Mercer Capital’s Insurance Industry newsletter is a quarterly publication providing perspective on valuation issues pertinent to insurance brokers, underwriters, and other industry professionals. Each issue includes a segment focus, market overview, mergers and acquisitions review, and more.

1. Value
Focus
© 2013 Mercer Capital // Data provided by SNL Financial 1
Insurance Industry
Second Quarter 2013
What to Make of Higher Interest Rates? The Federal Reserve’s June 19 statements regarding
the tapering of asset purchases caused quite a ripple in the fixed income markets. For insurers,
particularly the Life & Health sector, the prospect of rising interest rates could help boost investment
income and create opportunities for the sale of more interest rate sensitive products. The SNL Life
& Health Index significantly outperformed the S&P 500 during the second quarter (+17.3% versus
+2.9% for the S&P), and Multiline insurers followed suit, up 14.7%. The P&C Index moved in line with
the market (+2.6%). Subsequent to the quarter-end, Moody’s issued a note stating that gradually
increasing interest rates combined with an improving economy could prompt the rating agency to
change its outlook on the U.S. life insurance sector from negative to stable.
Renewal Rate Increases Steady. According to MarketScout, the overall average rate increase
on P&C commercial accounts held steady at +5% in June, although some industry participants
have expressed concern about slowing momentum for further rate increases. The relatively mild
weather and excess capital in the industry may lead to a moderation of such increases, especially
if insurers can count on higher interest rates to boost investment income and take pressure off
underwriting results. Competition and a flood of new capital in the reinsurance industry have already
led to significant price cuts in that sector. Back in the standard lines market, MarketScout reported
that the change in commercial property moved down from +6% in May to +5% in June.
Multiples Move Higher. The median price/book ratio for the firms in the SNL P&C Underwriter Index
ended the second quarter where it began, at about 1.0x. For L&H insurers, the potential benefits
of rising interest rates led to improvement in the median price/book ratio, from 0.62x to 0.69x, the
highest level observed since mid-2011. Insurance brokers continued to be viewed favorably by the
market and the median MVTC/EBITDA multiple climbed from 10.5x to 10.7x at the end of the second
quarter.
M&A Activity Down. Consistent with trends in the general M&A market, deal activity was slower
in the first half of 2013 compared to the prior year. The largest underwriter transaction of the quarter
was Protective Life Corp.’s $1.1B purchase of MONY Life Insurance Co. from AXA (with an estimated
price to statutory book value of 1.7x for the deal). On the broker side, two prominent deals occurred
in the second quarter: Madison Dearborn’s $1.3B take-private of National Financial Partners and
Brown & Brown’s $360M acquisition of Beecher Carlson. Estimated multiples of trailing twelve
months adjusted EBITDA for these deals was 9.1x and 10.9x, respectively.

2. © 2013 Mercer Capital // Data provided by SNL Financial 2
SNL Insurance Broker and Underwriter IndicesSNL Insurance Underwriter Segment Indices
Insurance Brokers: Median Valuation Multiples
as of June 30, 2013
SNL Underwriter Indices: Median Valuation Multiples
as of June 30, 2013
Mercer Capital’s Value Focus: Insurance Industry Second Quarter 2013
60.0
80.0
100.0
120.0
140.0
160.0
180.0
200.0
6/29/12
7/29/12
8/29/12
9/29/1210/29/1211/29/1212/29/12
1/29/13
2/28/13
3/31/13
4/30/13
5/31/13
June29,2012=100
SNL Insurance Underwriter Segment Indices
S&P 500: 20.60% SNL Insurance Multiline: 46.50%
SNL Insurance L&H: 51.51% SNL Insurance P&C: 28.59%
SNL Reinsurance: 31.25% SNL Managed Care: 30.25%
SNL Title Insurer: 30.41% SNL Mortgage & Finl Guaranty: 66.98%
90.0
95.0
100.0
105.0
110.0
115.0
120.0
125.0
130.0
135.0
140.0
6/29/12
7/29/12
8/29/12
9/29/1210/29/1211/29/1212/29/12
1/29/13
2/28/13
3/31/13
4/30/13
5/31/13
June29,2012=100
SNL Insurance Broker and Underwriter Indices
SNL U.S. Insurance Broker: 29.41%
SNL U.S. Insurance Underwriter: 35.29%
S&P 500: 20.60%
No. of
Companies
Price
/ LTM
EPS”
Price
/ ‘13E
EPS
Price
/ ‘14E
EPS
Price /
Book
Price /
Tangible
Book
Dividend
Yield
Multiline 7 16.90 10.54 9.79 0.72 0.81 0.46%
Life and Health 24 10.86 9.40 8.55 0.69 0.78 0.26%
Property and Casualty 68 12.32 13.10 11.90 0.99 1.02 0.46%
Reinsurance 17 7.36 9.40 9.52 0.79 0.83 0.46%
Managed Care 12 12.64 11.54 10.28 1.72 2.49 0.00%
Title Insurance 4 8.23 11.12 10.30 1.07 1.55 0.33%
Mortgage and Fin. Guaranty 7 5.42 5.41 7.94 0.82 0.86 0.01%
No. of
Companies
Price/
LTM EPS
Price /
‘13E EPS
Price /
‘14E EPS
MTVC/
EBITDA
MTVC/
Revenue
Broker Median 5 21.45 16.50 14.79 10.74 2.53
Aon Corp. nm 19.07 13.69 12.38 10.74 2.11
Arthur J. Gallagher & Co. nm 26.70 19.86 17.34 14.07 2.53
Brown & Brown Inc. nm 23.84 21.49 18.21 12.20 4.13
Marsh & McLennan Companies nm 17.28 16.50 14.79 10.69 2.05
Willis Group Holdings Plc nm nm 14.80 13.66 (100.17) 2.70

3. © 2013 Mercer Capital // Data provided by SNL Financial 3
Recent Transactions Underwriter Return Stratification by Asset Size
M&A Activity Recap: Insurance UnderwritersM&A Activity Recap: Insurance Brokers
Mercer Capital’s Value Focus: Insurance Industry Second Quarter 2013
Assets <
$250 MM
Assets
$250 -
$500 MM
Assets
$500 MM
- $1 BN
Assets $1
- $2.5 BN
Assets
$2.5 - $10
BN
Assets >
$10 BN
Quarter-to-Date 5.32% 7.57% 9.64% 4.26% 4.47% 9.79%
Year-to-Date 26.83% 22.58% 10.14% 11.33% 18.08% 25.67%
Last 12 Months 39.27% 39.60% 37.68% 29.41% 33.81% 35.31%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
AsofJune30,2013
Underwriter Return Stratification by Asset Size
Q1! Q2! Q3! Q4! YTD at 6/30!
2010! 21 ! 25 ! 23 ! 37 ! 46 !
2011! 27 ! 18 ! 34 ! 28 ! 45 !
2012! 19 ! 28 ! 25 ! 18 ! 47 !
2013! 20 ! 13 ! 0 ! 0 ! 33 !
0 !
20 !
40 !
60 !
NumberofTransactions!
M&A Activity Recap: Insurance Underwriters!
Q1! Q2! Q3! Q4! YTD at 6/30!
2010! 50 ! 45 ! 53 ! 77 ! 95 !
2011! 77 ! 58 ! 73 ! 81 ! 135 !
2012! 63 ! 70 ! 56 ! 132 ! 133 !
2013! 39 ! 33 ! 0 ! 0 ! 72 !
0 !
20 !
40 !
60 !
80 !
100 !
120 !
140 !
160 !
NumberofTransactions!
M&A Activity Recap: Insurance Brokers!
Largest Deals
Deal Info ($M)
Target LTM
Financials ($000s)
Deal Multiples
Announce
Date
Total Deal
Value
Debt
Assumed
Total
Assets
Revenue
Price /
Earnings
Price /
Book
Brokers
Madison Dearborn
Partners, LLC/ National
Financial Partners Corp.
4/14/2013 1,283.8 n/a 899,859 1,068,976 35.68 245.16
Brown & Brown, Inc./
Beecher Carlson
Holdings Inc.
5/21/2013 360.0 n/a n/a 105,600 n/a n/a
Underwriters
Protective Life
Corporation/ MONY Life
4/10/2013 1,056.0 n/a n/a n/a n/a n/a
SCOR SE/ US Life
Reinsurance Business
6/3/2013 920.0 n/a n/a n/a 14.84 n/a

4. Mercer
Capital
Insurance Industry Services
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Reporters requesting additional information or editorial comment should contact Barbara Walters Price at 901.685.2120. Mercer Capital’s Industry Focus is published quarterly and does not constitute legal or financial consulting advice. It is offered as an
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Mercer Capital provides the insurance industry with corporate valuation,
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Industry Segments
Mercer Capital serves the following industry segments:
• Agencies
• Independent insurance brokers and agents
• Bank-owned agencies
• Retail, wholesale, and MGAs
• Underwriters
• P&C, life & health, and managed care
Mercer Capital Experience
• Nationwide client base
• Agency clients range from single office agencies to top-10 public brokers
• Underwriter clients range from monoline privates to publicly traded multi-line carriers
Contact a Mercer Capital professional to discuss your needs in confidence.
• Reinsurance
• Captives and risk retention groups
• Ancillary
• Third-party administrators
• Claims adjusters and other service providers
Contact Us Lucas M. Parris, CFA
901.322.9784
parrisl@mercercapital.com
Travis W. Harms, CFA, CPA/ABV
901.322.9760
harmst@mercercapital.com
Mercer Capital
5100 Poplar Avenue, Suite 2600
Memphis, Tennessee 38137
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www.mercercapital.com