This presentation is from a recent A.M. Best market briefing. The topics of this panel discussion included global reinsurance trends, the impact of alternative capital, and the merger and acquisition phase. A.M. Best’s group vice president John Andre, vice president Bob DeRose, assistant vice presidents Steve Chirico and Greg Reisner, and senior financial analyst Susan Molineux participated in the discussion.

1. State of the Global Reinsurance
Market
May 17, 2016
Panelists:
Bob DeRose – Vice President
Steve Chirico – Assistant Vice President
Greg Reisner – Assistant Vice President
Susan Molineux – Senior Financial Analyst
Moderator:
John Andre – Group Vice
President
A.M. Best Briefing - Bermuda

2. Disclaimer
A.M. Best Briefing - Bermuda 2
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May 17, 2016

3. Discussion Outline
A.M. Best Briefing - Bermuda 3
Global Reinsurance Results and Trends
Impact of Alternative Capital
The Merger and Acquisition Phase
May 17, 2016

4. Global Reinsurance
A.M. Best Briefing - Bermuda 4
Global Reinsurance Results
and
Trends
May 17, 2016

5. Market Reinsurers Have…
A.M. Best Briefing - Bermuda 5
Negative
Outlook
Increased
client
retentions
Excess
capacity
Capital
convergence
Benign cat
losses
Questionable
underwriting
discipline
Declining
reserve
redundancies
Low
investment
yields
May 17, 2016

6. Combined Ratios by Sector
A.M. Best Briefing - Bermuda 6May 17, 2016
Note: “Big Four” refers to the Big Four European
Reinsurers
99% 95% 93%
107% 108% 107%
91% 91% 93% 91% 87% 87%
92% 88% 87% 92% 90% 89%
0%
20%
40%
60%
80%
100%
120%
Big
Four
Lloyd's US
&
BDA
Big
Four
Lloyd's US
&
BDA
Big
Four
Lloyd's US
&
BDA
Big
Four
Lloyd's US
&
BDA
Big
Four
Lloyd's US
&
BDA
Big
Four
Lloyd's US
&
BDA
2010 2011 2012 2013 2014 2015
Loss Ratio Expense Ratio

7. Return on Equity by Sector
A.M. Best Briefing - Bermuda 7May 17, 2016
-5%
0%
5%
10%
15%
20%
2010 2011 2012 2013 2014 2015
European "Big Four" US & Bermuda Market Lloyd's Five Year Average

8. Reinsurance Capacity Utilization
A.M. Best Briefing - Bermuda 8May 17, 2016
Source: A.M. Best research and data
Capacity Utilization Based on Aggregate Risk-Adjusted
Capitalization of Rated Balance Sheets
50%
60%
70%
80%
90%
100%
2012 2013 2014 2015E

9. Capital Management
A.M. Best Briefing - Bermuda 9May 17, 2016
194 194
218 215
235 232
10 14
20 25
33 38
- 2
4 6
14 21
-
50
100
150
200
250
300
2010 2011 2012 2013 2014 2015
Shareholders'Equity(USDBillions)
Global Reinsurance
Shareholders' Equity plus Share Repurchases & Dividends
Shareholders' Equity (End of Period) Share Repurchases Common and Preferred Dividends

10. Global Reinsurance
A.M. Best Briefing - Bermuda 10
Impact
of
Alternative Capital
May 17, 2016

11. Alternative Capital
A.M. Best Briefing - Bermuda 11
Market still heavily
influenced
by
global leaders –
that won’t change anytime
soon
Cultural issues
no longer
limiting M&A –
it is happening
Alternative capacity
is driving change
Alternative capital is
driving a great deal of
structural change in the
market
However, do not lose
sight of the fact that the
market continues to be
heavily influenced by the
global reinsurance leaders
May 17, 2016

12. Top 50 Global Reinsurers
A.M. Best Briefing - Bermuda 12
The Top 10 global reinsurance companies continue
to strongly influence the landscape
Reinsurance
Premiums Written
2015 Life & Non-Life (USD m)
Ranking Company Name Gross Net
1 Munich Reinsurance Co. 39,035 37,761
2 Swiss Reinsurance Co. Ltd. 33,276 31,640
3 Hannover Rueckversicherung AG 17,457 15,100
4 Berkshire Hathaway Inc. 14,919 14,919
5 SCOR S.E. 13,756 12,324
6 Lloyd’s 13,199 10,416
7 Reinsurance Group of America Inc. 9,118 N/A
8 China Reinsurance (Group) Corp. 8,506 7,991
9 PartnerRe Ltd. 5,932 5,720
10 Everest Re Group Ltd. 5,749 5,257
Life and Non-Life GPW Distribution by
Ranking
May 17, 2016
Source: A.M. Best data and research
Rank 1-10
72%
Rank 11-20,
13%
Rank 21-30
7%
Rank 31-40
5%
Rank 41-50
3%

13. Dedicated Reinsurance Capacity
A.M. Best Briefing - Bermuda 13May 17, 2016
Total Dedicated Reinsurance Capacity (USD billions)
Note: * Estimate by Guy Carpenter and A.M. Best
Source: A.M. Best, Guy Carpenter
-
50
100
150
200
250
300
350
400
450
2012 2013 2014 2015E*
Estimate for Total Dedicated Reinsurance Capacity
Traditional Capacity Convergence Capacity

14. CAT Bond Issuances
A.M. Best Briefing - Bermuda 14May 17, 2016
Source: A.M. Best Research and Artemis
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
CatastropheBonds(MillionsofUSD)
Year
Property and Casualty Industry

15. Convergence Products
A.M. Best Briefing - Bermuda 15
Basis Risk – The risk that a convergence instrument may not fully trigger when
the sponsor suffers a loss
Tail Risk – The risk borne by a sponsor if an entity to which it cedes business
is insufficiently capitalised
Credit, Default and Recovery Risk – Transactions that
involve payment obligations from third parties
Investment Performance Risk – For transactions that rely on
investment earnings and return on investments
Structuring Risk – Transactions involving securitizations where cash
flows are an essential source of investor repayment
Modelling Risk – Transaction where modelling performed by third-party
consulting firms
Risks associated
with convergence
products
May 17, 2016

16. Global Reinsurance
A.M. Best Briefing - Bermuda 16
Alternative Capital
“Hedge Fund Re”
May 17, 2016

17. Alternative Capital
A.M. Best Briefing - Bermuda 17
Asset Manager View
• Permanent capital to earn
fee income
• Tax deferred returns
• Cost free“float” if done
correctly
• Provide another product for
potential investors
Reinsurer View
• Can toggle between asset
and liability risk providing
more cycle management
opportunity
• Float can generate more
income than plain vanilla
portfolio
May 17, 2016
Hedge Fund Reinsurance Model

18. Alternative Capital
A.M. Best Briefing - Bermuda 18
Build
• Long-term capital
• Recruit leadership talent
• Build infrastructure
• Develop relationships
• Obtain acceptable rating
• Gain market acceptance
Partnership
• Long-term capital
• Draw from existing talent
• Established infrastructure
• Benefit from existing relationships
• Reduce ramp-up risk
• Alignment of interest
• Obtain acceptable rating
• Gain market acceptance
May 17, 2016
Hedge Fund Reinsurance Model Continues to Gain Interest

19. Alternative Capital
A.M. Best Briefing - Bermuda 19
Hedge fund reinsurers
Greenlight
Re
Build
FSR “A”
Third
Point
Re
Build
FSR “A-”
Hamilton
Re
Build
FSR “A-”
PAC Re
Partner
Rating
Withdrawn
Watford
Re
Partner
FSR “A-”
Fidelis
Build
FSR “A-”
May 17, 2016

20. Global Reinsurance
A.M. Best Briefing - Bermuda 20May 17, 2016
The Merger
and
Acquisition Phase

21. The Drive for Efficiency
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The market will continue to
become more efficient as all
players strive to become closer to
the client
May 17, 2016

22. The Base Case for M&A
May 17, 2016A.M. Best Briefing - Bermuda 22
Broader product
capability
Broader geographic
reach
Greater influence
with brokers and
cedants
Greater
attractiveness to
third-party capital
M&A
Most M&A deals
in the current
reinsurance
market are
focused on one,
if not all, of
these four
categories

23. Reinsurers Price-to-Book Value
excluding AOCI as of 2015
A.M. Best Briefing - Bermuda 23
The increase in
valuations helps
when buying from a
“currency”
perspective
Alternatively,
companies typically
don’t want to sell
themselves below
book value
May 17, 2016
40
60
80
100
120
140
160
180
200
220
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
Price/BookValue
Years
Average
Current P/BV: 1.10x
Average 1993-Present: 1.16x
Low Reached March 2009 (0.75x BV)
Peak reached February 2002 (1.83x BV)
1.0x P/BV
Source: Company reports, Bloomberg, A.M. Best data and research

24. Appendix
May 17, 2016A.M. Best Briefing - Bermuda 24

25. Current Market Conditions
It’s a “buyer’s market”
Primary
companies
strategically
buying
Increased use
of alternative
capacity
Terms and
conditions
broadened
Rate on line
under
pressure –
especially
loss-free
business
Industry
consolidation
is creating a
ripple effect
A.M. Best Briefing - Bermuda 25May 17, 2016

26. Catastrophe Rates
A.M. Best Briefing - Bermuda 26May 17, 2016

27. Navigating the Market
May 17, 2016A.M. Best Briefing - Bermuda 27
Sources: GC Analysis, SNL,
Bloomberg

28. Alternative Capital
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Capital
Market /
Reinsurers
Convergence
Relatively
attractive
returns
Uncorrelated
asset class
Limited
investment
alternatives
Better
understanding
of risk
Losses have
been limited
thus far
Tax
advantage
return
Permanent
source of
capital
Cost-free
float
Hedge
Fund
Model
May 17, 2016

29. State of the Global Reinsurance
Market
May 17, 2016
Panelists:
Bob DeRose – Vice President
Steve Chirico – Assistant Vice President
Greg Reisner – Assistant Vice President
Susan Molineux – Senior Financial Analyst
Moderator:
John Andre – Group Vice
President
A.M. Best Briefing - Bermuda