Global Reinsurer Capital Continues To Build To USD575 Billion

Aon Benfield Analytics | Market Analysis

The Aon Benfield Aggregate Results for the year ended December 31, 2014

Risk. Reinsurance. Human Resources.

Table of Contents Global Reinsurer Capital ...................................................................................................3 Executive Summary ..........................................................................................................4 ABA Capital ......................................................................................................................5 Capital Development ......................................................................................................... 5 Capital Management .......................................................................................................... 6 Premium Income ..............................................................................................................8 Earnings .........................................................................................................................12 Underwriting Performance ............................................................................................... 13 Investment Results ........................................................................................................... 15 Net Income ...................................................................................................................... 16 Return on Equity .............................................................................................................. 17 ABA Business Model Evolution ........................................................................................19 Who Are The New Investors? ........................................................................................... 19 How Is New Money Being Deployed? .............................................................................. 19 Implications for ‘Traditional’ Reinsurers ............................................................................ 19 How Are The ABA Companies Responding? ..................................................................... 19 Mergers & Acquisitions...................................................................................................21 ABA Valuation ................................................................................................................22 Financial Strength Ratings ..............................................................................................23 Appendix 1: ABA Data ....................................................................................................24

2

The Aon Benfield Aggregate – Results for the year ended December 31, 2014

Global Reinsurer Capital Aon Benfield estimates that global reinsurer capital totaled USD575 billion at the end of 2014, an increase of 6% over the course of the year. This calculation is a broad measure of capital available for insurers to trade risk with and includes both traditional and alternative forms of reinsurer capital.

Exhibit 1: Global Reinsurer Capital 700

Traditional Capital Alternative Capital Global Reinsurer Capital

600

USD (billions)

500 400

385

400 340

6%

-17%

300 200

470

410

455

6% 7%

11%

-3%

575

540

505

18%

18%

447

428

466

490

511

368

388

17

22

19

22

24

28

39

50

64

FY 2006

FY 2007

FY 2008

FY 2009

FY 2010

FY 2011

FY 2012

FY 2013

FY 2014

321

378

100 0

Source: Company reports, Aon Benfield Analytics

Traditional capital rose by 4% to USD511 billion. Major insurers and reinsurers generally maintained their solid operating performance during 2014, aided by below average insured catastrophe losses, economic recovery in the United States, exposure growth in emerging markets and relatively stable capital market conditions. Retained earnings were bolstered by unrealized gains on bond portfolios, driven in particular by lower yields in the eurozone, providing a boost to reported capital positions.

Alternative capital continued its strong growth, rising by 28% to USD64 billion in 2014. This was reflected in record levels of catastrophe bond issuance, expansion of fully collateralized placements, the establishment of new sidecar vehicles and the exploration of alternative business models by hedge fund managers.

Evolution of the ABA Aon Benfield Aggregate (ABA) reports are produced on a half-yearly basis and cover the reported results of 31 major reinsurers worldwide, with the aim of identifying current trends in the P&C reinsurance marketplace.

The study comprises 29 publicly-listed holding companies (‘the listed ABA’) and two US-domiciled subsidiaries of Berkshire Hathaway, namely National Indemnity Company (NICO) and General Reinsurance Corporation (Gen Re).

NICO’s 2014 results were significanty impacted by intra-group transactions involving GEICO. To provide a more meaningful picture of the sector’s underlying performance, many of the charts and ratios used in this report focus on the listed ABA. Platinum was acquired by RenaissanceRe effective March 2, 2015 and therefore will not feature in future editions.

Aon Benfield Analytics | Market Analysis

3

Executive Summary Reinsurance industry capital continues to build, with material alternative capital growth.

Underwriting performance remains strong, given low global catastrophe losses.

Aon Benfield estimates that global reinsurer capital rose by 6% to USD575 billion in 2014, including a 28% increase in alternative capital to USD64 billion.

The combined ratio of the listed ABA improved by 0.3 percentage points to 89.9% in 2014. P&C underwriting profit rose by 6% to USD16.8 billion.

The shareholders' funds of the 31 ABA companies rose by 2% to USD346 billion, driven by net income of USD38.5 billion and unrealized gains of USD8.1 billion.

The attritional loss and expense ratios were impacted by weakening pricing and increased volumes of longer tail proportional business.

Alternative capital has driven catastrophe risk transfer costs down.

Investment returns have been resilient, despite the impact of low interest rates.

Reinsurers are incorporating material alternative capital (through ILS, sidecars, and asset management mandates) to lower their cost of underwriting capital.

The listed ABA reported a 2% increase in ordinary investment income to USD26.5 billion in 2014, driven by underlying asset growth and portfolio repositioning.

Dividends and share buybacks rose by 18% to USD18.3 billion in 2014. This was equivalent to 8.0% of opening capital, up from 6.4% in 2013.

Headline return on equity has been stable at around 11% for the last three years.

Premium growth is being achieved, despite difficult market conditions.

Property and casualty (P&C) premiums written by the 29 listed ABA companies rose by 2% to USD198 billion in 2014.

Reinsurance volume was unchanged at USD89 billion, despite the industry’s pricing pressure.

4

The Aon Benfield Aggregate – Results for the year ended December 31, 2014

Across the listed ABA, net income attributable to common shareholders rose by 4% to USD25.5 billion in 2014.

Sector consolidation is underway as companies look to achieve the advantages of scale and diversification.

Three recently announced M&A transactions between ABA companies will reduce the number of entities in the study.

ABA Capital The reported shareholders’ funds of the 31 ABA companies stood at USD346 billion at December 31, 2014, an increase of 2% or USD9 billion over the course of the year. The total for the listed ABA was USD240 billion, an increase of 5% or USD11 billion.

Exhibit 2: ABA Shareholders’ Funds 400

USD (billions)

NICO & Gen Re

Listed ABA

300

100

44

242

226

201 200

12%

157

45

Total ABA 283 278

187 -17% 37

180

48

15%

78

2%

79

12%

90

346

337

317 6%

109

2%

106

29%

151

193

200

204

227

229

240

FY 2009

FY 2010

FY 2011

FY 2012

FY 2013

FY 2014

0 FY 2006

FY 2007

FY 2008

Source: Company reports, Aon Benfield Market Analysis

Capital Development The drivers of ABA capital growth were net income of USD38.5 billion and unrealized investment gains of USD8.1 billion. These positive factors were partly offset by dividends of USD13.8 billion, share buybacks of USD8.5 billion, foreign exchange losses of USD8.2 billion and a net reduction in issued capital of USD5.2 billion. The latter was driven by a USD7.1 billion transfer of subsidiary interests from NICO to Berkshire Hathaway.

Exhibit 3: ABA Shareholders’ Funds Development 375

38.5

-8.2

8.1

-8.5

USD (billions)

-13.8 -2.8

350 337.4

345.5

-5.2

325

300 FY 2013 Additional Net SHF capital income

FX

Investment Share Dividends gains buybacks

Other

FY 2014 SHF

Source: Company reports, Aon Benfield Market Analysis

Aon Benfield Analytics | Market Analysis

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Between them, NICO and Gen Re reported USD106 billion of shareholders’ funds at December 31, 2014, representing 31% of the ABA total. On a combined basis, Munich Re, Swiss Re and ACE contributed USD102 billion or 30%. More than half of the ABA companies reported shareholders’ funds in excess of USD5 billion, while five remained below USD2 billion.

Exhibit 4: Shareholders’ Funds at December 31, 2014

USD (billions)

100 90 80 40 70 60 30 50 40 20 30 20 10 10 00

Source: Company reports, Aon Benfield Market Analysis

All but five ABA companies reported capital growth in 2014, mainly driven by retained earnings.

Unrealized gains taken directly to equity impacted outcomes at Hannover Re (USD0.8 billion), Mapfre (USD0.9 billion), Munich Re (USD3.5 billion), Swiss Re (USD3.8 billion) and XL (USD1.2 billion).

NICO’s capital fell by 3% to USD94 billion, driven by a USD7.1 billion upstreaming of subsidiary interests and USD3.9 billion of unrealized losses on equities. Reductions in shareholders’ funds at Lancashire, Validus, RenaissanceRe and Platinum were driven by active capital management.

Exhibit 5: Growth in Shareholders’ Funds 30% 20% 10% 0% -10%

Source: Company reports, Aon Benfield Market Analysis

Capital Management Surplus equity is being returned to investors in growing amounts, partly reflecting increased interaction with third party capital structures. Capital repatriation by the listed ABA rose by 28% to USD18.3 billion in 2014. This was equivalent to 8.0% of opening shareholders’ funds, up from 6.4% in the prior year period. Public dividends rose by 6% to USD9.9 billion, while share buybacks climbed by 68% to USD8.5 billion.

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The Aon Benfield Aggregate – Results for the year ended December 31, 2014

Exhibit 6: Dividends & Share Buybacks as a Percentage of Opening Capital 25% 20%

Dividends Share buybacks

15% 10% 5% 0%

Source: Company reports, Aon Benfield Market Analysis

The first few months of 2015 have provided further evidence of the quickening pace of capital repatriation. Most ABA companies increased their final dividends alongside the release of their full-year results. In addition, Amlin, Beazley, Catlin, Hannover Re, Hiscox, Lancashire, Platinum and Swiss Re announced special dividends. New share buyback authorizations were announced at ACE (USD1.5 billion), Aspen (USD0.5 billion), Munich Re (EUR1.5 billion), Swiss Re (CHF1.0 billion) and Validus (USD0.75 billion).

Aon Benfield Analytics | Market Analysis

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Premium Income Total premiums written by the ABA rose by 9% to USD311 billion in 2014. The portion related to P&C business rose by 12% to USD226 billion, but was up by only 2% to USD198 billion excluding NICO and Gen Re. Exhibit 7: ABA Total Premiums Written 350

Other GPW

P&C GPW

Total GPW

300

261

USD (billions)

250 200 150

191 9%

50

58

6%

62

100 50

222

221

207

229

1%

67

3%

14% 80

5%

311

285

274 4% 82

9%

84

84

70

142

149

158

156

159

FY 2006

FY 2007

FY 2008

FY 2009

FY 2010

181

192

202

FY 2011

FY 2012

FY 2013

226

0 FY 2014

Source: Company reports, Aon Benfield Market Analysis

Gross P&C premiums written by NICO more than tripled to USD27.0 billion in 2014, driven by a new 50% intra-group quota share reinsurance agreement with GEICO Group. Non-affiliated premiums at NICO rose by 8% to USD4.6 billion. The listed ABA reported 3% growth in P&C insurance premiums to USD109 billion in 2014, while P&C reinsurance premiums were flat at USD89 billion. Exhibit 8 shows total P&C volumes for years prior to 2013, as consistent segmental splits are not available.

Exhibit 8: ABA P&C Gross Premiums Written 250

NICO & Gen Re

Insurance

181

USD (billions)

200 150

Reinsurance

142 7

149

156

159

7

7

6

151

149

153

158

6

100 50

135

143

8

174

Total 192 9

226 202 7

28

106

109

89

89

FY 2013

FY 2014

183

0 FY 2006

FY 2007

FY 2008

FY 2009

FY 2010

Source: Company reports, Aon Benfield Market Analysis

8

The Aon Benfield Aggregate – Results for the year ended December 31, 2014

FY 2011

FY 2012

Strong P&C premium growth of 34% at Lancashire and 23% at Markel was driven by the acquisitions of Cathedral and Alterra, effective November 7, 2013 and May 1, 2013 respectively. Arch reported an increase of 15%, driven by acquisitions in the mortage segment and USD80 million of non-affiliated business written by Watford Re (which is fully consolidated).

At the other end of the spectrum, Platinum’s P&C book showed a broad-based contraction of 12%, while QBE reported a reduction of 6% on a constant currency basis, mainly due to reduced volumes in North America and Europe.

Exhibit 9: Growth in P&C Gross Premiums Written 380% 340% 300% 40% 260% 30% 220% 180% 20% 140% 10% 100% 60% 0% 20% -10% -20% -20%

Source: Company reports, Aon Benfield Market Analysis

*P&C reinsurance segment only (as disclosed)

Exhibit 10 shows the split of P&C premiums between primary insurance and assumed reinsurance across all of the ABA companies in 2014, based on our best interpretation of sometimes inconsistent company disclosure.

Exhibit 10: 2014 P&C Segmental Splits 30 25

P&C Insurance P&C Reinsurance

USD (billions)

20 15 10 5 0

Source: Company reports, Aon Benfield Market Analysis

*Of which only USD4.6 billion was non-affiliated ** P&C insurance relates to Risk Solutions (ERGO excluded)

Aon Benfield Analytics | Market Analysis

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Exhibit 11 shows the growth of the primary insurance and assumed reinsurance books of the ABA companies in 2014, based on our best interpretation of sometimes inconsistent company disclosure.

Absent acquisition effects at Markel and Lancashire, the most significant growth in reinsurance was seen at Everest Re (mainly property treaty and Mt Logan Re), Amlin (Zurich office and multi-year contracts) and Catlin (international diversification and multi-year contracts).

Hiscox, Beazley and Validus reported reductions of 14%, 9% and 8% in their reinsurance books, driven predominantly by lower volumes of property catastrophe business.

Exhibit 11: 2014 P&C Segmental Growth 100% 90% 80% 40% 70% 30% 60% 20% 50% 40% 10% 30% 0% 20% -10% 10% 0% -20%

Source: Company reports, Aon Benfield Market Analysis

Reinsurance GPW

Insurance GPW

* P&C insurance relates to Risk Solutions (ERGO excluded)

Total P&C premiums ceded to third parties by the listed ABA rose by 5% to USD29.2 billion in 2014, a cession ratio of 14.7% (2013: 14.3%). Retained premiums rose by 1% to USD169 billion. Reinsurance utilisation rose most significantly at Endurance, RenaissanceRe, XL, Everest Re and Hiscox. The biggest reductions were at Amlin, Swiss Re, Montpelier Re, Validus and ACE.

Exhibit 12: Reinsurance Cession Ratios 35% 30%

FY 2014

FY 2013

25% 20% 15% 10% 5% 0%

Source: Company reports, Aon Benfield Market Analysis

10

The Aon Benfield Aggregate – Results for the year ended December 31, 2014

*P&C reinsurance segment only (as disclosed)

Total P&C net premiums earned by the ABA rose by 13% to USD190 billion in 2014. The listed ABA reported a 2% increase to USD166 billion, with the five largest constituents contributing USD87.6 billion, or 53% of the total.

Exhibit 13: 2014 P&C Net Premiums Earned 25

USD (billions)

20

15

10

5

0

Source: Company reports, Aon Benfield Market Analysis

*P&C reinsurance segment only (as disclosed)

Exhibit 14 shows the year-on-year movements in P&C net premiums earned across the ABA in 2014.

The strong growth at Lancashire, Markel and Arch was influenced by acquisitions, while the 11% increase at Aspen was driven by the continued build-out of the group’s US insurance operations.

Seven companies reported reduced volumes on this basis.

Exhibit 14: Growth in P&C Net Premiums Earned 310% 300% 290% 30% 280% 25% 270% 20% 260% 15% 250% 10% 240% 230% 5% 220% 0% 210% -5% 200% -10% 190% 180% 170%

Source: Company reports, Aon Benfield Market Analysis

*P&C reinsurance segment only (as disclosed)

Aon Benfield Analytics | Market Analysis

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Earnings Profitability in 2014 was in line with the two prior years, but earnings are becoming increasingly reliant on unsustainable factors such as benign catastrophe experience, material reserve releases and capital gains. Increasing competition and low interest rates continue to pressure underlying returns on equity.

USD (billions)

Exhibit 15: Listed ABA Pre-Tax Profit

60 50 40 30 20 10 0 -10 -20 -30

Other Investment income

31.3

35.4

Pure life technical result Capital gains/losses

29.2

25.8

11.6

FY 2006

FY 2007

FY 2008

P&C underwriting result Pre-tax profit

29.2

28.0

31.2

FY 2012

FY 2013

FY 2014

9.3

FY 2009

FY 2010

FY 2011

Source: Company reports, Aon Benfield Market Analysis

The listed ABA reported pre-tax profit of USD31.2 billion in 2014, an increase of 11% relative to the prior year. P&C underwriting profit rose by 6% to USD16.8 billion, with favourable prior year reserve development of USD8.0 billion contributing 48% of the total. Ordinary investment income rose by 2% to USD26.5 billion, driven by underlying asset growth and portfolio repositioning. Capital gains rose by 41% to USD7.1 billion, as declining interest rates impacted bond values.

Exhibit 16 shows the distribution of reported pre-tax profits across the 31 ABA companies. NICO’s result was heavily influenced by a USD7.1 billion intra-group dividend from GEICO.

Exhibit 16: 2014 Pre-Tax Results 12.0

USD (billions)

USD (billions)

5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0

Source: Company reports, Aon Benfield Market Analysis

12

The Aon Benfield Aggregate – Results for the year ended December 31, 2014

Underwriting Performance The combined ratio of the listed ABA improved by 0.3 percentage points to 89.9% in 2014. Reported catastrophe losses were significantly reduced relative to the prior year and well below the long-term average. Support from favourable development of prior year reserves increased for the second year in a row, notwithstanding deterioration of the New Zealand earthquake and Costa Concordia losses.

Underlying trends were negative, as weakening pricing and business mix changes, particularly a shift towards longer-tail proportional contracts, impacted attritional loss and expense ratios.

Exhibit 17: Listed ABA Combined Ratio Composition

94.5% 89.9% 94.2% 89.2% 89.5% 2.8%

3.7%

59.4%

59.7%

8.4%

62.0%

3.2%

9.8%

60.9%

58.7%

104.9% 20.3%

59.8%

92.6% 90.2% 89.9% 8.2%

58.7%

5.6%

3.8%

58.5%

59.5%

Total catastrophe losses Attritional loss ratio Expense ratio

27.7%

28.8%

28.7%

29.3%

29.9%

29.9%

30.2%

30.8%

31.4%

-0.7%

-2.7%

-4.6%

-3.4%

-4.2%

-5.1%

-4.4%

-4.6%

-4.8%

Prior year reserve adjustment

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Source: Company reports, Aon Benfield Market Analysis

Exhibit 18 shows the distribution of reported combined ratios across the listed ABA for 2014. All of the constituents were profitable on a calendar year basis, although half of them reported weaker results relative to the prior year. On a non-weighted basis, the average result was 85.6%.

Exhibit 18: 2014 Calendar Year Combined Ratios 120%

Loss ratio

Expense ratio

Listed ABA combined ratio

100% 80%

89.9%

60% 40% 20% 0%

Source: Company reports, Aon Benfield Market Analysis

*P&C reinsurance segment only (as disclosed) **Excluding funds withheld

Aon Benfield Analytics | Market Analysis

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Exhibit 19 shows the P&C underwriting results reported by the listed ABA companies. On a combined basis, Swiss Re, ACE and Munich Re contributed USD6.2 billion, or 37% of the total.

Exhibit 19: 2014 P&C Underwriting Results 3.0 2.5

USD (billions)

2.0 1.5 1.0 0.5 0.0

Source: Company reports, Aon Benfield Market Analysis

*P&C reinsurance segment only (as disclosed) **Excluding funds withheld

Exhibit 20 shows prior year reserve development as a percentage of P&C net premiums earned by the listed ABA constituents in the last two years. Half of the companies reported lower releases in 2014.

Exhibit 20: Prior Year Loss Reserve Adjustments 30%

FY 2014

FY 2013

25% 20% 15% 10% 5% 0% -5%

Source: Company reports, Aon Benfield Market Analysis

14

The Aon Benfield Aggregate – Results for the year ended December 31, 2014

*P&C reinsurance segment only (as disclosed)

Exhibit 21 shows the reported accident year combined ratios (excluding prior year reserve movements) of the listed ABA companies. Only Markel and PartnerRe were unprofitable on this basis.

Exhibit 21: 2014 Accident Year Combined Ratios 120%

Listed ABA

100% 94.7%

80% 60% 40% 20% 0%

Source: Company reports, Aon Benfield Market Analysis

*P&C reinsurance segment only (as disclosed) **Excluding funds withheld

Investment Results The listed ABA reported cash and investments of USD899 billion at December 31, 2014, split fixedincome 66%, cash/short-term 9%, loans 8%, deposits with cedants 6%, equities 5% and other 6%.

The underlying and total investment yields reported through income statements since 2006 are captured in Exhibit 22. The former has fallen by a third since 2007, reflecting the impact of the low interest rate environment.

Exhibit 22: Listed ABA Investment Yield 6% 5%

4.9%

Total investment yield (incl. capital gains/losses)* Ordinary investment yield*

4.8%

4.2%

3.9%

4% 4.1%

4.3%

3%

3.9%

3.7%

3.7%

3.3%

3.4%

3.9% 3.4%

3.0%

2%

3.7%

2.9%

2.9%

FY 2013

FY 2014

1.9% 1% FY 2006

FY 2007

FY 2008

Source: Company reports, Aon Benfield Market Analysis

FY 2009

FY 2010

FY 2011

FY 2012

*Reported through income statements, excluding unit-linked and with-profit business

Aon Benfield Analytics | Market Analysis

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Exhibit 23 shows the underlying and total investment yields reported by the ABA companies through their income statements in 2014 (excluding the impact of derivatives where separately disclosed).

Investment classification varies and result comparison can therefore be misleading. Unrealized gains and losses are recognized in the income statements of some companies (e.g. PartnerRe, Fairfax and White Mountains), but in other cases are taken directly to equity.

Exhibit 23: 2014 Investment Yields 10%

Ordinary investment yield*

9%

Total investment yield*

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

Source: Company reports, Aon Benfield Market Analysis

*Reported through income statements, excluding unit-linked and with-profit business

Net Income The ABA reported net income attributable to common shareholders of USD38.1 billion in 2014, an increase of 12% relative to 2013. Net income across the listed ABA rose by 4% to USD25.5 billion.

Exhibit 24: ABA Net Income Attributable to Common Shareholders 45 40 USD (billions)

35 30 25

NICO & Gen Re 31.2 7.4

Listed ABA

38.1 34.0

31.3 4.8

25.8

26.8

2.8

6.6

20 15 10

5.9

9.3

12.5

14.7 23.8

26.6

7.1

23.0

20.2

1.4 5.7

5 0 FY 2006

FY 2007

FY 2008

6.2

23.4

24.7

25.5

FY 2012

FY 2013

FY 2014

8.5

FY 2009

FY 2010

Source: Company reports, Aon Benfield Market Analysis

16

29.3

The Aon Benfield Aggregate – Results for the year ended December 31, 2014

FY 2011

Exhibit 25 shows the distribution of net income by ABA constituent. The combined results of NICO, Munich Re, Swiss Re and ACE rose by 7% to USD22.5 billion, representing 59% of the total.

Exhibit 25: 2014 Net Income Attributable to Common Shareholders 12

USD (billions) USD (billions)

10 5 8 4 6 3 4 2 2 1 0 0

Source: Company reports, Aon Benfield Market Analysis

Return on Equity Exhibit 26 shows the development of net income attributable to common shareholders relative to average common shareholders’ funds across the ABA since 2006. Return on equity over this period (which encompasses both the financial crisis and the record year for insured catastrophe losses) averaged 11.2% for the listed ABA and 10.8% for the ABA as a whole.

Exhibit 26: ABA Common Net Income ROE 20% 15%

17.7%

Listed ABA

16.6%

ABA

14.1%

17.6% 15.3%

10.8%

10%

12.5% 3.7%

10.7%

5.4%

11.4%

11.1%

10.1%

10.6%

FY 2012

FY 2013

11.3% 11.1%

5% 4.4%

3.6%

0% FY 2006

FY 2007

FY 2008

FY 2009

FY 2010

FY 2011

FY 2014

Source: Company reports, Aon Benfield Market Analysis

Aon Benfield Analytics | Market Analysis

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Exhibit 27 shows return on equity by ABA constituent, based on reported net income in 2014. Only 12 companies reported improved performance on this measure in 2014 (see data in Appendix 1). The result at XL was impacted by a one-off charge associated with the sale of the group’s discontinued life reinsurance operations.

Exhibit 27: 2014 Common Net Income ROE 25% Listed ABA 20% 15% 11.1% 10% 5% 0%

Source: Company reports, Aon Benfield Market Analysis

18

The Aon Benfield Aggregate – Results for the year ended December 31, 2014

ABA Business Model Evolution A structural shift in the way capital is raised and

Implications For ‘Traditional’ Reinsurers

deployed to mitigate insurance risk is underway. The

New vehicles operating at a lower cost of capital are making inroads into higher-margin areas that remain a key driver of profits for ‘traditional’ reinsurers. These dynamics are forcing many ABA constituents to rethink their business models in the pursuit of differentiation and relevance in the market. In the catastrophe reinsurance space, this increasingly means being able to offer larger line sizes, a full product suite including collateralized limits and enhanced claims service. Companies that are successful in attracting and deploying third party capital will potentially be able to advance their client offering, reduce earnings volatility through fee income, lower their own risk transfer costs and manage their capital bases more effectively.

pool of potential investors is broadening and new money is flowing towards structures offering access to quality business at relatively low cost. These changes have forced the ABA companies to re-evaluate their business models.

Who Are The New Investors?

Reinsurance as an asset class has performed relatively well in an environment of low interest rates and is viewed as having limited correlation with broader capital market movements. These attributes have attracted new investors such as pension funds, high net worth individuals and sovereign wealth funds, who typically: •

only enter the sector after extensive due diligence;

•

invest a small percentage of the substantial assets at their disposal as a diversifying strategy;

•

seek lower, more stable returns over longer timeframes than has historically been the case.

How Is New Money Being Deployed?

Much of the new capital is being channelled to specialist fund managers, who then deploy it into the insurance-linked securities (ILS) sector via catastrophe bonds or other ‘alternative’ structures such as industry loss warranties, sidecars and collateralized reinsurance. The current focus is property catastrophe and retrocession business, particularly in the US market where exposures tend to be best understood, although diversification into other lines and territories is underway.

How Are The ABA Companies Responding?

Most ABA constituents are now moving strongly to incorporate alternative capital into their business models (see Exhibit 28 for a summary of recent activity). Many are now actively involved in raising and managing third party capital. Others have invested in strategic partnerships with established independent specialist fund managers. Sidecar structures that allow sponsors to grow their footprint in the market without assuming additional balance sheet risk continue to be in vogue.

The availability of lower cost capital has allowed most ABA companies to drive down their own risk transfer costs.

Retrocession pricing has reduced and in some cases additional protection has been purchased, with consequent impact on disclosed modeled exposures. In addition, a number of catastrophe bond transactions have recently been brought to the market by ABA sponsors.

Aon Benfield Analytics | Market Analysis

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Exhibit 28: Recent Incorporation of Alternative Capital Company

Cat Bonds

Third Party Capital Vehicles The Altair Re reinsurance sidecar series provides collateralized support for ACE Tempest Re. Committed capital stood at $95m in 2013 and 2014. ACE is currently working with BlackRock to form Bermuda-based reinsurer ABR Re.

Other A new global cat program at Jul 1, 2014 reduced the modelled peak 1-in250-year PML from 10.3% to 8.1% of shareholders’ equity. Approximately 20% of the coverage was placed on a fully collateralized basis.

Alleghany

TransRe ownership of Pillar Capital increased to 50% in Jun 2014. TransRe operates the Pangaea Re reinsurance sidecar series and is reported to be working in partnership with Providence on a reinsurance captive.

Ongoing investment partnership with Ares Management. Investments in Pillar Capital and its managed funds contributed a return of $22m in 2014 and totaled $235m at the year-end.

Allied World

Allied World has a minority interest in Aeolus Capital and contributed $350m of funds for investment during 2014. Reported to have worked with Pine River Capital in trying to establish a new hedge fund reinsurer in 2H 2014.

Retro programs were purchased on a fully collateralized basis in 2013 and 2014. A collateralized property cat quota share reinsurance contract with Aeolus Re generated $87m of assumed premium in 2014.

Tramline Re (Dec 2011, Jun 2013, Dec 2014)

Amlin raised its ownership of Leadenhall Capital from 40% to 75% in Oct 2014.

AuM totalled $1.9bn at year-end, including £64m from Amlin. SPS 6106 (20092013).

Arch co-sponsored Watford Re with Highbridge Capital, investing $100m for an 11% interest (Mar 2014). Watford Re takes 10% of Arch’s property cat book and wrote $80m of open market business in 2014.

Syndicate 2001 and Amlin AG fronted £25m of business for Leadenhall in 2014. From 2015, Amlin purchased a single retro program and cut its tolerance for RDSs by £50m to £300m net.

Increased retro purchases reduced Arch's largest 250-year PML for a single event (North-East US wind) to a record low of 9% of common shareholders' equity at Jan 1, 2015.

Loma Re (Jun 2011, Dec 2011, Dec 2013)

The Harambee Re sidecar series provides Argo with fully collateralised reinsurance support.

Formed ILS fronting partnership with Horseshoe Re (Mar 2014).

The Silverton Re sidecar series writes a collateralized quota share of Aspen Bermuda's property cat book. Committed capital rose from $65m in 2014 to $85m in 2015.

Aspen Capital Markets (est Mar 2013) now has $185m of third party AuM and is being used to help manage net cat exposure. ACM contributed $13m to Aspen's results in 2014.

Formed AXIS Ventures with $50m of third party capital (Nov 2013). Class 3A insurer AXIS Ventures Reinsurance Ltd provides AXIS with fully collateralized reinsurance support.

AXIS Ventures completed 8 transactions and contributed $3m towards group earnings in 2014. AXIS Ventures Re had total assets of $97m at the end of 2014.

ACE

Amlin

Arch Argo Aspen

Axis

Northshore Re (Aug 2013)

Beazley

SPS 6107 (since 2010).

Galileo Re (Oct 2013, Feb 2015)

Catlin has operated SPSs since 2012, providing whole account quota share support to Syndicate 2003. From 2014, a ‘Portfolio Participation Vehicle’ provides similar collateralised protection to Catlin’s non-Lloyd’s entities.

Everest Re

Kilimanjaro Re (Apr 2014, Nov 2014)

The Mt. Logan Re sidecar series writes worldwide cat on a fully collateralized basis. Third party AuM totalled $690m at the end of 2014, all of which was deployed in the January renewals. Mt. Logan Re generated $28m of fees for Everest Re in 2014.

Hannover Re

Eurus (Sep 2012)

The K-Cessions sidecar series provides fully collateralized quota share retro support. Capacity rose by 25% to $400m for 2015.

Catlin

Endurance

Everest Re is growing its property cat book, but has kept its net risk appetite stable by transferring risk to Mt.Logan Re, sourcing $950m of retro capacity from cat bonds and purchasing ILWs to hold its Florida PML steady.

Hannover Re is active as a rated fronting market for collateralized reinsurance vehicles and opened its internal ILS fund to third parties via Leine Investment from Jan 2013.

Kiskadee Investment Managers (est Jun 2013) expects to have $500m of committed capital by mid-2015. Hiscox currently manages $4bn of cat quota share capacity for investors.

Hiscox

The Kiskadee Re sidecar series has provided collateralized reinsurance support since Jun 2013. SPS 6104 (since 2008).

Lancashire

Kinesis Re I Ltd (est. Jun 2013) writes multi-class reinsurance business on a fullycollateralized basis, deploying around $340m of limit in 2014. Previous vehicles include Saltire Re (aggregate covers) and the Accordian Re series (property retro).

Bermuda-based third party capital manager Kinesis Capital Management was formed in Jun 2013. Lancashire's peak 1-in-250 year PMLs have been reduced via the purchase of additional retro. Most of the cover is reinstateable in 2015.

Markel

The New Point Re sidecar series underwrites property retro business on a fully collateralized basis.

Erik Manning joined as Managing Director of Alternative Solutions at Markel Re in Jun 2014.

Montpelier Re

Collateralized property cat reinsurance is written via Blue Water Re and Blue Capital Re.

Blue Capital Management was launched in Dec 2012 to offer a range of property cat-linked investment products to institutional and retail investors.

AuM totalled $790m in Jan 2015.

Reinsurance sidecars Eden Re I and Eden Re II provide a combined $365m of property cat XL capacity in 2015.

Munich Re has operated an internal ILS fund for 6+ years. Increased retro purchases have reduced peak PMLs.

Sidecar Lorenz Re formed with $75m of third party capital to provide additional capacity for a diversified portfolio of cat reinsurance treaties over a multi-year period on a fully collateralized basis (Mar 2013).

Lorenz Re had total assets of $101m at the end of 2014.

Munich Re

Multiple sponsor

PartnerRe

PMLs have been reduced through the purchase of additional retro protection.

Platinum QBE

VenTerra Re (Dec 2013)

RenRe

Mona Lisa Re (Jul 2013)

RenRe operated Upsilon Re (Jan 2013, Jan 2014) and Timicuan Re (Jun 2009, Jun 2012) sidecars. In Nov 2014, the Upsilon platform was converted into perpetual funds, writing fully collateralized reinsurance and retro and investing in ILS.

Managed property cat-oriented joint ventures include DaVinci, Top Layer Re, Medici, Upsilon RFO and Upsilon Fund. Third-party capital spread across these vehicles totalled $1.1bn at the end of 2014.

SCOR

Multiple sponsor

Sidecar Atlas X ($55m of capital) provides 3 years of collateralized quota share capacity to SCOR Global P&C’s property cat book (Jan 2014).

SCOR Global Investments has operated the Atropos ILS funds since Aug 2011. AuM totalled $460m in mid 2014.

Swiss Re

Multiple sponsor

Sector Re sidecar series.

No plans to open internal ILS fund to third parties.

Validus

The AlphaCat sidecar series writes collateralized property cat and retro. Top layer cat is written via PaCRe (owned 10% by Validus).

At the end of 2014, AlphaCat had $1.5bn of third party AuM ($289m in the AlphaCat sidecars, $786m in the AlphaCat ILS funds and $459m in PaCRe).

White Mountains

Class 3 Bermudian insurer Alstead Re was formed to write collateralized reinsurance and retro business from Jan 2014.

During 4Q, the strategic direction of Sirius Capital Markets (launched in May 2013) was reviewed and entities that were formed for this initiative are being dissolved or redeployed.

XL

Vector Re writes global property cat business on a collateralized basis from Jan 2014.

XL and Stone Point established New Ocean Capital Management in Nov 2013. The net assets of the New Ocean Cat Fund and Vector Re were $94m and $47m at Dec 31.

Source: Company reports, Aon Benfield Market Analysis

20

Commissions and fees recognised by Catlin from third-party capital providers totalled $66m in 2014. The group is writing ~15% of its business against almost $350m of third party capital in 2015.

Additional retro was purchased in 2014 and at Jan 1, 2015. The peak 1-in100 year PML reduced to 10.3% of shareholders' equity at Dec 31, 2014, from 11.0% a year earlier.

The Aon Benfield Aggregate – Results for the year ended December 31, 2014

SPS = Special Purpose Syndicate; AuM = assets under management

Mergers & Acquisitions Four high profile M&A deals involving ABA companies have been announced in recent months. RenaissanceRe’s acquisition of Platinum completed on March 2, 2015.

Proposed transactions between XL and Catlin, Axis and PartnerRe and Fairfax and Brit remain subject to regulatory and/or shareholder approvals.

Exhibit 29 provides an indication of the scale the combined entities would achieve in capital terms, were all of the transactions to complete, albeit based only on the aggregation of reported figures at the end of 2014.

USDUSDbn (billions)

Exhibit 29: Shareholders’ Funds at December 31, 2014 95 90 40 85 35 80 30 75 25 70 20 65 15 60 10 55 5 50 0

Combined entities on a pro forma basis

Source: Company reports, Aon Benfield Market Analysis

Exhibit 30 provides an indication of the scale the combined entities would achieve in terms of P&C gross premiums written, were all of the transactions to complete, albeit based only on the aggregation of 2014 volumes.

Exhibit 30: 2014 P&C Gross Premiums Written 30

USD (billions)

25

Combined entities on a pro forma basis

20 15 10 5 0

Source: Company reports, Aon Benfield Market Analysis

*P&C reinsurance segment only (as disclosed)

Aon Benfield Analytics | Market Analysis

21

ABA Valuation The overall market capitalization of the ABA companies was relatively stable during 2014, but has increased by 6% since the beginning of 2015. The trailing price-to-book ratio began 2014 at 1.14x and dipped briefly below 1.0x in October, but has since rebounded to 1.16x.

Exhibit 31: ABA Market Capitalization

Exhibit 33: ABA Trailing Price-to-Book Ratio 1.3

140

1.2

120

1.1

100

1.0 80

0.9

60 40 Jan-08

0.8 Jan-09

Jan-10

Source: Bloomberg

Jan-11

Jan-12

Jan-13

Jan-14

Jan-15

Note: As of March 27, 2015, excluding Berkshire Hathaway

Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Source: Bloomberg

Note: As of March 27, 2015, excluding Berkshire Hathaway

Exhibit 32 shows the share price development of individual ABA companies since the beginning of 2014.

Exhibit 34 shows the evolution of the trailing price-to-book values of individual ABA companies since the beginning of 2014.

Exhibit 32: Share Price Development Since Jan 1, 2014

Exhibit 34: Trailing Price-to-Book Ratios

Fairfax Hannover Re Markel Montpelier Re Swiss Re Platinum Munich Re Catlin Alleghany Beazley SCOR Argo XL White Mountains Aspen Amlin QBE Everest Re Hiscox Endurance PartnerRe Axis Allied World ACE Mapfre Arch Validus RenaissanceRe Lancashire -20% Source: Bloomberg

22

0.7

Hiscox Beazley Amlin Hannover Re Fairfax Markel Arch Lancashire ACE QBE Mapfre Munich Re Catlin RenaissanceRe Montpelier Re SCOR Everest Re Alleghany Endurance Allied World White Mountains Aspen Axis Validus Platinum XL Swiss Re PartnerRe Argo 0%

20%

40%

60%

80%

Note: As of March 27, 2015

The Aon Benfield Aggregate – Results for the year ended December 31, 2014

March 27, 2015 January 1, 2014 0.0

Source: Bloomberg

0.5

1.0

1.5

2.0

Financial Strength Ratings Several ABA companies have benefited from positive rating actions since the beginning of 2014, as shown in Exhibit 35. Recently announced M&A transactions have provoked a cautious response, pending further discussion with senior management teams.

Exhibit 35: Financial Strength Ratings Main Operating Company

A.M. Best

Standard & Poor’s

ACE Tempest Reinsurance Ltd

A++

Stable

AA

Stable

Allied World Assurance Co Ltd

A

Stable

A

Stable

Amlin AG

A

Stable

A

Stable

Arch Reinsurance Ltd

A+

Stable

A+

Stable

Argo Re Ltd

A

Stable

-

-

Aspen Bermuda Ltd

A

Stable

A

Stable

AXIS Specialty Ltd

A+

Review Negative

A+

Stable

Beazley Insurance Company, Inc

A

Stable

-

-

Catlin Insurance Company Ltd

A

Review Positive

A

Stable

Endurance Specialty Insurance Ltd

A

Stable

A

Stable

Everest Reinsurance (Bermuda) Ltd

A+

Stable

A+

Stable

General Reinsurance Corporation

A++

Stable

AA+

Stable

Hannover Rück SE

A+

Stable

AA-

Stable

Hiscox Insurance Company (Bermuda) Ltd

A

Stable

-

-

Lancashire Insurance Company Ltd

A

Stable

A-

Stable

MAPFRE Re, Compania de Reaseguros SA

A

Stable

A

Stable

Markel Bermuda Ltd

A

Stable

A

Stable

Montpelier Reinsurance Ltd

A

Stable

A-

Stable

Munich Reinsurance Co

A+

Stable

AA-

Stable

National Indemnity Company

A++

Stable

AA+

Stable

Odyssey Reinsurance Company

A

Stable

A-

Negative

Partner Reinsurance Co Ltd

A+

Review Negative

A+

Stable

Platinum Underwriters Bermuda Ltd

A

Review Developing

A-

CreditWatch Positive

QBE Re (Europe) Ltd

A

Stable

A+

Negative

Renaissance Reinsurance Ltd

A+

Review Negative

AA-

Stable

SCOR Global P&C SE

A

Stable

A+

Positive

Sirius International Insurance Corp

A

Stable

A-

Stable

Swiss Reinsurance Co

A+

Stable

AA-

Stable

Transatlantic Reinsurance Co

A

Positive

A+

Stable

Validus Reinsurance Ltd

A

Stable

A

Stable

XL Re Ltd

A

Review Negative

A+

Stable

Source: A.M. Best, Standard & Poor’s

Upgrade / outlook raised since January 1, 2014

Downgrade / outlook lowered since January 1, 2014

Ratings as at March 2015

Aon Benfield Analytics | Market Analysis

23

Appendix 1: ABA Data Exhibit 36: Results for the year ended December 31, 2014

Reporting Currency (millions)

Company

P&C Gross Premiums Written FY 2013

P&C Gross Premiums Written FY 2014

Change

P&C Net Premiums Earned FY 2013

P&C Net Premiums Earned FY 2014

Change

Listed Groups ACE

USD

20,752

21,261

2%

14,708

15,464

5%

Alleghany

USD

4,886

5,097

4%

4,239

4,411

4%

Allied World

USD

2,739

2,935

7%

2,006

2,183

9%

Amlin

GBP

2,467

2,564

4%

2,095

2,201

5%

Arch

USD

4,197

4,841

15%

3,146

3,594

14%

Argo

USD

1,888

1,905

1%

1,304

1,338

3%

Aspen

USD

2,647

2,903

10%

2,172

2,405

11%

Axis

USD

4,697

4,712

0%

3,707

3,871

4%

Beazley

USD

1,970

2,022

3%

1,591

1,659

4%

Catlin

USD

5,309

5,966

12%

3,948

4,160

5%

Endurance

USD

2,665

2,894

9%

2,016

1,864

-8%

Everest Re

USD

5,219

5,749

10%

4,754

5,169

9%

Fairfax

USD

7,227

7,460

3%

5,994

5,985

0%

Hannover Re

EUR

7,818

7,903

1%

6,866

7,011

2%

Hiscox

GBP

1,699

1,756

3%

1,283

1,316

3%

Lancashire

USD

680

908

34%

568

716

26%

Mapfre

EUR

16,278

16,409

1%

13,229

13,227

0%

Markel

USD

3,920

4,806

23%

3,232

3,841

19%

USD

706

740

5%

600

645

8%

Munich Re

EUR

17,013

16,730

-2%

16,237

16,150

-1%

PartnerRe

USD

4,590

4,667

2%

4,235

4,387

4%

Platinum

USD

580

509

-12%

553

507

-8%

QBE

USD

17,975

16,332

-9%

15,396

14,084

-9%

RenaissanceRe

USD

1,605

1,551

-3%

1,115

1,062

-5%

SCOR

EUR

4,848

4,935

2%

4,256

4,287

1%

Swiss Re

USD

20,670

20,288

-2%

17,464

19,042

9%

Validus

USD

2,401

2,363

-2%

2,102

2,002

-5%

White Mountains

USD

2,297

2,499

9%

1,987

2,059

4%

XL

USD

7,417

7,761

5%

6,014

5,717

-5%

ABA (Listed Sector)

USD

194,606

198,367

2%

162,054

165,997

2%

Gen Re

USD

1,073

1,165

9%

554

564

2%

NICO

USD

5,964

26,957

352%

5,884

23,680

302%

ABA (Total)

USD

201,643

226,490

12%

168,492

190,240

13%

Montpelier Re 1

Source: Company reports, Aon Benfield Market Analysis Figures in reporting currencies, but converted to USD (millions) for ABA lines

24

The Aon Benfield Aggregate – Results for the year ended December 31, 2014

1

P&C reinsurance segment only (as disclosed)

Exhibit 36: Results for the year ended December 31, 2014 (cont’d) Calendar Year Loss Ratio FY 2013

Loss Ratio FY 2014

Expense Ratio FY 2013

ACE

59.6%

58.3%

28.3%

29.5%

88.0%

87.7%

-0.2pp

Alleghany

58.5%

56.6%

31.6%

32.2%

90.1%

88.8%

-1.3pp

Allied World

56.0%

54.9%

30.2%

30.3%

86.2%

85.2%

-0.9pp

Amlin

52.2%

55.6%

33.5%

33.0%

85.7%

88.5%

2.9pp

Arch

53.4%

53.4%

32.5%

33.8%

85.9%

87.2%

1.3pp

Argo

57.8%

55.9%

39.7%

40.3%

97.5%

96.2%

-1.3pp

Aspen

56.3%

54.4%

36.3%

37.3%

92.6%

91.7%

-0.9pp

Axis

57.6%

56.5%

33.4%

35.1%

91.0%

91.6%

0.6pp

Beazley

45.0%

49.0%

39.0%

40.0%

84.0%

89.0%

5.0pp

Catlin

52.3%

52.5%

33.3%

34.3%

85.6%

86.8%

1.3pp

Endurance

60.5%

52.1%

29.7%

33.9%

90.2%

86.0%

-4.2pp

Everest Re

58.9%

56.2%

25.6%

26.6%

84.5%

82.8%

-1.6pp

Fairfax

61.6%

59.0%

31.1%

31.8%

92.7%

90.8%

-1.9pp

Hannover Re1

70.2%

68.9%

24.9%

26.1%

95.1%

95.0%

-0.1pp

Hiscox3

40.5%

40.4%

42.6%

43.5%

83.0%

83.9%

0.9pp

Lancashire

33.1%

31.7%

37.1%

37.0%

70.2%

68.6%

-1.6pp

Mapfre

67.0%

68.0%

29.1%

27.7%

96.1%

95.7%

-0.4pp

Markel

56.2%

57.3%

40.6%

38.0%

96.8%

95.4%

-1.4pp

Montpelier Re

21.1%

29.4%

35.0%

36.3%

56.1%

65.6%

9.6pp

Munich Re2

61.7%

60.2%

30.4%

32.5%

92.1%

92.7%

0.6pp

PartnerRe

56.7%

56.1%

28.6%

30.0%

85.3%

86.2%

0.9pp

Platinum

30.3%

36.2%

32.4%

33.2%

62.7%

69.4%

6.7pp

QBE

64.5%

63.2%

33.3%

32.9%

97.8%

96.1%

-1.7pp

RenaissanceRe

15.4%

18.6%

28.4%

31.5%

43.8%

50.2%

6.4pp

SCOR

64.1%

61.1%

29.7%

30.3%

93.9%

91.4%

-2.5pp

Swiss Re

55.3%

55.4%

30.0%

30.0%

85.3%

85.4%

0.1pp

Validus

37.8%

38.6%

33.5%

35.1%

71.2%

73.7%

2.5pp

White Mountains

52.4%

56.8%

35.6%

34.4%

88.0%

91.2%

3.2pp

XL

62.0%

57.0%

30.5%

31.2%

92.5%

88.2%

-4.3pp

ABA (Listed Sector)

59.4%

58.5%

30.8%

31.4%

90.2%

89.9%

-0.4pp

Gen Re3

30.7%

41.7%

44.2%

47.1%

75.0%

88.9%

13.9pp

NICO3

49.2%

79.3%

25.3%

14.8%

74.5%

94.1%

19.7pp

ABA (Total)

59.0%

61.0%

30.7%

29.4%

89.6%

90.4%

0.7pp

Company

Expense Ratio FY 2014

Combined Ratio FY 2013

Combined Ratio FY 2014

Change

Listed Groups

Source: Company reports, Aon Benfield Market Analysis

1

Excluding funds withheld P&C reinsurance segment only (as disclosed) As calculated by Aon Benfield Market Analysis

2 3

Aon Benfield Analytics | Market Analysis

25

Exhibit 36: Results for the year ended December 31, 2014 (cont’d) Accident Year

Company

Prior Year Reserve Adjustment FY 2013

Prior Year Reserve Adjustment FY 2014

Prior Year Reserve Adjustment as % of NPE FY 2013

Prior Year Reserve Accident Year Accident Year Adjustment as Combined Combined % of NPE Ratio Ratio FY 2014 FY 2013 FY 2014

Change

Listed Groups ACE

-530

-527

3.6%

3.4%

91.6%

91.1%

-0.4pp

Alleghany

-203

-215

4.8%

4.9%

94.9%

93.7%

-1.2pp

Allied World

-180

-213

9.0%

9.7%

95.1%

95.0%

-0.2pp

Amlin

-134

-90

6.4%

4.1%

92.0%

92.6%

0.6pp

Arch

-264

-327

8.4%

9.1%

94.3%

96.3%

2.0pp

Argo

-34

-38

2.6%

2.8%

100.0%

99.0%

-1.1pp

Aspen

-108

-104

5.0%

4.3%

97.6%

96.0%

-1.6pp

Axis

-219

-259

5.9%

6.7%

96.9%

98.3%

1.4pp

Beazley

-218

-158

13.7%

9.5%

97.8%

98.6%

0.8pp

Catlin

-167

-120

4.2%

2.9%

89.8%

89.7%

-0.1pp

Endurance

-222

-234

11.0%

12.5%

101.2%

98.6%

-2.7pp

Everest Re

-18

-40

0.4%

0.8%

84.8%

83.6%

-1.2pp

Fairfax

-440

-446

7.3%

7.4%

100.0%

98.2%

-1.8pp

Hannover Re1

-424

-276

6.2%

3.9%

101.3%

98.9%

-2.4pp

Hiscox

-140

-172

10.9%

13.1%

94.0%

97.0%

3.0pp

Lancashire

-16

-34

2.8%

4.8%

73.0%

73.4%

0.4pp

Mapfre

-87

-443

0.7%

3.3%

96.8%

99.1%

2.3pp

Markel

-411

-436

12.7%

11.3%

109.5%

106.7%

-2.8pp

Montpelier Re

-144

-152

24.1%

23.5%

80.2%

89.2%

9.0pp

Munich Re2

-759

-900

4.7%

5.6%

96.8%

98.3%

1.5pp

PartnerRe

-721

-660

17.0%

15.1%

102.3%

101.2%

-1.1pp

Platinum

-161

-128

29.0%

25.3%

91.7%

94.7%

3.0pp

QBE

552

-1

-3.6%

0.0%

94.2%

96.1%

1.9pp

RenaissanceRe

-144

-144

12.9%

13.5%

56.7%

63.7%

7.0pp

SCOR Swiss Re Validus White Mountains XL ABA (Listed Sector)

-31

0

0.7%

0.0%

94.6%

91.4%

-3.2pp

-1,137

-673

6.5%

3.5%

91.8%

88.9%

-2.9pp

-205

-252

9.8%

12.6%

81.0%

86.3%

5.3pp

-48

-6

2.4%

0.3%

90.4%

91.5%

1.1pp

-290

-255

4.8%

4.5%

97.3%

92.6%

-4.7pp

-7,486

-8,003

4.6%

4.8%

94.9%

94.7%

-0.2pp

Gen Re3

-248

-170

44.7%

30.2%

119.7%

119.1%

-0.6pp

NICO3

-968

-896

16.5%

3.8%

90.9%

97.9%

7.0pp

-8,702

-9,069

5.2%

4.8%

94.8%

95.2%

0.3pp

ABA (Total)

Source: Company reports, Aon Benfield Market Analysis Figures in reporting currencies, but converted to USD (millions) for ABA lines n.d. = not disclosed

26

The Aon Benfield Aggregate – Results for the year ended December 31, 2014

1 Excluding funds withheld P&C reinsurance segment only (as disclosed) 3 As calculated by Aon Benfield Market Analysis 2

Exhibit 36: Results for the year ended December 31, 2014 (cont’d)

Company

Net Investment Income FY 2013

Net Investment Income FY 2014

Capital Gains / Losses FY 2013

Capital Gains / Losses FY 2014

Total Investment Return FY 2013

Total Investment Return FY 2014

Change

Listed Groups ACE

2,144

2,252

504

-507

2,648

1,745

-34%

Alleghany

466

460

188

211

654

671

3%

Allied World

158

177

50

128

208

305

47%

Amlin

33

36

101

101

134

137

2%

Arch

267

303

85

49

352

351

0%

Argo

100

87

71

94

171

181

5%

Aspen

186

190

36

32

223

222

0%

Axis

409

343

68

142

477

484

2%

-15

26

43

83

92%

Beazley

58

57

Catlin

116

119

8

107

124

226

82%

Endurance

166

132

13

13

179

145

-19%

Everest Re

549

531

300

84

849

615

-28%

Fairfax

474

510

178

1,667

652

2,177

234%

1,314

1,350

98

122

1,412

1,472

4%

38

42

16

11

55

53

-2%

Hannover Re Hiscox Lancashire

36

36

13

-6

49

30

-38%

Mapfre

1,660

2,146

297

0

1,956

2,146

10%

Markel

317

363

63

46

381

409

8%

64

47

-49

5

15

52

253%

6,907

6,675

1,323

2,395

8,230

9,070

10%

498

495

-161

372

337

867

157%

Montpelier Re Munich Re1 PartnerRe Platinum

72

69

22

2

94

71

-24%

QBE

665

678

112

103

777

781

1%

RenaissanceRe

231

150

35

41

266

192

-28%

SCOR

443

474

48

112

491

586

19%

3,947

4,103

741

393

4,688

4,496

-4%

101

108

-55

-35

46

74

61%

Swiss Re1 Validus White Mountains XL ABA (Listed Sector) Gen Re NICO ABA (Total)

111

105

162

284

273

389

43%

1,096

885

88

123

1,184

1,008

-15%

26,057

26,470

4,985

7,050

31,042

33,520

8%

706

642

191

-19

897

623

-31%

6,109

12,567

2,163

2,241

8,272

14,808

79%

32,872

39,679

7,339

9,271

40,210

48,950

22%

Source: Company reports, Aon Benfield Market Analysis Figures in reporting currencies, but converted to USD (millions) for ABA lines n.m. = not meaningful

1

Reported through income statements, excluding unit-linked and with-profit business

Aon Benfield Analytics | Market Analysis

27

Exhibit 36: Results for the year ended December 31, 2014 (cont’d)

Company

Pre-Tax Result FY 2013

Pre-Tax Result FY 2014

Change

Pre-Tax Return on Equity FY 2013

Pre-Tax Return on Equity FY 2014

Change

-18%

15.0%

11.9%

-3.1pp

Listed Groups ACE

4,238

3,487

Alleghany

855

932

9%

12.8%

12.9%

0.1pp

Allied World

428

521

22%

12.5%

14.3%

1.8pp

Amlin

326

259

-21%

20.5%

14.9%

-5.6pp

Arch

743

844

14%

13.7%

13.2%

-0.5pp

Argo

180

216

20%

11.7%

13.5%

1.8pp

Aspen

343

368

7%

10.1%

11.0%

0.9pp

Axis

734

830

13%

12.6%

14.1%

1.5pp

Beazley

313

262

-16%

24.6%

19.5%

-5.1pp

Catlin

432

488

13%

11.8%

12.6%

0.7pp

Endurance

318

349

10%

11.4%

11.5%

0.1pp

Everest Re

1,555

1,446

-7%

22.5%

19.4%

-3.2pp

-1,001

2,338

n.m.

-11.5%

25.7%

37.2pp

Fairfax Hannover Re

1,102

1,371

24%

16.6%

18.5%

1.9pp

Hiscox

245

231

-6%

17.6%

16.1%

-1.5pp

Lancashire

218

227

4%

15.3%

16.1%

0.8pp

Mapfre

1,564

1,824

17%

15.6%

17.1%

1.5pp

Markel

362

440

22%

6.7%

6.1%

-0.6pp

Montpelier Re

211

245

17%

12.0%

12.9%

0.9pp

Munich Re

3,441

2,859

-17%

12.8%

10.1%

-2.7pp

PartnerRe

722

1,308

81%

10.5%

18.9%

8.3pp

Platinum

258

182

-29%

14.2%

10.4%

-3.7pp

QBE

-448

931

n.m.

-4.1%

8.7%

12.8pp

RenaissanceRe

841

687

-18%

17.7%

13.7%

-4.0pp

SCOR

640

675

5%

13.1%

12.6%

-0.5pp

Swiss Re

4,825

4,227

-12%

14.4%

12.2%

-2.2pp

Validus

597

538

-10%

13.7%

12.8%

-0.9pp

White Mountains

345

302

-13%

8.0%

6.8%

-1.2pp

1,094

259

-76%

9.4%

2.3%

-7.2pp

28,017

31,172

11%

11.9%

12.8%

0.9pp

1,040

689

-34%

9.3%

5.9%

-3.4pp

9,041

11,867

31%

10.2%

12.4%

2.2pp

38,098

43,727

15%

11.4%

12.5%

1.1pp

XL ABA (Listed Sector) Gen Re NICO ABA (Total)

Source: Company reports, Aon Benfield Market Analysis Figures in reporting currencies, but converted to USD (millions) for ABA lines n.m. = not meaningful

28

The Aon Benfield Aggregate – Results for the year ended December 31, 2014

*Calculated by excluding the impact of net realized and unrealized investment gains/losses reported through income statements

Exhibit 36: Results for the year ended December 31, 2014 (cont’d)

Company

Common Net Income FY 2013

Common Net Income FY 2014

Change

Return on Equity* FY 2013

Return on Equity* FY 2014

Change

-24%

13.3%

9.8%

-3.6pp

Listed Groups ACE

3,758

2,853

Alleghany

628

679

8%

9.4%

9.4%

0.0pp

Allied World

418

490

17%

12.2%

13.4%

1.2pp

Amlin

299

237

-21%

18.8%

13.7%

-5.1pp

Arch

688

812

18%

13.5%

14.6%

1.1pp

Argo

143

183

28%

9.3%

11.4%

2.1pp

Aspen

294

317

8%

10.2%

11.3%

1.1pp

Axis

684

771

13%

13.1%

14.8%

1.8pp

Beazley

264

218

-18%

20.8%

16.2%

-4.5pp

Catlin

392

418

7%

12.8%

12.7%

-0.1pp

Endurance

279

316

13%

11.8%

12.1%

0.3pp

Everest Re

1,259

1,199

-5%

18.4%

16.6%

-1.8pp

Fairfax

-634

1,576

n.m.

-8.5%

20.3%

28.8pp

Hannover Re

895

986

10%

15.0%

14.7%

-0.4pp

Hiscox

238

216

-9%

17.1%

15.1%

-2.0pp

Lancashire

223

229

3%

15.6%

16.3%

0.7pp

Mapfre

790

845

7%

10.1%

10.0%

-0.2pp

Markel

281

321

14%

5.3%

4.5%

-0.8pp

Montpelier Re

191

211

10%

12.9%

14.1%

1.2pp

Munich Re

3,304

3,153

-5%

12.4%

11.3%

-1.2pp

PartnerRe

597

998

67%

10.0%

16.6%

6.5pp

Platinum

223

165

-26%

12.3%

9.5%

-2.8pp

QBE

-254

742

n.m.

-2.3%

6.9%

9.3pp

RenaissanceRe

666

510

-23%

20.1%

14.6%

-5.5pp

SCOR

549

512

-7%

11.3%

9.6%

-1.6pp

Swiss Re

4,444

3,500

-21%

13.3%

10.2%

-3.1pp

Validus

533

481

-10%

13.8%

13.2%

-0.6pp

White Mountains

322

313

-3%

8.4%

7.9%

-0.5pp

1,060

188

-82%

10.3%

1.9%

-8.5pp

24,656

25,539

3.6%

11.1%

11.1%

0.0pp

931

538

-42%

8.4%

4.6%

-3.7pp

8,391

12,007

43%

9.5%

12.6%

3.1pp

33,978

38,084

12%

10.6%

11.3%

0.7pp

XL ABA (Listed Sector) Gen Re NICO ABA (Total)

Source: Company reports, Aon Benfield Market Analysis Figures in reporting currencies, but converted to USD (millions) for ABA lines n.m. = not meaningful

*Common net income as a percentage of average common equity

Aon Benfield Analytics | Market Analysis

29

Exhibit 36: Results for the year ended December 31, 2014 (cont’d) Cash and Investments FY 2013

Cash and Investments FY 2014

ACE

61,977

Alleghany

Company

Change

Shareholders’ Funds FY 2013

Shareholders’ Funds FY 2014

Change

64,063

3%

28,825

29,587

3%

Listed Groups

19,490

19,441

0%

6,924

7,473

8%

Allied World

9,026

9,263

3%

3,520

3,778

7%

Amlin

4,510

4,564

1%

1,678

1,783

6%

Arch

14,037

15,842

13%

5,647

6,130

9%

Argo

4,237

4,179

-1%

1,563

1,647

5%

Aspen

8,300

8,654

4%

3,300

3,419

4%

Axis

14,768

14,980

1%

5,818

5,821

0%

Beazley

4,430

4,451

0%

1,339

1,343

0%

Catlin

9,209

9,276

1%

3,783

3,992

6%

Endurance

6,575

6,720

2%

2,887

3,185

10%

Everest Re

16,824

17,664

5%

6,968

7,451

7%

Fairfax

24,893

25,803

4%

8,353

9,526

14%

Hannover Re

46,149

52,080

13%

5,888

7,551

28%

Hiscox

3,157

3,490

11%

1,409

1,453

3%

Lancashire

2,484

2,343

-6%

1,460

1,357

-7%

Mapfre

40,133

48,673

21%

7,834

9,153

17%

Markel

17,612

18,638

6%

6,674

7,595

14%

3,306

3,190

-3%

1,642

1,648

0%

Montpelier Re Munich Re1

203,535

219,965

8%

25,945

30,033

16%

PartnerRe

18,274

17,988

-2%

6,710

7,049

5%

Platinum

3,612

3,398

-6%

1,747

1,738

0%

30,632

28,597

-7%

10,356

11,030

7%

7,230

7,269

1%

3,904

3,866

-1%

23,755

25,894

9%

4,940

5,694

15%

QBE RenaissanceRe SCOR Swiss Re1

143,332

137,355

-4%

32,952

35,930

9%

Validus

8,110

8,409

4%

3,704

3,588

-3%

White Mountains

8,003

7,803

-3%

3,906

3,997

2%

36,192

30,712

-15%

9,998

10,034

0%

917,805

898,912

-2%

228,620

239,804

5%

15,810

15,672

-1%

11,562

11,707

1%

XL ABA (Listed Sector) Gen Re NICO ABA (Total)

148,939

162,422

9%

97,226

93,998

-3%

1,082,554

1,077,006

-1%

337,408

345,508

2%

Source: Company reports, Aon Benfield Market Analysis Figures in reporting currencies, but converted to USD (millions) for ABA lines

30

The Aon Benfield Aggregate – Results for the year ended December 31, 2014

1

Excluding unit-linked and with-profit business

Contacts Mike Van Slooten

Jonny Eggins

Head of Market Analysis - International Aon Benfield Analytics +44.207.7522.8106 mike.vanslooten@aonbenfield.com

Analyst Market Analysis - International Aon Benfield Analytics +44.207.7522.3898 jonathan.eggins@aonbenfield.com

Mike McClane Head of Market Analysis - Americas Aon Benfield Analytics +1.215.751.1596 michael.mcclane@aonbenfield.com

Marie Teissier Analyst Market Analysis - International Aon Benfield Analytics +44.207.7522.3951 marie.teissier@aonbenfield.com

Eleanore Obst Analyst Market Analysis - International Aon Benfield Analytics +44.207.7522.3823 eleanore.obst@aonbenfield.com

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Aon Benfield Analytics | Market Analysis

31

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