2010-us_insurance_16th annual bermuda insurance survey_210510

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Source: Bermudian Business /Deloitte.

BY CAPITAL AND SURPLUS ($ 000s)

BY TOTAL ASSETS ($ 000s)

BY PREMIUMS EARNED ($ 000s)

BY NET INCOME ($ 000s)

With

Analysis by

XL Capital Ltd

PartnerRe Ltd.

AXIS Capital Holdings Limited

Arch Capital Group Ltd.

Validus Holdings, Ltd.

RenaissanceRe Holdings Ltd.

Aspen Insurance Holdings Limited

Catlin Group Limited

Allied World Assurance Company Holdings, Ltd

Endurance Specialty Holdings Ltd.

9,615,090

7,645,727

5,500,244

4,323,349

4,031,120

3,840,786

3,305,000

3,278,051

3,213,295

2,787,283

XL Capital Ltd

PartnerRe Ltd.








Max Capital Group Ltd.

45,579,675

23,732,544

15,375,790

15,306,524

11,681,740

9,653,153

8,257,000

7,801,041

7,666,694

7,339,746

XL Capital Ltd

PartnerRe Ltd.





Hiscox Ltd.

Everest Reinsurance (Bermuda), Ltd.



5,151,739

4,119,825

2,917,862

2,842,745

2,791,764

1,823,000

1,724,020

1,715,254

1,633,192

1,449,577

PartnerRe Ltd.

Oil Insurance Limited









1,536,854

1,100,270

897,407

851,101

838,858

606,887

536,104

508,903

497,886

474,000

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2009 Delivers Strong Earnings But Long-Term Performance Still Lags

BERMUDA INSURANCE MARKET 2010

B E r m uDa I n S ur a n cE S ur v E y 2 0 1 0

In a decade marked by sIgnIfIcant operatIng performance volatIlIty, 2009wIll be remembered as one of the good years for bermuda-based Insurers

and reInsurers. after a stIcky start, the combInatIon of few catastrophe losses and ultImately sIgnIfIcant Investment gaIns led partIcIpants In our

bermuda Insurance survey to report very strong operatIng results wIth an average return on equIty (roe) of 23%, aggregate comprehensIve

Income of $15 bIllIon, and an ImpressIve 37% growth theIr aggregate capItal and surplus. thIs Is In stark comparIson wIth a dIsappoIntIng roe

of -5%, comprehensIve loss of $8 bIllIon,and 16% contractIon In aggregate capItal and surplus reported by these companIes In 2008. whIle the

markets Improved operatIng performance In 2009 helped bermuda (re)Insurers sIgnIfIcantly boost theIr capItal posItIon and strengthen theIr

balance sheets, It also hIghlIghted the contInued rollercoaster experIenced by these players over the past 10 years.

sImIlar to most global reInsurers and many u.s. prImary property/casualty Insurers, over the past decade bermuda wrIters have endured

sIgnIfIcant losses stemmIng from the soft u.s. casualty cycle of the late 1990s, the september 11 terrorIsm events In 2001, the devastatIon of

hurrIcane katrIna In 2005, and unprecedented Investment losses resultIng from the fInancIal markets crIsIs In 2008, among others. but these

companIes also saw strong operatIng results In a number of years,wIth low catastrophe actIvIty sIgnIfIcantly contrIbutIng to strong operatIng

performance In 2003, 2006, 2007, and 2009. all In all, our surveyed partIcIpants reported a 5-year average roe of 10% from 2005-2009, a

relatIvely low fIgure when rIsk-adjustIng thIs sectors returns for the Inherent uncertaInty In property/casualty (re)Insurance lInes and the

sIgnIfIcant volatIlIty experIenced by these players on a year-over-year basIs. lookIng out at a longer track record, bermuda (re)Insurers

by lalIne carvalho, dIrector

f

1 6 t h a n n u a l


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performance falls even further, with an

estimated 10-year ROE of 9%.

Despite the markets disappointing long-

term performance, we believe there is

reason for optimism with regard to Bermuda

players future earnings streams. One of the

key reasons is the continued investment by

(re)insurers on the island in their enterprise

risk management (ERM) programs to minimizethe impact of future large loss events and

optimize risk adjusted returns. As a result,

a number of Bermuda (re)insurers are, in

our opinion, in the vanguard of embedding

modeling capabilities among property/casualty

(re)insurers around the world. Most have Chief

Risk Officers and have continued to formalize

and expand their ERM programs. Improved

risk aggregation and risk monitoring resulting

from these processes should help these writers

better define their risk appetite and translate

this into risk limits for peak catastrophe zones,

achieve improved portfolio diversification,

and avoid concentrations in any one lineof business, geographic zone, or investment

class. Their more sophisticated emerging risk,

risk-adjusted pricing and capital allocation

techniques should also provide these companies

with tools enabling them to refrain from the

predatory pricing seen in U.S. casualty markets

in the late 1990s. Compensation systems for

many (re)insurers on the island have also been

changed to reward underwriters and senior

management based on long term bottom line

profits, rather than top line growth. Ultimately,

all these improvements should lead to better

operating results in future years.

Some of the fruits of this effort could already

be seen in 2008, when Bermuda players

relatively conservative and well diversified

investment portfolios helped them avoid

steeper investment losses during the capital

markets crisis. In addition, efforts to reduce

catastrophe exposure concentrations sinceHurricane Katrina helped these companies post

relatively good underwriting results in 2008

(as seen in our survey participants average

combined ratio of 91%) despite significant

industry losses related to U.S. Hurricanes

Ike and Gustav. Bermuda (re)insurers have

also remained prudent in their underwriting

approach, in our view, cutting back exposures

in regions of the world where pricing has been

under greatest pressure. For those players on

the island with significant casualty writings,

such discipline has meant substantially cutting

back their U.S. casualty reinsurance writings

following several years of pricing decline inthat market since 2004.

Despite these positive factors, we believe

Bermuda writers still face significant challenges.

Pricing for property and (to a lesser extent)

casualty reinsurance covers saw increased

pressure during this January 1, 2010 renewal

cycle as a result of the combination of increased

risk appetite by reinsurance players (given their

stronger capital positions) and weaker demand

due to the global economic slowdown and

increased retentions by primary companies.

In addition, after a slowdown in premium rate

declines through most of 2009, pricing erosion

for U.S. property/casualty insurance lines has

picked up again due to similar dynamics of

increased availability of capital and lower

product demand. Given this scenario, we see

limited opportunity for profitable growth both

in insurance and reinsurance during 2010.

Uncertainty with regard to the pace andshape of recovery for most global economies

in coming months also leaves several questions

unanswered for property/casualty (re)insurance

writers, including how stable the capital

markets (and thus their investment returns)

might be over the next 12-24 months, when

demand for (re)insurance products may pick up

again, and how factors such as unemployment

and potential inflationary pressures may affect

profitability margins. Because of inflations

potential to erode casualty insurance and

reinsurance margins by increasing the severity

of losses, we believe that property/casualty

(re)insurers offering casualty covers are atparticular risk of adverse inflationary trends.

For Bermuda players participating in our

survey, this concern is slightly diminished

by the fact that approximately two-thirds of

their aggregate writings consist of property,

property/catastrophe, and other short-tail lines

of business. However, companies on the island

with relatively large casualty portfolios such

as PartnerRe, Everest, XL, Platinum, Harbor

Point, and Arch could face significant margin

compression if future pricing for casualty fails

to keep up with inflationary trends.

Earnings volatility is also expected to remain

a challenge for Bermuda (re)insurers, given the

islands significant role in providing severity-

driven property/catastrophe and other short-tail

coverages to clients around the world. The first

quarter of 2010 was no exception, with the recent

earthquake in Chile and European Windstorm

Xynthia expected to lead many Bermuda writers

to report only break-even results for the quarter.

For those players with more significant property/

catastrophe books of business and significant

exposure to Chile, their loss could exceed one

quarters worth of earnings.

Although these losses are within our

expectations given the size of estimated

industry losses for Chile ($5-$10 billion in

estimated insured losses) and Xynthia ($2-$4

billion), the occurrence of these events so early

in the year places doubt on earnings prospects

for Bermuda writers in 2010, particularly

if the Atlantic hurricane season generates

significant insured losses this fall. Many writers

on the island expect the Chilean earthquake

and Xynthia to use up as much as 50%-

80% of their allocated catastrophe budget

for 2010. This factor, combined with weaker

pricing in property and casualty writings in

36 Bermudian Business April/May 2010

Reur o Equiy

Oil Isurace Limied

Oil Casualy Isurace, Ld.

Validus Holdigs, Ld.

Hiscox Ld.

Mopelier Re Holdigs Ld.

Amli Bermuda Ld.

ParerRe Ld.

ReaissaceRe Holdigs Ld.

Cali Group Limied

%Percentages based on Return on Average Equity

Copyright 2010 Bermudian Business /Deloitte.

0 20 6040

Lacashire IsuraceCompay Limied


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Copyright 2010 Bermudian Business /Deloitte. A p r i l /M a y 2 0 1 0 Bermudian Business 37

Ivesme Porfolio by %

100

90

80

70

60

50

40

30

20

10

0

2005 2006 2007 2008 2009

%

Year

recent months, is likely to prevent Bermuda

(re)insurers from seeing their 2010 ROEs

anywhere close to the very strong levels

reported in 2009.

2009 In REVIEw StROnG YEAR OVERALL2009 will surely go on record as the best year

for Bermuda (re)insurers over the past decade

if judged by reported GAAP net income of$11 billion and ROE of 23%. The only other

year coming close to this figure was 2006,

when our survey participants reported net

income of $9 billion and ROE of 22.5%.

Due to significant differences in investment

accounting methods by Bermuda (re)insurers,

however, net income and ROE have become

less accurate guides to underlying earnings

since 2008. This is because GAAP net income

(the numerator for our GAAP ROE calculation)

includes realized investment gains/losses for

all, but only captures unrealized investment

gains/losses for those Bermuda writers that

have chosen to fully adopt fair value guidelinesunder FAS 159 (about half of our surveyed

participants). For the other writers, their

unrealized investment losses are not part of net

income but flow as a direct adjustment to these

companies shareholders equity (which we

refer to as capital and surplus in this survey).

Given the significant volatility experienced

in the capital markets during 2008 and

2009, Bermuda (re)insurers experienced large

movements in their unrealized investment

gains/losses during these two years, leading

to abnormally different reported net income

and ROE figures depending on their chosen

accounting method. For this reason, for the

purposes of 2008 and 2009 calendar years, we

view comprehensive income (which normalizes

all surveyed participants by including

unrealized losses for all companies) as a more

meaningful measure than net income.

When judging Bermudas performance based

on comprehensive income, 2009 comes out

as an even stronger year with $2 billion in

unrealized investment gains contributing to a

record $15 billion in comprehensive earnings.

This represented a 30% return on surveyed

participants aggregate capital and surplus at the

beginning of 2009, and was a key contributor

to the extraordinary 37% growth in aggregate

capital and surplus during 2009. The strength

of this performance enabled survey participants

as a group to fully recover from their worst

year on record in 2008, when aggregate capital

and surplus dropped by 16% due to deep

realized and unrealized investment losses.

These companies ended 2009 with aggregate

capital and surplus of $66 billion, significantly

higher than $49 billion at year-end 2008, and

even higher than the pre-capital market crisis

level of $58 billion at year-end 2007.

ne Icome, Gross & ne Premium wrie adCapial & Surplus by Icorporaio Dae

(All amous i billios of US dollars)

1975 andprior

1976-1985

1986-1990

1991-1995

1996-2000

2001-2005

2006-Current

30

25

20

15

10

5

0

Icorporaio Dae

$

ne Icome

Gross Premium wrie

ne wrie Premium

Capial ad Surplus

Corporae Deb Securiies

Foreig Goverme Deb Securiies

Equiies

Morgage & Asse Baced Securiies

Oher

US Goverme & Goverme

Agecy Deb Securiies


4/16

Although large realized and unrealized

investment gains accounted for a significant

portion of earnings in 2009, operating results

were also helped by low catastrophe activity,

good accident year performance and continued

favorable loss reserve development for prior

years (particularly accident years 2002 to

2006). This enabled survey participants to

report what we consider to be a strong

average combined ratio of 73% in 2009,

compared with 84% in 2008. For those

players with shorter-tail, catastrophe-driven

portfolios, combined ratios were even lower.

This included companies such as Montpelier

(with combined ratio of 38% for 2009),

Lancashire (41%), Tokio Millenium (43%),

RenRe (45%), and Amlin Bermuda (58%).

Players with a greater proportion of casualty

and specialty writings (including professional

liability covers) as part of their business mix

also performed well, with most reporting

combined ratios in the mid-80%/low 90%

range. Among them were companies such as

Allied World (with a combined ratio of 76%),

Everest (90% based on the consolidated

group), AXIS (81%), Arch (88%), and

PartnerRe (75%).

Similar to 2008 and in line with other

global reinsurers and U.S. primary companies,

Bermuda (re)insurers reported significant

favorable loss reserve development for prior

years in calendar year 2009. For global

reinsurers and many Bermuda (re)insurers,

these reserve releases have contributed to

reduce 2008 and 2009 calendar-year combined

ratios by between 5% to 20% depending onthe company. We expect moderate reserve

releases to continue into 2010.

While current data suggest that accident

years 2002-2006 were conservatively reserved

by global reinsurers and U.S. primary writers

in their initial years (thus leading to current

reserve releases), we are concerned that the

continued high levels of reserve releases may

weaken these companies reserve adequacy

and balance sheets over the next two to three

years. In addition, although global reinsurers

and U.S. primary insurers appear to be well

reserved for potential claims related to the

capital market crisis (particularly in Directors& Officers and Errors & Omission lines), we

have concerns that loss reserves for accident

years 2007-2009 may not be as robust as those

for 2002-2006 given a number of factors. These

include changes in ultimate loss picks in recent

years to reflect the industrys more favorable

experience since 2002 (which translates

into lower estimated ultimate loss ratios);

potentially higher than expected losses due to

the capital markets fallout and as a result of the

global economic slowdown; and the potential

that frequency trends and/or inflation could

increase. These factors create the potential for

loss reserve strengthening at some point in

the not too distant future. This concern also

applies to Bermuda (re)insures, since most

of these companies write a combination of

primary and reinsurance covers, and many of

them have significant U.S. risk exposure.

EVER GROwInG COMPAnIES

When looking at the Bermuda (re)insurancemarket on a year-over-year basis, one of its

most noticeable features is the fast pace of

growth of companies on the island. Through a

combination of organic growth, capital raising

initiatives, and acquisitions, participants in our

survey have experienced a 5-year compound

growth rate of 83% in their aggregate capital

and surplus from 2005 through 2009. While

at year-end 2005 only 6 out of our 22 survey

participants had more than $2 billion in

capital and surplus, this figure doubled to

12 companies at year-end 2009. Even more

impressive, the number of market participants

with capital and surplus above $3 billiontripled from 3 at year-end 2005 to 9 at year-

end 2009.

It is also interesting to note that during this

5-year period aggregate premium writings

grew by a much more modest 15%. We

believe this can be explained by a number

of factors. Among them is a more stringent

view of required capital to support property/

catastrophe lines of business by many

Bermuda players following substantial losses

incurred by the market due to U.S. hurricanes

Katrina, Rita, and Wilma (KRW) in 2005.

As a result, many of these writers currently

allocate significantly higher levels of capital to

the same amount of risk today as compared to

prior years. Many Bermuda writers have also

strategically decided to keep significant levels

of excess capital in their companies as a means

of offering higher security to their clients and

as a reflection of their desire to limit the need

to tap the capital markets in the case of a large

catastrophe loss (following KRW a significantnumber of Bermuda (re)insurers needed to

tap the capital markets to replenish their

capital position). A number of players on the

island have also engaged into acquisitions in

recent years as a means of broadening their

platform, diversifying their risk profiles, and

just as importantly, achieving a larger capital

base. This reflects the premise by a number of

Bermuda management teams that clients may

prefer to do business with a larger company.

Lastly, premium growth in recent years has

been dampened in part by gradual softening

of premium rates in a number of lines of

business (particularly casualty) since 2004.This last factor is fairly important because to

the degree that current pricing for property

and casualty (re)insurance covers may not

support profitable growth opportunities over

the near-term, the increased capital position

of most Bermuda players in 2009 has left

many of them with significant excess capital

and limited means of deploying it. This is

already leading many of these writers to look

for ways to return capital to shareholders

either through share repurchases or

special dividends.

Copyright 2010 Bermudian Business /Deloitte.38 Bermudian Business April/May 2010

Cashflos (All amous i billios of US dollars)

15

10

5

0

(5)

(10)

(15)

(20)

2005

2006

2007

2008

2009

$

Financing TotalInvestingOperating


5/16


tHE tOP 10XL stood at the top of our ranking this

year as the largest Bermuda (re)insurer based

on 2009 capital and surplus of $9.6 billion

and premiums earned of $5.1 billion. While

maintaining its position as the largest player

for many years, XL has reported some of the

most modest rates of growth in capital among

companies on the island, with capital and

surplus growing by a compound 13% from

2005 through 2009. In addition, XL has seen

a contraction of 32% in reported premiums

earned over the last five years. This is partially

explained by this groups continued operating

difficulties, with a poor 5 year-ROE of -5%.

This has resulted in significant restructuring of

XLs operations in recent years.

Although XLs underwriting performance was

good in 2009 with a combined ratio of 94%,

this group reported the weakest ROE of 1%

among survey participants. This was partially

reflective of XLs significant restructuring of

its investment portfolio in 2009, following

substantial investment losses in 2008. The

investment portfolio restructuring led to $900

million in realized investment losses in 2009, and

contributed to the groups modest net income of

$74 million for the year. This represented a

significant improvement, however, compared to

a $2.6 billion loss in 2008.

PartnerRe ranked as the second largest

player in 2009 based on total capital and

surplus of $7.6 billion and based on premiums

earned of $4.1 billion. PartnerRes total capital

and surplus increased significantly at year-

end 2009 from $4.2 billion at year-end 2008,

reflective of its acquisition of Swiss-based

reinsurer PARIS RE S.A. in the fourth quarter

of 2009. With the benefit of this acquisition

we estimate that PartnerRes net writings could

be closer to $5.0 billion in 2010. PartnerRe

reported what we consider to be strong

operating results in 2009, ranking #10 based

on ROE of 26%.

AXIS ranked #3 based on total capital and

surplus of $5.5 billion and #5 based on net

premiums earned of $2.8 billion. A consistent

performer, AXIS has achieved an average ROE

of 14% over the past five years. Its capital basehas also grown by a significant 57% from year-

end 2005. AXIS had one of the lowest ROEs

among market participants in 2009 at 10%

(although still good), partially reflecting $312

million in other than temporary investment

losses related to its medium term notes. The

groups underwriting performance, however,

remained strong, in our view, with an 81%

combined ratio. Arch, which reported just

slightly higher net premiums earned than AXIS

and took the #4 spot based on 2009 premiums,

also ranked #4 based on capital and surplus

of $4.3 billion. Another consistent performer,

Arch ranked #14 based on ROE of 22%.

Validus, which ranked #12 based on total

capital and surplus in our survey last year

jumped to #5 this year following its acquisition

of IPCRe. Validus capital base virtually

doubled from $1.9 billion at year-end 2008

to $4.0 billion at year-end 2009. Part of the

Class of 2005 Bermuda formations, Validus

has been successful in establishing itself in

the reinsurance marketplace (particularly in

property/catastrophe and other short-tail lines),

and has significantly expanded and diversified

its platform since 2006. This groups operating

performance track record has been strong so

far, in our view, with a 4-year average ROE

of 19%. RenRe, one of the longer-standing

and most respected property and property/

catastrophe writers on the island, ranked #6

based on total capital and surplus of $3.8

billion, #12 based on premiums earned of $1.3

billion, and #9 based on ROE of 24%.

Not surprisingly for a low catastrophe year, the

Top ROE performers in 2009 were companies

with the greatest proportion of catastrophe-

driven books of business. These players very

strong ROEs largely benefited from very strong

underwriting results during 2009, in ouropinion. This included companies such as OIL,

Lancashire, Validus, Hiscox and Montpelier.

OIL and Oil Casualtys (OCIL) ROEs of 55%

and 32%, respectively, which we consider to

be very strong, placed them as the #1 and

#3 best ROEs in 2009. Their performance

not only reflected strong underwriting results

but also exceptionally large investment gains

related to the recovery in the capital markets.

OIL and OCIL have traditionally held more

aggressive investment portfolios compared

to other Bermuda (re)insurers, with a greater

proportion of their investments allocated to

equities. This contributed to these companies

seeing some of the greatest swings in investment

performance between 2008 and 2009. During

2008 OIL and OCIL suffered deep investment

losses. OILs 2008 underwriting results were also

significantly affected by large losses incurred by

its members, with the company reporting the

highest 2008 combined ratio (138%) among

surveyed participants. In a reverse picture from

2009, these players reported the worst ROE

performance in 2008 among survey participants,

with ROE of -39% for OCIL and -66% for OIL.

MARkEt PROFILEBermuda writers have broadly embraced a

hybrid business model under which they

offer both insurance and reinsurance products,

rather than concentrating in just one of these

All Compaies Surveyed

Cash & CashEquivalents

7%

QuotedInvestments

65%

OtherInvestments

5%

Other Assets14%

Quoed Ivesmesby Composiio

Other10%

Equities3%

Mortgage & AssetBacked Securities

28%

US Government &

Government AgencyDebt Securities

16%

ForeignGovernment Deb

Securities10%

Corporate DebtSecurities

33%

Selected dataFiscal 2009

Goodwill & OtherIntangible Assets

2%

ReinsuranceBalances

Receivable7%

toal Asse Composiio


6/16


segments. Among the few remaining pure

reinsurers on the island are PartnerRe, Harbor

Point, and Platinum, although Harbor Point

is expected to merge with Max later this year,

with the merged group expected to offer a

combination of insurance and reinsurance

products. And among our survey participants

OIL is the only 100% direct insurer. All other

survey participants have a more blended profilebetween these two segments of the business.

The motivation for most management

teams to offer a combination of insurance

and reinsurance products is the flexibility this

business strategy allows to allocate capital

and resources to segments of the market

that offer the best pricing and competitive

conditions at the time, thus allowing for

better cycle management and improved risk

and earnings diversification. The challenge

we see with this strategy is that insurance

and reinsurance are very different businesses,

with different needs in terms of staffing, local

presence, and risk characteristics. Achieving

comparable levels of competence in both is

challenging. We also believe there is potential

for risk aggregation among different insurance

and reinsurance lines, with the potential for

higher than expected losses for companies

improperly capturing such risks. So far we

believe Bermuda (re)insurers have approached

this hybrid model prudently, with no adverse

impact on their earnings or operations.

Most have actively moved writings between

their insurance and reinsurance segments

depending on their view for profitability in

different markets. In addition, continued

improvements in their ERM processes has

increased our confidence in these companies

ability to manage potential aggregation of

risk among their business segments and to

minimize other potential operational hazards

derived from running distinct insurance and

reinsurance operations.

Geographic and line of business diversification

has continued to be a key strategic theme for

many Bermuda (re)insurers. Over the last five

years many of these companies have expanded

their platform to encompass a broader range

of products. A number have also opened new

offices in parts of Europe, North America andelsewhere, with the intent of sourcing more local

business that typically does not reach Bermuda.

This has included a number of players from the

Class of 2005 formations, which have achieved

improved diversification through a combination

of organic growth, acquisitions, and the entrance

into the Lloyds market. This partially explains

the decline in the proportion of aggregate gross

writings among survey participants sourced

directly out of Bermuda, which stood at 10%

in 2009 compared to 16% in 2005. Market

participants have also seen an increase in gross

Gross Premiums by Line of Business

Year

100

80

60

40

20

0

Accident & Health

Excess Liability

Financial Guarantee

Finite

Life

Marine & Aviation

Other

Professional Liability

General Liability

Casualty

Property

Property Catatrophe

Terrorism

Workers Compensation

%

200920072005

Gross Premiums Written by Geographic Region*

%

100

80

60

40

20

02005

20062007

20082009

Year

* At 2009, the above graph represents 91% of

the gross premium written of all participants,

as not all participants reported this data.

2006 2008

North America

Europe

UK

Rest of World

Bermuda

Asia, Australia & New Zealand


7/16


writings sourced from the UK and continental

Europe (35% in 2009 versus 28% in 2005) as

well as Asia, Latin America and other emerging

regions (11% in 2009 versus 4% in 2005).

Similar to prior years, North America remains

the largest source of premium production for

Bermuda, representing 50% of aggregate gross

premiums in 2009.

Another feature to note among Bermuda

writers this year is the increasing conservatism

in their investment portfolios. While most

already held fairly conservative investmentportfolios prior to 2008, appetite for

investment volatility among those players that

strategically took more risk on the portfolio

appears to have declined. Recognizing

that conditions in the capital markets have

improved from a year ago but are still not

back to normal, management teams on the

island have also continued to place significant

emphasis on their liquidity position. This

has led many of these players to increase the

amount of cash and short term investments

as a proportion of their holdings over the

last two years. Many have also curtailed their

equity and alternative investment (which

declined to 12% of surveyed participants

aggregate investment portfolio in 2009 versus

15% in 2007). Most companies have also

focused on maintaining a fairly short duration

in their investment portfolios (with many with

duration around 2.0-2.5 years) as a means of

protecting it from potential gyrations in credit

spreads and future inflationary pressures. We

expect this conservative investment posture

to remain in place among Bermuda writers at

least over the next 12-18 months.

tHE nEVER EnDInG PRICInG CYCLE

Our survey participants ranked renewal

pricing rates and growing market share versus

profitability as either #1 or #2 among their

management teams key strategic concerns

over the near term. This is not surprising,

considering increased pressure on property

and casualty pricing seen in global reinsurance

and U.S. commercial lines in recent months.

So far it is unclear whether the Chilean

earthquake and Windstorm Xynthia will have

any meaningful impact on pricing trends for

property/catastrophe risks on the June 1 and

July 1 reinsurance renewal season. During the

January 1 2010 reinsurance renewal season

pricing for US property/catastrophe risks fell

about 5%-10%, while Europe was about flat to

down 5%.

While we believe property/catastrophe risks

are still offering higher returns than casualty

reinsurance at this stage, the downward trend

in pricing in this line could significantly

erode risk-adjusted returns in this segment if

it continues for a protracted period of time.

Beyond the recent catastrophe events, it is

unclear how global warming and expected

changes in weather patterns might affect the

frequency and severity of natural catastrophe

events in coming years. With a significant

proportion of their business consisting of

property/catastrophe writings, this concern is

directly relevant to writers on the island.

We also believe U.S. casualty insurance and

reinsurance pricing, which has been under

continued pricing pressure since 2004, could

present challenges for writers in Bermuda.

While the decline in U.S. casualty insurance

and reinsurance rates has been partially driven

by lower frequency of losses for most casualty

lines over the last five years, there is significant

divergence of opinion among insurers and

reinsurers as to how much credit to provide in

the pricing of the business for such favorable

trends, and whether these trends will continue

into the future (most market players currently

believe this trend is unsustainable). There is alsosignificant uncertainty as to whether inflation

will creep up over the next three to five years,

with management teams left to figure out how

to incorporate this risk into their pricing and

claims estimates. Further raising the stakes in

casualty underwriting is the fact that current

market conditions will make it very difficult

for reinsurers to make up for underwriting

losses through earnings in their investment

portfolios. This reflects the expectation of

lower investment returns in coming years

as a result of more conservative investment

portfolios and relatively low interest rates. We

believe premium rate adequacy is particularly

tenuous in casualty reinsurance, where further

weakening in premium rates and/or terms and

conditions could easily tip the scale toward

unprofitable underwriting.

REtURnInG ExCESS CAPItAL

With the return to a significant excess capital

position at year-end 2009, many Bermuda

(re)insurers have started returning capital to

shareholders either through stock buybacks

or special shareholder dividends. Given

the relatively weak pricing conditions for

insurance and reinsurance risks and limited

potential for growth at the moment, we believe

such measure is prudent as long as companies

are able to balance the need to reduce excess

capital with the risk of needing to reload in the

capital markets if a major catastrophe event

occurs.

We believe that the majority of Bermuda

(re)insurers rated by Standard & Poors entered

2010 with capital adequacy levels in the AA to

AAA range, according to our capital adequacy

model. To the extent that most Bermuda

writers plan to return capital in 2010 that is

either commensurate with, or lower than their

expected earnings for the year, this shouldenable these companies to still end 2010 with

very strong capital adequacy. Significant losses

from the Chilean earthquake and Windstorm

Xynthia, however, may change management

teams appetite to return capital this year or at

least until the Atlantic hurricane season is over

and a better picture of 2010 earnings emerges.

Increased merger and acquisition activity is

also a likely outcome of Bermuda (re)insurers

strengthened capital position and limited

growth opportunities over the near term. Over

the past year the market already saw Validus

ne Premiums wrie o Capial & Surplus(All amous i billios of US dollars)

70

60

50

40

30

20

10

0

Capial & Surplus

ne Premiums wrie

2005

2006

2007

2008

2009Year

$


8/16


acquisition of IPCRe, PartnerRes acquisition

of PARIS RE, and the recent announcement

by Harbor Point and Max on their intention

to merge. We believe Class of 2005 reinsurers

are among the most likely players to entertain

M&A activity in coming months, given

their relatively narrow line of business focus

(primarily property and other short-tail lines)

and their desire to further diversify theirbusiness profile. While many of the right

elements seem to be in place to foster mergers

and acquisitions among (re)insurance players

over the next 1-2 years (including improved

liquidity in the capital markets), there are some

deterrents to more significant M&A activity. An

important one is the continued low valuation of

the stock of most publicly traded (re)insurers

on the island, which could make valuation

discussions among interested parties difficult.

As of year-end 2009, most publicly traded

companies participating in our survey had their

stock trading at 70%-85% of book value.

Bermuda domicile under threat?Between 2001 and 2005 Bermudas significance

in the global (re)insurance markets increased

significantly. In that period the island

witnessed a flurry of formation activity. This

appeared to solidify Bermudas position as

(re)insurers domicile of choice. As we look

at 2010 and beyond, however, management

teams of many global (re)insurers seem to be

looking at other locations around the world

as potentially attractive domiciles. Several

European countries in particular (such as

Ireland and Switzerland) appear to be gaining

Sk Ps ov 2009/2010

Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

90

80

70

60

50

40

30

20

10

0

$

m2009 2010

a W ass cpyhgs, l

a cp Gp l.

ag Gp l.

asp is hgs l.

aXiS cp hgs l

c Gp l

e Spy hgs l

Fgs rs hgs

hsx l.

mx cp Gp l.

mp r hgs l.

Pr l.

rssr hgs l.

Vs hgs, l.

Xl cp l.

S & Ps 500 isix (1:10)

cps f n Ps e(a s bs f uS s)

30

25

20

15

10

5

0

(5)

(10)

uwg Pf/lss

uwg expss

lsss & lae

Y

$

2005

2006

2007

2008

2009

2008


9/16


Selected data

Fiscal 2009

PUBLICLY-TRADED COMPANIES

Stock

Exchange

Symbol


Argo Group Ltd.



Catlin Group Limited (1)


Flagstone Reinsurance Holdings Limited

Hiscox Ltd. (3)


Montpelier Re Holdings Ltd.

PartnerRe Ltd. (4)



XL Capital Ltd

AWH

ACGL

AGII

AHL & AHL BH

AXS

CGL

ENH

FSR

HSX.L

MXGL

MRH

PRE

RNR

VR

XL

46.07

71.55

29.14

25.45

28.41

3.40

37.23

^

3.17

22.30

17.32

74.66

53.15

26.94

18.33

Common Stock Price

(as of Dec. 31) ($)

40.60

70.10

33.92

24.25

29.12

4.34

30.53

^

3.40

17.70

16.79

71.27

51.56

26.16

3.70

52 Week High/Low

(Jan. 1 - Dec. 31) ($)

48.74/33.00

72.25/44.68

36.66/25.33

28.44/18.46

31.46/17.92

4.49/2.83

38.44/19.71

12.45/7.24

3.64/2.73

23.69/13.00

17.95/10.55

80.99/54.65

57.37/39.37

27.24/20.93

18.95/2.67

Prior

49.72/22.46

75.31/54.80

41.44/25.84

29.90/14.33

41.81/17.27

4.54/2.66

42.22/20.0

14.26/7.26

3.61/1.92

30.27/09.96

17.94/10.13

82.23/48.48

59.27/35.16

26.22/14.84

51.48/2.68

Curr Prior

3.76

5.21

7.63

4.37

8.46

3.61

4.30

^

4.22

5.16

3.23

3.12

3.94

2.83

6.77

P/E Ratios

10.83

17.14

16.55

26.35

11.65

n/m

23.30

^

18.09

n/m

n/m

n/m

n/m

42.19

1.06

Curr PriorCurr

64.61

73.01

52.37

35.43

37.84

7.68

47.74

14.37

4.81

28.01

21.08

84.51

51.68

31.38

24.60

Book value per

common share ($)

49.29

51.36

44.18

28.95

29.08

6.61

35.76

11.53

3.72

22.94

15.88

63.95

38.74

25.64

15.46

Curr Prior

0.71

0.98

0.56

0.72

0.75

1.00

0.78

^

1.06

0.80

0.82

0.88

1.03

0.86

0.75

Market/book

value ratio ($)

0.82

1.28

0.77

0.84

1.00

1.00

0.85

^

1.32

1.08

1.06

1.11

1.33

1.02

0.24

Curr Prior

12.26

13.74

3.82

5.82

3.36

1.52

9.14

2.87

1.18

4.32

5.36

23.93

13.50

9.51

0.61

Basic earning

per share ($)

3.75

4.09

2.05

0.92

2.50

-0.16

1.41

-2.20

0.35

-3.10

-1.69

0.22

-0.21

0.62

-10.94

Curr Prior

11.67

13.74

3.81

5.64

3.07

1.47

8.69

2.87

1.14

4.26

5.36

23.51

13.40

9.24

0.61

Fully diluted

earnings per

share ($)

3.59

4.09

2.05

0.89

2.26

-0.16

1.31

-2.20

0.33

-3.10

-1.69

0.22

-0.21

0.61

-10.94

Curr Prior

(1) Catlin Group Limited stock price denominated in GBP but reports in USD.(2) P/E ratio with n/m - due to the net loss attributable to common shareholders per common share for the year ended December 31, 2008, the P/E ratio is not meaningful.(3) Hiscox Ltd.'s common stock price and 52 week high/low are denominated in GBP; all other amounts shown in USD.(4) PartnerRe Ltd. P/E ratio based on fully diluted earnings per share.^ Information not provided by respondent

momentum given their proximity to the

European markets, a talented workforce, and

favorable tax treaties with the U.S.

Of particular concern to (re)insurers

currently is potential tax changes that could be

enacted by President Obamas administration

that could change the tax treatment of US-

sourced business going to Bermuda and

other low tax domiciles. With one of thekey operating advantages for (re)insurers

operating in Bermuda consisting of its tax-

free status, the prospect of taxation for US

business would have significant implications.

In addition, planned regulatory changes in

Europe related to Solvency II is viewed

by some (re)insurance management teams

as potentially offering a more stable and

sophisticated regulatory environment, even

though the Bermuda Monetary Authority

(BMA) has been aggressive in introducing

enhancements to its oversight of Bermuda

(re)insurers to keep up with Solvency II

expectations. Given these factors, discussion

among (re)insurers on the island about pros

and cons of a potential redomestication

of their companies to other domiciles has

become a more frequent topic over recent

years. To-date, however, few companies have

moved from Bermuda although over the

All Companies Surveyed (All amounts in billions of US dollars)

2005 20062007 2008 2009

70

60

50

40

30

20

10

0

(10)

Net Income

Losses & LAE

Premiums Earned

Total Capital & Surplus

$

Year

(continued on page 50)

Allied World AssuranceCompany Holdings, Ltd


10/16


16TH ANNUAL BERMUDIAN BUSINESSAll amounts in U.S. $ 000s)scal 2009

llied World Assurance Company Holdings, Ltd

mlin Bermuda Ltd.

rch Capital Group Ltd.

rgo Group Ltd (4)

spen Insurance Holdings Limited

XIS Capital Holdings Limited

atlin Group Limited

ndurance Specialty Holdings Ltd.

verest Reinsurance (Bermuda), Ltd. (2)

lagstone Reinsurance Holdings Limited

arbor Point Limited

iscox Ltd.

ancashire Insurance Company Limited



il Casualty Insurance, Ltd.

il Insurance Limited

artnerRe Ltd.


okio Millennium Re Ltd.

alidus Holdings, Ltd.

L Capital Ltd

S&Ps Rating (1)

as of 15 March 10

A-

A

A

A-

A

A+

A

A

A+

NR

A-

A

NR

A-

A-

BBB+

A-

AA-

AA-

AA

NR

A

Stable

Stable

Positive

Stable

Stable

Stable

Stable

Stable

Stable

-

Stable

Stable

-

Stable

Stable

Stable

Stable

Negative

Stable

Negative

-

Negative

S&Ps Outlook2009 (3) Period End

12/31/09

12/31/09

12/31/09

12/31/09

12/31/09

12/31/09

12/31/09

12/31/09

12/31/09

12/31/09

12/31/09

12/31/09

12/31/09

12/31/09

12/31/09

11/30/09

12/31/09

12/31/09

12/31/09

12/31/09

12/31/09

12/31/09

Basis ofaccounting forsurvey response

US GAAP

UK GAAP

US GAAP

US GAAP

US GAAP

US GAAP

US GAAP

US GAAP

Bermuda Statutory

US GAAP

US GAAP

Other

Other

US GAAP

US GAAP

US GAAP

US GAAP

US GAAP

US GAAP

US GAAP

US GAAP

US GAAP

Current

3,213,295

1,580,570

4,323,349

1,614,900

3,305,000

5,500,244

3,278,051

2,787,283

2,572,527

1,211,018

1,889,700

1,805,270

1,268,100

1,564,633

1,728,500

450,785

2,481,884

7,645,727

3,840,786

1,241,504

4,031,120

9,615,090

66,949,336

Capital & Surplus

Prior

2,416,862

1,389,485

3,432,965

1,352,900

2,779,000

4,461,041

2,469,235

2,207,283

2,095,152

986,013

1,691,472

1,369,477

1,138,800

1,280,331

1,357,600

326,174

1,471,395

4,199,108

3,032,743

1,054,014

1,938,734

6,616,831

49,066,615

1,316,892

582,743

2,842,745

1,414,900

1,823,000

2,791,764

2,917,862

1,633,192

1,715,254

758,455

548,450

1,724,020

538,300

834,356

573,200

15,875

891,115

4,119,825

1,273,816

356,686

1,449,577

5,151,739

35,273,766

PremiumsEarned Current

606,887

390,971

851,101

117,500

474,000

497,886

508,903

536,104

441,748

242,192

250,126

440,380

389,500

246,215

463,500

124,616

1,100,270

1,536,854

838,858

200,522

897,407

74,991

11,230,531

Net IncomeCurrent

Class 4

Class 4

Class 4

Class 4

Class 4

Class 4

Class 4

Class 4

Class 4

Class 4

Class 4

Class 4

Class 4

Class 4

Class 4

Class 3

Class 2

Class 4

n/a

Class 3B

Class 4

Class 4

InsuranceRegulationClass

11/13/01

10/28/05

3/1/95

10/5/99

5/23/02

11/8/01

6/25/99

11/30/01

3/1/00

11/10/05

10/24/05

12/12/06

10/28/05

8/20/99

11/14/01

5/14/86

12/14/71

8/24/93

6/7/93

3/15/00

10/19/05

3/16/98

Date ofIncorporatio

1) All the ratings in this table are financial strength ratings of the lead rated operating companies with each group as of March 15, 2010.

2) All Everest Reinsurance (Bermuda) Ltd.'s financial information provided in this survey is unaudited.

3) Outlooks can be positive, negative, or stable, and signal a potential change in an interactive rating over the next 2-3 years.

4) For Argo Group Ltd., ratings refer to the financial strength ratings on the lead companies in Argo Group U.S.

R - Not Rated by Standard & Poor's.

Information not provided by respondent.

^ Geographic breakdown represents those companies which provided this information.


11/16

Copyright 2010 Bermudian Business /Deloitte. A p r i l / M ay 2 0 1 0 Bermudian Business 545

Type of Insurance

as % of Premiums

Line of Business as

% of Premiums

Marine

&Aviat

oin

Financial

Guarantee

Acciden

t&Health

Property

ExcessLiability

Other

Life

Workers

Compen

sation

Gross Premiums Written by

Geographic Area^^

and DELOITTE INSURANCE SURVEY

Direct

27%

100%

30%

^

51%

51%

30%

54%

100%

91%

100%

31%

28%

43%

88%

5%

-

100%

72%

100%

72%

34%

Reinsurance

-

2%

2%

^

17%

8%

23%

2%

3%

-

7%

7%

20%

14%

-

-

-

10%

-

2%

36%

11%

-

-

-

^

-

-

-

2%

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

2%

^

-

-

3%

-

2%

-

-

2%

-

2%

-

-

-

-

-

-

1%

-

14%

21%

31%

^

30%

24%

18%

17%

49%

20%

14%

22%

44%

25%

15%

-

100%

17%

10%

-

16%

23%

30%

-

12%

^

4%

-

-

12%

13%

-

2%

-

-

8%

-

100%

-

-

-

-

-

-

-

-

6%

^

-

-

-

1%

4%

-

2%

-

-

6%

-

-

-

-

-

5%

1%

-

-

-

-

^

-

-

-

-

-

-

-

-

-

3%

-

-

-

15%

-

-

-

9%

27%

40%

26%

^

9%

12%

6%

28%

-

33%

2%

46%

-

13%

38%

-

-

36%

27%

11%

20%

28%

-

47%

-

^

6%

-

63%

1%

17%

-

17%

20%

-

-

4%

^

^

-

-

-

-

-

55%

41%

72%

^

77%

48%

17%

67%

67%

40%

65%

34%

45%

79%

56%

^

^

41%

85%

-

26%

45%

UK North

Am

erica

Asia,Au

stralia&

NewZea

land

PropertyCatastro

phe

-

37%

7%

^

13%

13%

21%

15%

-

47%

27%

4%

26%

-

47%

-

-

10%

63%

80%

24%

5%

Terrorism

-

-

1%

^

-

1%

4%

-

-

-

-

3%

10%

-

-

-

-

-

-

2%

2%

-

Europe

11%

5%

17%

^

4%

29%

5%

1%

12%

12%

5%

13%

6%

21%

6%

^

^

41%

3%

-

7%

43%

-

6%

4%

^

4%

-

4%

1%

-

6%

1%

1%

4%

-

4%

^

^

8%

2%

-

2%

-

Professio

nal

Liability

21%

-

13%

^

2%

28%

10%

10%

5%

-

27%

16%

-

20%

-

-

-

-

-

-

-

24%

Bermuda

34%

-

5%

^

-

23%

11%

30%

4%

-

12%

-

-

-

-

^

^

-

-

100%

-

12%

73%

-

70%

^

49%

49%

70%

46%

-

9%

-

69%

72%

57%

12%

95%

100%

-

28%

-

28%

66%

GeneralLi

ability

7%

-

-

^

2%

14%

12%

-

20%

-

19%

-

-

-

-

-

-

-

-

-

-

-

Casualty

-

-

-

^

23%

-

3%

13%

4%

-

-

-

-

9%

-

-

-

12%

-

-

-

-


12/16


All amounts in U.S. $ 000s)

a s s e t s

BALANCE SHEET

6,971,394

1,261,903

10,759,855

4,237,300

5,970,000

10,051,828

5,193,237

5,094,319

5,580,381

1,461,285

2,079,501

3,885,413

1,651,700

4,241,999

2,374,700

677,882

5,165,385

15,075,978

4,295,792

991,791

5,351,144

29,307,171

131,679,958

184,869

582,134

109,026

97,000

27,000

570,276

-

351,352

155,736

45,934

144,951

11,782

11,000

314,849

94,100

-

-

2,350,358

1,957,619

181,889

37,615

2,514,860

9,742,350

681,803

213,978

2,427,896

916,300

710,000

2,435,984

1,829,436

935,281

364,662

290,169

138,141

1,073,238

214,300

1,464,633

137,800

51,678

353,260

2,615,916

620,399

135,791

902,801

8,893,974

27,407,440

9,653,153

2,302,271

15,375,790

6,896,800

8,257,000

15,306,524

11,681,740

7,666,694

6,995,684

2,566,768

3,223,415

6,146,033

2,006,300

7,339,746

3,102,300

1,061,101

6,007,030

23,732,544

7,801,041

1,501,204

7,019,140

45,579,675

201,221,953

4,761,772

386,044

7,873,412

3,203,200

3,331,000

6,564,133

5,392,283

3,157,026

3,669,263

480,660

707,840

2,494,410

411,800

4,550,607

680,800

343,000

3,331,281

12,426,676

1,702,006

84,412

1,622,134

20,823,524

87,997,283

1,106,601

229,489

1,720,270

1,379,400

794,000

1,292,877

1,441,234

565,348

543,241

278,956

242,363

676,403

1,000

567,301

288,900

281,300

-

2,249,181

589,827

104,622

196,547

374,844

14,923,704

928,619

297,758

1,433,331

803,600

908,000

2,209,397

1,723,971

832,561

541,531

330,416

374,491

922,575

255,400

628,161

215,400

20,123

1,706,816

446,649

102,797

724,104

3,651,310

19,057,010

Cash & CashEquivalents Quoted Investments Other Investments

ReinsuranceBalances

Receivable Other Assets Total Assets Loss ReservesUnearned Premium

Reserve

llied World Assurance Company Holdings, Ltd

mlin Bermuda Ltd.

rch Capital Group Ltd.

rgo Group Ltd

spen Insurance Holdings Limited

XIS Capital Holdings Limited

atlin Group Limited




arbor Point Limited

iscox Ltd. (2)




il Casualty Insurance, Ltd.

il Insurance Limited

artnerRe Ltd.

RenaissanceRe Holdings Ltd. (3)



L Capital Ltd

379,751

14,767

334,571

18,100

748,000

864,054

2,499,655

528,944

351,664

438,101

360,530

418,032

128,300

702,278

202,100

50,241

488,385

738,309

260,716

81,981

387,585

3,643,697

13,639,761

Goodwill andOther Intangible

Assets

328,735

-

24,172

248,700

8,000

91,505

718,178

191,450

-

52,323

257,929

81,165

-

48,686

4,700

-

-

702,802

76,688

5,130

143,448

845,129

3,828,740

1) All Everest Reinsurance (Bermuda) Ltd's financial information provided in this survey is unaudited.

2) Hiscox Ltd. balance sheet amounts were translated from GBP to USD using the year end closing rate of $1.61.

3) Included in other liabilities is $786.6 million related to RenaissanceRe Holdings Ltd.'s redeemable noncontrolling interest in DaVinciRe Holdings Ltd.


13/16


L I A B IL I T IE S A N D C A P I TA L & S U R P L US

DATA, FISCAL 2009

498,919

-

400,000

380,600

250,000

499,476

-

447,664

-

252,402

200,000

223,048

-

90,464

331,700

200,000

-

450,000

300,000

-

289,800

2,451,417

7,265,490

250,548

37,899

1,345,698

894,500

463,000

533,274

1,287,435

442,160

212,363

292,272

51,384

700,730

71,000

505,881

145,900

47,193

193,865

1,503,325

1,511,600

72,491

351,982

9,038,334

19,952,834

6,439,858

721,701

11,052,441

5,281,900

4,952,000

9,806,280

8,403,689

4,879,411

4,423,157

1,355,750

1,333,715

4,340,763

738,200

5,775,113

1,373,800

610,316

3,525,146

16,086,817

3,960,255

259,700

2,988,020

35,964,585

134,272,617

1,492

1,000

548

31,000

-

1,903

3,589

55,116

1,250

850

16,039

32,454

1,000

55,867

100

300

560

82,586

61,745

250,000

22,480

3,421

623,300

-

-

130

-

-

500,000

589,785

8,000

-

(20)

-

-

-

-

-

-

474,625

20,800

650,000

-

-

10

2,243,330

1,359,934

1,000,765

578,336

702,400

1,763,000

2,014,815

1,937,661

929,577

1,326,453

892,817

1,651,355

507,627

752,309

1,541,200

3,357,004

400,000

2,675,680

10,502,981

33,893,914

1,702,020

578,692

3,605,809

779,200

1,285,000

3,569,411

997,547

1,742,442

1,090,670

324,347

222,306

1,204,447

281,500

731,026

222,400

450,485

2,006,699

4,100,782

3,087,603

569,687

1,337,811

94,460

29,984,344

149,849

-

138,526

107,400

155,000

85,633

38,247

236,130

-

-

-

29,000

25,431

(2,900)

-

-

-

41,438

21,817

-

(1,187,559)

(161,988)

-

113

-

(5,100)

102,000

(671,518)

(250,531)

13,901

(81,976)

(6,976)

60,742

956,600

-

(32,300)

-

-

84,555

-

-

(4,851)

201,777

366,436

3,213,295

1,580,570

4,323,349

1,614,900

3,305,000

5,500,244

3,278,051

2,787,283

2,572,527

1,211,018

1,889,700

1,805,270

1,268,100

1,564,633

1,728,500

450,785

2,481,884

7,645,727

3,840,786

1,241,504

4,031,120

9,615,090

66,949,336

9,65

2,30

15,37

6,89

8,25

15,30

11,68

7,66

6,99

2,56

3,22

6,14

2,00

7,33

3,10

1,06

6,00

23,73

7,80

1,50

7,01

45,57

201,22

Debt Other Liabilities Total Liabilities Common Stock Pre ferred StockAdditional Paid

in Capital Retained Earnings

Unrealised InvestmentGains (Losses) Other

Total Capital &Surplus

Total LiabilCapital &


14/16


AllamountsinU.S.$000s)

ratio

(xx to 1)

OPERATING DATA,

% change from

prior period

Loss Ratio (1)

Current Prior Current Prior

Expense Ratio (1)

Current Prior

Combined Ratio (1)

NetPremiumsWritten toCapital &Surplus

LossReserve toCapital &Surplus

Capital &Surplus

NetPremiums

Written

Loss Ratio (6)

(5 year average)

GrossPremiums

Written

57.40%

65.09%

64.97%

64.32%

65.80%

63.74%

62.90%

64.28%

67.18%

58.07%

69.95%

52.70%

60.40%

85.47%

55.84%

-114.73%

134.94%

63.90%

54.84%

19.72%

61.45%

66.16%

30.18%

20.16%

29.97%

36.60%

32.14%

30.21%

31.50%

30.69%

29.37%

37.39%

36.29%

44.20%

25.12%

25.59%

14.04%

3.91%

1.56%

21.90%

29.79%

37.47%

32.81%

32.14%

26.78%

34.37%

29.98%

36.12%

29.79%

24.85%

32.00%

29.45%

21.03%

31.30%

29.28%

22.60%

22.44%

23.32%

15.88%

8.11%

1.06%

23.30%

24.21%

37.46%

30.72%

28.79%

76.05%

57.46%

88.18%

96.90%

84.15%

81.21%

89.10%

83.75%

89.98%

74.73%

80.61%

86.00%

40.48%

96.87%

38.24%

-13.14%

59.77%

74.60%

45.28%

43.30%

68.94%

93.65%

84.18%

99.46%

94.95%

100.43%

95.59%

88.59%

94.90%

93.73%

88.21%

89.37%

99.23%

75.30%

82.83%

108.79%

71.71%

-106.62%

136.00%

87.20%

79.04%

57.18%

92.17%

94.94%

41.11%

39.37%

63.91%

88.02%

55.58%

51.21%

96.65%

57.62%

68.12%

65.44%

31.85%

100.62%

40.55%

57.17%

34.84%

4.40%

35.90%

51.65%

31.41%

29.04%

34.44%

49.34%

148.19%

24.42%

182.11%

198.35%

100.79%

119.34%

164.50%

113.27%

142.63%

39.69%

37.46%

138.17%

32.47%

290.84%

39.39%

76.09%

134.22%

162.53%

44.31%

6.80%

40.24%

216.57%

32.95%

13.75%

25.94%

19.37%

18.93%

23.30%

32.76%

26.28%

22.78%

22.82%

11.72%

31.82%

11.35%

22.21%

27.32%

38.20%

68.68%

82.08%

26.64%

17.79%

107.93%

45.31%

19.32%

13.37%

-1.52%

23.49%

0.05%

5.61%

21.32%

-9.99%

-24.56%

14.07%

18.76%

9.30%

0.12%

6.46%

11.27%

175.34%

24.01%

-1.02%

-10.88%

13.29%

12.12%

-17.33%

65.57%

44.24%

60.85%

61.25%

62.02%

59.31%

57.03%

62.58%

68.17%

42.39%

52.08%

49.20%

31.05%

83.73%

74.25%

202.77%

90.11%

63.82%

50.15%

23.12%

43.18%

72.25%

1,696,345

628,330

3,592,931

1,988,900

2,067,000

3,587,295

3,715,493

2,021,450

1,979,152

988,491

607,520

2,253,580

526,200

1,375,001

634,900

49,028

891,115

4,000,888

1,728,932

417,622

1,621,241

6,111,311

42,482,725


Amlin Bermuda Ltd.


Argo Group Ltd (4)

Aspen Insurance Holdings Limited (3)


atlin Group Limited




Harbor Point Limited

Hiscox Ltd. (5) (11) (12)


Max Capital Group Ltd. (10)


Oil Casualty Insurance, Ltd.

Oil Insurance Limited

artnerRe Ltd. (7)




XL Capital Ltd (8)

CedPremi

(375,2

(6,0

(829,8

(567,5

(230,0

(770,8

(547,2

(415,4

(226,8

(196,0

(5,6

(437,0

(12,0

(480,4

(32,7

(29,1

(52,1

(522,5

(57,0

(232,8

(1,367,5

(7,394,2

1)Loss,expense&combinedratioonlyfornon-lifebusiness.

2)ReturnonEquity=NetIncome/AverageofCYCapital&SurplusandPYCapital

&Surplus.

3)AspenInsuranceHoldingsLtd.'sreturnonequityiscalculatedbasedonnetincomeadjusted

forpreferencesharedividendsdividedbyaverageequityfortheperiodexcludingpreference

shares,theaverageaftertaxunrealizedappreciationordepreciationoninvestmentsandthe

averageaftertaxunrealizedforeignexchangegainsorlosses.

4)OnMarch14,2007(andasamendedandrestatedonJune8,2007),PXREGroupLtd.

(PXRE)andArgonautGroup,Inc.(ArgonautGrouporArgonaut)enteredintoamerger

agreement(theMergerAgreement)pursuanttowhichArgonautGroupbecameawholly-

ownedsubsidiaryofPXREonAugust7,2007(theMerger).PXREchangeditsnametoArgo

GroupInternationalHoldings,Ltd.upontheclosingoftheMerger.Immediatelyfollowingthe

Merger,ArgonautGroupspre-Mergershareholdersheldapproximately73%ofArgoGroups

shares,withPXREspre-Mergershareholdersretainingapproximately27%ofArgoGroups

shares.NotwithstandingthefactthatPXREwasthelegalacquirerundertheMergerand

remainedtheregistrantforSecuritiesandExchangeCommission(SEC)reportingpurposes,

theMergerwasaccountedforasareverseacquisitionwithArgonautGroupastheaccounting

acquirer.Consequently,thefinancialdatasubmittedforthissurveyfortheperiodpriortothe

MergerconsistsoftheresultsofArgonaut(theGAAPaccountingacquirer),whilethestockand

securityinformationrelatestoPXRE(thelegalacquirer).

(5)HiscoxLtd.'sreturnonequityiscalculatedbasedonadjustedopeningequitywhichtakes

intoconsiderationtheweightedaverageofcapitalfromshareoptionexerciseslessweighted

averagepaymentofcapitaltoshareholdersbydividendandtreasurystock.

(6)Lossratio(5yearaverage)=sumoflossandLAE(fiveyears)/sumofpremiumsearned(5

years).Forthoserespondentsthatprovidedlessthanfiveyearsofdata,theaveragehasbeen

calculatedoverthenumberofperiodsprovided.

(7)PartnerReLtd.'sratiosexcludelifebusiness.

(8)XLCapitalLtdunderwritingincome/(loss)ongeneraloperationsexcludeslifeandfinancial

operations.

(9)AllEverestReinsurance(Bermuda),Ltd'sfinancialinformationprovidedinthissurveyis

unaudited.

(10)MaxCapitalGroupLtd.'sratiosincludelong-termlifeandannuitybusiness.

(11)HiscoxLtd.incomestatementtranslatedfromGBPtoUSDusingaveragerateof$1.57forthe

relevantyear.

(12)HiscoxLtd.expenseratioandcombinedratioexcludingFXimpactis40.4%(2008:38.9%)

and82.20%(2008:91.6%),respectively.

45.87%

37.30%

58.21%

60.29%

52.00%

51.00%

57.60%

53.06%

60.61%

37.34%

44.32%

41.80%

15.36%

71.28%

24.20%

-17.05%

58.21%

52.70%

15.49%

5.83%

36.13%

61.51%


15/16


CURRENT PERIOD

FISCAL 2009

Net PremiumsWritten

1,321,125

622,305

2,763,112

1,421,400

1,837,000

2,816,429

3,168,286

1,606,050

1,752,317

792,469

601,873

1,816,526

514,200

894,520

602,200

19,830

891,115

3,948,704

1,206,397

360,578

1,388,358

4,743,712

35,088,506

Change in UPR

(4,233)

(39,562)

79,633

(6,500)

(14,000)

(24,665)

(250,424)

27,142

(37,063)

(34,014)

(53,423)

(92,506)

24,100

(60,164)

(29,000)

(3,955)

-

171,121

67,419

(3,892)

61,219

408,027

185,260

PremiumsEarned

1,316,892

582,743

2,842,745

1,414,900

1,823,000

2,791,764

2,917,862

1,633,192

1,715,254

758,455

548,450

1,724,020

538,300

834,356

573,200

15,875

891,115

4,119,825

1,273,816

356,686

1,449,577

5,151,739

35,273,766

Losses& LAE

604,060

217,354

1,654,674

853,100

948,000

1,423,872

1,681,099

866,640

1,039,689

283,185

243,074

727,252

82,700

594,692

138,700

(2,707)

518,734

2,295,296

197,287

20,784

523,757

3,168,837

18,080,079

Commissions& Brokerage

148,847

92,101

490,098

318,800

334,000

420,495

585,634

267,971

480,581

136,471

117,734

402,915

108,400

96,874

80,500

621

14,636

885,214

189,775

53,633

262,966

775,869

6,264,135

OtherUnderwriting

Expenses

248,592

25,360

361,907

199,100

252,000

422,762

464,538

233,240

23,200

147,138

81,318

176,825

26,800

116,657

-

-

(741)

-

189,686

80,030

212,605

879,727

4,140,744

UnderwritingIncome/(Loss)

315,393

247,928

336,066

43,900

289,000

524,635

186,591

265,341

171,784

191,661

106,324

417,028

320,400

26,133

354,000

17,961

358,486

939,315

697,068

202,239

450,249

327,306

6,788,808

Investment

IncomeEarned

(excludingrealized

gains/losses)

300,675

32,788

390,131

145,500

248,000

464,478

187,239

284,200

277,039

28,531

70,653

118,912

52,300

246,255

81,000

23,047

117,096

596,071

323,981

28,834

118,773

1,319,823

5,455,326

Realized Gains/(Losses)

76,775

(77,608)

77,449

(16,700)

11,000

(311,584)

232,020

(13,948)

6,265

50,921

(314)

30,981

22,400

(1,193)

30,800

(45,097)

(198,817)

171,265

82,069

-

(11,543)

(955,084)

(839,943)

InterestExpense on

Debt

(39,019)

-

(24,440)

(25,500)

(16,000)

(32,031)

-

(30,174)

(954)

(12,105)

(1,428)

(8,310)

-

(21,339)

(26,300)

(16,922)

(320)

(28,301)

(15,111)

-

(27,086)

(216,504)

(541,844)

Other Income(Expenses)and (Taxes)

(46,937)

26,484

71,895

(29,700)

(50,000)

(147,612)

(53,447)

30,685

(12,386)

(16,816)

(8,409)

(255,907)

(5,600)

(7,007)

(135,100)

(9,722)

(16,196)

(650,365)

(237,761)

(30,551)

282,218

(400,550)

(1,702,784)

Net Income/(Loss)

606,887

390,971

851,101

117,500

474,000

497,886

508,903

536,104

441,748

242,192

250,126

440,380

389,500

246,215

463,500

124,616

1,100,270

1,536,854

838,858

200,522

897,407

74,991

11,230,531

RetuEqu

21

26

21

7

15

10

24

21

18

22

13

30

32

17

30

32

55

25

24

17

31

0

Change inUnrealized

Gains/(Losses)

-

161,379

-

-

(8,000)

-

-

-

-

-

83,300

137,676

-

3,366

159,100

155,349

840,021

508,869

(11,388)

-

84,796

-

2,114,468

ComprehensiveIncome/(Loss)

787,952

390,971

207,903

253,600

591,700

1,328,352

620,851

754,164

721,755

243,487

250,126

331,126

392,300

317,045

463,800

124,616

1,100,270

1,598,973

923,407

187,490

900,414

2,297,451

14,787,753


16/16

COMPANY OFFICERS** As of year end 2009

Allied World Assrace Compay Holdigs, Ltd

Amli Bermda Ltd.

Arch Capital Grop Ltd.

Argo Grop Ltd

Aspe Israce Holdigs Limited

AXIS Capital Holdigs Limited

Catli Grop Limited

Edrace Specialty Holdigs Ltd.

Everest Reisrace (Bermda), Ltd.

Flagstoe Reisrace Holdigs Limited

Harbor Poit Limited

Hiscox Ltd.

Lacashire Israce Compay Limited

Max Capital Grop Ltd.

Motpelier Re Holdigs Ltd.

Oil Casalty Israce, Ltd.

Oil Israce Limited

ParterRe Ltd.

ReaissaceRe Holdigs Ltd.

Tokio Milleim Re

Valids Holdigs, Ltd.

XL Capital Ltd

Scott Carmilani

Stuart MacKellar

Constantine Iordanou

Mark Watson

Christopher O'Kane

John Charman

Stephen Catlin

David S. Cash

Mark de Saram

David Brown

John Berger

Bronek Masojada

Greg Lunn

W. Marston Becker

Christopher Harris

Robert D. Stauffer

Robert D. Stauffer

Patrick Thiele

Neill Currie

Tatsuhiko Hoshina

Edward J. Noonan

Michael S. McGavick

Frank D'Orazio

Robert Wyatt

^

^

Kate Vacher (Underwriting Director)

^

Paul Brand

^

^

Guy Swayne (International) & Gary Prestia (North America)

Greg Richardson

Robert Childs

Charles Mathias

Angelo Guagliano

David Sinnott

Jerry Rivers

George F. Hutchings

Costas Miranthis (Global (Non-U.S)), Tad Walker (U.S.)

Kevin O'Donnell

Jerome Faure

Conan Ward

N/A

Joan Dillard

Elizabeth Murphy

John C.R. Hele

Jay Bullock

Richard Houghton

David Greenfield

Benjamin Mueli

Michael J. McGuire

^

Patrick Boisvert

Andrew Cook

Stuart Bridges

Elaine Whelan

Joseph Roberts

Michael Paquette

Ricky E. Lines

Ricky E. Lines

Albert Benchimol

Jeffrey Kelly

Shumpei Takizawa

Joseph E. (Jeff) Consolino

Simon Rich

Chief Executive Officer Chief Underwriting Officer Chief Financial Officer

HOW THE SURVEY WAS DONE

For this 16th Annual Bermudian Business/

Deloitte Bermuda Insurance Survey, financial

data was obtained from Bermuda-based

insurance and reinsurance companies with

fiscal years ending in 2009.

Deloitte compiled the financial data provided

by survey participants. Industry commentary

and analysis contained in the survey was prepared

by Standard & Poors based upon the compiled

financial data.

The 16th Annual Bermudian Business/

Deloitte Bermuda Insurance Survey will

go online at both the Bermudian Business

and Deloitte websites. Find the sites at

www.bermudianbusiness.com and www.deloitte.bm.

^ Information not provided by respondent

past year insurance broker Willis Group

redomiciled to Ireland.

Among Bermuda (re)insurers rated by

Standard & Poors, we believe a change in U.S.taxation, if enacted, would have a modest to

moderate impact on Bermuda (re)insurers tax

position. In addition, because most Bermuda

writers are already global in nature with

offices and staff in several locations around

the world, a potential redomestication of any

of these players would likely be neutral to

their ratings since it likely would have no

significant impact on their business. This

also helps explain why management teams of

companies participating in our survey ranked

Bermuda Market Presence and Regulation

as less pressing concerns among their top 5

strategic challenges in the near term comparedto issues such as pricing and growth vs.

profitability. Bermuda would invariably

suffer the greatest impact if more Bermuda

(re)insurers redomesticated elsewhere, given

the importance of the (re)insurance market as

part of its economy.

COnCLuSIOn

We believe Bermuda (re)insurers are likely to

see weaker operating performance in 2010

compared to 2009. Key factors contributing

to this in our view are the significant losses

incurred by companies on the island due to the

Chilean earthquake and Windstorm Xynthia

during the first quarter, weaker pricing on

most property and casualty (re)insurance lines,

and the expectation of a more normalized

level of investment gains/losses in 2010. In

addition, Bermuda writers remain exposed to

potential further catastrophe losses throughthe remainder of 2010, which could lead them

to exceed their catastrophe budgets and miss

their earnings targets for the year.

Given the severity-driven portfolios of

(re)insurance players on the island, we expect

their earnings to be volatile on a year-over-yearbasis. But over the long run, these companies

should be able to compensate their shareholders

for this increased risk through above-average

returns. Bermuda writers currently have many

of the right tools to help them accomplish this

goal. Among them are their strong balance

sheet position, enhanced competitive position

through their expanding global platforms,

increasingly sophisticated risk management

tools, and compensation systems that place

emphasis on bottom line profitability. The jury

is still out, however, as to whether management

teams on the island will succeed in leveraging

these strengths against the challenges they faceto produce much needed strong, risk-adjusted

profits over the long term.

2010-us_insurance_16th annual bermuda insurance survey_210510

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