A.M. Best’s Insurance Market Briefing - Canada Reinsurance Overview Greg Reisner A.M. Best Company

1. A.M. Best’s Insurance Market Briefing - CanadaReinsurance OverviewGreg ReisnerA.M. Best Company September 8, 2010

2. A.M. Best maintains STABLE OUTLOOK for 2010 • This outlook maintains that the majority of future rating actions are likely to be affirmations with a modest number of rating or outlook changes • Expect overall favorable operating performance in 2010 • Capital positions are strong and have been bolstered since the financial crisis • Market discipline is still present • Enterprise Risk Management appears to be embraced and enhanced • Key factors include catastrophes and fragile financial markets • Execution remains important • Efficient deployment of capital is fundamental yet imperative • Sufficient underwriting margins need to be generated • Risk awareness needs to be crystal clear

3. Longer Term there are Challenges • Broadly speaking there are 3 concerns: • Pricing fundamentals continue to disappoint with the concern being that ultimately companies will compete for market share • The potential threat of inflationary pressures • Regulatory issues concerning the U.S. and Bermuda and Solvency II for Bermudian companies

4. Recipe For Success • Strong focus on cycle management and pricing integrity • Demonstrated track record of stable and consistent results with no outsized losses relative to expectations and/or compared to the peer group • The (re)insurance model continues to work well and recent events show the dangers of moving outside of the core business

5. Underwriting PerformanceU.S. Reinsurance and Bermuda Market • Underwriting results were favorable for 2009 • Results were better than 2008 and comparable to 2007 • Results were aided by mild catastrophes and reserve releases • Market challenges remain in terms of pricing, attachment points, terms and conditions • Despite the challenges the expectation is for profitable underwriting results in 2010 with some companies outperforming others • Impact of catastrophes is always a variable

6. U.S. Reinsurance and Bermuda Market Trends

7. Net Premiums Earned as a Percentage of the U.S. Reinsurance and Bermuda Market (P&C only) YTD Q2 2010

8. Underwriting Performance U.S. Reinsurance and Bermuda Market

9. US Reinsurance & Bermuda Market Trends 25.0% 19% 20.0% 16% 16% 15.0% 10% 10.0% ROE 5.0% 0.0% -1% 2006 2007 2008 2009 YTD 2Q 2010 -5.0% (annualized) Performance Trends U.S. Reinsurance and Bermuda Market

10. Investment Allocation U.S. Reinsurance and Bermuda Market at Q2 2010

11. Market EnvironmentU.S. Reinsurance and Bermuda Market • During 2009 companies sharpened their focus on counterparty risk, investment risk and remained cognizant of the underwriting risks. Access to capital was limited. • The theme for 2009 was to tighten up risk parameters and bet, or not bet • Companies willingly sacrificed investment earnings as capital preservation was the focus • What will the theme be going forward? • Performance anxiety could dictate decisions – companies want to show competitive results • Risk selection is paramount as companies are cautious as to when the next shoe will drop • How much capital will be available and will it be plentiful post-event? • Battles are being waged under the seemingly calm environment as reinsurers are looking to hold the line on pricing • In the new decade, companies continue to adjust to the “new normal”

12. Canadian Reinsurance MarketOverview

13. Canadian Reinsurance

14. Canadian Reinsurance Trends

15. Canadian Reinsurance Trends

16. Summary • Currently, there appears to be more market challenges than opportunities • The good news though is that at this stage of the cycle companies are still well-capitalized • Reinsurance companies are still maintaining pricing discipline • The winners will be the companies that navigate the cycle more effectively and can capitalize on the next hard market

17. Questions?