7% 0.6% -2.2% 1.1% 2.3% 0.9% Indemnity severities usually outpace wage gains 2.9% 2.9% 3% 0% 1.1% 3.0% 2.3% 1.5% 1.0% 95 97 99 01 03 05 07 09 11 13 15p 2014p: Preliminary based on data valued as of 12/31/2014; 1991-2010: Based on data through 12/31/2010, developed to ultimate. Based on the states where NCCI provides ratemaking services. Excludes the effects of deductible policies. CPS = Current Population Survey. Source: NCCI; Insurance Information Institute

Workers Compensation Medical Severity: Small Decrease in 2015 Medical Claim Cost ($000s) 30 25 20 15 10 5 Annual Change 1991 1993: +1.9% Annual Change 1994 2001: +8.9% Annual Change 2002 2010: +6.0% +6.8%+1.3%-2.1% +9.0%+5.1%+7.4% $8.1 $8.2 $8.1 $8.8 $9.1 Average Medical Cost per Lost-Time Claim $9.8 Medical severity for lost time claims was down 1% in 2015, the first decline in at least 20 years Cumulative Change = 252% (1991-2015p) +10.6% +7.3% +10.1% +8.3% $10.8 $11.7 $12.9 $13.9 +7.7% +5.4% +8.8% +13.5% Accident Year 2015p: Preliminary based on data valued as of 12/31/2015. 1991-2013: Based on data through 12/31/2014, developed to ultimate Based on the states where NCCI provides ratemaking services including state 79 funds, excluding WV; Excludes high deductible policies. $15.7 $17.1 $18.4 $19.4 +5.9% +5.8% +7.8% $20.9 $22.1 $23.4 +7.0% +4.5%+0.4%+2.2% $25.0 $26.2 $26.3 $26.8 +2.0% +2.3% +3.0% -1% 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15p Accident Year $27.3 $28.0 $28.8 $28.5

Workers Compensation Change in Medical Severity Comparison to Change in Medical Consumer Price Index (CPI) Percent Change 16 14 12 10 8 6 4 2 0 10.6 10.1 8.3 7.4 5.1 4.5 3.5 3.2 3.5 2.8 13.5 8.8 7.7 7.3 5.4 4.6 4.7 4.1 4.0 Change in Lost-Time Medical Claim Severity Change in US Medical CPI Average Annual Change: 1994 2015 Lost-Time Medical Severity: +5.9% US Medical CPI: +3.6% 7.8 7.0 5.8 5.9 4.4 4.2 4.4 4.5 4.0 3.7 3.2 3.4 3.7 3.0 2.2 2.0 0.4 2 3.0 3 2.4 2.6-2 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15p Year -1.0 2015p: Preliminary based on data valued as of 12/31/2015. Sources: Severity: 995-2013: Based on data through 12/31/2014, developed to ultimate Based on the states where NCCI provides ratemaking services including state funds, excluding WV; Excludes high deductible policies. US Medical CPI: US Bureau of Labor Statistics.

WC Medical Severity Generally Outpaces the Medical CPI Rate 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% 5.1% 4.5% 7.4% 10.1% 8.3% 10.6% 13.5% 7.3% 8.8% 7.7% 5.4% 7.8% 5.8% 6.8% 5.9% 4.6% 4.1% 4.7%4.0% 4.4% 4.2% 4.4% 4.0% 3.5% 3.7% 3.2%3.5% 3.2% 3.4% 2.8% Change in Medical CPI Average annual increase in WC medical severity from 1995 through 2015 was well above the medical CPI (5.9% vs. 3.6%), but the gap has narrowing. Lost-time medical severities appear to on the rise again. 4.0% 4.0% 0.5% Change Med Cost per Lost Time Claim 3.0% 3.7% 3.2% 2.5% 2.4% 2.6% 2.4% 2.4% 95 97 99 01 03 05 07 09 11 13 15p -1.0% Sources: Med CPI from US Bureau of Labor Statistics, WC med severity from NCCI based on NCCI states.

Medical Cost Inflation vs. Overall CPI, 1995 2014* 5% Though moderating, medical inflation will continue to exceed inflation in the overall economy 4% 3% 2% 1% 0% -1% Average Annual Growth Average 1995 2013 Healthcare: 3.8% Total Nonfarm: 2.4% Change in Medical CPI CPI-All Items 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14* *July 2014 compared to July 2013. Sources: Med CPI from US Bureau of Labor Statistics, WC med severity from NCCI based on NCCI states.

U.S. Health Care Expenditures, 1965 2022F 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 $42.0 $46.3 $51.8 $58.8 $66.2 $74.9 $83.2 $93.1 $103.4 $117.2 $133.6 $153.0 $174.0 $195.5 $221.7 $255.8 $296.7 $334.7 $369.0 $406.5 $444.6 $476.9 $519.1 $581.7 $647.5 $724.3 $791.5 $857.9 $921.5 $972.7 $1,027.4 $1,081.8 $1,142.6 $1,208.9 $1,286.5 $1,377.2 $1,493.3 $1,638.0 $1,775.4 $1,901.6 $2,030.5 $2,163.3 $2,298.3 $2,406.6 $2,501.2 $2,600.0 $2,700.7 $2,806.6 $2,914.7 $3,093.2 $3,273.4 $3,458.3 $3,660.4 $3,889.1 $4,142.4 $4,416.2 $4,702.0 $5,008.8 $ Billions $6,000 $5,000 $4,000 $3,000 From 1965 through 2013, US health care expenditures had increased by 69 fold. Population growth over the same period increased by a factor of just 1.6. By 2022, health spending will have increased 119 fold. $2,000 $1,000 $0 U.S. health care expenditures have been on a relentless climb for most of the past half century, far outstripping population growth, inflation of GDP growth Sources: Centers for Medicare & Medicaid Services, Office of the Actuary at http://www.cms.gov/research-statistics-data-and-systems/statistics- Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html accessed 3/14/14; Insurance Information Institute. 84

National Health Care Expenditures as a Share of GDP, 1965 2022F* 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 % of GDP 20% Health care expenditures as a share 18% of GDP rose from 5.8% in 1965 to 16% 18.0% in 2013 and are expected to reach 19.9% of GDP by 2022 14% 12% 10% 8% 6% 4% 2% 1965 5.8% 1980: 9.2% 1990: 12.5% 2000: 13.8% 2010: 17.9% 2022 19.9% Since 2009, heath expenditures as a % of GDP have flattened out at about 18%--the question is why and will it last? 0% Sources: Centers for Medicare & Medicaid Services, Office of the Actuary at http://www.cms.gov/research-statistics-data-and-systems/statistics- Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html accessed 3/14/14; Insurance Information Institute.

Insured Catastrophe Losses 2013-2015 Experienced Below Average CAT Activity After Very High CAT Losses in 2011/12 2016 Is On Track to Surpass Recent Years 86

$5.0 $8.2 $3.9 $9.1 $6.3 $13.0 $11.3 $14.8 $11.9 $7.8 $16.8 $10.9 $7.7 $14.4 $11.8 $14.9 $13.1 $15.5 $15.2 $11.0 $27.2 $35.8 $34.7 $30.1 $38.9 $34.6 $36.1 U.S. Insured Catastrophe Losses ($ Billions, $ 2015) $80 $70 $60 $75.7 2012 was the 3 rd most expensive year ever for insured CAT losses $50 $40 $30 $20 $10 $0 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16* 2013/14/15 Were Welcome Respites from 2011/12, among the Costliest Years for Insured Disaster Losses in US History. 2016 Is Off to a Costlier Start. $11.0B in insured CAT losses though 6/30/16 *Through 6/30/16. 2016 figure stated in 2016 dollars. 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. 87

0.3 0.4 0.71.5 0.5 0.5 1.0 1.6 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016F 0.9 0.1 1.1 1.1 0.8 1.6 2.3 3.3 2.8 3.6 2.9 2.7 2.6 3.6 3.3 5.4 5.0 4.6 5.9 8.1 8.0 9.6 Combined Ratio Points Associated with Catastrophe Losses: 1960 2016F* Combined Ratio Points 12 Avg. CAT Loss Component of the Combined Ratio by Decade Catastrophe losses as a share of all losses reached a record high in 2011 10 8 6 4 2 0 0.4 1.2 0.4 0.81.3 1960s: 1.04 1970s: 0.85 1980s: 1.31 1990s: 3.39 2000s: 3.52 2010s: 5.47* 1.0 0.4 0.4 0.7 1.8 1.1 0.6 1.42.0 1.3 2.0 0.7 3.0 1.2 2.1 8.8 1.6 3.3 3.5 4.0 3.1 4.7 The Catastrophe Loss Component of Private Insurer Losses Has Increased Sharply in Recent Decades *2010s represent 2010-2015. Notes: Private carrier losses only. Excludes loss adjustment expenses and reinsurance reinstatement premiums. Figures are adjusted for losses ultimately paid by foreign insurers and reinsurers. Source: ISO (1960-2009); A.M. Best (2010-16E) Insurance Information Institute. 88

Inflation Adjusted U.S. Catastrophe Losses by Cause of Loss, 1996 2015 1 Winter storm losses were much above average in 2014/15 pushing this share up Winter Storms, $30.4 Tornado share of CAT losses is rising Other Wind/Hail/Flood (3), $19.9 Terrorism, $24.6 Events Involving Tornadoes (2), $158.6 7.5% 6.1% 0.2% 1.8% 4.9% 40.2% Fires (4), $7.3 Other (5), $0.8 39.2% Insured cat losses from 1996-2015 totaled $404.1B, an average of $20.2B per year or $1.68B per month Hurricanes & Tropical Storms, $158.6 Wind losses are 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 2015 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. 89

Top 3 States for Insured Catastrophe Losses, 1996-2005 (in 2015 Dollars) Texas, Florida and New York lead the country in insured catastrophe losses over the past 20 years. These 3 states accounted for nearly 1/3 of all insured catastrophe losses over the past two decades Source: PCS/Verisk for 2016 Insurance Fact Book, Insurance Information Institute. 90

Top 16 Most Costly Disasters in U.S. History Katrina Still Ranks #1 (Insured Losses, 2014 Dollars, $ Billions) $60 $50 Storm Sandy in 2012 was the last mega-cat to hit the US $50.2 $40 $30 $20 $10 $4.6 Includes Tuscaloosa, AL, tornado $5.7 $5.8 $6.9 $7.3 Includes Joplin, MO, tornado $7.7 $8.1 $9.0 $9.4 $11.4 $13.8 $24.6 $25.3 $26.4 $19.3 $0 Irene (2011) Jeanne (2004) Frances (2004) Rita (2005) Tornadoes/ Tornadoes/ T-Storms T-Storms (2011) (2011) Hugo (1989) Ivan (2004) Charley (2004) Wilma (2005) Ike (2008) Sandy* (2012) Northridge 9/11 Attack Andrew (1994) (2001) (1992) Katrina (2005) 12 of the 16 Most Expensive Events in US History Have Occurred Since 2004 Sources: PCS; Insurance Information Institute inflation adjustments to 2014 dollars using the CPI. 91

Convective Loss Events in the US Overall and insured losses, 1980 2015 $ Billions The period from 2008-2015 has been the most expensive on record for insured losses from Convective Events (severe thunderstorms, tornado, hail, lightning and flash flood) Overall losses (in 2015 values)* Insured losses (in 2015 values)* *Losses adjusted to inflation based on CPI Source: Geo Risks Research, NatCatSERVICE Analysis contains: severe storm, tornado, hail, flash flood and lightning 92

Winter Storm Losses in the US 1980 2015 (Overall and Insured Losses)* $ Billions Winter storm losses have been increasing rapidly in recent years Overall losses (in 2015 values)* Insured losses (in 2015 values)* *Winter storms include also winter damages, blizzards and cold waves Source: Property Claim Services, MR NatCatSERVICE. *Losses adjusted to inflation based on CPI. 93

THE ECONOMY The Strength of the Economy Will Greatly Influence Insurer Exposure Base Across Most Lines 95

2000 2001 2002 2003 2004 2005 2006 2007 08:1Q 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 -5.3% -3.7% -1.8% -0.3% -0.9% 0.1% 2.7% 1.8% 1.3% 2.3% 2.2% 2.6% 2.4% 5.0% 2.5% 1.3% 4.1% 2.0% 1.3% 3.1% 0.4% 2.7% 1.8% 2.1% 2.0% 2.6% 2.0% 0.9% 0.8% 1.1% 2.9% 2.4% 2.2% 2.3% 2.2% 2.1% 4.1% 1.1% 1.8% 2.5% 3.6% 3.1% 4.5% 3.5% 4.6% 4.3% US Real GDP Growth* Real GDP Growth (%) 7% 5% 3% 1% -1% -3% -5% -7% -9% Recession began in Dec, 2007 The Q4:2008 decline was the steepest since the Q1:1982 drop of 6.8% -8.9% 1.4% Q1 2014/15 GDP data were hit hard by this year s Polar Vortex and harsh winter Demand for Energy Should Increase in 2016-17 as GDP Growth Continues at a Steady, Albeit Moderate Pace and Gradually Benefits the Economy Broadly * Estimates/Forecasts from Blue Chip Economic Indicators. Source: US Department of Commerce, Blue Economic Indicators 9/16; Insurance Information Institute. 96

4.5% 4.5% 4.6% 4.8% 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 8.9% 9.1% 9.1% 8.7% 8.3% 8.2% 8.0% 7.8% 7.7% 7.6% 7.3% 7.0% 6.6% 6.2% 6.1% 5.7% 5.6% 5.4% 5.2% 5.0% 4.9% 4.9% 4.8% 4.8% 4.7% 4.6% 4.6% 4.5% 9.6% 10.0% 9.7% 9.6% 9.6% 9.6% US Unemployment Rate Forecast 2007:Q1 to 2017:Q4F* 11% 10% 9% 8% 7% 6% 5% 4.9% 5.4%6.1% 6.9% 8.1% 9.3% Unemployment forecasts have been revised modestly downwards. Optimistic scenarios put the unemployment as low as 4.4% by Q4 of 2016. Rising unemployment eroded payrolls and WC s exposure base. Unemployment peaked at 10% in late 2009. Jobless figures have been revised downwards for 2016 4% * = actual; = forecasts Sources: US Bureau of Labor Statistics; Blue Chip Economic Indicators (9/16 edition); Insurance Information Institute. 97

1,268.7 1,250.8 1,301.1 1,435.7 1,439.0 1,388.3 1,349.1 1,381.6 1,416.7 1,455.9 1,460.7 Trucking Employment: 2006 2016* (000) 1,500 1,450 1,400 1,350 1,300 1,250 1,200 1,150 1,100 1,050 1,000 06 07 08 09 10 11 12 13 14 15 16* Trucking employment is up by more than 200,000 or 16.8% since 2010 *Seasonally-adjusted monthly average through Aug 2016 Source: US Census Bureau; Insurance Information Institute. 98

Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 2/30/20 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-12 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 5,581 5,522 5,542 5,554 5,527 5,512 5,497 5,519 5,499 5,501 5,497 5,468 5,435 5,478 5,485 5,497 5,524 5,530 5,547 5,546 5,583 5,576 5,577 5,612 5,629 5,629 5,628 5,627 5,608 5,623 5,632 5,641 5,649 5,668 5,684 5,724 5,746 5,798 5,815 5,813 5,833 5,856 5,854 5,866 5,893 5,918 5,953 5,937 6,006 6,032 6,062 6,103 6,114 6,121 6,152 6,169 6,191 6,201 6,231 6,275 6,316 6,347 6,335 6,365 6,377 6,378 6,383 6,391 6,410 6,484 6,549 6,597 6,615 6,628 6,665 6,659 6,641 6,635 6,646 6,640 Construction Employment, Jan. 2010 Aug. 2016* (Thousands) 6,800 6,700 6,600 6,500 6,400 6,300 6,200 6,100 6,000 5,900 5,800 5,700 5,600 5,500 5,400 Construction employment is +1.205 million above Jan. 2011 (+22.2%) trough Construction and manufacturing employment constitute 1/3 of all WC payroll exposure. *Seasonally adjusted. Sources: US Bureau of Labor Statistics at http://data.bls.gov; Insurance Information Institute. 99

Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 156.4 156.7 157.6 158.7 158.1 158.4 159.7 160.2 161.5 161.4 161.0 162.7 164.3 166.6 169.2 170.1 171.2 172.6 174.0 176.6 178.2 178.7 180.6 181.3 182.3 184.7 185.2 186.2 187.8 188.6 189.3 189.4 189.4 190.5 192.2 193.1 194.6 194.0 193.8 193.1 192.5 193.0 193.4 193.3 193.1 194.0 194.0 194.0 195.4 193.7 194.6 196.4 197.6 198.6 198.4 199.4 201.5 201.0 201.2 199.4 197.6 197.7 194.4 194.2 193.2 193.6 191.7 190.0 186.7 185.0 182.9 181.7 179.7 177.9 175.7 174.4 172.9 172.0 172.8 (000) 210 Employment in Oil & Gas Extraction, Jan. 2010 Aug. 2016* Employment peaked in Oct. 2014 at 201,500 its highest level since Dec. 1986. 200 190 180 170 160 150 Oil and gas extraction employment is down up 14.2% since Oct. 2014 as oil prices remain depressed *Seasonally adjusted Sources: US Bureau of Labor Statistics at http://data.bls.gov; Insurance Information Institute. 100

CONSTRUCTION INDUSTRY OVERVIEW & OUTLOOK The Construction Sector Is Critical to the Economy and the P/C Insurance Industry 101

Value of New Private Construction: Residential & Nonresidential, 2003-2016* Billions of Dollars $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 New Construction peaks at $911.8. in 2006 $613.7 $298.1 Non Residential Residential Trough in 2010 at $500.6B, after plunging 55.1% ($411.2B) $261.8 $238.8 2016: Value of new pvt. construction hits $875.0 as of Jul. 2016, up 74.8% from the 2010 trough but still 4.0% below 2006 peak 03 04 05 06 07 08 09 10 11 12 13 14 15 16* Private Construction Activity Is Moving in a Positive Direction though Remains Well Below Pre-Crisis Peak; Residential Dominates $447.9 $398.3 *2016 figure is a seasonally adjusted annual rate as of July. Sources: US Department of Commerce http://www.census.gov/construction/c30/c30index.html ; Insurance Information Institute. 102

Value of Construction Put in Place, 2016 vs. 2015* Growth (%) 6% 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% 0.0% 1.0% Private sector construction activity is up in both the residential and nonresidential segments Total Construction Private: +1.0% Public: -3.1% Total Private Construction 0.3% Residential-- Private Public sector construction activity 1.7% is finally beginning to create less drag up after years of decline Non- Residential-- Private -3.1% Total Public Construction 4.7% Residential- Public -3.2% Non- Residential-- Public Overall Construction Activity is Up Slighty, Having Decelrated from Early 2016; State/Local Sector Government Sector Was Recovering but Is Experienced Renewed Weakness *seasonally adjusted data through July 2016. Source: U.S. Census Bureau, http://www.census.gov/construction/c30/c30index.html ; Insurance Information Institute. 103

Value of Private Construction Put in Place, by Segment, 2016 vs. 2015* Total Private Construction Residential Total Nonresidential Lodging Office Commercial Health Care Educational Religious Amusement & Rec. Transportation Communication Power/Utility Manufacturing Growth (%) 6% 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% -5% 1.0% 0.3% 1.7% -1.2% 4.6% 1.2% Construction activity has slowed in 2016, but led by the Office and Manufacturing segments, the sector continues to expand after plunging during the Great Recession. -0.3% 1.6% 0.0% -3.9% 0.4% 1.2% 1.1% 3.9% Private Construction Activity is Up in Most Segments in the Second Half of 2016; Expansion Should Continue *seasonally adjusted through Jul. 2016. Source: U.S. Census Bureau, http://www.census.gov/construction/c30/c30index.html ; Insurance Information Institute. 104

0.91 1.01 1.19 1.35 1.46 1.29 1.20 0.55 0.59 0.61 0.78 0.92 1.00 1.11 1.19 1.30 1.43 1.46 1.47 1.49 1.48 1.47 1.62 1.64 1.57 1.60 1.71 1.85 1.96 2.07 1.80 1.36 New Private Housing Starts, 1990-2021F (Millions of Units) 2.1 1.9 1.7 Job growth, low inventories of existing homes, still-low mortgage rates and demographics should continue to stimulate new home construction for several more years 1.5 1.3 1.1 0.9 0.7 0.5 0.3 New home starts plunged 72% from 2005-2009; A net annual decline of 1.49 million units, lowest since records began in 1959 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 16F 17F 18F 19F20F 21F 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 (9/16 for 2016-17; 3/16 for 2018-21F; Insurance Information Institute. 105

Value of Public Construction Put in Place, by Segment, 2015 vs. 2016* Total Public Construction Residential Total Nonresidential Office Commercial Health Care Educational Public Safety Amusement & Rec. Transportation Power Highway & Street Sewage & Waste Disposal Water Supply Conservation & Develop. Growth (%) 10% 5% 0% -5% -3.1% -10% -15% -20% -25% -30% 4.7% Public sector construction activity slowed by mid-2016-3.2% -0.2% -12.5% 2.5% -8.3% 1.8% 0.0% -0.1% Power, Commercial and Educations led declines in public sector construction -27.1% -0.3% -0.1% -0.3% -6.1% Public Construction Activity Surged in Early 2016 but Contracted Again by Mid-Year. A Resumption of the Recovery is Likely which Will Help Drive Demand in Many Commercial Insurance Lines *seasonally adjusted through July 2016. Source: U.S. Census Bureau, http://www.census.gov/construction/c30/c30index.html ; Insurance Information Institute. 106

Value of New Federal, State and Local Government Construction: 2003-2016* ($ Billions) $350 $300 $250 $216.1 Construction across all levels of government peaked at $314.9B in 2009 $220.2 $234.2 $255.4 $289.1 $308.7 $314.9 $304.0 $286.4 $279.3 Austerity Reigns Govt. construction has slowed in 2016; still down $36.7B or 11.7% since 2009 peak $270.7 $275.7 $291.3 $278.2 $200 $150 $100 $50 $0 2003 2004 2005 2006 2007 2008 2009 Government Construction Spending Peaked in 2009, Helped by Stimulus Spending, but Contracted As State/Local Governments Grappled with Deficits and Federal Sequestration; Only Now Recovering *2016 figure is a seasonally adjusted annual rate as of July; http://www.census.gov/construction/c30/historical_data.html Sources: US Department of Commerce; Insurance Information Institute. 2010 2011 2012 2013 2014 2015* 2016* 107

Construction Employment, Jan. 2003 Dec. 2015 (Thousands) 8,000 7,500 Construction employment peaked at 7.726 million in April 2006 Construction employment as of Dec. 2015 totaled 6.538 million, an increase of 1.103MM jobs or 20.2% from the Jan. 2011 trough 7,000 6,500 6,000 5,500 The Great Recession and housing bust destroyed 2.3 million constructions jobs Construction employment troughed at 5.435 million in Jan. 2011, after a loss of 2.291 million jobs, a 29.7% plunge from the April 2006 peak Gap between prerecession construction peak and today: 1.19 million jobs 5,000 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 The Construction Sector Was a Growth Leader in 2014-15 as the Housing Market, Private Investment and Govt. Spending Recover. WC Insurers Will Benefit. Note: Recession indicated by gray shaded column. Sources: U.S. Bureau of Labor Statistics; Insurance Information Institute. 108

MANUFACTURING SECTOR OVERVIEW & OUTLOOK The U.S. Manufacturing Sector Is Being Buffeted by a High Dollar, Weak Export Markets and Plunging Oil Prices 109

Dollar Value* of Manufacturers Shipments Monthly, Jan. 1992 December 2015 $ Millions $500,000 The value of Manufacturing Shipments in Dec. 2015 was $467.0B down 8% from the July 2014 record high of $508.1B $400,000 $300,000 $200,000 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan 01 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 12-Jan 13-Jan 14-Jan 15-Jan Monthly shipments in Nov. 2014 exceeded the pre-crisis (July 2008) peak but has declined in recent months. Weakness abroad, falling energy prices and a strong dollar are hurting the sector, especially exports. Manufacturing growth leads to gains in many commercial exposures: WC, Commercial Auto, Marine, Property, and various Liability Coverages. * Seasonally adjusted; Data published Feb. 4, 2016. Source: U.S. Census Bureau, Full Report on Manufacturers Shipments, Inventories, and Orders, http://www.census.gov/manufacturing/m3/ 110

58.3 57.1 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec- Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec- Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec- Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec- Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec- Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec- ISM Manufacturing Index (Values > 50 Indicate Expansion) 60.4 59.6 57.8 55.3 55.1 55.2 61.4 59.7 59.7 54.1 52.5 50.2 50.5 50.7 51.6 51.7 49.9 51.3 55.7 56.2 56.4 57.0 56.5 55.4 58.7 55.5 53.5 52.7 51.1 50.2 50.1 48.6 48.2 5 January 2010 through December 2015 0 5 0 55.3 56.958.2 58.5 60.8 54.2 55.8 51.4 52.5 52.5 51.8 52.2 53.1 54.1 51.9 53.3 50.2 53.154.2 50.7 49.0 50.9 55.4 51.3 53.2 53.7 54.9 55.3 57.159.0 56.6 59.0 53.5 52.9 51.5 51.5 52.8 5 Manufacturing began to contract in late 2015 0 The manufacturing sector expanded for 68 of the 72 months from Jan. 2010 through Dec. 2015. Manufacturing sector now appears to be in contraction due to weakness abroad, strong dollar and collapse in oil prices Source: Institute for Supply Management at http://www.ism.ws/ismreport/mfgrob.cfm; Insurance Information Institute. 111

Manufacturing Growth for Selected Sectors, 2015 vs. 2014* All Manufacturing Durable Mfg. Wood Products Primary Metals Fabricated Metals Machinery Electrical Equip. Computers & Electronics Transportation Equip. Non-Durable Mfg. Food Products Petroleum & Coal Chemical Plastics & Rubber Textile Products Growth (%) 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% -35% -4.2% 1.8% Durables: +1.8% Non-Durables: -9.6% -0.6% -9.5% -0.6% -2.3%-2.1% 8.0% 3.4% Manufacturing of nondurable goods is weaker than for durables -9.6% -1.3% -32.2% -2.3%-2.3% 2.6% Manufacturing Is Contracting Across a Number of Sectors, Especially Petroleum. Adverse Exposure Impacts Are Likely for: WC, Commercial Property, Commercial Auto and Certain Liability Coverages *Seasonally adjusted; Date are YTD comparing data through November 2015 to the same period in 2014. Source: U.S. Census Bureau, Full Report on Manufacturers Shipments, Inventories, and Orders, http://www.census.gov/manufacturing/m3/ 112

'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Manufacturing Employment, Jan. 2003 December 2015 (Thousands) 15,000 14,500 14,000 Manufacturing employment hit a trough at 11.45 million in Feb. and Mar. 2010 13,500 13,000 12,500 Manufacturing employment was declining, slowly, before the Great Recession Latest (Dec 2015) at 12.33 million 12,000 11,500 11,000 Manufacturing employment was growing slowly but steadily from 2010 through 2014 but has been flat in 2015. Automation, a slowing world economy, the strong dollar and other factors have held the growth rate down. Note: Recession indicated by gray shaded column. Data are seasonally adjusted. Sources: US Bureau of Labor Statistics; Insurance Information Institute. 113

Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec- Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec- Jan-12 2/30/2 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec- Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec- Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec- 11,460 11,460 11,466 11,497 11,531 11,539 11,558 11,548 11,554 11,555 11,577 11,590 11,624 11,662 11,682 11,707 11,715 11,724 11,747 11,760 11,762 11,770 11,769 11,797 11,841 11,870 11,910 11,920 11,926 11,935 11,957 11,943 11,925 11,931 11,938 11,951 11,965 11,988 11,984 11,977 11,972 11,965 11,948 11,963 11,993 12,011 12,046 12,053 12,061 12,081 12,085 12,094 12,109 12,130 12,154 12,157 12,169 12,193 12,222 12,239 Manufacturing Employment, Jan. 2010 December 2014* (Thousands) 12,500 12,250 Since Jan 2010, manufacturing employment is up (+877,000 or +7.7%) and still growing. 12,000 11,750 11,500 11,250 Manufacturing employment is a surprising source of strength in the economy. Employment in the sector is at a multi-year high. *Seasonally adjusted. Sources: US Bureau of Labor Statistics at http://data.bls.gov; Insurance Information Institute. 114

Index of Total Industrial Production:* A Near Peak as of December 2014 120 100 Many economists expect business investment to rise in 2015 80 60 40 20 Recession Peak at 100.82 in December 2007 (officially the 1 st month of the Great Recession) December 2014 Index at 106.5 0 Insurance exposures for industrial production will continue growing in 2015, and commercial insurance premium volume with them. Y-o-Y growth to December 2014 was 4.6%. Both production and premium volume growth for 2015 should exceed this. *Monthly, seasonally adjusted, through December 2014 (which is preliminary). Index based on year 2007 = 100 Sources: Federal Reserve Board at http://www.federalreserve.gov/releases/g17/ipdisk/ip_sa.txt. National Bureau of Economic Research (recession dates); Insurance Information Institute. 117

Recovery in Capacity Utilization is a Positive Sign for Commercial Exposures Mar 01 Jun 01 Sep Dec Mar 02 Jun 02 Sep Dec Mar 03 Jun 03 Sep Dec Mar 04 Jun 04 Sep Dec Mar 05 Jun 05 Sep Dec Mar 06 Jun 06 Sep Dec Mar 07 Jun 07 Sep Dec Mar 08 Jun 08 Sep Dec Mar 09 Jun 09 Sep Dec Mar 10 Jun 10 Sep Dec Mar 11 Jun 11 Sep Dec Mar 12 Jun 12 Sep Dec Mar 13 Jun 13 Sep Dec Mar 14 Jun 14 Sep Dec March 2001 through Dec. 2014 Percent of Industrial Capacity 82% 80% Hurricane Katrina Full Capacity The US operated at 79.7% of industrial capacity in Dec. 2014, well above the June 2009 low of 66.9% but is still below pre-recession levels. 78% 76% 74% 72% The closer the economy is to operating at full capacity, the greater the inflationary pressure 70% 68% March 2001- November 2001 recession December 2007- June 2009 Recession 66% Source: Federal Reserve Board statistical releases at http://www.federalreserve.gov/releases/g17/current/default.htm. 118 118

TECHNOLOGY, DISRPTORS AND INSURANCE Applications of Technology in P/C Insurance Have Gripped the Media as Have Industry Solutions 119

Interest in Technology Issues and Insurance Is Surging: Presents Opportunity Insurers are at the intersection of many of the most important technological innovations of the early 21 st century Problem Solution Opportunity Industry is too often depicted as a technology laggard I.I.I. is highlighting the industry as being on the technological cutting edge an innovative, nimble industry with solutions for managing countless new risks of the current era: Sharing economy Cyber Auto Technology Supply Chain Climate Risk Drones Wearable devices The Internet of Things Positions industry well with customers, investors, current and prospective workers/millennials, regulators/legislators and (tech) media 120

CYBER RISK AND INSURANCE Cyber Risk is a Rapidly Emerging Exposure for Businesses Large and Small in Every Industry 121

Data Breaches 2005-2015, by Number of Breaches and Records Exposed # Data Breaches/Millions of Records Exposed 800 700 600 500 400 300 200 100 66.9 157 321 19.1 446127.7 656 35.7 222.5 498 662 16.2 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Identity Theft Resource Center (updated as of Jan. 6, 2016); http://www.idtheftcenter.org/images/breach/itrcbreachreport2015.pdf 419 22.9 470 17.5 614 92.0 783 85.6 781 169.1 # Data Breaches # Records Exposed (Millions) The 781 reported data breaches in 2015 was virtually unchanged form the record 783 reported in 2014. The number of exposed records soared to 169.1 million, and increase of 97.5%. Millions 220 200 180 160 140 120 100 80 60 40 20 0

Data/Privacy Breach: Many Potential Costs Can Be Insured Costs of notifying regulatory authorities Costs of notifying affecting individuals Defense and settlement costs Regulatory fines at home & abroad Data Breach Event Lost customers and damaged reputation Forensic costs to discover cause Business Income Loss Cyber extortion payments 123

Estimated Cyber Insurance Premiums Written, 2014 2020F $ Billions $8 $7 $6 $5 $4 Cyber insurance premiums written could more than triple to $7.5 billion by 2020 I.I.I. s Cyber Risk paper issued Oct. 2015 $7.5 $3 $2 $1 $1.5 $2.0 $0 2014 2015E 2020F Source: Advisen (2014 est.); PwC (2015, 2020); Insurance Information Institute. 124

THE SHARING (ON-DEMAND) ECONOMY Area of Extreme Interest And Insurers Are Providing Solutions for this Dynamic Economic Segment 125

Sharing/On-Demand/Peer-to-Peer Economy Impacts Many Lines of Insurance The On-Demand Economy is or will impact many segments of the economy important to P/C insurers Auto (personal and commercial) Homeowners/Renters Many Liability Coverages Professional Liability Workers Comp Many insurance questions have arisen Insurance solutions are increasingly available to fill the many insurance gaps that arise 126

Labor on Demand: Huge Implications for the US Economy, Workers & Insurers 127

Ridesharing Regulation/Legislation and Status of ISO Filings as of 9/30/15 Status Ride Sharing Legislation/Regulation Status of ISO Filings 128 Source: ISO.

Percent of Americans Who Have Engaged in the Gig/Sharing Economy by Transaction Drivers have significant WC exposures About 22% of Americans have offered services in the sharing economy Service platforms have the most direct link to WC; 11% of Americans have offered their services Sources: The SelfEmployed.com accessed at https://www.theselfemployed.com/gig-economy/infographic-inside-the-neweconomy/ based on a poll by Time magazine, Bursten-Marsteller and The Aspen Institute; Insurance Information Institute. 129

Americans Who Offer Services in the Sharing/Gig Economy Are Statistically More Prone to Workplace Injury Young, Urban Minority Males Are the Most Likely to Offer their Services in the Sharing Economy Sources: The SelfEmployed.com accessed at https://www.theselfemployed.com/gig-economy/infographic-inside-the-neweconomy/ based on a poll by Time magazine, Bursten-Marsteller and The Aspen Institute; Insurance Information Institute. 130

The Sharing Economy Can t Escape Politics and Regulation 131

Political Skepticism About the Gig Economy "Many Americans are making extra money renting out a spare room, designing a website... even driving their own car. This on demand or so called 'gig' economy is creating exciting opportunities and unleashing innovation, but it's also raising hard questions about workplace protections and what a good job will look like in the future." --Hillary Clinton, July 13, 2015 132

AUTO TECHNOLOGY & THE FUTURE OF AUTO INSURANCE Technology Promises Safer Cars and Highways, BUT Some Analysts, Media and Many in Silicon Valley Are Predicting Doom for Auto Insurers 133

Media is Obsessed with Driverless Vehicles: Often Predicting the Demise of Auto Insurance By 2035, it is estimated that 25% of new vehicle sales could be fully autonomous models Questions Are auto insurers monitoring these trends? How are they reacting? Will or Amazon or FinTech take over the industry? (cars/sales) Will the number of auto insurers shrink? How will liability shift? Source: Boston Consulting Group; Insurance Information Institute. 134

I.I.I. Poll: Telematics Q. I m going to ask you a question about your opinion of insurance companies collecting information about how and when you drive in order to set your auto insurance premium. Please tell me which statement you agree with. Would you 1 Don t know 1% Would not allow 42% 39% Allow if premium went down 18% Allow whether or not premium went down More Than Half of Auto Policyholders Would Allow Their Insurer to Collect Their Driving Information In Order to Set Premiums. 1 Asked of those who auto insurance. Source: Insurance Information Institute Annual Pulse Survey. 135

Send in the Drones: Potential Rapid Adoption in Industry; Media Loves It Drones or Unmanned Aerial Vehicle (UAV) technology is seeing rapid adoption rate in many industries, including insurance FAA granting Section 333 exemptions for commercial use and testing of UAS At least 5 insurers have received permission to test Wide variety of applications: claims, pre-event property inspections Insurers partnering with construction industry to guide R&D and regulation of UAV use via Property Drone Consortium: www.propertydrone.org 136

THE INTERNET OF THINGS Capturing Economic Value Amid a Shifting Insurer Value Chain 137

The Internet of Things and the Insurance Industry Sources: McKinsey Global Institute, The Internet of Things: Mapping the Value Beyond the Hype, June 2015; Insurance Information Institute. The Internet of Things will create trillions in economic value throughout the global economy by 2025 What opportunities, challenges will this create for insurers? What are the impact on the insurance industry value chain? 138

The Internet of Things and the Insurance Industry Value Chain The Insurance Industry Value Chain Is Changing for Many Reasons Source: Willis Capital Markets & Advisory; Insurance Information Institute. 139

The Internet of Things and the Insurance Industry Value Chain Who owns the data? Where does It flow? Who does the analytics? Who is the capital provider? Source: Willis Capital Markets & Advisory; Insurance Information Institute. 140

A NEST Case Study Nest: A Leader in the Internet of Things Collision Course or Cooperation with the Insurance Industry? 141

Telematics for Your Home: The Internet of Things The home is the next frontier for telematics Rapidly becoming a crowded space How and with whom will insurers partner? Can control increasing array of household systems remotely Heat, A/C Fire, CO detection Security Systems Cameras/Monitors Appliances Lighting Technology is adaptive Uses sensors and algorithms to learn about you 142

Partnerships with Insurers: Selling Safety and Savings Simultaneously Nest is actively seeking to partner with insurers. As of Jan. 10, 2016, Nest listed 2 insurance partners offering discounts in a number of states Source: https://nest.com/insurance-partners/ accessed 1/10/16; Insurance Information Institute research. 143