Is the World Becoming aRiskier Place?

Overview & Outlook for the P/C insurance Industry: 2012 & Beyond

PLUS Conference 2011San Diego, CA

November 2, 2011Download at www.iii.org/presentationsRobert P. Hartwig, Ph.D., CPCU, President & Economist

Insurance Information Institute 110 William Street New York, NY 10038Tel: 212.346.5520 Cell: 917.453.1885 bobh@iii.org www.iii.org

2

What in the World Is Going On?

Is the World Becoming a Riskier Place?

What Are the Implications for Insurance and Risk Management?

3

Uncertainty, Risk and Fear Abound

ECONOMIC & POLITICAL CONCERNS Global Economic Slowdown Echoes of the Financial Crisis European Sovereign Debt, Bank & Currency Crises Collapse of Major Financial Institutions US Debt and Budget Crisis, S&P Downgrade & Austerity Housing Crisis Persistently High Unemployment Inflation/Deflation Runaway Energy & Commodity Prices Political Upheaval in the Middle East Regulation ChinaNow the #2 Economy in the World 2012 ElectionsCATASTROPHIC LOSS Japan, New Zealand, Turkey, Haiti, Chile Earthquakes Nuclear Fears US: Tornadoes, Flooding, Wildfires, Hurricanes, Winter Storms Manmade Disasters (e.g., Deepwater Horizon) Cyber Attacks Resurgent Terrorism Risk (e.g., Bin Laden, Gadhafi Killings)

Are “Black Swans”

everywhere or does it just seem that way?

4

What is Going On in the US and Global Financial Markets?

1. Need for a Binding, Comprehensive Solution to Europe’s Debt Problems Big Fat Greek Haircut: Agreement developed for Greek debt lasted just 5 days Financial “Firewall” around Italy, Spain, Ireland, Portugal may be too small Difficulties in managing multinational institutions and economic policies ECB and individual member EU countries not all on same page Solution: Unified strategy similar to TARP; Monetary easing OUTCOME: Europeans will eventually stumble into a resolution

2. Realization that US Economic Growth Will Remain Lackluster Q1 GDP just 0.4%; Q2 only 1.3%; Q3 still a subpar 2.5%; Acceleration unlikely Job growth has been anemic for months and unemployment remains high at 9.1% Markets remain extremely volatile and jittery; Housing/Debt hangover OUTCOME: Tepid growth in the 2% - 2.5% range in 2012; Unemployment 8.5% - 9%

3. View that Washington is Dysfunctional and “Rudderless” Lack of coherent, consistent medium and long term plan to deal with basic

structural issues in the US economy (debt, taxes, employment, regulation, etc.) No confidence that 2012 political cycle will resolve these problems

4. Economic Slowdown in Emerging Markets China, other economies less able to stimulate global economy than in 2008

5

Déjà Vu? Lehman II? Is This 2008 All Over Again?

Why Today is Not 2008 All Over Again The Situation Today is Very, Very Different from 2008 Credit Markets Are Not Seizing; Some Contraction in Europe Bank Balance Sheets Are in Much Stronger Shape

Capital up, charge offs falling We Will Not Experience the Mega-Collapses/Near Collapses Like in 2008

No repeat of Lehman, AIG, Washington Mutual, Wachovia… MF Global is not a “Systemically Important Financial Institution”

Some Additional Regulatory Controls Are Now Place

What Would Be Helpful Now? Solution to European Bank/Sovereign Debt Problem (Thought We Had One!) Long-Term Fiscal and Monetary Policy Direction Fed on Aug. 9 stated rates would remain low “at least through mid-2013”

This is not only a signal that borrowing costs will remain low over an extended period of time and that inflation will remain muted; Also tells investors that they’ll need to take on risk in order to earn returns in the market.

Congress and the Administration need to remove regulatory and tax uncertainty ASAP and drive a pro-growth agenda

6

Top 10 US Corporate Bankruptcies, by Asset Size

*MF Global filed for bankruptcy on October 31, 2011.Source: Council of Insurance Agents and Brokers; Insurance Information Institute.

All 10 of the Biggest Bankruptcies in US History Occurred Within the Past 10 Years With Varied Effects on D&O Market. MF Global Was the

8th Largest Bankruptcy in US History

Billions ($)

$61.4 $41.0 $39.3 $36.5

$691.1

$327.9

$103.9 $91.0 $80.4 $65.5

$0

$100

$200

$300

$400

$500

$600

$700

$800

LehmanBrothers(2001)

WashingtonMutual(2008)

WorldCom(2002)

GeneralMotors(2009)

CIT Group(2009)

Enron(2001)

Conseco(2002)

MF Global(2011)

Chrysler(2009)

ThornburgMortgage

(2009)

The collapse of MF Global, run by Jon Corzine, a former Goldman

Sachs CEO and NJ Governor and Senator, shows that the lessons of the financial crisis have not been

learned by even some of Wall Street’s brightest and most

experienced people.*

Enron, WorldCom helped ignite a

hard market in the D&O line

7

Why Didn’t Sarbanes-Oxley Prevent the 2008 Financial Crisis? It Couldn’t…

2001: Outright Fraud, Poor Governance & Greed Enron, WorldCom “Cooked the Books” Crimes Were Committed People Went to Jail Enron’s Crimes Were Not New, Just Different Sarbanes-Oxley’s Intent Was to Make Fraud More Difficult Utilizing a Variety

of Tools, One of Which Was Enhancing Corporate Governance Major and long-lasting impacts for D&O

Sarb-Ox Was Never Intended to Prevent the Collapse in Risk Management at the Core of the Financial System that Occurred During the Financial Crisis

2008 to Today: Stupidity, Poor Risk Management & Greed Stupidity, Poor Risk Management & Greed Are Not Illegal This Is Way Nobody Associated with the Spectacular Collapses of 2008 Are

in Jail Today The Accounting-Centric Focus of Sarb-Ox Was Not Designed to Contain or

Control Reckless/Absent/Ineffectual Risk Management 2010 Dodd-Frank Act Attempts to Rein-In Reckless Risk Taking

Focus Is on Systemically Important Financial Institutions (SIFIs) Fewer implications for D&O

8

P/C Insurance Industry Financial Overview

Profit Recovery Will Be Set Back by High CATs, Low

Interest Rates, Diminishing Reserve Releases

P/C Net Income After Taxes1991–2011:H1 ($ Millions)

$1

4,1

78

$5

,84

0

$1

9,3

16

$1

0,8

70

$2

0,5

98

$2

4,4

04 $

36

,81

9

$3

0,7

73

$2

1,8

65

$3

,04

6

$3

0,0

29

$6

2,4

96

$3

,04

3

$3

4,6

70

$4

,75

8

$2

8,6

72

-$6,970

$6

5,7

77

$4

4,1

55

$2

0,5

59

$3

8,5

01

-$10,000

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11*

2005 ROE*= 9.6% 2006 ROE = 12.7% 2007 ROE = 10.9% 2008 ROE = 0.3% 2009 ROAS1 = 5.9% 2010 ROAS = 6.5% 2011:H1 ROAS = 1.7%

P-C Industry 2011:H1 profits were down 71.6% to $4.8B vs. 2010:H1,

due to high catastrophe losses and as non-cat underwriting

results deteriorated

* ROE figures are GAAP; 1Return on avg. surplus. Excluding Mortgage & Financial Guaranty insurers yields a 2.3% ROAS for 2011:H1, 7.5% for 2010 and 7.4% for 2009.Sources: A.M. Best, ISO, Insurance Information Institute

A 100 Combined Ratio Isn’t What ItOnce Was: Investment Impact on ROEs

Combined Ratio / ROE

* 2009 and 2010 figures are return on average statutory surplus. 2008 -2011 figures exclude mortgage and financial guaranty insurers. 2011H1 combined ratio including M&FG insurers is 110.5 , ROAS = 2.3%. Source: Insurance Information Institute from A.M. Best and ISO data.

97.5

100.6 100.1 100.7

92.6

99.3100.8

109.4

101.0

2.3%

7.5%7.4%

9.6%

15.9%

14.3%

12.7%

4.4%

8.9%

80

85

90

95

100

105

110

1978 1979 2003 2005 2006 2008* 2009* 2010* 2011:H1*0%

3%

6%

9%

12%

15%

18%

Combined Ratio ROE*

Combined Ratios Must Be Lower in Today’s DepressedInvestment Environment to Generate Risk Appropriate ROEs

A combined ratio of about 100 generated ~7.5% ROE in 2009/10,

10% in 2005 and 16% in 1979

-5%

0%

5%

10%

15%

20%

25%

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

*

Profitability Peaks & Troughs in the P/C Insurance Industry, 1975 – 2011*

*Profitability = P/C insurer ROEs are I.I.I. estimates. 2011 figure is an estimate based on annualized ROAS for H1 data. Note: Data for 2008-2011 exclude mortgage and financial guaranty insurers. For 2011:H1 ROAS = 1.7% including M&FG.Source: Insurance Information Institute; NAIC, ISO, A.M. Best.

1977:19.0% 1987:17.3%

1997:11.6%2007:12.3%

1984: 1.8% 1992: 4.5% 2001: -1.2%

10 Years

10 Years10 Years

2011:2.3%*

History suggests next ROE peak will be in 2016-2017

ROE

1975: 2.4%

Global Catastrophe Loss Developments and Trends

12

2011 Will Rewrite Catastrophe Loss and Insurance History

But Will Losses Turn the Market?

13

Global Catastrophe Loss Summary: First Half 2011

2011 Is Already (as of June 30) the Highest Loss Year on Record Globally Extraordinary accumulation of severe natural catastrophe: Earthquakes, tsunami, floods

and tornadoes are the primary causes of loss

$260 Billion in Economic Losses Globally New record for the first six months, exceeding the previous record of $220B in 2005

Economy is more resilient than most pundits presume

$55 Billion in Insured Losses Globally More than double the first half 2010 amount

Over 4 times the 10-year average

$27 Billion in Economic Losses in the US Represents a 129% increase over the $11.8 billion amount through the first half of 2010

$17.3 Billion in Insured Losses in the US Arising from 100 CAT Events Represents a 162% increase over the $6.6 billion amount through the first half of 2010

14Source: MR NatCatSERVICE

Natural Loss Events,January – September 2011

World Map

Insured losses 2011 (January – June only): US$ 60bn

Worldwide Natural Disasters 2011% Distribution of Insured Losses Per Continent (January – June only)

15

21%

49%

<1%

29% <1%

<1%

Continent Insured losses [US$ m] in 2011 Jan - June

Africa minor

America 17,800

Asia 30,080Australia/Oceania 12,900

Europe 100

Source: MR NatCatSERVICE

16

Top 16 Most Costly World Insurance Losses, 1970-2011*

(Insured Losses, 2010 Dollars, $ Billions)

*Through June 20, 2011. 2011 disaster figures are estimates; Figures include federally insured flood losses, where applicable.Sources: Swiss Re sigma 1/2011; AIR Worldwide, RMS, Eqecat; Insurance Information Institute.

$11.3$14.0 $14.9$16.3$20.5$20.8 $23.1$24.9

$35.0

$72.3

$10.0$9.3$9.0$8.0$8.0$7.8

$0

$10

$20

$30

$40

$50

$60

$70

$80

WinterStormDaria(1991)

ChileQuake(2010)

Hugo (1989)

TyphoonMirielle(1991)

Charley(2004)

NewZealandQuake(2011)

Rita (2005)

Wilma(2005)

Ivan (2004)

SpringTornadoes/

Storms(2011)

Ike (2008)

Northridge(1994)

WTC TerrorAttack(2001)

Andrew(1992)

JapanQuake,

Tsunami(2011)*

Katrina(2005)

Taken as a single event, the Spring 2011 tornado and

thunderstorm season would likely become the 7th

costliest event in global insurance history

3 of the top 15 most expensive

catastrophes in world history have occurred in the past 18 months

100

200

300

400

500

600

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Worldwide Natural Disasters,1980 – 2011*

Number of Events

*2011 figure is through June 30.Source: MR NatCatSERVICE 17

Meteorological events(Storm)

Hydrological events(Flood, mass movement)

Climatological events(Extreme temperature, drought, forest fire)

Geophysical events(Earthquake, tsunami, volcanic eruption)

There were 355 events through the first 6

months of 2011

18

U.S. Insured Catastrophe Loss Update

2011 CAT Losses Already Greatly Exceed All of 2010 and Will Become One of the Most Expensive Years on Record

19

$8

.3

$7

.4

$2

.6 $1

0.1

$8

.3

$4

.6

$2

6.5

$5

.9 $1

2.9 $

27

.5

$6

1.9

$9

.2

$6

.7

$2

7.1

$1

0.6

$1

3.6 $2

5.0

$1

00

.0

$7

.5

$2

.7

$4

.7

$2

2.9

$5

.5 $1

6.9

$0

$20

$40

$60

$80

$100

$120

89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11*20??

US Insured Catastrophe Losses

*Estimate through Oct. 31, 2011.Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01. Includes only business and personal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B.Sources: Property Claims Service/ISO; Insurance Information Institute.

2011 Will Become the 5th or 6th Most Expensive Year in History for Insured Catastrophe Losses in the US

$100 Billion CAT Year is Coming Eventually

Record Tornado Losses Caused

2011 CAT Losses to Surge

($ Billions)

2000s: A Decade of Disaster2000s: $193B (up 117%)

1990s: $89B

20

Top 12 (13?) Most Costly Disastersin U.S. History

(Insured Losses, 2010 Dollars, $ Billions)

*IncludLosses will actually be broken down into several “events” as determined by PCS.Sources: PCS; Insurance Information Institute inflation adjustments.

$11.5 $12.8$16.3 $17.5

$22.6 $23.1

$45.8

$8.6$8.2$6.7$6.3$5.3$4.3

$0$5

$10$15$20$25$30$35$40$45$50

Jeanne(2004)

Frances(2004)

Rita (2005)

Hugo (1989)

Ivan (2004)

Charley(2004)

Wilma(2005)

Ike (2008)

SpringTornadoes& Storms*

(2011)

Northridge(1994)

Andrew(1992)

9/11 Attack(2001)

Katrina(2005)

Taken as a single event, the Spring 2011 tornado season

would likely become 5th costliest event in US insurance history

21

Combined Ratio Points Associated with Catastrophe Losses: 1960 – 2011:H1*

*Insurance Information Institute estimates for 2010 and 2011:H1Notes: 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; Insurance Information Institute.

0.4

1.2

0.4 0.

8 1.3

0.3 0.4 0.

71.

51.

00.

40.

4 0.7

1.8

1.1

0.6

1.4 2.

01.

3 2.0

0.5

0.5 0.7

3.0

1.2

2.1

8.8

2.3

5.9

3.3

2.8

1.0

3.6

2.9

1.6

5.4

1.6

3.3

3.3

8.1

2.7

1.6

5.0

2.6 3.

35.

0

3.6

0.9

0.1

1.1

1.1

0.8

0

1

2

3

4

5

6

7

8

9

10

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

E

The Catastrophe Loss Component of Private Insurer Losses Has Increased Sharply in Recent Decades

Avg. CAT Loss Component of the Combined Ratio

by Decade

1960s: 1.04 1970s: 0.85 1980s: 1.31 1990s: 3.39 2000s: 3.52 2010s: 4.15*

Combined Ratio Points

Nu

mb

er

Geophysical (earthquake, tsunami, volcanic activity)

Climatological (temperature extremes, drought, wildfire)

Meteorological (storm)

Hydrological (flood, mass movement)

Natural Disasters in the United States, 1980 – 2011*Number of Events (Annual Totals 1980 – 2010 and First Half 2011)

*Through June 30.Source: MR NatCatSERVICE 22

50

100

150

200

250

300

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

There were 98 natural disaster events in the first

half of 2011

37

8

51

2

23

Inflation Adjusted U.S. Catastrophe Losses by Cause of Loss, 1990–2011:H11

0.2%

2.4%

3.4%4.9%

6.6%

8.0%

31.8%

42.7%

1. Catastrophes are defined as events causing direct insured losses to property of $25 million or more in 2009 dollars.2. Excludes snow.3. Does not include NFIP flood losses4. Includes wildland fires5. 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.

Hurricanes & Tropical Storms, $160.5

Fires (4), $9.0

Tornadoes (2), $119.5

Winter Storms, $30.0

Terrorism, $24.9

Geological Events, $18.5

Wind/Hail/Flood (3), $12.7

Other (5), $0.6

Wind losses are by far cause the most catastrophe losses,

even if hurricanes/TS are excluded.

Tornado share of CAT losses is

rising

Number of Federal Disaster Declarations, 1953-2011*

13 1

7 18

16

16

7 71

21

22

22

0 25

25

11

11

19

29

17

17

48

46

46

38

30

22 2

54

22

31

52

42

13

42

7 28

23

11

31

38

45

32 3

63

27

54

46

55

04

54

5 49

56

69

48 5

26

37

55

98

19

0

43

0

10

20

30

40

50

60

70

80

90

100

53

54

55

56

57

58

59

60

61

62

63

64

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

*

*Through October 31, 2011.Source: Federal Emergency Management Administration: http://www.fema.gov/news/disaster_totals_annual.fema ; Insurance Information Institute.

The Number of Federal Disaster Declarations Is Rising and Set a New Record in 2011

The number of federal disaster declarations set a new record in 2011, with 90

declarations through Oct. 31. It is no wonder that FEMA is

broke!

There have been 2,040 federal disaster

declarations since 1953. The average

number of declarations per year is 34 from

1953-2010, though that few haven’t been

recorded since 1995.

25

Federal Disasters Declarations by State, 1953 – Oct. 31, 2011: Highest 25 States

86

78

70

65 63

58

55 55 53 53 51 50 50 48 48 47 47 47 46 45 44 43 42 40 39

0

10

20

30

40

50

60

70

80

90

100

TX CA OK NY FL LA AL KY AR MO IL MS TN IA MN KS NE PA WV OH WA VA ND NC IN

Dis

aste

r Dec

lara

tions

Source: FEMA: http://www.fema.gov/news/disaster_totals_annual.fema; Insurance Information Institute.

Over the past nearly 60 years, Texas has had the highest number of

Federal Disaster Declarations

26

Federal Disasters Declarations by State, 1953 – Oct. 31, 2011: Lowest 25 States*

39 39

36 35 35

32 32

27 27 26 26 25 25 24 23 23 22

20

17 16 16 15 14

10 9 9 9

0

10

20

30

40

50

ME SD GA AK WI VT NJ NH OR MA PR HI MI AZ ID NM MD MT NV CO CT SC DE DC RI UT WY

Dis

aste

r Dec

lara

tions

*Includes Puerto Rico and the District of Columbia.Source: FEMA: http://www.fema.gov/news/disaster_totals_annual.fema; Insurance Information Institute.

Over the past nearly 60 years, Wyoming, Utah and Rhode Island had the fewest number of

Federal Disaster Declarations

27

SPRING 2011 TORNADO & SEVERE STORM OUTBREAK

2011 Losses Are Putting Pressure on US P/C Insurance Markets

28

1,1

33

1,1

32 1

,29

7

1,1

73

1,0

82 1,2

34

1,1

73

1,1

48

1,4

24

1,3

45

1,0

71 1,2

16

94

1

1,3

76

1,2

64

1,1

03

1,0

98

1,6

92

1,1

56 1,2

82

1,819

1,8

05

546

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11P

Nu

mb

er

of

To

rna

do

es

0

100

200

300

400

500

600

Nu

mb

er o

f De

ath

s

Number of Tornadoes

Number of Deaths

*2011 is preliminary data through October 13.Source: U.S. Department of Commerce, Storm Prediction Center, National Weather Service.

Number of Tornadoes and Related Deaths, 1990 – 2011*

Tornadoes have already claimed more than 500 lives

There were 1,805 tornadoes recorded in the US by Oct. 13

Insurers Expect to Pay at Least $2 Billion Each for the April 2011 Tornadoes in Alabama and a Similar Amount for the May Storms in Joplin

Location of Tornadoes in the US, January 1—October 13, 2011

Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2011_annual_summary.html# 29

1,805 tornadoes killed 546 people through Oct. 13, including at least 340 on April 26 mostly in the

Tuscaloosa area, and 130 in Joplin

on May 22

Location of Large Hail Reports in the US, January 1—October 13, 2011

Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2011_annual_summary.html# 30

There were 9,287 “Large Hail”

reports through Oct. 13, causing

extensive damage to homes,

businesses and vehicles

Location of Wind Damage Reports in the US, January 1—Oct. 13, 2011

Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2011_annual_summary.html# 31

There were 18,293 “Wind Damage” reports through Oct. 13, causing

extensive damage to homes and,

businesses

Severe Weather Reports,January 1—October 13, 2011

32Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2011_annual_summary.html#

There have been 29,385

severe weather reports through

Oct. 13; including 1,805

tornadoes; 9,287 “Large Hail” reports

and 18,293 high wind events

The BIG Question:When Will the Market Turn?

33

Are Catastrophes and Other Factors Pressuring Insurance Markets?

34

Criteria Necessary for a “Market Turn”:All Four Criteria Must Be Met

Criteria Status Comments

Sustained Period of

Large Underwriting

LossesEarly Stage,

Inevitable

• Apart from Q2:2011, overall p/c underwriting losses remain modest

• Combined ratios (ex-Q2 CATs) still in low 100s (vs. 110+ at onset of last hard market)

• Prior-year reserve releases continue reduce u/w losses, boost ROEs

Material Decline in Surplus/ Capacity

Entered 2011 At Record

High; Since Fallen

• Surplus hit a record $565B as of 3/31/11• Fell by 1% in Q2 2011• Little excess capacity remains in reinsurance markets• Weak growth in demand for insurance is insufficient to

absorb much excess capacityTight

Reinsurance Market

Somewhat in Place

• Much of the global “excess capacity” was eroded by cats• Higher prices in Asia/Pacific• Modestly higher pricing for US risks

Renewed Underwriting

& Pricing Discipline

Some Firming in Property,

WC

• Commercial lines pricing trends turning from negative to flat or up in some lines (property, WC)

• Competition remains intense as many seek to maintain market share

Sources: Barclays Capital; Insurance Information Institute.

35

Do the Property Catastrophe Events of 2011 Impact Casualty Markets?

Unlikely that Record 2011 Property CAT Loss Will Impact Casualty Markets in Any Material Way, Including Professional Liability Lines

Global P/C & Reinsurance Industries Entered 2011 w/ Record Capital

Events so far in 2011 are earnings events, rather than capital events

Natural Catastrophe and Casualty Risks Are Largely Uncorrelated

Risks are different

Geographically, mostly distinct primary carriers: Japan-Australia-NZ-US

Casualty markets generally don’t influence property markets

Property and Casualty Risks Are Largely Siloed

Record Property Losses in 2004/2005 Did Not Impact Casualty Mkts.

Casualty Markets Have Their Own Issues

Tort environment

Inflation

Public policy

1. UNDERWRITING

36

Have Underwriting Losses Been Large Enough for Long Enough to Turn the Market?

37

P/C Insurance Industry Combined Ratio, 2001–2011:H1*

* Excludes Mortgage & Financial Guaranty insurers 2008--2011. Including M&FG, 2008=105.1, 2009=100.7, 2010=102.4, 2011=110.5 Sources: A.M. Best, ISO.; III Estimated for 2011:H1 (Q1 actual ex-M&FG was 102.2).

95.7

99.3100.8

109.4

101.0

92.6

100.898.4

100.1

107.5

115.8

90

100

110

120

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011*

Best Combined

Ratio Since 1949 (87.6)

As Recently as 2001, Insurers Paid Out

Nearly $1.16 for Every $1 in Earned

Premiums

Relatively Low CAT Losses, Reserve Releases

Cyclical Deterioration

Heavy Use of Reinsurance Lowered Net

Losses

Relatively Low CAT Losses, Reserve Releases

Avg. CAT Losses,

More Reserve Releases

Higher CAT

Losses, Shrinking Reserve

Releases, Toll of Soft

Market

Underwriting Gain (Loss)1975–2011*

* Includes mortgage and financial guaranty insurers in all years. 2011 figure is actual H1 underwriting losses of $24.098 billion.Sources: A.M. Best, ISO; Insurance Information Institute.

Large Underwriting Losses Are NOT Sustainable in Current Investment Environment

-$55

-$45

-$35

-$25

-$15

-$5

$5

$15

$25

$35

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 1011*

The industry recorded a $10.4B underwriting loss in 2010 compared

to $3.0B in 2009

Cumulative underwriting deficit from 1975 through

2010 is $455B

($ Billions) Underwriting losses in 2011 will be much larger:

$24.1B based on H1

data

39

Number of Years with Underwriting Profits by Decade, 1920s–2010s

0 0

3

0

54

8

10

76

0

2

4

6

8

10

12

1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s* 2010s**

* 2009 combined ratio excluding mortgage and financial guaranty insurers was 99.3, which would bring the 2000s total to 4 years with an underwriting profit.**Data for the 2010s includes 2010 and 2011.Note: Data for 1920–1934 based on stock companies only.Sources: Insurance Information Institute research from A.M. Best Data.

Number of Years with Underwriting Profits

Underwriting Profits Were Common Before the 1980s (40 of the 60 Years Before 1980 Had Combined Ratios Below 100) –

But Then They Vanished. Not a Single Underwriting Profit Was Recorded in the 25 Years from 1979 Through 2003

40

2.3

-2.1

-8.3

-2.6-6.6

-9.9 -9.8

-4.1

1

11.7

23.2

13.79.9

7.3

-6.7-9.5

-14.6-16 -15

-5

-$20

-$15

-$10

-$5

$0

$5

$10

$15

$20

$25

$309

2

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09

10

E

11

E

Pri

or

Yr.

Re

se

rve

Re

lea

se

($

B)

-6

-4

-2

0

2

4

6

8 Imp

ac

t on

Co

mb

ine

d R

atio

(Po

ints

)

Prior Yr. ReserveDevelopment ($B)

Impact onCombined Ratio(Points)

P/C Reserve Development, 1992–2011E

Reserve Releases Are Remained Strong in 2010 But Should Begin to Taper Off in 2011

Note: 2005 reserve development excludes a $6 billion loss portfolio transfer between American Re and Munich Re. Including this transaction, total prior year adverse development in 2005 was $7 billion. The data from 2000 and subsequent years excludes development from financial guaranty and mortgage insurance. Sources: Barclay’s Capital; A.M. Best.

Prior year reserve releases totaled $8.8

billion in the first half of 2010, up from

$7.1 billion in the first half of 2009

Financial Strength & Underwriting

41

Cyclical Pattern is P-C Impairment History is Directly Tied to

Underwriting, Reserving & Pricing

P/C Insurer Impairments, 1969–20108

15

12

71

19

34

91

31

21

99

16

14

13

36

49

31 3

45

04

85

56

05

84

12

91

61

23

11

8 19

49 50

47

35

18

14 15 16 18

11

5

0

10

20

30

40

50

60

70

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

Source: A.M. Best Special Report “1969-2010 Impairment Review,” June 21, 2010; Insurance Information Institute.

The Number of Impairments Varies Significantly Over the P/C Insurance Cycle, With Peaks Occurring Well into Hard Markets

8 of the 18 in 2009 were small Florida carriers. Total also

includes a few title insurers.

43

P/C Insurer Impairment Frequency vs. Combined Ratio, 1969-2010

90

95

100

105

110

115

1206

97

07

17

27

37

47

57

67

77

87

98

08

18

28

38

48

58

68

78

88

99

09

19

29

39

49

59

69

79

89

90

00

10

20

30

40

50

60

70

80

91

0

Co

mb

ine

d R

ati

o

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

Imp

airm

en

t Ra

te

Combined Ratio after Div P/C Impairment Frequency

Source: A.M. Best; Insurance Information Institute

2010 impairment rate was 0.35%, down from 0.65% in 2009 and near the record low of 0.17% in 2007; Rate is still less

than one-half the 0.81% average since 1969

Impairment Rates Are Highly Correlated With Underwriting Performance and Reached Record Lows in 2007

44

Reasons for US P/C Insurer Impairments, 1969–2010

3.6%4.0%

8.6%

7.3%

7.8%

7.1%

7.8%13.6%

40.3%

Source: A.M. Best: 1969-2010 Impairment Review, Special Report, April 2011.

Historically, Deficient Loss Reserves and Inadequate Pricing AreBy Far the Leading Cause of P-C Insurer Impairments.

Investment and Catastrophe Losses Play a Much Smaller Role

Deficient Loss Reserves/Inadequate Pricing

Reinsurance Failure

Rapid GrowthAlleged Fraud

Catastrophe Losses

Affiliate Impairment

Investment Problems (Overstatement of Assets)

Misc.

Sig. Change in Business

45

Top 10 Lines of Business for US P/C Impaired Insurers, 2000–2010

2.0%4.4%

4.8%

6.5%

6.9%

7.7%

8.1%

10.9%

22.2%

26.6%

Source: A.M. Best: 1969-2010 Impairment Review, Special Report, April 2011.

Workers Comp and Pvt. Passenger Auto Account for Nearly Half of the Premium Volume of Impaired Insurers Over the Past Decade

Workers Comp

Financial Guaranty

Pvt. Passenger Auto

Homeowners

Commercial Multiperil

Commercial Auto Liability

Other Liability

Med Mal

SuretyTitle

46

Performance by Segment:Commercial Lines

109.4110.2

118.8

109.5

112.5

110.2

107.6

104.1

109.7 110.2

102.5

105.4

91.2

93.7

104.1

98.9

101.2

107.5

102.0

111.1112.3

122.3

90

95

100

105

110

115

120

125

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11P

Co

mm

erc

ial L

ine

s C

om

bin

ed

Ra

tio

Source: 2011 RIMS Benchmark Survey; A.M. Best; Insurance Information Institute

Commercial Lines Combined Ratio, 1990-2011P

Commercial lines in 2011 will likely experience record their

worst underwriting performance since 2002

Workers Compensation Combined Ratio: 1994–2011P

10

2.0

97

.0 10

0.0

10

1.0

11

0.9

11

0.0

10

7.0

10

2.7

98

.4

10

3.6

10

4.4 1

10

.6 11

6.8

11

8.012

1.7

10

7.0

11

5.3

11

8.2

80

85

90

95

100

105

110

115

120

125

130

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11P

Workers Comp Underwriting Results Are Deteriorating Markedly and the Worst They

Have Been in a DecadeSources: A.M. Best (1994-2010); Insurance Information Institute (2011P).

2. SURPLUS/CAPITAL/CAPACITY

49

Have Large Global Losses Reduced Capacity in the Industry, Setting

the Stage for a Market Turn?

50

Policyholder Surplus, 2006:Q4–2011:Q2

Sources: ISO, A.M .Best.

($ Billions)

$487.1$496.6

$512.8$521.8

$478.5

$455.6

$437.1

$463.0

$490.8

$511.5

$540.7$530.5

$544.8$556.9

$559.1

$505.0$515.6$517.9

$420

$440

$460

$480

$500

$520

$540

$560

$580

06:Q4 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:Q2

2007:Q3Previous Surplus Peak

Quarterly Surplus Changes Since 2007:Q3 Peak

09:Q1: -$84.7B (-16.2%) 09:Q2: -$58.8B (-11.2%)09:Q3: -$31.0B (-5.9%)09:Q4: -$10.3B (-2.0%)10:Q1: +$18.9B (+3.6%)

10:Q2: +$8.7B (+1.7%)10:Q3: +$23.0B (+4.4%)10:Q4: +$35.1B (+6.7%)11:Q1: +$42.9B (+8.2%)11:Q2: +37.3B (+7.1%)

Surplus as of 6/30/11 fell by 1% below its all time record high of $564.7B set

as of 3/31/11. Further declines are likely

*Includes $22.5B of paid-in capital from a holding company parent for one insurer’s investment in a non-insurance business in early 2010.

The Industry now has $1 of surplus for every $0.78 of

NPW—the strongest claims-paying status in its history.

51

M&A Activity Globally Among P/C Insurers Remains Subdued: Little Capacity Leaving

$5

1.8

$5

.5

$2

4.4

$4

5.1

$1

3.8

$2

.3

$5

.8

$1

.2

$1

5.3

$9

.8$

0.8

$2

.4

$6

.9

$7

.6$

9.4

$1

3.9

$5

0.6

$3

0.3

$1

5.0

$1

6.5

$0 $35 $70 $105 $140

2007

2008

2009

2010

Property-Casualty Life-Annuity Health/Managed Care Distribution Services

Sources: Conning Research; Insurance Information Institute.

$ Billions

52

3. REINSURANCE MARKET CONDITIONS

Record Global Catastrophes Activity is

Pressuring Pricing

Source: Guy Carpenter, GC Capital Ideas.com, September 26, 2011.

Global Property Catastrophe Rate on Line Index, 1990-2011 YTD (6/1/11)

A modest increase in global property catastrophe reinsurance pricing was

evident in June 1 renewals in the wake of record global catastrophe

losses. Larger increase could occur for the Jan.1, 2012 renewals

4. RENEWED PRICING DISCIPLINE

54

Is There Evidence of a Broad and Sustained Shift in Pricing?

55

-5%

0%

5%

10%

15%

20%

25%

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*

Soft Market Persisted in 2010 but Growth Returned: More in 2011?

(Percent)1975-78 1984-87 2000-03

*2011 figure is for H1 vs. 2010:H1. Shaded areas denote “hard market” periodsSources: A.M. Best (historical and forecast), ISO, Insurance Information Institute.

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.

NWP was up 0.9% in 2010

2011:H1 growth

was +2.6%

56

Direct Premiums Written: All P/C Lines Percent Change by State, 2005-2010

44

.8

25

.4

19

.8

17

.3

16

.6

14

.2

13

.9

12

.4

12

.3

11

.9

9.1

8.1

8.1

7.1

6.8

5.4

5.2

4.7

3.8

3.7

3.1

3.0

1.5

1.2

1.1

0

5

10

15

20

25

30

35

40

45

ND

SD LA

WY

OK

WV

KS IA TX

MT

NE

DE

MS

NM SC

DC

UT

AR

NC ID WA

AL

WI

AK

TN

Pe

ce

nt

ch

an

ge

(%

)

Sources: SNL Financial LC.; Insurance Information Institute.

Top 25 States

North Dakota is the growth juggernaut of the P/C

insurance industry—too bad nobody lives there…

57

0.7

0.6

0.1

-0.1

-0.3

-0.5

-0.8

-1.4

-1.6

-1.7

-2.5

-2.8

-2.9

-3.4

-3.6

-4.1

-4.5

-4.7

-4.8

-5.7

-5.8

-8

-8.2

-8.3

-13

.5

-14

.2

-15

.5

-20

-15

-10

-5

0

5M

D

MO

KY IN NY

GA

MN

VA

US

PA

OR FL IL CT

VT

OH RI

CO

NJ HI

ME

NH

MA

AZ

NV MI

CA

Pe

ce

nt

ch

an

ge

(%

)

Sources: SNL Financial LC; Insurance Information Institute.

Bottom 25 States

States with the poorest performing economies also produced the most negative net change in premiums of

the past 5 years

Direct Premiums Written: All P/C Lines Percent Change by State, 2005-2010

US Direct Premiums Written declined by 1.6% between 2005

and 2010

58

P/C Net Premiums Written: % Change, Quarter vs. Year-Prior Quarter

Sources: ISO, Insurance Information Institute.

Pricing and more stable exposure environment are contributing to consistent positive growth in recent quarters

(vs. the same quarter, prior year)

10.2

%15

.1%

16.8

%16

.7%

12.5

%10

.1%

9.7%

7.8%

7.2%

5.6%

2.9%

5.5%

-4.6

%-4

.1%

-5.8

%-1

.6%

10.3

%10

.2% 13

.4%

6.6%

-1.6

%2.

1%0.

0%-1

.9%

0.5%

-1.8

%-0

.7%

-4.4

%-3

.7%

-5.3

%-5

.2%

-1.4

%-1

.3%

1.3% 2.

3%1.

3%3.

5%1.

6%

-10%

-5%

0%

5%

10%

15%

20%

2002

:Q1

2002

:Q2

2002

:Q3

2002

:Q4

2003

:Q1

2003

:Q2

2003

:Q3

2003

:Q4

2004

:Q1

2004

:Q2

2004

:Q3

2004

:Q4

2005

:Q1

2005

:Q2

2005

:Q3

2005

:Q4

2006

:Q1

2006

:Q2

2006

:Q3

2006

:Q4

2007

:Q1

2007

:Q2

2007

:Q3

2007

:Q4

2008

:Q1

2008

:Q2

2008

:Q3

2008

:Q4

2009

:Q1

2009

:Q2

2009

:Q3

2009

:Q4

2010

:Q1

2010

:Q2

2010

:Q3

2010

:Q4

2011

:Q1

2011

:Q2

Positive premium growth continued into through

the first half of 2011.

59

Average Commercial Rate Change,All Lines, (1Q:2004–3Q:2011)

-3.2

%-5

.9%

-7.0

%

-9.4

%-9

.7% -8

.2%

-4.6

% -2.7

%-3

.0%

-5.3

%-9

.6%

-11

.3%

-11

.8%

-13

.3%

-12

.0%

-13

.5%

-12

.9% -1

1.0

%-6

.4% -5

.1%

-4.9

%-5

.8%

-5.6

%-5

.3%

-6.4

% -5.2

%-5

.4%

-2.9

%-0

.1%

0.9%

-0.1

%

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

1Q

04

2Q

04

3Q

04

4Q

04

1Q

05

2Q

05

3Q

05

4Q

05

1Q

06

2Q

06

3Q

06

4Q

06

1Q

07

2Q

07

3Q

07

4Q

07

1Q

08

2Q

08

3Q

08

4Q

08

1Q

09

2Q

09

3Q

09

4Q

09

1Q

10

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

Source: Council of Insurance Agents & Brokers; Insurance Information Institute

KRW Effect

Pricing as of Q3:2011 is positive

for the first time since 2003

(Percent)

Q2 2011 marked the 30th consecutive quarter of price

declines

60

D&O Premium Index: U.S. For-Profit Entities Only, 1974-2011:Q3

Sources: Towers Perrin, Directors and Officers Liability, 2008 Survey of Insurance Purchasing Trends for data through 2008. Data for 2009-2011:Q3 are Insurance Information Institute estimates derived from annual averages of quarterly data from the Council of Insurance Agents and Brokers survey. *2011 figure calculated using the average of the first three quarters of 2011.

0

200

400

600

800

1,000

1,200

1,400

19

74

19

76

19

78

19

80

19

82

19

84

19

86

19

88

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

*

Enron and Worldcom Bankruptcies, Tech Bubble Collapse; Over commercial

hard market

61

D&O Average Rate Change,(1Q:2007–3Q:2011)

-7.7

%

-8.5

%

-7.6

%

-8.4

%

-8.1

% -6.1

%

-0.2

%

0.3

%

1.1

%

-0.7

%

-1.9

%

-2.1

%

-3.4

%

-3.7

% -1.9

% -0.4

%

0.3

%

0.8

%

-8.7

%

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

1Q

07

2Q

07

3Q

07

4Q

07

1Q

08

2Q

08

3Q

08

4Q

08

1Q

09

2Q

09

3Q

09

4Q

09

1Q

10

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

Source: Council of Insurance Agents & Brokers; Insurance Information Institute

Pre-Crisis: D&O was less soft than the market overall

During Crisis: Fear over Financial Institution

exposure causes firming in D&O market,

albeit less than anticipated

(Percent) D&O market softens modestly when FI

exposures are less than feared and markets recover

3 Years After Crisis: D&O market firms along with overall

market

62

D&O vs All Lines Average Commercial Rate Change, (1Q:2007–3Q:2011)

-11

.8%

-12

.0%

-11

.0%

-6.4

% -5.1

%

-4.9

%

-5.8

%

-5.6

%

-5.3

%

-6.4

% -5.2

%

-5.4

%

-2.9

%

-0.1

%

-7.7

%

-8.5

%

-7.6

%

-8.4

%

-8.1

% -6.1

%

-0.2

%

0.3

%

1.1

%

-0.7

%

-1.9

%

-2.1

%

-3.4

%

-3.7

% -1.9

% -0.4

%

0.3

%0

.9%

-13

.3%

-12

.9%

-13

.5%-1

1.3

%

0.8

%

-8.7

%

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

1Q

07

2Q

07

3Q

07

4Q

07

1Q

08

2Q

08

3Q

08

4Q

08

1Q

09

2Q

09

3Q

09

4Q

09

1Q

10

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

Source: Council of Insurance Agents & Brokers; Insurance Information Institute

Pre-Crisis: D&O was less soft than the market overall

During Crisis: Fear over Financial Institution

exposure causes firming in D&O market,

albeit less than anticipated

(Percent) D&O market softens modestly when FI

exposures are less than feared and markets recover

3 Years After Crisis: D&O market firms along with overall

market

63

Change in Commercial Rate Renewals, by Account Size: 1999:Q4 to 2011:Q3

Source: Council of Insurance Agents and Brokers; Insurance Information Institute.

Percentage Change (%)

Peak = 2001:Q4 +28.5%

Pricing Turned Negative in Early

2004 and Has Been Negative

Ever Since

Pricing turned positive (+0.9%) in Q3:2011, the first increase in

nearly 7 years (Q4:2003)

KRW Effect: No Lasting Impact

Trough = 2007:Q3 -13.6%

64

Cumulative Qtrly. Commercial Rate Changes, by Account Size: 1999:Q4 to 2011:Q3

Source: Council of Insurance Agents and Brokers; Insurance Information Institute.

Downward pricing pressure still

evident for large accounts, down 0.6% in Q3:2011

Despite Q3:2011 gain of 0.9%, pricing today is

where is was in late 2000 (pre-9/11)

1999:Q4 = 100

65

Change in Commercial Rate Renewals, by Line: 2011:Q3

Source: Council of Insurance Agents and Brokers; Insurance Information Institute.

Major Commercial Lines Renewed Uniformly Upward in Q3:2011 for the First Time Since 2003, With Workers Up More than Any Other Line

Percentage Change (%)

1.5%1.9%

3.0%

4.1%

0.2% 0.3%0.6%

0.8% 0.8%

1.3%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

Ge

ne

ral

Lia

bili

ty

Su

rety

Co

mm

l Au

to

Co

nst

ruct

ion

D&

O

Um

bre

lla

EP

L

Bu

s.In

terr

up

tion

Co

mm

erc

ial

Pro

pe

rty

Wo

rke

rsC

om

p

Workers Comp Rate Changes,2008:Q4 – 2011:Q3

Source: Council of Insurance Agents and Brokers; Information Institute.

-5.5%-4.6%

-4.0%-4.6%

-3.7% -3.9%

-5.4%

-3.7% -3.4%

-1.6%

2.6%

4.1%

-6%

-4%

-2%

0%

2%

4%

6%

08:Q4 09:Q1 09:Q2 09:Q3 09:Q4 10:Q1 10:Q2 10:Q3 10:Q4 11:Q1 11:Q2 11:Q3

The Q3 2011 WC rate change was the largest

among all major commercial lines

(Percent Change)

109.4110.2

118.8

109.5

112.5

110.2

107.6

104.1

109.7 110.2

102.5

105.4

91.2

93.7

104.1

98.9

101.2

107.5

102.0

111.1112.3

122.3

$7

.30

$6

.49

$1

3.9

1

$1

3.1

5

$1

1.9

4

$1

1.5

5

$1

0.6

8

$1

0.3

5

$1

0.0

2

10

.25

$1

1.9

5

$8

.30

$1

3.5

0

$8

.42

$4

.83

$5

.20

$5

.71

$5

.25

$5

.70

$7

.70

$6

.40

$6

.10

90

95

100

105

110

115

120

125

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11*

Co

mm

erc

ial L

ine

s C

om

bin

ed

Ra

tio

$0

$2

$4

$6

$8

$10

$12

$14

Co

st

of

Ris

k/$

10

00

Re

ve

nu

e

CommercialCombined RatioCost of Risk

*Insurance Information Institute estimates for 2011.Source: 2011 RIMS Benchmark Survey; A.M. Best; Insurance Information Institute

Cost of Risk vs. Commercial Lines Combined Ratio

The cost of risk cannot continue to fall as actual

results deteriorate

How the Risk Dollar is Spent (2011)

Source: 2011 RIMS Benchmark Survey, Advisen; Insurance Information Institute

Firms w/Revenues < $1 Billion

WC Premiums,

8%

Total Mgmt. Liab., 5%

Liability Retained

Losses, 13%

Liability Premiums,

21%

Property Premiums,

21%

Retained Property

Losses, 3%

WC Retained Losses, 9%

Total Prof. Liability

Costs, 8%

Firms w/Revenues > $1 Billion

Management & Professional Liability Costs Account for 9% - 13% of the Risk Dollar

WC Premiums,

6%

Total Mgmt. Liab., 6%

Liability Retained

Losses, 12%

Liability Premiums,

10%

Property Premiums,

13%

Retained Property

Losses, 8%

WC Retained Losses, 21%

Total Prof. Liability

Costs, 3%

69

The Unfortunate Nexus: Opportunity, Risk & Instability

Most of the Global Economy’s Future Gains Will be Fraught with Much

Greater Risk and Uncertainty than in the Past

70

Global Real (Inflation Adjusted) NonlifePremium Growth: 1980-2010

Source: Swiss Re, sigma, No. 2/2010.

198

0198

1198

2198

3198

4198

5198

6198

7198

8198

9199

0199

1199

2199

3199

4199

5199

6199

7199

8199

9200

0200

1200

2200

3200

4200

5200

6200

7200

8200

9201

0

-10%

-5%

0%

5%

10%

15%

20%

Real growth rates

Total Industrialised countries Emerging markets

Nonlife premium growth in emerging markets has

exceeded that of industrialized countries in

27 of the past 31 years, including the entirety of the

global financial crisis..

Real nonlife premium growth is very erratic in part to inflation volatility in emerging markets as

well as a lack of consistent cyclicality

Average: 1980-2010

Industrialized Countries: 3.8%

Emerging Markets: 9.2%

Overall Total: 4.2%

71

Nonlife Real Premium Growth in 2010

Source: Swiss Re, sigma, No. 2/2011.

Latin and South American markets performed

relatively well during and after the global financial crisis in terms of growth

There was also growth in the Middle East, East and South Asia as well as Australia and New

Zealand

72

Political Risk in 2010: Greatest Business Opportunities Are Often in Risky Nations

Source: Maplecroft

The fastest growing markets are generally

also among the politically riskiest

Heightened risk has insurance implications

(4.0)

(2.0)

0.0

2.0

4.0

6.0

8.0

10.0

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

Advanced economies Emerging and developing economies World

Source: International Monetary Fund, World Economic Outlook Update, June 2011; Ins. Info. Institute.

Emerging economies (led by China) are expected to grow by 6.6% in 2011 and 6.4% in 2012. Role of FDI in exposure growth key.

GDP Growth: Advanced & Emerging Economies vs. World, 1970-2012F

Advanced economies are expected to grow at a relative modest 2.2% in

both 2011 and 2.6% in 2012.

World output is forecast to grow by 4.3% in 2011 and 4.6% in 2011,

following growth of 3.0% in 2010 and a 0.6% drop in 2009.

GDP Growth (%)

74

Other Cycle-Influencing Factors

Could Other Factors Act as a Catalyst to Turn the

Market?

INVESTMENTS: THE NEW REALITY

75

Investment Performance is a Key Driver of Profitability

Does It Influence Underwriting or Cyclicality?

Property/Casualty Insurance Industry Investment Gain: 1994–2011:H11

$35.4

$42.8$47.2

$52.3

$44.4

$36.0

$45.3$48.9

$59.4$55.7

$64.0

$31.7

$39.2

$52.9

$24.8

$58.0

$51.9$56.9

$0

$10

$20

$30

$40

$50

$60

$70

94 95 96 97 98 99 00 01 02 03 04 05* 06 07 08 09 10 11:H1

Investment Gains Recovered Significantly in 2010 Due to Realized Investment Gains; The Financial Crisis Caused Investment Gains to

Fall by 50% in 2008

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.Sources: ISO; Insurance Information Institute.

($ Billions)

2011 investment gains are likely to come in

below 2010 due to lower interest rates and poor stock market returns

77

Treasury Yield Curves: Pre-Crisis (July 2007) vs. Sept. 2011*

0.01% 0.01% 0.04% 0.10% 0.21%

1.42%

1.98%

4.82% 4.96% 5.04% 4.96% 4.82% 4.82% 4.88% 5.00% 4.93% 5.00%5.19%

0.90%

0.35%

3.18%2.83%

0%

1%

2%

3%

4%

5%

6%

1M 3M 6M 1Y 2Y 3Y 5Y 7Y 10Y 20Y 30Y

September 2011 Yield Curve*Pre-Crisis (July 2007)

Treasury yield curve remains near its most depressed level

in at least 45 years. Investment income is falling as a result. Fed is unlikely to hike rates until well into 2013.

The End of the Fed’s Quantitative Easing Is Unlikely to Push Interest Rates Up Substantially Given Ongoing Economic Weakness

*Average of daily rates.Sources: Board of Governors of the United States Federal Reserve Bank; Insurance Information Institute.

78

-1.8

%

-1.8

%

-2.0

%

-3.6

%

-3.3

%

-3.3

%

-3.7

%

-4.3

%

-5.2

%

-5.7

%

-7.3%

-1.9

%

-2.1

%

-3.1

%

-8%-7%-6%-5%-4%-3%-2%-1%0%

Perso

nal L

ines

Pvt Pass

Aut

o

Pers P

rop

Comm

ercia

l

Comm

l Auto

Credit

Comm

Pro

p

Comm

Cas

Fidelity

/Sure

ty

Warra

nty

Surplu

s Line

s

Med

Mal

WC

Reinsu

rance

**

Lower Investment Earnings Place a Greater Burden on Underwriting and Pricing Discipline

*Based on 2008 Invested Assets and Earned Premiums**US domestic reinsurance onlySource: A.M. Best; Insurance Information Institute.

Reduction in Combined Ratio Necessary to Offset 1% Decline in Investment Yield to Maintain Constant ROE, by Line*

Shifting Legal Liability & Tort Environment

79

Is the Tort PendulumSwinging Against Insurers?

80

Over the Last Three Decades, Total Tort Costs as a % of GDP Appear Somewhat Cyclical

$0

$50

$100

$150

$200

$250

$300

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10E 12E

To

rt S

ys

tem

Co

sts

1.50%

1.75%

2.00%

2.25%

2.50%

To

rt Co

sts

as

% o

f GD

P

Tort Sytem Costs Tort Costs as % of GDP

($ Billions)

Sources: Towers Watson, 2010 Update on US Tort Cost Trends, Appendix 1A

Tort Costs Have Remained High but Relatively Stable Since the mid-2000s. As a Share of GDP they Should Fall as

the Economy Expands

Business Leaders Ranking of Liability Systems in 2010

Best States

1. Delaware

2. North Dakota

3. Nebraska

4. Indiana

5. Iowa

6. Virginia

7. Utah

8. Colorado

9. Massachusetts

10. South Dakota

Worst States

41. New Mexico

42. Florida

43. Montana

44. Arkansas

45. Illinois

46. California

47. Alabama

48. Mississippi

49. Louisiana

50. West Virginia

Source: US Chamber of Commerce 2010 State Liability Systems Ranking Study; Insurance Info. Institute.

New in 2010

North Dakota Massachusetts South Dakota

Drop-offs

Maine Vermont Kansas

Newly Notorious

New Mexico Montana Arkansas

Rising Above

Texas South Carolina Hawaii

Midwest/West has mix of good and bad states.

82

The Nation’s Judicial Hellholes: 2010

Source: American Tort Reform Association; Insurance Information Institute

South Florida

West VirginiaIllinoisCook County

NevadaClark County

Watch List

Madison County, IL Atlantic County, NJ St. Landry Parish,

LA District of Columbia NYC and Albany,

NY St. Clair County, IL

Dishonorable Mention

MI Supreme Court City of St. Louis CO Supreme Court

CaliforniaLos Angeles

and Humboldt Counties

Philadelphia

Inflation

83

Is it a Threat to Claim Cost Severities

84

Annual Inflation Rates, (CPI-U, %),1990–2017F

2.8 2.6

1.51.9

3.3 3.4

1.3

2.5 2.3

3.0

3.8

2.8

3.8

-0.4

1.6

3.1

2.2 2.3 2.4 2.4 2.4 2.52.9

2.4

3.23.0

5.14.9

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11F12F13F14F15F16F17F

Sources: US Bureau of Labor Statistics; Blue Chip Economic Indicators, 10/11 (forecasts).

The slack in the U.S. economy suggests that inflation should not heat upbefore 2012, but other forces (commodity prices, inflation in countries from which we import, etc.), plus U.S. debt burden, remain longer-run concerns

Annual Inflation Rates (%)

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

Higher energy, commodity and food prices are pushing up inflation in 2011, but not longer turn

inflationary expectations.

Medical Cost Inflation Has Outpaced Overall Inflation Over 50 Years

719.8

1589.8

0

300

600

900

1200

1500

1800

61 66 71 76 81 86 91 96 01 06 11*

Inde

x V

alue

(196

1=10

0)

All ItemsMedical Care

*Based on change from Feb. 2011 to Feb. 2010 (latest available) Source: Department of Labor (Bureau of Labor Statistics)

A claim that cost $1,000 in 1961 would cost nearly $16,000 based on

medical cost inflation trends over the past 50 years.

Regulatory Environment & Financial Services Reform

86

Insurers Not as Impacted as Banks, But Dodd-Frank

Implementation Has Been a Concern for Insurers

Source: James Madison Institute, February 2008.

ME

NH

MA

CT

PA

WV

VA

NC

LA

TX

OK

NE

ND

MN

MI

IL

IA

ID

WA

OR

AZ

HI

NJRI B

DE

AL

VT

NY

MD

SC

GA

TN

AL

FL

MS

ARNM

KYMOKS

SDWI

IN

OH

MT

CA

NV

UT

WY

CO

AK

= A= B= C= D= F= NG

Source: Heartland Institute, May 2011

B B+

B+

D

B

C-

B-

B+

B+C-

B+C-

B

C+

C-

C-

B- D-

B

F

D

C-

C-C+

B+

B+

B+

A+

A+

C-

B

A

A

B

C+

C+

B-

B-

C+

C

F

D+F

D+

B

C+

F F

D-

2010 Property and Casualty InsuranceRegulatory Report Card

Not Graded: District of Columbia

Dodd-Frank & Insurance One Year:Status Report

88

Expectations vs. Reality

89

Dodd-Frank ImplementationStatus Report for Insurers: Slow Start

Financial Stability Oversight Council—Slow to Consider Insurer Concerns

FSOC deliberates largely behind closed doors

Criteria and process for designation of Systemically Important Financial Institutions (SIFIs) were not announced until October 12, 2011

• Possible that small number of US insurers will be designated as SIFIs

Operated/deliberated until late September 2011 without a voting member representing the insurance industry

• Roy Woodall, approved by Senate in Sept. 27, 2011, is the sole voting representative for the entire p/c and life insurance industry (was Kentucky Ins. Comm. 1966-1967; Worked in other insurance trade posts, Treasury)

Two non-voting FSOC members represent insurance interests:

• FIO Director Michael McGraith (started June 1, 2011)

• Missouri Insurance Director John Huff (started in Sept. 2010)

Not allowed to brief fellow regulators on FSOC discussions

The Dodd-Frank Wall Street Reform and Consumer Protection Act

Source: Insurance Information Institute (I.I.I.) updates and research

90

Dodd-Frank Implementation:SYSTEMIC RISK CRITERIA

All Banks with Assets > $50B Considered Systemically Important Non-Bank Financial Groups with Global Consolidated Assets > $50B Will Be Examined

for Systemic Riskiness, But Not Automatically Labeled as a Systemically Important Financial Institution (SIFI)

Foreign firms with assets in the US exceeding $50 billion will also fall under review If Firm Exceeds the $50B Threshold, a 3-Stage Test Applies STAGE 1: Non-Banks Financial Groups with $50B+ Assets Will Be Evaluated on Five

“Uniform Quantitative Thresholds,” at Least One of Which Will Have to Be Met to Trigger a Further (Stage 2) Review Potentially Leading to a SIFI Designation

Leverage: Would have to be leveraged more than 15:1 (insurers unlikely to trigger) ST Debt-to-Assets: Would have to a ratio of ST debt (less than 12 months to maturity) to

consolidate assets exceeding 10% Debt: Have total debt exceeding $20 billion (i.e., loans borrowed and bond issues) Derivative Liabilities: Have derivative liabilities exceeding $3.5 billion Credit Default Swaps: Have more than $30 billion CDS outstanding for which the nonbank financial

firm is the reference entity (i.e., CDS written against firm’s failure) Thresholds Considered to Be Guideposts

Not all companies that breach a barrier will be deemed systemically important Regulators retain right to include firms that do meet any of the criteria

The Dodd-Frank Act and Systemic Importance

Source: Financial Stability Oversight Council; Insurance Information Institute (I.I.I.) research.

91

Dodd-Frank Implementation:SYSTEMIC RISK CRITERIA (continued)

STAGE 2: Analysis of Firms Triggering Uniform Quantitative Thresholds Firms triggering one or more of the quantitative thresholds in Stage 1 will be analyzed using publicly

available information in order to conduct a more thorough review No data call will be required at this stage Firms viewed as potentially systemically important (candidate SIFIs) will subject to a Stage 3 analysis

STAGE 3: Analysis of Candidate Systemically Important Financial Institutions Firms deemed in Stage 2 to be potentially systemically important will be subjected to more detailed

analysis including data not available during the Stage 2 analysis Stage 3 firms will be notified by the FSOC that they are under consideration and will have the

opportunity to contest their consideration SIFI DESIGNATION PROCEDURE: 2-Stage Voting Procedure by FSOC is Required

Before a Final SIFI Designation is Made At the conclusion of the Stage 3, FSOC has the authority to propose a firm be designated as a SIFI Requires 2/3 majority vote of FSOC members, including affirmation of the Chair (Treasury Secretary) Potential SIFI firm will be given written explanation for the determination Firm can request a hearing to contest the determination Final determination requires another 2/3 majority of FSOC members and affirmation of the Chair

The Dodd-Frank Act and Systemic Importance

Source: Financial Stability Oversight Council; Insurance Information Institute (I.I.I.) research.

The Strength of the Economy Will Influence P/C Insurer

Growth Opportunities

92

Growth Would Also Help Absorb Excess Capital

93

US Real GDP Growth*

* Estimates/Forecasts from Blue Chip Economic Indicators.Source: US Department of Commerce, Blue Economic Indicators 10/11; Insurance Information Institute.

2.7

%

0.9

%

3.2

%

2.3

%

2.9

%

-0.7

%

0.6

%

-4.0

%

-6.8

% -4.9

%

-0.7

%

1.6

%

5.0

%

3.9

%

3.8

%

2.5

%

2.3

%

0.4

%

1.3

% 2.5

%

1.9

%

1.9

%

2.2

%

2.5

%2

.7%4.1

%

1.1

%

1.8

%

2.5

% 3.6

%

3.1

%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

   2

00

0   

   2

00

1   

   2

00

2   

   2

00

3   

   2

00

4   

   2

00

5   

   2

00

6   

07

:1Q

07

:2Q

07

:3Q

07

:4Q

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

Demand for Insurance Continues To Be Impacted by Sluggish Economic Conditions, but the Benefits of Even Slow Growth Will Compound and

Gradually Benefit the Economy Broadly

Real GDP Growth (%)

Recession began in Dec. 2007. Economic toll of credit

crunch, housing slump, labor market contraction has

been severe but modest recovery is underway

The Q4:2008 decline was the steepest since the Q1:1982 drop of 6.8%

2011 got off to a sluggish start, but growth is expected to proceed at a more modest, though still relatively weak

pace through 2012

94

43,6

9448

,125

69,3

0062

,436

64,0

04 71,2

77 81,2

3582

,446

63,8

5363

,235

64,8

53 71,5

4970

,643

62,3

0452

,374

51,9

5953

,549

54,0

2744

,367

37,8

8435

,472

40,0

9938

,540

35,0

3734

,317

39,2

0119

,695 28

,322

43,5

4660

,837

56,2

8224

,680

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

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

Business Bankruptcy Filings,1980-2011:H1

Sources: American Bankruptcy Institute at http://www.abiworld.org/AM/AMTemplate.cfm?Section=Home&TEMPLATE=/CM/ContentDisplay.cfm&CONTENTID=61633 ; Insurance Information Institute

Significant Exposure Implications for All Commercial Lines as Business Bankruptcies Begin to Decline

2010 bankruptcies totaled 56,282, down 7.5% from 60,837 in 2009—which were up 40%

from 2008 and the most since 1993. 2011:H1 filings are down 15.1% from 2010:Q2.

% Change Surrounding Recessions

1980-82 58.6%1980-87 88.7%1990-91 10.3%2000-01 13.0%2006-09 208.9%*

95

Private Sector Business Starts, 1993:Q2 – 2010:Q4*

175

186

174

180

186

192

188

187 18

918

6 190 19

419

119

9 204

202

195

196

196

206

206

201

192

198

206

206

203

211

205

212

200 20

520

420

419

720

320

920

1

192

192

193

201 20

420

221

0 212

209

216 22

0 223

220

220

210

221

212

204

218

209

207

207

199

191 19

317

2 176

169

184

172

172

182

196

203

150

160

170

180

190

200

210

220

230

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

Business Starts Were Down Nearly 20% in the Recession, Holding Back Most Types of Commercial Insurance Exposure

* Data through December 31, 2010 are the latest available as of September 8, 2011; Seasonally adjustedSource: Bureau of Labor Statistics, http://www.bls.gov/news.release/cewbd.t08.htm.

(Thousands)

722,000 new business starts were recorded in 2010, up 3.6% from 697,000 in 2009, which was the slowest year for new business starts since 1993.

Business Starts2006: 872,0002007: 843,0002008: 790,0002009: 697,000 2010: 722,000

96

11 Industries for the Next 10 Years: Insurance Solutions Needed

Shipping (Rail, Marine, Trucking)

Health Sciences

Health Care

Energy (Traditional)

Alternative Energy

Agriculture

Natural Resources

Environmental

Technology (incl. Biotechnology)

Light Manufacturing

Export-Oriented Industries

Many industries are

poised for growth, but

many insurers do not write in

these economic segments

97

Labor Market Trends

Massive Job Losses Sapped the Economy and Commercial/Personal

Lines Exposure, But Trend is Improving

98

Unemployment and Underemployment Rates: Stubbornly High in 2011

2

4

6

8

10

12

14

16

18

Jan00

Jan01

Jan02

Jan03

Jan04

Jan05

Jan06

Jan07

Jan08

Jan09

Jan10

Jan11

Traditional Unemployment Rate U-3

Unemployment + Underemployment Rate U-6

Unemployment stood at 9.1% in

September

Unemployment peaked at 10.1% in October 2009, highest monthly rate since 1983.

Peak rate in the last 30 years:

10.8% in November -

December 1982

Source: US Bureau of Labor Statistics; Insurance Information Institute.

U-6 went from 8.0% in March

2007 to 17.5% in October 2009; Stood at 16.5% in Sept. 2011

January 2000 through September 2011, Seasonally Adjusted (%)

Recession ended in

November 2001

Unemployment kept rising for

19 more months

Recession began in

December 2007

Stubbornly high unemployment and underemploymentwill constrain overall economic growth

Sep 11

18

67

92

13

65 1

27

42

15

-10

9-1

46

5 97

23

-12

-85 -58

-16

1-2

53

-23

0-2

57

-34

7-4

56

-54

7-7

34 -66

7-8

06 -7

07

-74

4 -64

9-3

34

-45

2-2

97 -2

15

-18

6-2

62

75

-83

16 6

2

22

95

1 61 1

17

14

31

12 1

93

12

8 16

79

42

61

21

92

41

99

75

17

34

21

37

14

4

(1,000)

(800)

(600)

(400)

(200)

0

200

400

Jan

-07

Fe

b-0

7M

ar-

07

Ap

r-0

7M

ay-

07

Jun

-07

Jul-

07

Au

g-0

7S

ep

-07

Oct

-07

No

v-0

7D

ec-

07

Jan

-08

Fe

b-0

8M

ar-

08

Ap

r-0

8M

ay-

08

Jun

-08

Jul-

08

Au

g-0

8S

ep

-08

Oct

-08

No

v-0

8D

ec-

08

Jan

-09

Fe

b-0

9M

ar-

09

Ap

r-0

9M

ay-

09

Jun

-09

Jul-

09

Au

g-0

9S

ep

-09

Oct

-09

No

v-0

9D

ec-

09

Jan

-10

Fe

b-1

0M

ar-

10

Ap

r-1

0M

ay-

10

Jun

-10

Jul-

10

Au

g-1

0S

ep

-10

Oct

-10

No

v-1

0D

ec-

10

Jan

-11

Fe

b-1

1M

ar-

11

Ap

r-1

1M

ay-

11

Jun

-11

Jul-

11

Au

g-1

1S

ep

-11

Monthly Change in Private Employment

January 2008 through September 2011* (Thousands)

Private Employers Added 2.764 million Jobs Since Jan. 2010 After Having Shed 4.66 Million Jobs in 2009 and 3.81 Million in 2008 (State and Local Governments Have Shed Hundreds of Thousands of Jobs

Source: US Bureau of Labor Statistics: http://www.bls.gov/ces/home.htm; Insurance Information Institute

Monthly Losses in Dec. 08–Mar. 09 Were

the Largest in the Post-WW II Period

137,000 private sector jobs were created in

September

100

Unemployment Rates by State, September 2011:Highest 25 States*

13.4

11.9

11.1

11.1

11.0

10.6

10.6

10.5

10.5

10.3

10.0

9.8

9.8

9.7

9.6

9.2

9.1

9.1

9.1

9.1

9.0

8.9

8.9

8.7

8.5

8.3

0

2

4

6

8

10

12

14

NV CA DC MI SC FL MS NC RI GA IL AL TN KY OR NJ AZ OH WA US ID CT IN MO TX AR

Une

mpl

oym

ent R

ate

(%)

*Provisional figures for September 2011, seasonally adjusted.Sources: US Bureau of Labor Statistics; Insurance Information Institute.

In September, 25 states reported over-the-month unemployment rate

decreases, 14 had increases, and 11 and the District of Columbia had no change.

101

8.3

8.3

8.2

8.1

8.0

7.8

7.7

7.6

7.5

7.4

7.4

7.3

6.9

6.9

6.7

6.6

6.5

6.4

6.0

5.9

5.8

5.8

5.4

4.6

4.2

3.5

0

2

4

6

8

10

CO PA WV DE NY WI MT AK ME MD UT MA LA MN KS NM VA HI IA OK VT WY NH SD NE ND

Une

mpl

oym

ent R

ate

(%)

Unemployment Rates By State, September 2011: Lowest 25 States*

*Provisional figures for September 2011, seasonally adjusted.Sources: US Bureau of Labor Statistics; Insurance Information Institute.

In September, 25 states reported over-the-month unemployment rate

decreases, 14 had increases, and 11 and the District of Columbia had no change.

102

US Unemployment Rate

4.5

%

4.5

%

4.6

%

4.8

%

4.9

% 5.4

% 6.1

%

6.9

%

8.1

%

9.3

%

9.6

% 10

.0%

9.7

%

9.6

%

9.6

%

8.9

%

9.1

%

9.1

%

9.1

%

9.1

%

9.1

%

9.0

%

8.9

%9.6

%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

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

Rising unemployment eroded payrolls

and workers comp’s

exposure base.

Unemployment peaked at 10% in

late 2009.

* = actual; = forecastsSources: US Bureau of Labor Statistics; Blue Chip Economic Indicators (10/11); Insurance Information Institute

2007:Q1 to 2012:Q4F*

Unemployment forecasts remain stubbornly high

through 2011, but still imply millions of new

jobs will created.

Jobless figures have been revised

upwards for 2011/12

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Thank you for your timeand your attention!

Twitter: twitter.com/bob_hartwigDownload at www.iii.org/presentations

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