Presentation by Meyer Shields, Managing Director Stifel, Nicolaus & Company, Inc. to the 66th Annual Fowler Seminar on Oct 12 2012 titled Equity Analyst’s View on Insurance

1. A View from the “Street”
The P&C Insurance Industry
from the Analyst’s Perspective
October 12, 2012
Meyer Shields, FCAS
(443-224-1331)
mshields@stifel.com
Stifel Nicolaus does and seeks to do business with companies covered in its research
reports. As a result, investors should be aware that the firm may have a conflict of interest
that could affect the objectivity of this report. Investors should consider this report as only
a single factor in making their investment decision.
All relevant disclosures and certifications appear on pages 25-26 of this report.
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2. Property & Casualty Insurance Overview
1. A business that involves selling people promises to pay later that are
never fulfilled.
Gomer paid flood insurance premiums for years, but then the insurer
decided to go out of business when the flood came because
management had spent all the premium, on private jets.
2. A form of gambling. A way to get free money.
a) I might get an accident and get insurance money!
b) I'm going to cause an accident and get insurance money!
Source: urbandictionary.com
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3. Current Investment Thesis
Negatives Positives
 Accident-year ROEs are pretty  Rates for almost all lines are
low flat or rising
 Prior-period reserve releases  2011 catastrophes haven’t
are slowing or reversing recurred (yet)
 Heightened catastrophic losses  Government role (TARP, AIG) is
appear to be here to stay diminishing (not counting OIR!)
 Financial shenanigans producing  Some signs of consolidation
D&O lawsuits (TransAtlantic, Flagstone Re,
 Investment returns are low, Groupama, Harleysville…)
new money rates trail book  Slow but stable economic
yields growth
 Municipal bankruptcies are  Technology finally taking root
increasing
 Significant crop losses
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4. 2012 NWP by LOB
Nonproportional Inland/Ocean Medical
Reinsurance Marine Malpractice
3% Fire and 3% 2%
Allied Lines
4%
Commercial Auto
5%
Commercial
Multiple Peril Private Passenger
7% Auto
37%
All Other Lines
7%
Workers
Compensation
8%
Other/Product Homeowners/
Liability Farmowners
9% 15%
4
Source: SNL

5. P&C Industry Performance
 Things are getting better…
2008 2009A 2010A 2011A 2012E
Net Written Premium Grow th -1.3% -3.8% 1.3% 3.3% 5.3%
Combined Ratio 104.6% 100.5% 101.8% 107.7% 103.8%
Net Underw riting Gain/(Loss) (21,173) (2,982) (10,514) (36,507) (22,562)
Loss Reserves 555,351 551,572 560,841 572,604 573,248
Investment Income Grow th -6.5% -8.6% 1.1% 3.0% -0.7%
Policyholders' Surplus 457,294 511,397 559,247 550,308 583,605
Trailing 12-Month ROE 3.4% 7.2% 5.8% 2.5% 4.0%
 … but, with a 4% ROE forecast for 2012,
they’re not actually “good.”
5
Source: SNL

6. Investor Concerns 2012
1. Are rate increases losing steam?
2. What do Europe’s troubles mean for premium volumes, insurance
losses, and asset values?
3. Who’s on the hook for the LIBOR scandals?
4. How will insurers offset declining investment income?
5. What does potential climate change imply for insurers?
6. Are there more likely to be major earthquakes in the near-term?
7. Whose reserves are most likely deficient?
8. Is more consolidation (carriers OR brokers) coming?
9. What’s the next big thing we’re not thinking about yet?
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7. Source: CIAB
0%
20%
50%
70%
80%
90%
10%
30%
40%
60%
100%
1Q00
2Q00
3Q00
4Q00
1Q01
2Q01
3Q01
4Q01
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
3Q03
4Q03
1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
Small
3Q05
4Q05
1Q06
2Q06
3Q06
4Q06
1Q07
Medium
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
Large
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
An Unimpressive Rate Turn…
2Q11
Percentage of surveyed brokers reporting 10%-plus rate increases
3Q11
4Q11
1Q12
2Q12
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8. Y/Y Rate Decrease
0%
10%
20%
30%
40%
-20%
-10%
Jul-01
Source: MarketScout
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
…but the Momentum Seems Clear
Jul-12
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9. Underlying Pricing Trends Are Solid
The Y/Y change in Y/Y rate changes is holding up
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
Aug-02
Aug-05
Aug-06
Aug-09
Aug-03
Aug-04
Aug-07
Aug-08
Aug-10
Aug-11
Aug-12
Feb-05
Feb-06
Feb-09
Feb-10
Feb-03
Feb-04
Feb-07
Feb-08
Feb-11
Feb-12
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Source: MarketScout, Stifel Nicolaus analysis

10. 0%
5%
10%
-5%
-20%
-15%
-10%
Apr-06
Jun-06
Aug-06
Oct-06
Dec-06
Feb-07
Apr-07
Jun-07
Aug-07
Oct-07
Small
Dec-07
Feb-08
Apr-08
Source: MarketScout, Stifel Nicolaus analysis
Jun-08
Aug-08
Oct-08
Dec-08
Medium
Feb-09
Apr-09
Jun-09
Aug-09
Oct-09
Large
Dec-09
Feb-10
Apr-10
Jun-10
Aug-10
Oct-10
Jumbo
Dec-10
Feb-11
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Little Differentiation by Account Size
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11. Y/Y % CPI Change
0%
2%
4%
6%
8%
10%
12%
-2%
-4%
Mar. '01
Jul. '01
Nov. '01
Mar. '02
Jul. '02
Nov. '02
Source: Bureau of Labor Statistics
Mar. '03
Jul. '03
Nov. '03
Mar. '04
Jul. '04
Nov. '04
Mar. '05
Motor vehicle insurance
Jul. '05
Nov. '05
Mar. '06
Jul. '06
Nov. '06
Mar. '07
Jul. '07
Nov. '07
Mar. '08
Jul. '08
Nov. '08
Mar. '09
Jul. '09
Nov. '09
Mar. '10
Jul. '10
Tenants' and household insurance
Nov. '10
Mar. '11
July. '11
Nov. '11
Mar. '12
Jul. '12
Personal Lines Rates Trending Up Again
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12. Few Investment Income Opportunities
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
9/92
9/93
9/95
9/97
9/99
9/00
9/01
9/02
9/04
9/06
9/08
9/09
9/11
9/94
9/96
9/98
9/03
9/05
9/07
9/10
U.S. 2-Yr Tsy U.S. 5-Yr Tsy
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Source: FactSet

13. Billions
$0
$20
$40
$60
$80
($60)
($20)
($40)
Source: A.M. Best
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
NII
1983
1984
1985
1986
1987
1988
1989
1990
UW Profits
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
We Need a New Business Model
2009
2010
2011
Over the past 45 years, NII accounted for about 170% (!) of pretax profits
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14. Industry-wide Loss Reserves About Right
Upper Bound 600.6
Stated 573.7
Lower Bound 540.9
0 100 200 300 400 500 600 700
$ Billions
14
Source: SNL, Stifel Nicolaus analysis

15. By-Line Breakdown is Less Reassuring
Workers Compensation reserves are about $4.5B below our range’s midpoint
160 147.8
139.2 139.0
140
120 143.5
$Billions
100 88.0 86.9 87.0 88.8
75.1 78.8
80
60 81.0 83.8 37.4 39.0 33.1 37.1 38.6
40 34.9
20 37.0 35.9
0
Work Comp PPA Liab Oth. Liab. Occ. Oth. Liab. C-M Reins. B.
Lower Bound Stated Upper Bound SN Midpoint
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Source: SNL, Stifel Nicolaus analysis

16. The “Reserving Cycle”
Standard commercial lines’ reserves ‘automatic’ redundancies are done
$25
$20
Reserve Charge/(Release), $B
$15
$10
$5
$0
($5)
($10)
($15)
1996
1998
2000
2001
2003
2005
2006
2008
2009
2010
2011
1997
1999
2002
2004
2007
Immediate Past Accident-Year All Accident Years
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Source: SNL

17. The Crop Insurance Conundrum
Federal reinsurance program (FCIC) protects net loss ratios
200%
180%
160%
140%
Net Loss Ratio
120%
100%
80%
60%
40%
20%
0%
100%
150%
250%
300%
400%
450%
500%
600%
200%
350%
550%
50%
0%
Gross Loss Ratio
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Source: Stifel Nicolaus

18. Three Thoughts on Telematics
1. The data works
Recent CFA complaints about “non-driving”
factors may unintentionally support usage
2. Significant numbers of drivers want a device
Savings, resignation to lost privacy
3. Expect a “virtuous cycle” for first movers
Cherry-picking those drivers unknowingly
subsidizing everyone else
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19. YTD Performance, Personal Lines
120%
99.3%
100%
80%
60% 50.2%
39.3%
40%
23.2%
16.8% 19.6%
15.4%
20% 12.3% 10.8%
13.8%
8.2%
1.4%
0%
-20% -10.3%
-16.3%
-40%
Source: FactSet
Note: Data through October 3, 2012 19

20. YTD Performance, Standard Commercial
Lines
35%
28.7% 29.0%
30%
24.2%
25% 21.5%
19.2%
20% 18.0%
15.4%
13.6%
15% 11.3%
10% 7.9%
6.9%
4.8%
5%
0%
-5%
-4.7%
-10%
CINF CNA EIHI EMCI HALL HIG ORI SIGI TRV UNAMUFCS WTM SPX
Source: FactSet
Note: Data through October 3, 2012 20

21. YTD Performance, Specialty Commercial
Lines
60%
47.5%
50%
40%
27.3%
30% 21.4%
18.5% 17.9%
20% 14.7% 14.2%13.6% 15.4%
10.8% 8.5% 7.3% 8.5%
10% 3.8% 2.8% 3.8%
0%
-10% -1.2%
-4.2%
-8.7%
-20%
-30%
-27.0%
-40%
Source: FactSet
Note: Data through October 3, 2012 21

22. YTD Performance, Bermuda (Re)Insurers
40%
29.4% 30.6%
26.8% 26.1%
30% 21.7%23.6%
17.6%
20% 13.2%13.5% 15.4%
13.0% 11.3%
7.2% 7.4%
10% 2.8% 4.7%
0.6%
0%
-10%
-8.9%
-20% -15.2%
Source: FactSet
Note: Data through October 3, 2012 22

23. YTD Performance, Insurance Brokers
30% 28.2%
25%
19.0%
20%
14.9% 15.4%
15% 11.6%
10.5%
10%
5%
0%
-5% -2.9%
AJG AOC BRO MMC NFP WSH SPX
Source: FactSet
Note: Data through October 3, 2012 23

24. So, What Looks Good Now?
A. Rising insurance rates are good for the brokers
Our top picks include AON (Buy, $53.71), AJG (Buy, $36.55),
MMC (Buy, $34.55)
B. Dwindling reserve adequacy – focus on the most
conservatively reserved insurers
Our top picks include CINF (Buy, $38.50), MKL (Buy, $457.46)
C. Rising rates can help “turnaround” stories
Our top picks include ENH (Buy, $40.38), XL (Buy, $24.71), HIG
(Buy, $20.75)
Prices are as of 10/4/12 market close. 24

25. Important Disclosures and Certifications
I, Meyer Shields, certify that the views expressed in this research report accurately reflect my personal views about the subject securities or
issuers; and I, Meyer Shields, certify that no part of my compensation was, is, or will be directly or indirectly related to the specific
recommendations or views contained in this research report. For our European Conflicts Management Policy go to the research page at
www.stifel.com.
For applicable current disclosures for all covered companies please visit the Research Page at www.stifel.com or write to the Stifel Nicolaus Research Department at
the following address.
Stifel Nicolaus Research Department
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16th Floor
Baltimore, Md. 21202
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MSCI World Index by more than 10% over the next 12 months. For yield-sensitive securities, we expect a total return in excess of 12% over the next 12
months for U.S. securities as compared to the S&P 500, for Canadian securities as compared to the S&P/TSX Composite Index, and for other non-U.S.
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