quarterly u.s. property & casualty market...

Rate Monitor Report and Quarterly U.S.

Property & Casualty Profitability Analysis

Second Quarter 2012

Prepared by Aon Benfield Analytics Proprietary & Confidential August 2012

Aon Benfield Analytics | Proprietary & Confidential 1

Contents

Section 1 Introduction & Purpose

Section 2 Rate Trends

Section 3 Exposure Trends

Section 4 Quarterly Performance Metrics & Analysis

Section 5 YTD Performance Metrics & Analysis

Section 6 Additional Information (Contacts, Data Sources etc.)

Section 1: Introduction & Purpose


Introduction & Purpose

The purpose of this report is to provide an update on rate and exposure

trends that will influence insurance market results in the near future

Rate and exposure trends are culled from a variety of public sources

(earnings calls, press releases, SEC filings etc.) and represent Aon

Benfield’s best estimate of property and casualty rate changes

Aon Benfield rate change information is compared to other industry rate

change indices including; CIAB, Advisen, Market Scout and CLIPS

Relevant details surrounding the rate changes are no longer published,

but are available upon request from any of the contacts listed in this

report


Introduction & Purpose

The report also provides insight into the U.S. P&C market, by focusing on

the financial results of the leading U.S. insurance groups

– Summarizes income, ROE, combined ratio, cat losses and reserve

release statistics by sector and for the industry, each quarter and year-to-

date

– Contrasts actual performance against industry analyst estimates

– Estimated earnings are consensus Earnings Per Share (EPS) estimates

The U.S. P&C Industry is represented by 67 public insurance and

reinsurance groups, predominantly U.S. non-life

Aon Benfield has categorized the groups into six sectors to provide further

insight into sector profitability and into which segments of the market are

outperforming or underperforming expectations

Section 2: Rate Trends


Q2 2012 Rate & Exposure Analysis Observations

Insurers continue to achieve rate increases in most lines of business

– Rates increased in casualty and commercial lines for the 6th consecutive

quarter

– Rate increases of mid to high single digits continued to be reported in

casualty and commercial lines (particularly in Property and Workers

Compensation)

– Three carriers have reported rate increases on new business higher than the

rate increases they are observing on their renewal business

All other rate indices are displaying the same trends as Aon Benfield’s findings

Overall exposure growth was modest or flat based on the economic indicators

included in the study


Aon Benfield Commercial Casualty Rate Indices

For the sixth consecutive quarter,

commercial casualty rates increased

– All 14 groups included in the study

recently achieved rate increases

At least three groups reported that new

business was being priced at better

rates than renewal business

Several groups stated that the largest

rate increases were achieved in workers

compensation (and property lines)

Rates in the professional lines were only

showing modest improvements

Notes: Groups included in the rate information above include: Standard: ACE Limited, American International Group, Inc., Hartford Financial Services Group, Inc., Travelers

Companies Inc., XL Group plc, W.R. Berkley Corporation, CNA Financial Corporation and Chubb Corporation; Specialty: ACE Limited, Arch Capital Group Ltd, Allied World

Assurance Company Holdings, AG, AXIS Capital Holdings Limited, Markel Corporation, Old Republic International Corporation, RLI Corp., W.R. Berkley Corporation, CNA

Financial Corporation and Chubb Corporation; Some groups report a Commercial Line rate change which includes both property and casualty

Aon Benfield Indices


Comparison of Commercial Casualty Rate Indices

Comparison of Publicly Available Indices Casualty Lines Rate Changes by Quarter as Reported

Aon Benfield Company Sample

Year Qtr CIAB (GL)

Market

Scout Advisen CLIPS All Co. Avg

Specialty

Co. Avg

Standard

Co. Avg

2007 Q1 -10.5% -10.3% -2.0% -4.0% -3.9% -5.2% -3.0%

2007 Q2 -11.4% -13.0% -2.5% -5.0% -6.0% -8.0% -4.8%

2007 Q3 -12.1% -14.3% -2.9% -5.0% -7.5% -9.4% -5.4%

2007 Q4 -12.2% -15.3% -3.6% -6.0% -7.1% -7.4% -5.8%

2008 Q1 -12.6% -13.7% -5.4% -6.0% -6.6% -6.9% -5.5%

2008 Q2 -11.9% -11.3% -6.0% -6.0% -7.6% -7.8% -5.9%

2008 Q3 -9.7% -10.3% -6.9% -5.0% -5.8% -6.0% -4.9%

2008 Q4 -5.8% -9.0% -6.4% -3.0% -3.6% -4.4% -2.6%

2009 Q1 -4.2% -8.0% -3.9% 0.0% -0.6% -0.8% -0.5%

2009 Q2 -4.9% -6.3% -2.8% 1.0% 0.6% 0.0% 1.2%

2009 Q3 -4.7% -5.0% -1.7% 0.0% 0.7% 0.6% 0.9%

2009 Q4 -5.6% -4.7% -1.7% 0.0% 0.9% 0.9% 0.5%

2010 Q1 -4.9% -4.3% -2.4% 0.0% -0.1% -1.0% 0.7%

2010 Q2 -6.3% -3.3% -2.9% -1.0% -2.1% -3.2% -0.1%

2010 Q3 -5.4% -3.7% -2.9% -1.0% -1.4% -2.0% -0.6%

2010 Q4 -2.2% -4.7% -2.4% -1.0% -1.8% -2.9% -0.6%

2011 Q1 -2.8% -4.7% -2.4% 0.0% 0.1% -0.5% 0.4%

2011 Q2 -1.0% -3.7% -1.9% 1.5% 1.3% 0.0% 1.8%

2011 Q3 0.3% -1.3% -1.1% 2.0% 2.5% 0.9% 3.3%

2011 Q4 2.2% 0.7% -0.4% 3.0% 3.7% 2.0% 4.6%

2012 Q1 3.4% 2.0% 0.8% 5.0% 4.9% 4.2% 5.4%

2012 Q2 4.3% 3.7% 5.9% 5.4% 6.6%

Annual

2007 -11.6% -13.3% -2.7% -5.0% -6.1% -7.5% -4.7%

2008 -10.0% -11.1% -6.2% -5.0% -5.9% -6.3% -4.7%

2009 -4.9% -6.0% -2.5% 0.3% 0.4% 0.2% 0.5%

2010 -4.7% -4.0% -2.7% -0.8% -1.4% -2.3% -0.1%

2011 -0.3% -2.3% -1.4% 1.6% 1.9% 0.6% 2.5%

2012 3.8% 2.8% 0.8% 5.0% 5.4% 4.8% 6.0%

Section 3: Exposure Trends


Economic Drivers

Note: Quarterly average % change year over year (i.e. Percentage change from 2st Quarter 2011 vs. 2st Quarter 2012)

Consumer Price Inflation (CPI) low in Q2 2012

Gasoline prices flattening in Q2 2012

Miles driven stabilizing after several negative quarters (Q2 2011 – Q4 2011)

CPI - All Urban Consumers (1) CPI - Gasoline (all types) (2) Miles driven (3)

3.4%

3.8%

3.3%

2.8%

1.9%

-10% -5% 0% 5% 10%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

35.2%

33.1%

17.6%

10.4%

-1.7%

-10% 0% 10% 20% 30% 40%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

-2.7%

-3.2%

-2.2%

1.4%

0.1%

-10% -5% 0% 5% 10%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012


Auto


CPI - Motor Vehicle Maintenance and Repair (1) BLS Employment: General freight trucking, long-distance (2) BLS Employment: General freight trucking, local (3)

1.9%

2.2%

2.3%

2.3%

2.0%

-5% 0% 5% 10% 15%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

3.9%

2.1%

1.7%

1.3%

1.0%

-5% 0% 5% 10% 15%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

7.6%

8.2%

6.7%

8.4%

5.2%

-5% 0% 5% 10% 15%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

Auto exposure and cost trends relatively stable in Q2 2012


Property


PPI New Construction (1) BLS Construction: Avg weekly earnings of all employees (2) New Residential Construction, Housing Units Completed (3)

PPI - Softwood veneer and plywood manufacturing (4) Change in Quarterly Cat Events (US) (5)

7.4%

8.0%

6.1%

4.2%

1.6%

-5% 0% 5% 10% 15%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

2.4%

2.8%

1.2%

2.7%

2.0%

-5% 0% 5% 10% 15%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

-28.9%

3.8%

1.7%

-0.8%

14.3%

-40% -30% -20% -10% 0% 10% 20%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

-15.3%

-9.0%

1.4%

4.2%

16.4%

-25% -15% -5% 5% 15% 25%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

4.8%

-20.0%

0.0%

0.0%

-4.5%

-30% -10% 10% 30%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012 Residential construction

trends remain volatile in

Q2 2012

Number of US weather

events stable /

decreasing in last CY


Medical


CPI - Medical Care (1) Health Care: Avg Weekly hours of all employees (2) BLS Health Care: Avg Hourly earnings of all employees (3)

BLS Health Care: Avg Weekly earnings of all employees (4) BLS Employment: Health Care (5) BLS Employment: Offices of physicians (6)

2.9%

3.1%

3.3%

3.5%

3.7%

-5% 0% 5% 10% 15%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

0.4%

0.0%

0.4%

0.4%

0.1%

-5% 0% 5% 10% 15%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

3.0%

3.2%

2.8%

3.3%

2.9%

-5% 0% 5% 10% 15%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

3.4%

3.2%

3.2%

3.8%

3.0%

-5% 0% 5% 10% 15%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

1.9%

2.1%

2.2%

2.4%

2.3%

-5% 0% 5% 10% 15%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

1.4%

2.2%

2.9%

3.1%

3.4%

-5% 0% 5% 10% 15%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012


Medical


Medical exposure and cost trends stable in Q2 2012

BLS Employment: Hospitals (7) CPI - Prescription Drugs (8)

1.0%

1.4%

1.6%

2.2%

1.9%

-5% 0% 5% 10% 15%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

4.3%

4.4%

4.1%

4.2%

3.5%

-5% 0% 5% 10% 15%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012


Total Private: Avg Weekly hours of all employees (1) BLS Total Private: Avg Hourly earnings of all employees (2) BLS Total Private: Avg Weekly earnings of all employees (3)

BLS Employment: Total private (4)

0.8%

0.2%

1.0%

0.7%

0.2%

-5% 0% 5% 10% 15%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

2.0%

1.9%

2.3%

1.9%

2.0%

-5% 0% 5% 10% 15%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

2.8%

2.1%

3.3%

2.6%

2.2%

-5% 0% 5% 10% 15%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

1.8%

1.8%

1.8%

2.1%

1.8%

-5% 0% 5% 10% 15%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

Labor


Labor cost trends

stable in Q2 2012

Section 4: Quarterly Performance Metrics & Analysis


Q2 2012 Profitability Analysis Observations

Despite a relatively benign catastrophe environment, continued favorable

reserve releases and modest earned premium growth, more than half of the 67

groups included in this report missed their EPS estimates

– This is a significant change from the first quarter where approximately three

quarters of the groups exceeded their EPS estimates

Overall the industry beat the weighted average EPS estimates by over 10%,

suggesting there were clear winners and losers

– The majority or winners were larger groups (groups with greater than $3

billion of equity) as 17 of 29 larger groups exceeded their estimates

Reinsurance and Specialty sectors fared the best, where 19 of 29 groups or

66%, beat their estimated EPS

The sector that fared the worst was Personal lines, where 8 of the 9 groups

missed their EPS estimates for the quarter

– Personal lines companies cited a number of reasons for missing their EPS

estimates, including; higher operating expenses, a reduction in favorable

reserve development and realized capital gains and weather-related

catastrophe losses



In Q2 2012, all sectors except Small Cap Specialty achieved positive Return

on Equity (ROE) for the second quarter in a row

ROE for the quarter was 5.0%, up 5.6 points from Q2 2011

However, the ROE decreased significantly from the first quarter ROE of 10%

Leading ROE performers were Reinsurance Sector at 9.7% and Specialty at

9.5% (up 7.4 and 0.3 points respectively)

– Positive results were driven by lower catastrophe losses, which contributed

approximately 5 points to the loss ratio for all sectors including Reinsurance,

compared to 15 points (Industry) and 25 points (Personal) in the prior year

quarter

Large Cap and Specialty sectors are the only two sectors that had positive

ROE ratios in every quarter since Q4 2010

Profitability was also driven by favorable reserve development

– Reserve development continued to benefit all sectors, lowering the

combined ratio 3.6 points in the quarter

– However, favorable development to earned premiums was flat as compared

to Q2 2011



Equity for the industry has increased for the third consecutive quarter

However, the increase in equity was more modest, (1.0% in Q2 2012), then in

the two previous quarters (3.6% increase in Q1 2012 and 5.2% in Q4 2011)

Dividends and share repurchases help temper the increase in equity by

approximately 1% of prior quarter total equity

– Led by the Reinsurance sector, which had dividends and share repurchases

that equaled 2.6% of prior quarter total equity

Earned premium for the industry increased 3.7% in the second quarter

– Specialty saw the most growth (up 10.5%) which was fueled by double digit

growth by 7 of the 16 groups

– Commercial lines experienced organic growth over 8%

– Personal lines continued to be virtually flat over the 1st two quarters


Miss Beat

% Beat

EPS Target

0% 20% 40% 60% 80% 100%

Large Cap (7)

Commercial (8)

Personal (9)

Specialty (16)

Small Cap Specialty (13)

Reinsurance (13)

Industry (66) 45

62

38

69

11

25

30

8

5

11

1

2

3

36

5

8

5

8

6

4 43

Q2 2012 Actual vs. Estimated EPS - Sector

Note: There are 67 insurance and reinsurance groups included in this report. However, EPS estimates were not available for 1 group. The number next to each sector represents

the number of groups in that sector. “Miss” or “Beat” refers to the number of groups that did not meet (Miss) or exceeded (Beat) the consensus EPS estimate.

Missed Target Est. Beat Target Est.

EPS Estimated vs. Actual


Q2 2012 Actual vs. Estimated EPS - Industry

Note: 1) Excludes BRK.A (Berkshire Hathaway Inc.)

Actual EPS Estimated EPS

Industry Weighted Average EPS

On average, the actual

EPS exceeded estimate by

over 10%

The industry EPS is

displayed both with and

without the dominant

Berkshire Hathaway Group

1.33

0.86

1.17

0.79

0.0 0.5 1.0 1.5 2.0 2.5 3.0

Industry

Industry¹


1,181

32

975

77

467

4,024

7,744

0 500 1,000 1,500 2,000 2,500

Reins

SCSpec

Spec

Pers

Comm

LargeCap*

LargeCap

* Excludes BRK.A (Berkshire Hathaway Inc.)

($M

illions)

EPS Est vs.

Actual diff

1.66

0.88

0.53

0.41

0.86

0.17

1.18

EPSEst

2.00

1.04

0.34

0.19

1.02

0.12

1.31

EPSActual

+20.8%

+17.9%

-35.8%

-53.6%

+18.9%

-29.6%

+11.0%

Q2 2012 Actual vs. Estimated EPS - Sector

Operating Income after taxes EPS Actual vs. Estimated % Difference

Note: Operating income after taxes not available for 7 groups

Operating Income By Sector


Q2 2012 Profitably – Industry

Notes: 1)Quarterly % change year over year (i.e. Percentage change from 2nd Quarter 2011 vs. 2nd Quarter 2012)

2)Represents a sample of 14 groups which focus on “Commercial Casualty” business

3)NWP (Trailing Twelve Months NWP) / Equity

Equity P&C Earned Premium Change¹

NWP / Equity3 Combined Ratio

Comm Lines & Casualty Rate Change2

-1.8%

+5.2%

+3.6%

+1.0%

450 475 500 525 550 575

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

QuarterChng

0.85

0.87

0.86

0.87

0.88

0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

5.6%

6.5%

5.4%

2.1%

3.7%

-5% 0% 5% 10% 15%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

107.1%

103.1%

101.2%

95.0%

97.0%

50% 65% 80% 95% 110% 125%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

($B

illion)

1.3%

2.5%

3.7%

4.9%

5.9%

-5% 0% 5% 10% 15%

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012


CY Quarter YOY Point Change

Q2 2012 Profitability Ratios – Sectors

Note: CY Quarter = Current Year Quarter; YOY Point Change = Percentage point change from 2nd Quarter 2011 vs. 2nd Quarter 2012

Return on Equity P&C Earned Premium Change Combined Ratio

Reserve Development to Premium Catastrophe Losses to Premium Combined Ratio ex-Cat & Reserve Development

-1.5

-0.6

-2.6

+1.6

-0.4

-1.4

+1.4

50% 65% 80% 95% 110% 125%

Pers

Comm

SCSpec

Spec

Industry

LargeCap

Reins

+13.0

+10.1

+7.4

+5.6

+2.9

+0.3

-0.2

-15% -10% -5% 0% 5% 10% 15%

Pers

SCSpec

Reins

Industry

LargeCap

Spec

Comm

-0.5

+2.4

+1.4

+0.3

+0.1

+0.1

-1.5

-10% -5% 0% 5% 10%

SCSpec

Comm

Pers

LargeCap

Industry

Reins

Spec

-14.4

-10.0

-5.3

-10.2

-9.0

-5.0

-17.4

50% 65% 80% 95% 110% 125%

Pers

SCSpec

Comm

Industry

LargeCap

Spec

Reins

-5% 0% 5% 10% 15%

Pers

LargeCap

Reins

Industry

SCSpec

Comm

Spec

11.0% -14.2

-7.2

-6.9

-8.0

-9.9

-5.1

-18.9

0% 2% 4% 6% 8% 10%

Pers

Comm

SCSpec

LargeCap

Industry

Spec

Reins

YOY Chng

YOY Chng

YOY Chng

YOY Chng

YOY Chng

Section 5: YTD Performance Metrics & Analysis


Q2 2012 YTD Profitability Analysis Observations

ROEs for all sectors have increased from the prior year

– Small Cap Specialty was flat while all other sectors reported positive ROEs

– Reinsurance, Large Cap and Specialty fared the best achieving double digit ROEs

All sectors except Small Cap Specialty, experienced favorable reserve development

However, reserve development for the year had less of an impact on the loss ratio than the same period for the prior year (-4.2% in Q2 2011 vs. -3.8% in Q2 2012)

Catastrophe losses as a percentage of earned premiums decreased in every sector

– Due to a significantly less amount of catastrophes as compared to the prior year, the Reinsurance sector’s loss ratio for catastrophes decreased almost 60 points from 2011

P&C earned premiums were up 3.6%, led by the Specialty (10.6%) and Commercial (7.2%) sectors

– Personal and Reinsurance sectors remained flat


Q2 2012 YTD Profitability Analysis Observations

Since Q2 2011, equity for the industry increased 8.1%, which included

dividends and share repurchases totaling 4.3% of Q2 2011 equity

– Driven by Specialty sectors and Reinsurance sector, which had dividends

and share purchases during this period that averaged over 6.5% of Q2 2011

equity


TTM Q2 2012 Actual vs. Estimated EPS - Industry

Industry Weighted Average EPS

4.45

2.84

4.79

3.20

0.0 0.5 1.0 1.5 2.0 2.5 3.0

Industry

Industry*

*Note: Excludes BRK.A (Berkshire Hathaway Inc.)

TTM: Trailing Twelve Months

Actual EPS Estimated EPS


TTM Q2 2012 Actual vs. Estimated EPS - Sector

3,275

120

3,383

436

2,353

12,863

25,763

0 1,000 2,000 3,000 4,000 5,000

Reins

SCSpec

Spec

Pers

Comm

LargeCap*

LargeCap

EPS Est vs.

Actual diff

($M

illions)

* Excludes BRK.A (Berkshire Hathaway Inc.)

6.77

3.57

2.36

1.84

3.48

0.70

4.28

EPSEst

6.46

3.25

1.60

1.37

3.68

0.34

3.93

EPSActual

-4.5%

-8.8%

-32.4%

-25.6%

+5.6%

-52.1%

-8.3%

Operating Income after taxes EPS Actual vs. Estimated % Difference

Operating Income By Sector


YTD Q2 2012 Profitability – Industry

Note: *Quarterly % change year over year; **Represents a sample of 14 groups which focus on “Commercial Casualty” business ; ***NWP (Trailing Twelve Months) / Equity

Equity P&C Earned Premium Change*

NWP / Equity*** Combined Ratio

Comm Lines & Casualty Rate Change**

+1.5%

+8.1%

450 475 500 525 550 575

Q2 2010

Q2 2011

Q2 2012

0.85

0.89

0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2

Q2 2011

Q2 2012

5.0%

3.6%

-5% 0% 5% 10% 15%

Q2 2011

Q2 2012

112.1%

95.9%

50% 65% 80% 95% 110% 125%

Q2 2011

Q2 2012

($B

illion)

YTD Chng

1.9%

5.4%

-5% 0% 5% 10% 15%

2011

Q2 2012


YTD Q2 2012 Profitability – Sector

YTD YOY Point Change

Return on Equity P&C Earned Premium Change Combined Ratio

Reserve Development to Premium Catastrophe Losses to Premium Combined Ratio ex-Cat & Reserve Development

-1.6

+0.1

-4.0

-0.5

+0.2

-1.4

+10.4

50% 65% 80% 95% 110% 125%

Comm

Pers

SCSpec

Spec

Industry

LargeCap

Reins

-7.7

-10.5

-7.6

-16.3

-8.3

-9.0

-47.5

50% 65% 80% 95% 110% 125%

Pers

SCSpec

Comm

Industry

LargeCap

Spec

Reins

+26.3

+7.9

+6.8

+3.8

+3.7

+2.9

+1.5

-15% -10% -5% 0% 5% 10% 15%

Reins

Industry

Pers

SCSpec

Spec

LargeCap

Comm

-1.1

+1.6

+0.8

+1.1

+0.4

-0.0

+1.8

-10% -5% 0% 5% 10%

SCSpec

Pers

LargeCap

Comm

Industry

Spec

Reins

-5% 0% 5% 10% 15%

Pers

Reins

LargeCap

Industry

SCSpec

Comm

Spec

-9.4

-7.1

-5.3

-16.9

-7.7

-59.7

-8.5

0% 2% 4% 6% 8% 10%

Pers

Comm

SCSpec

Industry

LargeCap

Reins

Spec

YOY Chng

YOY Chng

YOY Chng

YOY Chng

YOY Chng

Section 6: Additional Information


Insurance & Reinsurance Groups By Sector

Notes:

* Estimated EPS not available.

** Alleghany acquired Transatlantic in March 2012. Therefore, 2012 Transatlantic YTD results are not fully reflected in

Alleghany’s financial statements. Consequently adjustments to correct this discrepancy were made in the YTD results.

Delphi Financial Group, Inc. was removed due to acquisition of Safety National to Tokio Marine Holdings during Q2 2012.

Sector Company Sector Company

LargeCap ACE Limited SCSpec American Safety Insurance Holdings, Ltd.

LargeCap American International Group, Inc. SCSpec AMERISAFE, Inc.

LargeCap Allstate Corporation SCSpec Baldwin & Lyons, Inc.

LargeCap Berkshire Hathaway Inc. SCSpec Eastern Insurance Holdings, Inc.

LargeCap Chubb Corporation SCSpec EMC Insurance Group Inc.

LargeCap Progressive Corporation SCSpec First Acceptance Corporation

LargeCap Travelers Companies, Inc. SCSpec Meadowbrook Insurance Group, Inc.

SCSpec SeaBright Holdings, Inc.

Reins Aspen Insurance Holdings Limited SCSpec Employers Holdings, Inc.

Reins AXIS Capital Holdings Limited SCSpec Global Indemnity plc

Reins Everest Re Group, Ltd. SCSpec National Interstate Corporation

Reins Montpelier Re Holdings Ltd. SCSpec United Fire Group, Inc.

Reins PartnerRe Ltd. SCSpec Hallmark Financial Services, Inc.

Reins Platinum Underwriters Holdings, Ltd. SCSpec Kingsway Financial Services Inc.*

Reins RenaissanceRe Holdings Ltd.

Reins Validus Holdings, Ltd. Pers Donegal Group Inc.

Reins Flagstone Reinsurance Holdings, S.A. Pers Erie Indemnity Company

Reins Greenlight Capital Re, Ltd. Pers Kemper Corporation

Reins Maiden Holdings, Ltd. Pers Horace Mann Educators Corporation

Reins Alleghany Corporation** Pers Infinity Property and Casualty Corporation

Reins Alterra Capital Holdings Limited Pers Mercury General Corporation

Pers State Auto Financial Corporation

Spec Allied World Assurance Company Holdings, AG Pers Hilltop Holdings Inc.

Spec American Financial Group, Inc. Pers Safety Insurance Group, Inc.

Spec AmTrust Financial Services, Inc.

Spec Arch Capital Group Ltd. Comm Cincinnati Financial Corporation

Spec Argo Group International Holdings, Ltd. Comm CNA Financial Corporation

Spec Assurant, Inc. Comm Hartford Financial Services Group, Inc.

Spec Endurance Specialty Holdings Ltd. Comm Old Republic International Corporation

Spec ProAssurance Corporation Comm Tower Group, Inc.

Spec HCC Insurance Holdings, Inc. Comm XL Group plc

Spec Markel Corporation Comm Fairfax Financial Holdings Limited

Spec Navigators Group, Inc. Comm Hanover Insurance Group, Inc.

Spec OneBeacon Insurance Group, Ltd.

Spec RLI Corp.

Spec Selective Insurance Group, Inc.

Spec W.R. Berkley Corporation

Spec White Mountains Insurance Group, Ltd.


Sources

Quarterly Financial Data

SNL Financial LC

Economic Drivers (Page 10)

(1) U.S. Bureau of Labor Statistics (BLS) CPI - All Urban Consumers, series ID: CUUR0000SA0

(2) BLS CPI - Gasoline (all types), series ID: CUUR0000SETB01,CUUS0000SETB01

(3) Miles Driven: Federal Highway Administration. Traffic Volume Trends, All Systems (Commercial and Personal)

Auto (Page 11)

(1) BLS CPI - Motor vehicle maintenance and repair, series ID: CUUR0000SETD

(2) BLS PPI - General freight trucking, long-distance, series ID: PCU48412-48412-

(3) BLS PPI - General freight trucking, local, series ID: PCU484110484110

Property (Pages 12)

(1) BLS PPI - New Construction, series ID: PCUBNEW--BNEW--

(2) BLS Construction: Average weekly earnings of all employees, series ID: CEU2000000011

(3) Census: New Residential Construction, Housing Units completed in the USA, Not Seasonally Adjusted Total Units

(4) BLS PPI - Softwood veneer and plywood manufacturing, series ID: PCU321212321212

(5) Aon Benfield Impact Forecasting

Medical (Pages 13 and 14)

(1) BLS CPI - Medical, series ID: CUUR0000SAM

(2) BLS Health Care: Average Weekly hours of all employees, series ID: CEU6562000102

(3) BLS Health Care: Average Hourly earnings of all employees, series ID: CEU6562000103

(4) BLS Health Care: Average Weekly earnings of all employees, series ID: CEU6562000111

(5) BLS Employment: Health Care, series ID: CEU6562000101

(6) BLS Employment: Offices of physicians, series ID: CEU6562110001

(7) BLS Employment: Hospitals, series ID: CEU6562200001

(8) BLS CPI - Prescription Drugs, series ID: CUUR0000SEMF01

Labor (Page 15)

(1) BLS Total private: Average Weekly hours of all employees, series ID: CEU0500000003

(2) BLS Total private: Average Hourly earnings of all employees, series ID: CEU0500000003

(3) BLS Total private: Average Weekly earnings of all employees, series ID: CEU0500000011

(4) BLS Employment: Total private, series ID: CEU0500000001


Contacts

Stephen Mildenhall

Chief Executive Officer

Aon Benfield Analytics

+1.312.381.5880

[email protected]

Brian Alvers

Senior Managing Director


+1.312.381.5355

[email protected]

Thomas Kenia, FCAS

Managing Director


+1.212.441.1535

[email protected]

Chris Cortese

Associate Director


+1.215.751.1595

[email protected]

mailto:[email protected]





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© Aon Benfield Inc. All rights reserved. This document is intended for general information purposes only and should not

be construed as advice or opinions on any specific facts or circumstances. This analysis is based upon information from

sources we consider to be reliable, however Aon Benfield does not warrant the accuracy of the data or calculations herein.

The content of this document is made available on an “as is” basis, without warranty of any kind. Aon Benfield disclaims

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