National Property Practice

2. Property Market Trends and DevelopmentsDavid Laning, CPCUNational Property PracticeWells Fargo Insurance Services

3. National Property Practice Sixteen experienced professionals Embedded within regions Resources Win, Retain and Drive Property Insurance Successes Needs of our customers Better, Faster Creativity / Options / Alternatives

4. National Property Practice Knowledgeable Efficient Effective Proactive Support

5. Property / Market 2009 The “Hard Market of 2009” did not materialize Generally flat rates ± 5% Some increase on CAT Exposures and Reduced Capacity Quiet storm season to date Could make for an interesting end of the year Marine and Equipment Breakdown flat to -5% Reinsurance All Insurers paid more for their treaties on January 1 and July 1 Indications are renewals will be flat on January 1, 2010. 2010 Predictions Flat to slightly down rates barring no significant catastrophe or capital event Very tenuous and fragile market Underwriting discipline will continue

6. Cost of Capital Market Drivers

7. ROE vs. Equity Cost of Capital:US P/C Insurance:1991-2009:Q1* The p/c insurance industry fell well short of is cost of capital in 2008 +2.3 pts -9.0 pts -1.7 pts -8.4 pts -7.1 pts -13.2 pts US P/C insurers missed their cost of capital by an average 6.7 points from 1991 to 2002, but on target or better 2003-07, but falling well short in 2008/09 The cost of capital is the rate of return insurers need to attract and retain capital to the business 7 *Excludes mortgage and financial guarantee insurers. Source: The Geneva Association, Ins. Information Inst.

8. Combined RatiosandRate Changes

9. Commercial Lines Combined Ratio, 1993-2009F Commercial coverages have exhibited significant variability over time Mortgage and financial guarantee account for about 3-4 points on the commercial combined ratio in 2008/09 2006/07 benefited from favorable loss cost trends, improved tort environment, low CAT losses, WC reforms and reserve releases. Most of these trends reversed in 2008 and mortgage and financial guarantee segments have big influence. 2009 is transition year. 9 Sources: A.M. Best (historical and forecasts)

10. A 100 Combined Ratio Isn’t What it Used to Be: 95 is Where It’s At Combined ratios must me must lower in today’s depressed investment environment to generate risk appropriate ROEs 10 * 2008/9 figures are return on average statutory surplus. Excludes mortgage and financial guarantee insurers. Source: Insurance Information Institute from A.M. Best and ISO data.

11. Average Commercial Rate Change,All Lines, (1Q:2004 – 2Q:2009) Magnitude of price declines is now shrinking. Reflects shrinking capital, reduced investment gains, deteriorating underwriting performance, higher cat losses and costlier reinsurance -0.1% KRW Effect 11 Source: Council of Insurance Agents & Brokers; Insurance Information Institute

12. Catastrophe Losses

13. U.S. Insured Catastrophe Losses $ Billions $100 Billion CAT year is coming eventually 2008 CAT losses exceeded 2006/07 combined. 2005 was by far the worst year ever for insured catastrophe losses in the US, but the worst has yet to come. 2009 cat losses were down 43% in H1 from $10.3B in H1 2008 *Based on PCS data through June 30 = $6.9 billion. Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01. Includes only business and personal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B. Source: Property Claims Service/ISO; Insurance Information Institute 13 13

14. Inflation-Adjusted U.S. Insured Catastrophe Losses By Cause of Loss, 1988-2007¹ Insured disaster losses totaled $310.5 billion from 1988-2007 (in 2007 dollars) 1 Catastrophes are all events causing direct insured losses to property of $25 million or more in 2007 dollars. Catastrophe threshold changed from $5 million to $25 million beginning in 1997. Adjusted for inflation by the III. 2 Excludes snow. 3 Includes hurricanes and tropical storms. 4 Includes other geologic events such as volcanic eruptions and other earth movement. 5 Does not include flood damage covered by the federally administered National Flood Insurance Program. 6 Includes wildland fires. 14 Source: Insurance Services Office (ISO)..

15. Policy Holder Surplusand Capital Events

16. U.S. Policyholder Surplus: 1975-2009:H1* Actual capacity as of 6/30/09 was $471B, up from $437.1B as of 3/31/09 Recent peak was $521.8 as of 9/30/07. Surplus as of 6/30/09 is 9.8% below 2007 peak; Crisis trough was as of 3/31/0916.2% below 2007 peak $ Billions The premium-to-surplus ratio stood at $1.03:$1 as of 3/31/09, up from near record low of $0.85:$1 at year-end 2007 “Surplus” is a measure of underwriting capacity. It is analogous to “Owners Equity” or “Net Worth” in non-insurance organizations 16 16 Source: A.M. Best, ISO, Insurance Information Institute. *As of 6/30/09

17. Ratio of Insured Loss to Surplus for Largest Capital Events Since 1989* The financial crisis now ranks as the largest “capital event” over the past 20+ years *Ratio is for end-of-quarter surplus immediately prior to event. Date shown is end of quarter prior to event. **Latest available Source: PCS; Insurance Information Institute. 17

18. Property Market Trends and Recommendations Distinguish yourself Be out ahead of the market Create a positive story for your risk Losses – Positive spin – What is being done to prevent what has happened Quality of Risk - Information Risk Improvements Unparalleled underwriting data Value Justification and stratification Disaster Preparedness and tested recovery plan Loss Control and prevention Rate History Coverage Audit Retentions CAT Modeling Flood Mapping

19. Food For Thought Terrorism Swine Flu H1N1 Enterprise Risk Management NPIP – Remapping Industry Segment Program Development Rating Agencies