US FSI BermudaInsuranceSurvey 062712

7/31/2019 US FSI BermudaInsuranceSurvey 062712

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Bermudian Business Insurance Special 2012

B Innc vy 2012with analysis by Standard & Poors

1 8 n n u l

The BermudaTop 10

2011 Wa a Recrd Yearfr CatatrpheIn 2011, a number o severe natural

catastrophic events that extracted a heavy toll

both in atalities, and economic and insured

losses hurt the property and casualty (P&C)

insurance and reinsurance industry. These

catastrophic events were not limited to asingle geographic region. They were spread

across the Pacic Basin and North America.

Munich Re estimates that in 2011 insured

losses due to natural catastrophes amounted

to $105 billion, which topped the prior

record o $101 billion in 2005. Since the

beginning o the prior hard market in 2002,the P&C (re)insurance industry has been

challenged by an increase in the requency

and severity o catastrophes, and the global

nancial crisis and economic downturn. In

act, 22 o the 40 most costly catastrophic

events o the past 40 years rom an insured

loss prospective have occurred in the past 10years.

BY Doug osRMillR nD ouik gRiB

By CapiTal & SurpluS ($000s)

1 C lmted 24,516,0002 Xl grp pc 10,769,4103 ParterRe ltd. 6,467,5424 Xis Capta d lmted 5,444,0795 rch Capta grp ltd. 4,628,4866 ReaaceRe d ltd. 3,608,5337 Vad d, ltd. 3,448,425

8 Cat grp lmted 3,297,7419 pe irace d lmted 3,172,00010 ed Wrd race Cmpay d, g 3,149,022By ToTal aSSeTS ($000s)

1 C lmted 87,505,0002 Xl grp pc 44,626,0773 ParterRe ltd. 22,855,3734 Xis Capta d lmted 17,806,0595 rch Capta grp ltd. 17,141,7696 Cat grp lmted 12,959,0077 ed Wrd race Cmpay d, g 11,122,1588 terra Capta d ltd. 10,185,8479 pe irace d lmted 9,485,00010 drace specaty d ltd. 8,292,615

By premiumS earned ($000s)

1 C lmted 15,387,0002 Xl grp pc 5,327,1123 ParterRe ltd. 4,647,7544 Cat grp lmted 3,611,6235 Xis Capta d lmted 3,314,9616 rch Capta grp ltd. 2,631,8157 veret Rerace (Bermda), ltd. 2,024,346

8 drace specaty d ltd. 1,931,3939 pe irace d lmted 1,889,00010 cx ltd. 1,837,736

By neT inCome ($000s)

1 C lmted 1,585,0002 rch Capta grp ltd. 436,3583 ed Wrd race Cmpay d, g 274,5484 lacahre irace Cmpay lmted 239,7005 veret Rerace (Bermda), ltd. 97,3596 terra Capta d ltd. 65,2827 Xis Capta d lmted 46,3058 Cat grp lmted 38,3979 cx ltd. 34,14110 o Caaty irace, ltd. 29,614


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Despite these challenges and the highly

competitive pricing environment in recent

years, Bermuda-based (re)insurers collectively

are strongly capitalized, and their capital

adequacy ratios are mostly redundant at their

respective rating level as o year-end 2011.

However, within the group some companiesare signicantly better capitalized or their

rating level compared with the median result,

while others have less o a cushion. Standard

& Poors Ratings Services views excess capital

as a strength, as it provides a cushion to the

inherent severity risk that most Bermudians

underwrite, and or possible modeling errors

when evaluating their catastrophe exposures.

The participants in our Bermuda Market

Survey reported underwriting capital (dened

as total debt plus shareholders equity) o

$103 billion and net premiums written o$54 billion or 2011. Despite the record level

o insured losses in 2011, underwriting capi-

tal or the survey participants was down less

than 2% rom the 2010 level o $105 billion.

This decline in underwriting capital resulted

rom management returning capital to inves-

tors through both dividends and repurchased

shares. Companies, or the most part, put

their share-repurchase activity on hold in

the second hal o 2011 because o the heavy

catastrophe losses during the rst hal o the

year. The level o share repurchasing in 2011

was 38% o the amount repurchased in 2010

by the survey participants. Repurchasing

shares has been an attractive way or publicly

listed companies to manage their valuation

metrics, especially because the survey par-

ticipants that are publicly listed have broadly

traded at a 15% to 25% discount to book

value during the past ew years.

As a result o the record level o catastrophe

losses in 2011, the survey participants report-

ed a combined ratio o 104%, which was 15

percentage points worse than in 2010a year

with a moderate level o catastrophes. How-ever, investment income, which represented

a 3.1% yield on invested assets, more than

oset the underwriting loss. During the past

ve years, investment income has contributed

between 6.5 and 10.8 percentage points to

the earnings beore interest and taxes (EBIT)

return on underwriting capitala com-

mon industry metric. This has been possible

because the size o the survey participants

invested assets was more than twice that o

their underwriting capital. In three o the past

ve years, the survey participants obtained an

EBIT return on underwriting capital o 15%

or more, whereas 2008 and 2011 were hurt

by the nancial crisis and record catastrophe

losses, respectively. The ve-year average

EBIT return on underwriting capital or the

survey participants was 12.1%.

We believe that several key challenges ace

P&C (re)insurers in 2012. First, P&C (re)

insurers generally maintain healthy capital

positions, which have contributed to the

competitive pricing environment. Pricing

changes in the reinsurance market have been

ragmented. Property-catastrophe treaties that

were loss ree in 2011 and global marine/

energy have experienced rate increases o

around 5%-10%. Loss-aected property-

catastrophe treaties experienced greater rate

increases, although they varied by region.

Rate activity on casualty treaties ranged rom

a 5% decrease to a 5% increase, and there

were no major reductions in capacity.

Recent updates to vendor catastrophe mod-

els have had a more muted eect on pricing

than the market expected. Changing views

on exposure, actual loss experience, and com-

petitiveness o prior years pricing had more

o an inuence on pricing changes. In some

lines, we consider the rate increases we have

seen to be insufcient to cover increasing loss

costs or the increased view o risk. Thereore,

we do not consider the market as having

become hard across the board yet.

We expect the Bermudian (re)insurance

market to report a moderate increase in its

aggregate probable maximum losses in 2012

compared with 2011, partly driven by a

recent update in the U.S. wind model rom a

leading catastrophe modeling rm. Some Ber-

mudian (re)insurers may limit their exposure

to regions that experienced heavy catastrophe

losses in 2011, especially where the catas-

trophe models do not adequately reect the

Contribution Analysis: EBIT Return on Average Underwriting Capital (ROAC)

Calendar Year vs. Accident Year Loss & LAE Ratio


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exposures (e.g. Asia-Pacic). We have noticedan increased interest by the Bermudian (re)

insurance market to expand into noncatas-

trophe exposed short-tail classes o business,

such as accident and health, crop, and surety.

As a result, we could see some margin com-

pression in those classes o business due to

increasing competition.

Second, investment yields have continued

to decline during the past ew years and are

currently at levels not seen in recent history.

The survey participants achieved a 3.1%

yield on cash and invested assets in 2011.

However, their investment yield has contin-

ued to decline during the past ve years rom

a recent high o 4.8% in 2007. Typically, the

duration o xed-income investments or the

Bermuda (re)insurance market is between

three and our years, with an average credit

rating o between AA and A. At year-end

2011, the yield on the intermediate (ve-year

to seven-year) AA and A corporate debt was

2.16% and 3.19%, respectively. The yield on

the AA intermediate corporate debt dropped

by 287 basis points (bps) in 2011 rom 2007

levels, while the A intermediate corporatedebt yield dropped 225 bps or the same

period. As a result o this signicant drop in

investment yields rom historical levels, the

P&C (re)insurance market is going to need to

adjust pricing upward to achieve the level o

returns required by its shareholders.

As o year-end 2011, the Bermudian (re)

insurers collectively had a limited exposure to

the European periphery countries (i.e. Por-

tugal, Ireland, Italy, Greece, Spain) sovereign

debt relative to their total invested assets. Thesurvey participants non-U.S. government

debt holdings represented approximately 15%

o total invested assets at year-end 2011 and

this allocation has been relatively constant

over the past our years.

During the past ve years, realized and

unrealized capital gains and losses have

contributed signicant volatility to P&C (re)

insurers nancials. As a result o the nan-

cial crisis in 2008, the survey participants

reported realized capital losses o $7.2 billion

and a change in unrealized capital losses o

$7.2 billion. During the ollowing year, they

reported a change in unrealized capital gains

o $7.3 billion and $1.1 billion in realized

capital gains. Although the survey partici-

pants shareholder equity declined by $10.9

billion (16%) as o year-end 2008, it more

than recovered in 2009 due to retained earn-

ings, a reversal in unrealized capital gains and

losses, and issuance o equity primarily rom

business combinations.

Finally, the Bermudian (re)insurance mar-

kets calendar-year results have beneted rom

avorable prior-year loss reserve developmentduring the past ew years. The avorable

prior-year development has come largely rom

the recent hard market years (i.e., 2002 to

2005). During the past ve years, the survey

participants calendar-year combined ratio has

beneted rom ve to nine percentage points

o avorable prior-year development. Because

their premium leverage (dened as the ratio

o net premiums written to underwriting

capital) has been around 0.5x to 0.6x, the

benet to the EBIT return on underwriting

capital has been about hal the impact on

the calendar year combined ratio. We believe

that the remaining redundancies associated

with these hard market years are limited. As a

result, we expect the ongoing benet derived

rom avorable prior-year development to

be greatly diminished relative to that o the

past ew years. Although we believe that loss

reserves are generally adequately reserved

among the Bermudian (re)insurers that Stan-

dard & Poors rates, some could experience

adverse development on the more recent ac-

cident years. We also believe that the reserve

redundancy and increased likelihood o

adverse development could make disciplined,

protable underwriting a ratings dierentiator

in the coming years.

Given the current pricing environment,

relatively low investment yields, and ex-

pectation or diminishing prior-year reserve

redundancies, we expect the participants to

generate an EBIT return on underwriting

capital in the low teens, assuming normalized

catastrophe losses. Although this expecta-

tion is in line with the ve-year (2007-2011)average EBIT return on underwriting capital,

we expect the contribution to be more evenly

split between underwriting activities and

investment activities.

The Top 10

The three companies (i.e., ACE Limited.,

XL Group plc, and PartnerRe Ltd.) leading the

top-10 list remain unchanged rom last year

with regard to market share measured by net

All Copanies Surveyed: Total Asset Coposition Quoted Investent Coposition


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premiums earned (NPE). Also, their position

within the list is the same as last year, with

ACE Limited in the pole position ollowed

by XL Group plc (No. 2) and PartnerRe Ltd.

(No. 3). The top ve is rounded out by Catlin

Group Limited (No. 4) and AXIS Capital

Holdings Ltd. (No. 5), which both retained

the same ranking as last year.

Unlike the top hal o the list, there was

movement among the bottom hal. The

ranking o Arch Capital Group Ltd. (No. 6)

remained unchanged. Both Everest Reinsur-

ance (Bermuda) Ltd. (No. 7) and Endurance

Specialty Holdings Ltd. (No. 8) advanced

within the ranks, while Aspen Insurance

Holdings Ltd. (No. 9) and Hiscox Ltd. (No.

10) declined.

The top 10 as a group increased their NPE

on a year-over-year basis by nearly 9%. The

premium growth was lead by ACE Lim-

ited, with 13.9%. The top-line growth that

ACE Limited experienced came rom recent

acquisitions, its global accident and health

business, and its P&C business in Asia and

Latin America.

Three other companies experienced

double-digit growth in premium: AXIS Capi-

tal Holdings Ltd. (12.5%), Catlin Group Ltd.

(12.2%), and Endurance Specialty Holdings

Ltd. (10.9%). The top-line growth at AXIS

Capital Holdings Ltd. was led by its insur-

ance operations. Although its reinsurance

operations also expanded, they did so more

slowly than the insurance operations. At

Catlin Group Ltd., the growth came primar-

ily rom its international and U.S. hubs. For

Endurance Specialty Holdings Ltd., the top-

line growth was heavily weighted toward its

insurance operation and came primarily rom

its agriculture operations and recently ormed

contract binding authority business.

XL Group plc increased NPE by nearly

6% during 2011 as management executed its

growth plan to recapture market share ollow-

ing actions during 2009 and 2010 to stabilize

the ranchise. Two companies (PartnerRe Ltd.

and Aspen Insurance Holdings Ltd.) saw a

decline in NPE in 2011.

It is worth noting that the nancials or

Everest Reinsurance, Tokio Millennium Re,

Amlin AG, and Lancashire Insurance reect

only their Bermuda operations and not the

entire group.

The survey participants that had a sizable

global catastrophe reinsurance operation

recorded lower returns on average equity

(ROAE) than those that were heavily weighted

toward insurance and noncatastrophe expo-

sure reinsurance operations. This was because

the P&C (re)insurance industry experienced

$105 billion in insured catastrophe losses.

Lancashire Insurance Co. Ltd. is No. 1 in

ROAE at 18.9% and signicantly ahead o the

other companies in the top ve.

The ve-year average ROAE or the survey

participants was 11.2%, which is based on

a simple average calculation. However, the

average does not provide a true sense or the

level o variability in the ROAE. During the

past ve years, the ROAE or the survey par-

ticipants has ranged rom a high o 20.4% in

2009 to a low o negative 0.4% in 2008.

Most o the survey participants are global

(re)insurers and have sizable operating enti-

ties domiciled in other jurisdictions. Bermuda

is the domicile or the ultimate parent com-

pany or 16 o the 22 survey participants. The

others are domiciled in Switzerland (3), the

U.K. (1), Ireland (1), and Luxembourg (1).

Is Bermudas tatus as the omiile of

choie uder Threat?

During the past two decades, Bermuda

(AA-/Stable/A-1+) has gradually become the

domicile o choice or reinsurers setting up

new businesses. Bermudas share o the global

reinsurance market doubled to about 8%

in 2010 rom 4% a decade ago. This dem-

onstrates the attractiveness and competitive

advantage o Bermuda as a nancial center.

Start-up activity on the island was particu-

larly strong in 2001 and 2002 ollowing the

Sept. 11, 2001, terrorist attacks, as well as in

Top Ten Copanies 2011: Return on Average Equity


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2005 and 2006 ater Hurricanes Katrina, Rita,

and Wilma (KRW). Ater Sept. 11 and KRW,

the global (re)insurance industry raised $22

billion and $43 billion, respectively. Demand

or reinsurance increased substantially during

those times, and Bermuda proved an attrac-

tive location or reinsurance companies as themajority o raised capital ew to the island.

This resh capital was deployed to strengthen

existing players balance sheets, nance a new

generation o startups (dubbed the Classes o

2001 and 2005), and sponsor a host o side-

cars (nancial structures that are created to

allow investors to take on the risk and return

o a book o business written by a (re)insurer

and earn the risk and return that arise rom

that business). Similarly in 2011, because

o the magnitude o the global catastrophe

losses, Bermudians sponsored ve newsidecars. In April 2012, Validus Holdings Ltd.

announced the ormation and capitalization

o a new Bermuda Class 4 reinsurer, PaCRe

Ltd. Validus Underwriting Services Ltd. will

underwrite the business, while Paulson & Co

Inc. will manage the investments.

Bermudas growth in recent decades has

been driven by the expansion o oshore

reinsurance, captive insurance, asset man-

agement, and other international nancial

services companies. The island has taken a

particularly important role in underwriting

large property/catastrophe programs and

other global complex risks, with a notable

pool o on-island actuarial expertise. As a

result, most Bermudian underwriters today

(excluding captives), consist o global play-

ers oering a combination o insurance and

reinsurance covers. As o Dec. 31, 2009, the

Bermuda Monetary Authority (BMA) regu-

lated 1,061 insurers with total assets o about

$500 billion, gross premiums o $120 billion,

and capital o $182 billion. Bermudian com-

panies are multijurisdictional with operations

worldwide. North America is by ar the larg-est market, ollowed by Europe.

Bermuda has a key competitive advantage

as it oers relatively quick regulatory ap-

proval to launch operations in a ew weeks

compared with several months in other juris-

dictions. This is valuable especially ollowing

major catastrophic events because reinsur-

ance capital providers need to take advantage

o increased demand or reinsurance coverage

and better pricing, as we saw ater Sept. 11

and KRW. In addition, Bermudas regulatory

system generally provides companies with

both quick approval to start up their busi-

nesses and the ability to change their policies

terms and conditions rapidly while quickly

responding to changing market conditions.

(Re)insurers based in Bermuda benet rom

avorable tax laws (zero corporate income

tax) and proximity to the U.S., the largest

insurance market in the world with $660 bil-

lion in nonlie insurance premiums in 2010.

Furthermore, according to the World Banks

worldwide governance indicators, Bermuda

ranks in the 75th-90th percentile or each o

six indicators: political stability, government

eectiveness, regulatory quality, rule o law,

voice and accountability, and control o cor-

ruption.

During the past ew years, we have

witnessed the emergence o new competing

(re)insurance hubs such as Dubai, Dublin,

Luxembourg, and Zurich. In addition, a

rejuvenated Lloyds market (A+/Stable/--) has

been adding new syndicates and progressively

regaining its ormer strong market position.

Interestingly, many o these new entrants are

Bermudians seeking a global distribution and

highly rated paper. However, Irelands recentnancial crisis might have tarnished its image

as a thriving nancial center.

The possibility o taxation or U.S.-sourced

business written either directly by a Bermuda-

based subsidiary or indirectly by a U.S.-based

operating subsidiary with signicant quota-

share arrangements back to Bermuda could

jeopardize Bermudas position as the domicile

o choice. The Neal Bill, i enacted, would

change the U.S. Internal Revenue Code to cap

the deductibility o reinsurance premiums

paid by insurers to oreign afliates. Previ-

ous proposals similar to the Neal Bill were

not enacted. Opponents to the bill argue that

it would cut reinsurance capacity and raise

costs or insurers. Even though the Neal bill

has not yet passed, the risk remains as the

U.S. government looks or additional tax rev-

enues to close the budget decit. We believe

a change in U.S. taxation, i enacted, would

have a modest impact on the tax positions o

Bermuda (re)insurers that we rate.

The number o (re)insurers that are moving

to establish their businesses in Europe has

risen slightly during the past ew years. For

example, ACE Limited and XL Group plc

moved their respective holding companies

to Switzerland and Ireland rom the Cayman

Islands. In addition, Allied World Assurance

Company Holdings AG moved to Switzerland

rom Bermuda. Also, Flagstone Reinsurance

Holdings S.A. re-domiciled to Luxembourg.

Nevertheless, even i Bermudian (re)insurers

re-domicile to other countries, we expect

companies to maintain a signicant operat-

ing presence in Bermuda given the countrys

established position as a property-catastrophe

underwriting hub and its proximity to theNorth American market. Furthermore, recent

economic turmoil in some European sover-

eigns is likely to slow the pace o re-domes-

tication to Europe rom Bermuda, at least in

the near term.

Because most Bermuda (re)insurers are

global and already have numerous operating

subsidiaries in several parts o the world, a

change in the country o domicile is unlikely

to aect their business signicantly. There-

SOSORSOSOR

IESTmET (M. $)SIECAR

SIECAR CAITAL

COmmITmET (mil. $)

alidus Holdings Ltd. 50 phaCat Re 180

Alterra Capital Holdings Ltd. 75 new Pt iV 200

Lancashire Holdings Ltd. 50 ccrd Re 250

RenaissanceRe Holdings Ltd. n.. up Re n..

montpelier Re Holdings Ltd. n.. n.. n..

ta 175 630

n.. nt vaabe

srce: Cmpae pbc acemet

EW BERmUA SIECARS


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ore, we do not expect to take any rating ac-

tions on holding companies or core operating

companies as a result o taxation or domicile

changes.

With Solvency II around the corner (ex-

pected to be eective in 2014), the BMA has

made signicant enhancementssuch as the

introduction o a risk-based capital adequacymodel and several other measures. As a result

o these advances, the Committee o Euro-

pean Insurance and Occupational Pensions

Supervisors (CEIOPS) has recommended to

the European Commission that Bermuda,

along with Switzerland, be in the rst wave

o third country equivalence assessments

under Solvency II. In our opinion, the BMA is

somewhat better prepared than several con-

tinental European supervisors or Solvency

II, which speaks highly o the BMAs eorts

in recent years. Not surprisingly, companies

participating in our survey ranked regula-

tion, renewal rates, investment returns,

cost control, and growing market share vs.

protability as their top-ve key business

issues or 2012.

eap of ajor catastrophes for 2011

During the past 40 years, six o the most

costly events rom an insured loss prospective

occurred during 2011, which aected the Pa-

cic Basin and North America. The largest o

these events was the Japanese earthquake and

tsunami (March 11, 2011) that is estimated

at $35 billion in insured losses. The Japanese

earthquake measured 9.0 magnitude on the

Richter scale and the epicenter was located

o the coast o the main Japanese island o

Honshu, which is 231 miles northeast o

Tokyo. This was the strongest earthquake ever

recorded in the region. The initial earthquake

triggered a tsunami that hit the eastern coast

o Japan with 30-oot waves. Most losses to

the domestic Japanese insurers will likelystem rom three types o coverage: earthquake

insurance or residential properties, earth-

quake re-expense coverage, and earthquake

extended coverage or commercial risks.

Earthquake re-expense coverage protects

the insured or re-related earthquake losses

and increases the value o the re insurance

claim payment by up to 5%. Earthquake re-

expense coverage can be added to both resi-

dential and commercial property policies. The

earthquake extended coverage or commercial

risk covers losses arising rom earthquakesand is typically a rider to the commercial

policies. Domestic Japanese insurers tend to

retain a limited amount o their earthquake

re-expense and earthquake extended cover-

age by ceding a majority o these risks to

global reinsurers.

We segment the (re)insurers that were

aected by this event into three categories:

domestic Japanese P&C insurers, global

multinational insurers, and global reinsurers.

We believe that the domestic Japanese P&C

market retained the largest share o these

losses. Although we revised our outlook on

the Japanese nonlie sector to negative rom

stable at the time (March 15, 2011), the

outlooks on the individual Japanese nonlie

insurers remained stable. We had a similar

view o global multinational insurers with

material operations in Japan.

As or the global reinsurers, we stated at

the time (March 15, 2011) that the losses

could have a material impact on earnings, but

due to insurers strong capital and liquidity,

those losses would likely represent a minimal

percentage o capital. Domestic Japaneseinsurers typically retain a high share o their

residential risk, which we believe would

likely mitigate global reinsurers losses. Our

outlook on the global reinsurance remained

stable, (March 15, 2011), as it stands today, in

large part because o these companies strong

balance sheets and strong enterprise risk

management relative to the rest o the insur-

ance market.

On Feb. 22, 2011, a 6.3 magnitude earth-

Top Business Issues in Beruda

Top Business Issues in Beruda Rated Either 1 or 2


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quake struck the Canterbury region o New

Zealand and is estimated to have caused $12

billion in insured losses. This earthquake was

located 10 kilometers southeast o Christ-

church, New Zealand. Christchurch is an

urbanized center and the second-largest city

in the country. The February Christchurchearthquake ollowed the Sept. 4, 2010, Can-

terbury earthquake that measured 7.1 and

caused signicant damage in Christchurch,

New Zealand. The New Zealand Earthquake

Commission classied the February Christ-

church earthquake as a separate event and

not an atershock o the Sept. 4 Canterbury

earthquake. It was our view at the time (Feb.

23, 2011) that the Christchurch earthquake

would place downward pressure on earnings

o the domestic New Zealand insurers but

that their capital strength and extensive rein-surance protection would limit any negative

rating pressure.

The Thailand ood losses that hit the P&C

(re)insurance market in October 2011 were

triggered by heavy rainall that occurred rom

May to October. In addition, decisions relat-

ing to water management (release o storm

waters rom dams) are believed to have con-

tributed to the catastrophe to some degree.

Standard & Poors estimates the insured losses

resulting rom the Thailand oods at $16

billion to $18 billion. On Nov. 3, 2011, we

revised our outlook on the Thai P&C insur-

ance sector to negative rom stable, which was

based on our view that the nancial prole o

some Thai P&C insurers will likely deterio-

rate signicantly in 2011. Also, the relatively

small size o the Thai P&C insurers makes

them more vulnerable to accumulated

losses than the larger international insurers.

Insured losses have been so high in the Thai-

land oods that it has changed our opinion

on this market being catastrophe-remote.

Standard & Poors took negative rating

actions on two Bermuda-based (re)insur-ances (i.e. PartnerRe Ltd. and Platinum

Underwriters Holdings Ltd.) as a result o

their 2011 catastrophe losses that we believe

caused them to be negative outliers. During

2011, Platinum Underwriters Holdings Ltd.

reported $439 million, or 23% o reported

2010 GAAP equity, in catastrophe losses or

the year. Standard & Poors believes that the

sizable catastrophe losses indicate weakness

in the companys ability to manage catastro-

phe risk. As a result, Standard & Poors low-

ered its nancial strength ratings on Platinum

Underwriters core operating companies toA- rom A.

During 2011, PartnerRe Ltd. reported

$1,790 million, or 25% o reported 2010

GAAP equity, in catastrophe losses or the

year. Although companys incurred catastro-

phe losses were within managements stated

tolerances or its lines o business and dier-

ent regions, they highlighted the companys

exposure to moderate to high earnings and

capital volatility, which Standard & Poors

believes is more in line with peers rated A+.

As a result, we lowered our nancial strength

ratings on PartnerRes operating companies to

A+ rom AA-.

Unlike 2010 and 2011, the rst-quarter in

2012 was relatively benign rom a catastrophe

loss perspective.

quit arket Treds

More than three quarters o the survey par-

ticipants have common shares that are listed

on public exchanges, and the majority o

those are listed on a U.S. exchange. We have

generated a price-weighed index to consider

the equity value and valuation multiples o

the U.S. publicly listed survey participants

based on metrics as o Dec. 31 or each o the

ve years.

As a result o the global nancial-marketscrisis, the value o the index declined by

nearly 24% rom 2007 to 2008. Although

Index: U.S. ublicly Listed Survey articipants

Coposition of et reius Earned (a amt b f u.s. Dar)


8/16


the index continued to regain value during

the subsequent three-year period, it was still

o by 5% at year-end 2011 rom the 2007

level. In addition, the global nancial crisishurt the indexs book value, as evidenced by

a 12% decline at year-end 2008. However,

the book value o the index regained all o the

value lost during 2008 by 2009 through the

retention o earnings, reversal in unrealized

capital losses, and issuance o equity primar-

ily rom business combinations. During 2009,

Validus Holdings Ltd. acquired IPC Holdings

Ltd. in a transaction valued at $1.77 billion,

and PartnerRe Ltd. acquired PARIS RE S.A.

in a stock exchanged valued at $2 billion.

Although IPC Holdings Ltd. was a Bermuda

reinsurer, its results are captured in our 2012

Bermuda survey through its acquisition byValidus Holdings Ltd. These two transactions

represent the majority o the equity issuance

or the year.

The price-to-book value multiple or the

index declined signicantly rom 2007 to

2009. Since then, the index has been trading

at nearly a 20% discount to book value. As

o year-end 2011, Arch Capital Group Ltd.

traded at the highest multiple (1.18x) and

Argo Group International Holdings Ltd.

was trading at the lowest multiple (0.52x).

Because the universe o publicly listed P&C

(re)insurers has been trading below book

value or an extended time, we would have

expected a greater number o scale-motivated

acquisitions.

In addition to the IPC Holdings Ltd. andPARIS RE S.A. transactions, the only other

scale-motivated acquisition was Max Capital

Group Ltd.s 2010 acquisition o Harbor

Point Ltd.a privately held Bermuda rein-

surer. The combined entity was renamed

Alterra Capital Holdings. During 2011, Both

Allied World Assurance Company Hold-

ings AG. and Validus Holdings Ltd. also

attempted to acquire Transatlantic Holdings

Inc., a U.S.-domiciled global reinsurer. How-

ever, Alleghany Corp. ultimately acquired

the reinsurer. We believe that some o thesmaller Bermudian (re)insurers will look to

combine with one another or a larger (re)

insurer in the near term.

In addition to some scale-motivated

transactions, there has been some strategic

acquisition (e.g. Everest Re Groups acquisi-

tion o Heartland Crop Insurance, a managing

general agency) and some divestures (e.g.

RenaissanceRe Holdings Ltd. selling its U.S.

primary operations to QBE Insurance Group

Ltd.). We do not expect to see many acquisi-

tions o production sources (e.g. wholesale

brokers, managing general agents) due to the

potential or channel conict. The excep-

tion to this would be a highly ocused niche

market producer.

The oad head

While the 2011 catastrophe losses weighed

heavily on the P&C (re)insurance industry,

the Bermudians aired well collectively as

investment income oset underwriting losses

or the year. Furthermore, we consider the

Bermudians enterprise risk management

capabilities to be strong, and in our opinion

they are among the leading practitioners

in the industry. Despite the record level o

insured catastrophe losses or the industry,

pricing changes in the reinsurance market

have been ragmented. While property-ca-

tastrophe treaties that were loss ree in 2011

have experienced rate increases o 5%-10%,

loss-aected property-catastrophe treaties

experienced greater rate increasesalthough

they varied by region. However, rate activity

Gross reius by Line of Business

Gross reiu by Geographic Region


9/16


on casualty treaties is mixed and ranged rom

down 5% to up 5%.

Unlike ater the Sept. 11 terrorist attack

and hurricane Katrina in 2001 and 2005,

respectively, we did not see an interest by

investors to support a 2011 class o new

Bermuda (re)insurers, which we believe isbecause the industry did not experience a

signicant erosion in underwriting capital

and the lack o widespread rate increases

combined with prolonged low valuation or

the publicly listed reinsurers. However, we

did see a modest interest in unding new

Continued on page 40

STOCk E-CHAGESYmBOL

COmmOSTOCk RICE

(5)52 WEEk

HIGH/LOW (6) /E RATIO

BOOk ALUEER COmmO

SHAREmARkET/BOOkALUE RATIO

BASICEARIG

ER SHAREFULLY ILUTE

EARIGS

Curr Prior Curr Prior Curr Prior Curr Prior Curr Prior Curr Prior Curr Prior

ACE Liited C 70.12 62.25 74.50/56.90 62.37/47.50 14.98 6.80 72.76 68.59 0.91 0.86 4.68 9.15 4.65 9.11

Allied World AssuranceCopany Holdings, Ltd

W 62.93 59.44 70.97/49.00 60.41/40.60 8.73 4.16 83.44 80.75 0.75 0.74 7.21 14.30 6.92 13.32

Alterra CapitalHoldings Ltd.

l 23.63 21.64 25.68/17.33 24.99/17.02 38.11 6.78 27.51 26.30 0.86 0.82 0.62 3.19 0.61 3.17

Arch Capital GroupLtd. (1)

Cgl 37.66 29.35 38.60/29.63 92.05/65.70 12.68 5.67 32.03 29.99 1.18 0.98 2.97 5.18 2.97 5.18

Argo Group InternationalHoldings, Ltd.

gii 28.96 37.45 33.29/24.88 40.14/25.59 -9.56 13.38 56.21 58.41 0.52 0.64 -3.03 2.80 -3.03 2.76

Aspen InsuranceHoldings Liited

l & lB

26.50 28.62 29.09/21.99 31.60/23.80 -14.56 7.53 39.89 40.96 0.66 0.70 -1.82 3.80 -1.82 3.62

AIS Capital HoldingsLiited

Xs 31.96 35.88 36.63/24.80 37.15/27.22 399.50 5.32 39.37 45.60 0.81 0.79 0.08 6.74 0.07 6.02

Catlin Group Liited (2) Cgl 3.99 3.70 4.14/3.20 3.93/3.20 55.41 5.81 7.85 8.34 1.00 1.00 0.11 0.98 0.11 0.93

Endurance SpecialtyHoldings Ltd.

n 38.25 46.07 49.38/31.67 34.86/46.64 -12.97 6.85 51.48 57.25 0.74 0.80 -2.95 6.73 -2.95 6.38

Flagstone ReinsuranceHoldings Liited

sR 8.29 12.60 9.53/6.41 13.14/9.49 -1.78 10.24 11.62 16.07 0.71 0.78 -4.65 1.23 -4.65 1.23

Hiscox Ltd. (3) sX.l 3.74 3.81 4.25/3.41 3.81/3.17 67.91 8.08 4.98 5.23 1.15 1.15 0.09 0.73 0.09 0.70

montpelier ReHoldings Ltd.

MR 17.75 19.94 18.98/15.06 20.59/14.30 8.83 6.71 22.71 24.53 0.78 0.81 -2.01 2.97 -2.01 2.97

artnerRe Ltd. (4) PR 64.21 80.35 83.26/50.16 82.00/70.06 -7.64 7.54 84.82 93.77 0.76 0.86 -8.40 10.65 -8.40 10.46

RenaissanceReHoldings Ltd.

RnR 74.37 63.69 75.16/59.50 64.50/50.81 -40.42 5.13 59.27 62.58 1.25 1.02 -1.84 12.42 -1.84 12.31

alidus Holdings, Ltd. VR 31.50 30.61 34.95/23.24 30.66/23.14 225.00 8.98 34.67 35.76 0.91 0.86 0.14 3.41 0.14 3.34

L Group plc Xl 19.77 21.82 25.43/17.69 22.22/15.59 -13.01 12.54 29.64 29.78 0.67 0.73 -1.52 1.74 -1.52 1.73

(1) perd reect a 3:1 hare pt that ccrred May 2011.

(2) Cat grp lmted tc prce demated gBP bt reprt usD.

(3) cx ltd. cmm tc prce ad 52 wee hh/w are demated gBP; a ther amt hw usD.

(4) ParterRe ltd. P/ rat baed fy dted ear per hare.

(5) Crret reect c prce at December 30, 2011: Prr reect c prce at December 31, 2010.

(6) Crret reect the 12 mth perd ed December 30, 2011; Prr reect the 12 mth perd ed December 31, 2010.

puBliCly-Traded companies

et reius Written to Capital & Surplus (a amt b f u.s. Dar)


10/16


CAITAL & SURLUS

S&pS

RATInG

(1)

OUTLO

OkS(2)

ERmSCORE

BASIS

OF

ACCOU

nTInG

FORSURvEY

RESpO

nSE

CURRE

nT

pRIOR

pREmIUmS

EARnE

d

CURRE

nT

nETIn

COmE

CURRE

nT

InSURAnCE

REGULATIOn

CLASS

dATEO

F

InCORpORATIOn

ACE Liited - stabe str us gP 24,516,000 22,973,842 15,387,000 1,585,000 Ca 4 8/30/85

Allied World AssuranceCopany Holdings, AG

stabe str us gP 3,149,022 3,075,820 1,456,992 274,548 Ca 4 11/13/01

Alterra Capital Holdings Ltd. stabe str us gP 2,809,235 2,918,270 1,421,983 65,282 Ca 4 8/20/99

Alin AG stabedeqate wth a

ptve tredother 1,350,352 1,571,323 842,059 (98,785) Ca 4 10/28/05

Arch Capital Group Ltd. + stabe str us gP 4,628,486 4,513,003 2,631,815 436,358 Ca 4 3/1/95


- stabe deqate us gP 1,479,000 1,626,100 1,082,000 (82,400) Ca 4 10/5/99

Aspen Insurance Holdings Liited stabe str us gP 3,172,000 3,242,000 1,889,000 (106,000) Ca 4 5/23/02

AIS Capital Holdings Liited + stabe str us gP 5,444,079 5,624,970 3,314,961 46,305 Ca 4 11/8/01

Catlin Group Liited stabe str us gP 3,297,741 3,446,870 3,611,623 38,397 Ca 4 6/25/99

Endurance Specialty Holdings Ltd. stabe xceet us gP 2,611,165 2,848,153 1,931,393 (93,734) Ca 4 11/30/01

Everest Reinsurance(Beruda), Ltd. (3)

+ stabedeqate wth

tr r ctrBermdastattry

2,736,599 2,818,655 2,024,346 97,359 Ca 4 3/1/00


nR nR nR us gP 789,048 1,134,733 571,478 (304,471) Ca 4 11/10/05

Hiscox Ltd. stabe str other 1,934,084 1,987,798 1,837,736 34,141 Ca 4 12/12/06

Lancashire InsuranceCopany Liited

- stabedeqate wth a

ptve tredother 1,201,300 1,394,500 512,500 239,700 Ca 4 10/28/05

montpelier Re Holdings Ltd. - stabe str us gP 1,549,300 1,628,800 622,700 (115,200) Ca 4 11/14/01

Oil Casualty Insurance, Ltd. BBB+ stabe deqate us gP 461,117 431,503 37,331 29,614 Ca 3 5/14/86

Oil Insurance Liited - stabe deqate us gP 3,033,147 3,200,635 543,425 (104,636) Ca 2 12/14/71

artnerRe Ltd. + stabedeqate wth

tr r ctrus gP 6,467,542 7,206,919 4,647,754 (520,291) Ca 4 8/24/93

RenaissanceRe Holdings Ltd. (4) - stabe xceet us gP 3,608,533 3,939,214 957,049 (92,235) /a 6/7/93

Toio millenniu Re Ltd. - neatve str us gP 1,050,865 1,187,644 456,862 (56,320) Ca 3B 3/15/00

alidus Holdings, Ltd. - stabedeqate wth

tr r ctrus gP 3 ,448,425 3 ,504,831 1 ,802,143 21 ,329 Ca 4 10/ 19/05

L Group plc stabe str us gP 10,769,410 10,684,949 5,327,112 (403,883) Ca 4 3/16/98

ta 89,506,450 90,960,532 52,909,262 890,078

(In US $000s)As of Decenber 31, 2011

18Th annual Bermudian BuSineSSand deloiTTe

(1) the rat th tabe are aca treth rat f the ead rated perat cmpae wth each rp a f pr 23, 2012.

(2) ot ca be ptve, eatve, r tabe, ad a a pteta chae a teractve rat ver the ext 1-2 year.

(3) veret Rerace (Bermda) ltd. aca frmat prvded th rvey adted.

(4) ReaaceRe d ltd. mt cat perat bdare cde Reaace Rerace ad DaVc

whch are retered a Ca 4 ad gece ad p layer Re whch are retered a Ca 3.

nR nt Rated by stadard & Pr.

^ ifrmat t prvded by repdet.


11/16


TYE OFISURACE AS %

OF REmIUmS BREAkOW OF REmIUm AS CLASS OF BUSIESS RISk BREAkOW OF GROSS REmIUm BY

GEOGRAHIC REGIO

dIRECT

REInSU

RAnCE

mARInE&

AvIATIO

n

FInAnC

IAL

GUARAnTEE

ACCIdE

nT&

HEALTH

pROpER

TY

pROpER

TY

CATAST

ROpHE

pROFES

SIOnAL

LIABILIT

Y

ExCESS

LIABILITY

GEnERAL

LIABILIT

Y

CASUALTY

FInITE

WORkE

RS

COmpE

nSATIOn

LIFE

TERROR

ISm

OTHER

Uk

nORTH

AmERICA

EUROpE

ASIA,AUSTRALIA

&nEWZ

EALAnd

BERmUdA

RESTOFWORLd

85% 15% 0% 0% 23% 35% 2% 0% 0% 0% 35% 0% 0% 5% 0% 0% 0% 61% 18% 14% 0% 7%

70% 30% 0% 0% 0% 13% 0% 21% 27% 9% 2% 0% 0% 0% 0% 28% 0% 56% 11% 4% 29% 0%

43% 57% 9% 0% 2% 35% 0% 20% 10% 5% 11% 0% 2% 0% 0% 6% 0% 74% 16% 0% 0% 10%

0% 100% 1% 0% 0% 18% 33% 0% 0% 10% 1% 0% 0% 0% 0% 37% 36% 32% 18% 9% 0% 5%

70% 30% 2% 0% 2% 29% 8% 11% 13% 0% 0% 0% 7% 0% 1% 27% 0% 68% 20% 7% 3% 2%

^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^

46% 54% 0% 0% 0% 23% 14% 0% 0% 0% 20% 0% 0% 0% 0% 43% 7% 40% 5% 6% 0% 42%

52% 48% 8% 0% 3% 24% 12% 26% 0% 11% 0% 0% 0% 0% 1% 15% 0% 43% 36% 0% 20% 1%

63% 37% 24% 0% 0% 11% 0% 0% 0% 1% 20% 0% 0% 0% 0% 44% 52% 21% 8% 7% 12% 0%

60% 40% 2% 1% 0% 15% 14% 7% 12% 0% 11% 0% 0% 0% 0% 38% 1% 70% 2% 2% 25% 0%

0% 100% 2% 0% 4% 45% 0% 5% 12% 21% 5% 0% 6% 0% 0% 0% 13% 79% 5% 0% 3% 0%

8% 92% 0% 0% 0% 22% 55% 0% 0% 0% 0% 0% 0% 0% 0% 23% 0% 44% 16% 12% 0% 28%

74% 26% 7% 0% 1% 26% 3% 24% 0% 0% 0% 0% 0% 0% 3% 36% 23% 36% 14% 5% 0% 22%

73% 27% 19% 0% 0% 46% 25% 0% 0% 0% 0% 0% 0% 0% 10% 0% 0% 33% 5% 6% 0% 56%

19% 81% 0% 0% 0% 7% 43% 0% 0% 0% 0% 0% 0% 0% 0% 50% 32% 8% 0% 0% 60% 0%

80% 20% 0% 0% 0% 0% 0% 0% 100% 0% 0% 0% 0% 0% 0% 0% ^ ^ ^ ^ ^ ^

100% 0% 0% 0% 0% 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% ^ ^ ^ ^ ^ ^

0% 100% 12% 0% 0% 15% 13% 0% 0% 0% 11% 0% 0% 17% 0% 32% 0% 36% 42% 12% 0% 10%

2% 98% 0% 0% 0% 3% 84% 0% 0% 0% 0% 0% 0% 0% 0% 13% 0% 62% 3% 5% 0% 30%

0% 100% 1% 0% 0% 0% 74% 2% 0% 1% 0% 0% 3% 0% 1% 18% 0% 0% 0% 0% 100% 0%

24% 76% 33% 0% 1% 15% 31% 0% 0% 0% 0% 0% 1% 0% 2% 17% 0% 30% 7% 2% 0% 61%

64% 36% 11% 0% 0% 24% 6% 22% 0% 0% 0% 0% 0% 5% 0% 32% 0% 40% 49% 0% 11% 0%

inSuranCe Survey


12/16


ASSETS

C

ASH&CASH

E

QUIvALEnTS

Q

UOTEd

InvESTmEnTS

O

THER

InvESTmEnTS

R

EInSURAnCE

B

ALAnCES

R

ECEIvABLE

O

THER

A

SSETS

G

OOdWILL

A

ndOTHER

InTAnGIBLE

A

SSETS

T

OTAL

A

SSETS

L

OSS

R

ESERvES

U

nEARnEd

p

REmIUm

R

ESERvE

ACE Liited 614,000 53,362,000 2,314,000 4,387,000 21,997,000 4,831,000 87,505,000 41,751,000 6,334,000

Allied World AssuranceCopany Holdings, AG

716,604 6,498,702 907,892 1,229,640 1,447,046 322,274 11,122,158 5,225,143 1,078,412

Alterra Capital Holdings Ltd. 922,844 6,605,390 286,515 715,154 1,599,833 56,111 10,185,847 5,407,235 1,020,639

Alin AG 137,474 1,610,761 525,509 484,100 243,642 - 3,001,486 963,454 439,069

Arch Capital Group Ltd. 351,699 11,965,334 35,715 1,851,584 2,915,142 22,295 17,141,769 8,456,210 1,411,872


100,900 3,915,500 232,000 1,143,500 763,200 246,800 6,401,900 3,291,100 658,200

Aspen Insurance HoldingsLiited

1,239,000 6,302,000 33,000 894,000 997,000 20,000 9,485,000 4,525,000 916,000

AIS Capital Holdings Liited 981,849 11,767,569 699,320 3,184,168 1,073,563 99,590 17,806,059 8,425,045 2,454,462

Catlin Group Liited 2,063,493 6,324,563 0 1,216,902 2,636,773 717,276 12,959,007 6,466,719 2,118,722

Endurance Specialty HoldingsLtd.

890,914 4,959,535 432,658 636,727 1,190,953 181,828 8,292,615 3,824,224 932,108

Everest Reinsurance(Beruda), Ltd. (1)

235,383 6,284,615 174,657 1,216,310 291,337 - 8,202,302 4,581,287 704,283


366,962 1,149,051 125,452 236,375 900,656 - 2,778,496 897,368 215,316

Hiscox Ltd. (2) 795,482 3,647,699 9,825 758,473 1,187,511 104,030 6,503,020 2,929,959 920,441

Lancashire InsuranceCopany Liited

264,900 1,439,000 8,700 3,600 325,700 600 2,042,500 457,100 275,500

montpelier Re Holdings Ltd. 340,300 2,486,300 102,400 305,900 264,600 - 3,499,500 1,077,100 265,900

Oil Casualty Insurance, Ltd. 52,934 740,982 - 187,179 101,168 - 1,082,263 307,448 44,327

Oil Insurance Liited 282,441 5,255,944 - - 207,620 - 5,746,005 2,280,278 -

artnerRe Ltd. 1,342,257 14,929,091 1,626,164 2,059,976 2,308,485 589,400 22,855,373 12,918,753 1,448,841

RenaissanceRe Holdings Ltd.(3)(4)

216,984 4,433,517 1,775,735 471,878 837,904 8,894 7,744,912 1,992,354 347,655

Toio millenniu Re Ltd. 288,336 932,275 219,709 145,226 289,717 4,833 1,880,096 511,089 263,135

alidus Holdings, Ltd. 832,844 5,174,336 16,787 462,980 996,400 135,124 7,618,471 2,631,143 772,382

L Group plc 3,825,125 29,686,263 2,037,991 220,017 8,449,360 407,321 44,626,077 20,613,901 3,555,310

Total 16,862,725 189,470,427 11,564,029 21,810,689 51,024,610 7,747,376 2 98,479,856 139,532,910 26,176,574

BalanCe SheeT daTa

(In US $000s)

(1) veret Rerace (Bermda) ltd aca frmat prvded th rvey adted.

(2) cx ltd. baace heet amt were traated frm gBP t usD the year ed c rate f $1.57.

(3) icded ther abte $757.7 m reated t ReaaceRe d ltd. redeemabe ctr teret DaVcRe d ltd.

(4) ReaaceRe d ltd. etered t a detve tc prchae areemet wth QB d, ic. t e btatay a f t u.s.-baed race perat

nvember 2010. he traact ced March 2011. et ad abte f dcted perat hed fr ae f $n ad $13,507 have bee cded

ther aet ad ther abte, repectvey, at December 31, 2011 (2010 - $872,147 ad $598,511, repectvey; 2009 - $931,207 ad 665,641, repectvey).


13/16


LIABILITIES A CAITAL & SURLUS

d

EBT

O

THER

LIABILITIES

T

OTAL

L

IABILITIES

C

OmmOn

S

TOCk

p

REFERREd

S

TOCk

A

ddITIOnAL

p

AIdIn

C

ApITAL

R

ETAInEd

E

ARnInGS

U

nREALISEd

InvESTmEnT

G

AInS

(

LOSSES)

O

THER

T

OTALCApITAL

&

SURpLUS

T

OTAL

LIABILITIES

A

ndCApITAL

&

SURpLUS

4,920,000 9,984,000 62,989,000 10,095,000 - 5,326,000 7,511,000 1,715,000 (131,000) 24,516,000 87,505,000

797,949 871,632 7,973,136 557,153 - 78,225 2,635,750 14,484 (136,590) 3,149,022 11,122,158

440,500 508,238 7,376,612 102,102 - 1,847,034 693,142 166,957 - 2,809,235 10,185,847

148,700 99,911 1,651,134 10,204 - 848,704 348,737 - 142,707 1,350,352 3,001,486

400,000 2,245,201 12,513,283 549 130 486,289 4,833,067 153,923 (845,472) 4,628,486 17,141,769

377,000 596,600 4,922,900 31,300 - 716,800 752,000 139,800 (160,900) 1,479,000 6,401,900

499,000 373,000 6,313,000 - - 1,385,000 1,358,000 334,000 95,000 3,172,000 9,485,000

994,664 487,809 12,361,980 2,125 500,000 2,105,386 4,155,392 116,096 (1,434,920) 5,444,079 17,806,059

- 1,075,825 9,661,266 3,610 589,785 1,959,346 1,075,963 - (330,963) 3,297,741 12,959,007

528,118 397,000 5,681,450 43,087 17,200 526,910 1,873,418 142,973 7,577 2,611,165 8,292,615

- 180,133 5,465,703 1,250 - 1,327,791 1,217,093 275,926 (85,461) 2,736,599 8,202,302

250,575 626 ,189 1,989,448 845 (160,448) 872,819 88,416 - (12,584) 789,048 2,778,496

- 718,536 4,568,936 31,667 - 426,720 1,382,501 - 93,196 1,934,084 6,503,020

- 108,600 841,200 1,000 - - 228,400 15,300 956,600 1,201,300 2,042,500

327,800 279,400 1 ,950,200 100 150,000 1 ,165,600 259,700 (4,100) (22,000) 1 ,549,300 3,499,500

150,334 119,037 621,146 305 - - 460,812 - - 461,117 1,082,263

- 432,580 2,712,858 520 402,458 - 2,630,169 - - 3,033,147 5,746,005

750,000 1,270,237 16,387,831 84,767 35,750 3,803,796 4,035,103 - (1,491,874) 6,467,542 22,855,373

353,620 1,442,750 4,136,379 51,543 550,000 - 2,991,890 11,760 3,340 3,608,533 7,744,912

- 55,007 829,231 250,000 - 400,000 368,856 30,598 1,411 1,050,865 1,880,096

536,782 229,739 4,170,046 17,407 - 1,893,890 1,543,729 - (6,601) 3,448,425 7,618,471

2,275,327 7,412,129 33,856,667 3,157 - 8,938,678 (99,961) 521,796 1,405,740 10,769,410 44,626,077

13,750,369 29,513,553 208,973,406 11,287,691 2,084,875 34,108,988 40,343,177 3,634,513 (1,952,794) 89,506,450 298,479,856

fiscal 2011


14/16


(IN US $000s) LOSS RATIO (1) EESE RATIO (1) COmBIE RATIO (1) RATIO ( TO 1)% CHAGE FROm

RIOR ERIO

CURREn

T

pRIOR

CURREn

T

pRIOR

CURREn

T

pRIOR

nETpREmIUmSTO

CApITAL&SURpLUS

LOSSRESERvETO

CApITAL&SURpLUS

CApITAL&SURpLUS

nETpREmIUm

WRITTEn

LOSSRATIO(5)

(WEIGH

TEdAv.5YR.)

GROSS

pREmIUm

WRITTEn

CEdEdpREmIUmS

C lmted 65.70% 59.20% 28.90% 31.00% 94.60% 90.20% 62.70% 170.30% 6.71% 12.14% 61.18% 20,831,000 (5,459,000)

ed Wrd raceCmpay d, g

65.83% 52.07% 30.13% 32.81% 95.96% 84.88% 48.71% 165.93% 2.38% 10.15% 56.00% 1,939,521 ( 405,755)

terra Capta d ltd. (9) 66.50% 56.07% 31.49% 29.93% 97.99% 86.00% 50.87% 192.48% -3.74% 38.06% 63.56% 1,900,710 (471,712)

m g 92.90% 64.36% 19.50% 18.20% 112.40% 82.56% 71.59% 71.35% -14.06% 48.53% 58.75% 1,019,443 (52,693)

rch Capta grp ltd. 65.64% 59.46% 32.66% 32.90% 98.30% 92.36% 57.76% 182.70% 2.56% 6.46% 60.82% 3,436,456 (763,130)

r grp iteratad, ltd.

79.77% 64.17% 39.44% 39.01% 119.21% 103.18% 72.47% 222.52% -9.05% -2.18% 65.97% 1,544,800 (473,000)

pe irace dlmted (3)

82.37% 65.81% 30.86% 30.93% 113.23% 96.74% 60.81% 142.65% -2.16% 2.06% 63.81% 2,208,000 (279,000)

Xis Capta d lmted (12)(13) (14)

80.70% 56.90% 29.17% 29.21% 109.87% 86.11% 62.81% 154.76% -3.22% 8.64% 60.49% 4,096,153 (676,719)

Cat grp lmted 70.02% 57.54% 32.60% 32.30% 102.62% 89.84% 116.29% 196.10% -4.33% 15.59% 58.91% 4,513,285 (678,272)

drace specaty dltd.

84.53% 59.62% 28.51% 29.16% 113.04% 88.78% 75.82% 146.46% -8.32% 12.25% 61.69% 2,467,114 (487,293)

veret Rerace(Bermda), ltd. (8)

81.76% 67.14% 28.63% 31.29% 110.39% 98.43% 76.15% 167.41% -2.91% 12.05% 67.22% 2,242,319 (158,325)

ate Reraced lmted

118.38% 62.22% 35.20% 39.49% 153.58% 101.71% 70.77% 113.73% -30.46% -36.82% 63.29% 789,697 (231,265)

cx ltd. (4) (10) (11) 60.20% 50.10% 39.30% 39.20% 99.50% 89.30% 97.43% 151.49% -2.70% 7.68% 49.90% 2,325,996 (441,709)

lacahre iraceCmpay lmted

32.62% 27.53% 29.15% 25.92% 61.77% 53.45% 41.70% 38.05% -13.85% -13.35% 31.87% 522,400 (21,400)

Mtpeer Re d ltd. 98.30% 48.34% 32.76% 15.78% 131.06% 64.12% 40.28% 69.52% -4.88% -6.70% -7.25% 725,500 (101,500)

o Caaty irace, ltd. 0.52% 305.61% 0.03% 2.87% 0.55% 308.48% 11.82% 66.67% 6.86% 65.37% 15.45% 82,105 (27,588)

o irace lmted 110.25% 53.94% 0.00% -0.10% 110.25% 53.84% 17.92% 75.18% -5.23% -30.66% 82.05% 543,425 -

ParterRe ltd. (6) 96.70% 65.94% 28.70% 29.11% 125.40% 95.05% 69.37% 199.75% -10.26% -4.65% 66.01% 4,633,054 (146,725)

ReaaceRe d ltd. (3) 90.55% 14.95% 28.08% 30.18% 118.63% 45.13% 28.07% 55.21% -8.39% 19.30% 19.50% 1,434,976 (422,203)

Mem Re ltd. 82.17% 53.65% 26.50% 26.73% 108.67% 80.38% 51.18% 48.64% -11.52% 28.56% 35.29% 664,135 (126,324)

Vad d, ltd. 69.05% 56.08% 30.30% 30.15% 99.35% 86.23% 50.25% 76.30% -1.61% 4.22% 51.16% 2,124,691 (289,241)

Xl grp pc (7) 76.56% 63.84% 30.90% 30.94% 107.46% 94.78% 50.45% 191.41% 0.79% 8.68% 65.57% 6,898,284 (1,464,896)

ta 66,943,064 (13,177,750)

(1) l, expee & cmbed rat y fr -fe be.

(2) Retr qty = net icme / verae f CY Capta & srp ad PY

Capta & srp.

(3) ReaaceRe d ltd. etered t a detve tc prchae

areemet wth QB d, ic. t e btatay a f t u.s.-baed

race perat nvember 2010. he traact ced March

2011. et ad abte f dcted perat hed fr ae f $n ad

$13,507 have bee cded ther aet ad ther abte, repectvey,

at December 31, 2011 (2010 - $872,147 ad $598,511, repectvey; 2009 -

$931,207 ad $665,641, repectvey).

(4) cx ltd. retr eqty f 1.7% a preeted t aa reprt

cacated baed adjted pe eqty whch tae t cderat

the wehted averae f capta frm hare pt exerce e wehted

averae paymet f capta t harehder by dvded ad treary tc.

(5) l rat (5 year averae) = m f ad l (ve year) / m f

premm eared (5 year). r the repdet that prvded e tha

ve year f data, the averae ha bee cacated ver the mber f perd

prvded.

(6) ParterRe ltd. rat excde fe be.

(7) Xl grp pc derwrt cme / () eera perat excde fe

operaTing daTa


15/16


CURRET ERIO

nETpREmIUmS

WRITTEn

CHAnGEInUpR

pREmIU

mSEARnEd

LOSSES

&LAE

COmmISSIOnS&

BROkER

AGE

OTHER

UndERWRITInG

ExpEnS

ES

UndERWRITInG

GAIn/(LOSS)

InvESTmEnTInCOmE

EARnEd

(ExCLUdInG

REALIZE

dGAInS/

LOSSES

)

REALIZE

dCApITAL

GAIn/(LOSS)

CHAnGEIn

UnREALIZEd

GAInS/(LOSSES)

InTERESTExpEnSE

OndEB

T

OTHERInCOmE

(ExpEnSES)

TAxBEn

EFIT

(ExpEnSE)

nETInC

OmE

RETURn

On

EQUITY

(2)

RETURn

On

REvEnU

E

15,372,000 15,000 15,387,000 9,921,000 2,447,000 2,052,000 967,000 2,242,000 (795,000) - (250,000) (73,000) (506,000) 1,585,000 6.68% 16.44%

1,533,766 (76,774) 1,456,992 959,156 167,295 271,656 58,885 195,948 32,731 (22,654) (54,989) 95,607 (30,980) 274,548 8.82% 16.90%

1,428,998 (7,015) 1,421,983 945,593 261,102 186,743 28,545 234,846 8,564 (49,848) (43,688) (66,247) 9,501 65,282 2.28% 6.10%

966,750 (124,691) 842,059 782,281 1 17 ,141 47 ,071 ( 104,434) 26 ,730 24,640 (40,267) - (6,814) 1 ,360 (98,785) - 6.76% - 9.81%

2,673,326 (41,511) 2,631,815 1,727,553 459,508 400,100 44,654 338,198 101,584 - (31,691) (25,733) 9,346 436,358 9.55% 11.05%

1,071,800 10,200 1,082,000 863,100 426,700 - (207,800) 125,800 49,200 (3,500) (22,100) (4,500) (19,500) (82,400) -5.31% -9.03%

1,929,000 (40,000) 1,889,000 1,556,000 347,000 236,000 (250,000) 226,000 27,000 (60,000) (31,000) (55,000) 37,000 (106,000) -3.31% -5.34%

3,419,434 (104,473) 3,314,961 2,675,052 587,469 379,666 (327,226) 362,430 137,272 (15,833) (62,598) (32,507) (15,233) 46,305 0.84% -1.64%

3,835,013 (223,390) 3,611,623 2,528,807 758,874 514,395 (190,453) 147,409 100,292 - - 13,325 11,324 28,397 1.14% -2.21%

1 ,979,821 (48,428) 1 ,931,393 1,632,666 282,91 1 267 ,699 (251,883) 147 ,037 (57 ,366) (713) (36,254) (3 ,791) 23,00 6 (93 ,734) -3 .43% - 2.83%

2,083,994 (59,648) 2,024,346 1 ,655,087 560,022 19,611 (210,374) 282,545 30,214 - (1,310) 8,106 (11 ,822) 97,359 3.51% 3.41%

558,432 13,046 571 ,478 676,535 1 15 ,325 85,817 (306, 199) 34,312 ( 18 ,276) - ( 11,668) (2,691) 51 (304,471) -31.65% -47.46%

1,884,287 (46,551) 1 ,837,736 1 ,120,127 433,016 278,936 5,657 80,784 8,089 (49,559) (10,750) (6,502) 6,422 34,141 1 .70% 3.62%

501,000 11,500 512,500 167,200 121,000 28,400 195,900 37,900 7,900 - - (2,000) - 239,700 18.47% 42.27%

624,000 (1,300) 622,700 612,100 105,400 98,600 (193,400) 68,700 34,600 (8,400) (20,600) 3,300 600 115,200 -7.25% 12.72%

54, 517 ( 17,186) 37,331 193 1,296 - 35,842 2 0,7 15 14,514 (19,179) (12,482) (9,796) - 29,614 6. 64% 7 1. 04%

543,425 - 543,425 5 99,109 323 (1, 062) (54,945) 112,855 3,516,983 (307,881) (787) (17, 855) - (104,636) -3.36% -519. 05%

4,486,329 161,425 4,647,754 4,372,570 938,361 - (663,177) 629,148 40,328 26,364 (48,949) (435,033) (68,972) (520,291) -7.61% -10.70%

1,012,773 (61 ,724) 951 ,049 861,179 97,376 169,666 (177,172) 1 18,000 48,147 21,969 (23,368) (80,126) 315 (92,235) -2.44% -16.45%

537,811 (80,949) 456,862 375,423 126,020 (4,929) (39,652) 35,666 4,641 - - (59,047) 2,072 (56,320) -5.03% -14.54%

1,835,450 (33 ,307) 1 ,802,143 1,244,401 314, 184 231,793 1 1,765 1 12 ,296 28,532 (19,991) (44,271) (66, 178) (824) 21 ,329 0.61% 0.74%

5,433,388 (106,276) 5,327,112 4,078,391 786,093 859,981 (397,353) 1 ,137,769 (199,097) - (205,592) (679,903) (59,707) (403,883) -3.77% -2.51%

53,765,314 (862,052) 52,903,262 39,353,523 9,453,416 6,122,143 (2,025,820) 6,717,088 3,145,492 (549,492) (912,097) (612,041) 1,110,478

ad aca perat.

(8) veret Rerace (Bermda), ltd aca frmat prvded th

rvey adted.

(9) terra rat excde lfe be

(10) cx ltd. cme tatemet traated frm gBP t usD averae rate

f $1.54633 fr the reevat year.

(11) cx ltd. expee rat ad cmbed rat excd X mpact 39.1%

(2010: 39.7%) ad 99.3% (2010: 89.8%), repectvey.

(12) Xis Capta d ltd. expee rat per the 10-k 31.6% fr 2011 ad

31.8% fr 2010, whch cde crprate expee f $77.1m ad $75.4m fr

2011 ad 2010 repectvey.

(13) Xis Capta d ltd. cmbed rat per the 10-k 112.3% fr 2011 ad

88.7% fr 2010, whch cde crprate expee f $77.1M ad $75.4M fr

2011 ad 2010 repectvey.

(14) Xis Capta d ltd. retr eqty per the 10-k 0.2% fr 2011,

preferred hare are excded frm th cacat.

fiscal 2011


16/16

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