Aig Best of Bernstein Slides

See Disclosure Appendix of this report for important Disclosures and Analyst Certifications
May 2014
See Disclosure Appendix of this report for important Disclosures and Analyst Certifications
U.S. Insurance/Nonlife
Josh Stirling Senior Analyst +1-212-823-3188 josh.stirling@bernstein.com
Grant DAvino Research Associate +1-212-823-3903 grant.davino@bernstein.com

AIG: From Controversial, To Consensus?

A recovering global franchise,
and a great company
just starting to emerge
U.S. Insurance/Nonlife 2 2
Thirty eight slides but three simple goals for our presentation today
AIG is a recovering global franchise, still trading below book

Well do a rapid review of AIGs transformation

Well show why we believe 2014 will be AIGs breakout year
Understand
the value
opportunity
at AIG
Unlock
the keys to
AIGs
transformation
Prepare for
the catalysts
we see coming
this year
Today, we hope to help you
Our thesis is simple: on AIG there are only 3 things to know
AIG is still trading at less than 75% of book, and has lagged
the market since November of last year

AIGs initiatives are nothing less than a transformation, and
their efforts will drive earnings growth of more than 30%

AIG has substantial excess capital, and growth and capital
returns will allow the firm to re-lever its balance sheet and
achieve peer ROEs of 12% or beyond
We see AIG as a compelling core holding, likely to outperform over many
years as earnings recover and once again is re-rated as a global franchise
AIG is
still well
discounted
AIGs
earnings are
recovering
and AIG will
achieve peer
ROEs
AIG is a global multi-line franchise, trading at half the multiple of peers
Source: FactSet, Bernstein Research
0.0x 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x
AIG
ING
Hartford
CNA
Swiss Re
Prudential
Munich Re
Allstate
Met
Chubb
Travelers
ACE
Allianz
Zurich
Aflac
Sampo
PGR
Generali
Price-to-Tangible Book Value
Global multi-
line peers
Where they
are now
AIG has roomto double its
valuation just by trading in
line with global multi-line
peers
There are only five things AIG needs to do to achieve peer ROEs
Fixing claims, lowering the loss ratio, shifting to property

Improving margins, and positioning for global growth

Consolidating, streamlining, and modernizing to reduce expenses

Taking advantage of a strong market to drive margins & take share

Unlocking trapped capital to invest in growth, and capital returns

Commercial
P&C
Consumer
P&C
Expenses
U.S. Life
Growth &
Capital
Returns
But the Street has no visibility, or confidence in AIGs turnaround
The Street has been taking down estimates since last fall, and would have
to raise its FY15 estimate by 15% to come into line with SCB.
$0.90
$1.00
$1.10
$1.20
$1.30
$1.40
$1.50
$1.60
2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
Bernstein EPS versus the Street
Bernstein Consensus
We see an operating
recovery the Street
doesn't
20%
And fixing P&C, growing Life & buying its stock, AIG can deliver a 12% ROE
2013A 2015E Eventually
The last
transitional
year
Starting to
show
performance
Releveraging
with buybacks
and growth
Loss Ratio 67.6% 59.6% ~60%
Expense Ratio 34.6% 33.4% ~30%
Combined Ratio 102.2% 93.0% ~90%
P&C Earnings $4.5 billion $7.4 billion $8+ billion
Life Earnings $5.1 billion $4.9 billion $7+ billion
Assets/Equity 5.4x ~6x ~8-10x
Book Value $69 $77 $80 or more
ROE 6.8% 7.7% 11-13%
Source: Company reports, Bernstein Research
After lagging for six months, AIG is well positioned for a run in 2014
AIGs shares have lagged the market on a lack of visibility
and weak sell-side conviction
AIG, 4%
XLF, 6%
SPX, 10%
-8%
-4%
0%
4%
8%
12%
10-13 11-13 01-14 02-14 04-14
AIG XLF SPX
Our six part
series on AIG
and for many investors, mega-cap AIG has grown too big to ignore
AIG has the largest book equity in the world
The leader in corporate business, 97% of
the Fortune 500 are customers
A leading U.S. life insurer in most major
lines
And has the romance of legacy footprint and
growing emerging markets businesses
Even trading at a fraction the multiple of
peers, it is already over $70b market cap
and DWARFS most of its peers
AIG is already a giant, and as this global franchise recovers,
we think many will come to see it as a must own name
0 50 100 150
Standard Life
Old Mutual
CNA
L&G
PGR
Aviva
Hartford
Sampo
Chubb
Allstate
Generali
Munich Re
Travelers
Aflac
Swiss Re
ACE
Zurich
Prudential
ING
Allianz
Met
AXA
AIG
Market Capitalization ($ billions)
AIG's market cap
would grow
substantially if it traded
in line with quality
peers on P/BV
Assessing the turnaround: Loss Ratios
Driving lower loss ratios is the key lever for AIG today
There are five clear levers to drive margins in P&C
102.2
86
88
90
92
94
96
98
100
102
104
2013
CR
Pricing
Mix Shif t
Underwriting
Better Claims
Practices Expense
Management
Target
CR 90
to 95
We expect expenses to be a major part of the AIG recovery in the long term, but for
now the biggest lever management has to drive earnings is fixing the P&C loss ratio.
The 5
initiatives to
fix P&C
Source: Bernstein Research
The market doesnt understand the leverage of claims
LR +
LAE
LAE
Underspending Overspending
Old AIG
NewAIG
Travelers
Progressive
Old
Technology
Impact of going from
139 claims systems
to 1 = opportunity to
reduce LR + LAE by
10 points or more
New
Technology
Source: Bernstein Research
and AIGs claims transformation may reduce loss ratios
by 10 points or more
AIG was
under-
investing and
using old
technology
AIGs re-underwriting shows particular discipline
While AIG is shrinking
XL is up 39% in Casualty
CB is up 27% in WC
ACE is up 14% in NA Casualty
and ex. AIG staff start-up funded
by Berkshire wants to write
billions of new business
The bid for AIGs business from these well regarded companies show that AIGs
underwriters are now writing business that meets standards of leading peers
Two Year NPW Growth
39%
27%
14%
-17%
-30%
-20%
-10%
0%
10%
20%
30%
40%
XL CasualtyCB Workers'
Comp
ACE NA
Casualty
AIG Comm
Casualty
The LR improvement in Comml is clear, and Consumer should follow
A normalized trend shows more
than 10pts of underlying loss ratio
improvements since 2011
Management says Commercial
improvement will continue until the
firm is in line with peers.
and Consumers new
management is starting to follow
the same data-driven product
management approach
76
69
66
69
65
64
61
62
62
62
55
60
65
70
75
80
Commercial AY LR ex Cat & Severe
Losses
and every day, AIGs reserve deficiencies move further into the past
With AIGs historic reserve problems largely behind it, we expect strong
recent reserves to start to develop favorably in 2014
Assessing the Turnaround: Expenses
and next year, earnings will be driven by lower expenses
Behind the numbers: AIG is quietly building a new, leaner company
Looking at the company at its most granular level, AIG is being disciplined
and is truly committed to executing dramatic change
Source: LinkedIn, Bernstein Research
Notes: Companies X,Y,Z are peer companies trading below book value.
0
10
20
30
40
50
60
70
AIG Company X Company Y Company Z
Number of employees with "transformation" in job
title

AIG has made a major commitment to
its transformation
Our research shows AIG has been
recruiting high quality talent
Staff have been empowered to build
the New AIG behind the scenes
AIG has dramatic leverage to modernize its systems and reduce cost
An insurance company is only
as good as its systems.
Old systems are inflexible,
ineffective, expensive to
maintain and are a fundamental
limit on the firms returns
AIG has substantial
opportunities to consolidate,
modernize, to reduce cost and
improve effectiveness
-
500
1,000
1,500
2,000
2,500
3,000
Old AIG New AIG
P&C Systems
97% reduction
in systems,
modernizing
and improving
ef f iciency
and modern technology allows for a modern global workforce
The insurance company of the future has
Technology in Malaysia
Customer Service in Manila
Accountants in Budapest
Actuaries in Shanghai
Japanese staff in Okinawa instead of Tokyo
And staff in the U.S. in Texas, Kansas and Tennessee
A Lower Cost
and More Flexible
And More Dynamic
Workforce Than
AIGs Legacy Staff
Technology is enabling a dramatic transformation of the global workforce
=
and AIG has rationalization opportunities on many other fronts
Consolidating 3 different divisions AIU, American Home, and Fuji

Consolidating back and middle offices across 4 Life businesses
Integrating siloed sales forces
AIG is integrating two overlapping Benefits divisions in Life & P&C

Finance department had 500 general ledgers pre-SAP
HR had 50 different payroll systems, and 393 comp plans.
Procurement had never been centralized
Japanese
P&C
U.S. Life &
Benefits
Finance,
Procurement
& HR
So why havent we seen progress yet? They are still adding staff
AIG has been on a hiring binge since
2010 looking for high energy talent
Net underlying head count has risen
by nearly 15% over past 3 years
The new staff reduction program to
address 3% of current workforce is
only a beginning
52,000
54,000
56,000
58,000
60,000
62,000
64,000
66,000
2011 2012 2013
Employees
AIG is starting to shift from aggressive hiring, to harvesting the benefit of
their substantial technology and talent investments
But AIGs expenses will materially decline when they are done
A well-run, simplified AIG should get substantial expense leverage, and as the
largest firm in the sector, as much as 10 points might even be possible
Global Peers
Have
Expense
Ratios In
The 20s
34.6%
31.1%
30.5%
28.4%
27.2%
25% 30% 35%
AIG today
AIG in 2010
XL
ACE
Zurich
Expense Ratio
Assessing the Turnaround: Driving To Peer ROEs
and over five years, AIG can achieve 12% ROEs through
a combinations of buybacks and profitable growth
AIG has a low ROE because they are under-levered by as much as 50%
Source: SNL, Bernstein Research
AIG has only half the total leverage of many multi-line peers since more than
30% of equity is tied up in run-off legacy assets (DIB/GCM, ILFC and the DTA)
3.1x
4.2x
5.4x
6.4x
9.5x
9.6x
12.8x 12.8x
13.3x
14.7x
14.9x
0x
2x
4x
6x
8x
10x
12x
14x
16x
CB TRV AIG ALL C BAC ZURN GS MS HIG MET
Total Assets to Equity
Capital returns will be important lever for AIG to normalize its ROE
AIG wants to demonstrate it is a normal company
AIG has started buying back stock, and instituted a 1% dividend
AIG has committed to $5-10b of further buybacks by 2015
We expect the firm to achieve their goals and announce
additional authorization with ILFC proceeds in 2H14
But the firm is a headline SIFI and must be gradual, and
demonstrate prudence to keep their constituencies in balance
On capital, AIG wont disappoint, but we suspect a recovery in their ROE will
come much more from recovering margins, and growth, than capital returns
AIG will
continue to
achieve
capital
returns
and growth in U.S. Life will become a big part of the ROE story
U.S. Life revenues and earnings benefit from rising rates & market appreciation
VAs have been de-risked and retail is coming back with the market at new highs
AIG has excess capital, and AIG is taking share from capital constrained peers
-
500
1,000
1,500
2,000
2,500
3,000
1
Q
1
0
3
Q
1
0
1
Q
1
1
3
Q
1
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1
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1
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3
3
Q
1
3
1
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1
4
3
Q
1
4
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3
Q
1
5
Western National - Fixed Annuities
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
1
Q
1
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1
4
3
Q
1
4
1
Q
1
5
3
Q
1
5
SunAmerica - Variable Annuities
Further, Mortgage insurance is a growth business for AIG
AIGs mortgage insurance is benefiting from:
Recovery in housing prices even in legacy markets
Shrinkage of FHA driving demand for private MIs
Strong profits on new vintages since 2009
Declining impact from legacy delinquencies

Growth in top line and
MI strong bottom line
earnings
100
125
150
175
200
225
250
275
300
Q
1
'
1
0
Q
2
'
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0
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3
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$

M
i
l
l
i
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n
s
Mortgage Guaranty NWP
(150)
(100)
(50)
-
50
100
150
200
250
300
Q
1
'
1
0
Q
2
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$

M
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Mortgage Guaranty Operating Income
and AIG is very well positioned to take advantage of EM stress
A short list of countries of interest:
Thailand
Turkey
Argentina
South Africa
India
China
AIGs heart remains focused on
global emerging markets
Recent initiatives include:
Brazil consumer de novo startup
China auto insurance de novo startup
China Life J.V. with PICC startup
E.M. Bancassurance distribution deals
J.V. buy-outs
All Blacks Rugby Sponsorship
Global marketing spend, focused on using
new media to engage EM consumers

The world is starting to present
opportunities for well capitalized
players
Hank took big bets following the last Asian Financial Crisis
what could AIG do today?
If you take the long view

AIG will once again be a great company, and we believe,
this global franchise will again trade at a premium to its peers

Assessing the Turnaround: Is It Really A Transformation?
How can we say this? Why, its the people of the New AIG
A Chief Underwriter whos an actuary and who leads a
whole department filled with the same the clearest single sign
that at AIG value over volume is real
A Chief Actuary who left insurance for Wall Street because
it was too boring and is coming up with advanced new
methods to tackle the toughest questions of any at AIG
A Chief Claims and Admin officer who is a Technologist not
a claims guy, but rather, is a former engineer and whose role is
not to supervise budgets, or deny claims, but is AIGs chief
infrastructure change agent
And finally, a Chief Science Officer previously from big-
data leaders Progressive and Capital One, who is leading a
newly hired staff of 100 quants and business leaders, focused
on quick hits, and building a long-term competitive advantage in
big dataand in time, expect AIG to outrun most everyone

its hard to
pick
just four
but these
are the
four key
leaders
transforming
AIG
This is not your
fathers AIG
And of course, it is great people, who build great companies
Peter B. Lewis was the
iconoclast and visionary who was
the founder of Progressive
Created $16b market cap insurer
from ~$5mm LBO in 1965
His firm has for over 20 years
traded at 2x the multiple of peers

More than any one thing, it was the smart, innovative people that Peter brought to
Progressive that made his company great and changed the industry

James Stone, Chairman of Plymouth Rock Assurance Company,
honoring Peter at his Induction to the Insurance Hall of Fame
Source: Progressive
Celebrating their 50 year Anniversary
Peter B. Lewis, 1933 - 2013
Why do we care? Hard at work building a great company like PGR,
we believe AIG will once again trade at a premium to its peers
0.0x 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x
AIG
ING
Hartford
CNA
Swiss Re
Prudential
Munich Re
Allstate
Met
Chubb
Travelers
ACE
Allianz
Zurich
Aflac
Sampo
PGR
Generali
Global multi-
line peers
Who they
aspire to be
Where they
are now
AIG's aspiration is to
be the most valuable
insurance company
in the world
If youll indulge, one final thought

We believe it is a good time to buy AIG
With the stock lagging the market, we see an opportunity
AIGs shares have lagged the market on a lack of visibility
and limited sell-side conviction
AIG, 4%
XLF, 6%
SPX, 10%
-8%
-4%
0%
4%
8%
12%
10-13 11-13 01-14 02-14 04-14
AIG XLF SPX
We see three catalysts for the stock as we move through the year
AIG is starting to tell its story again at three conferences this
month aloneand others on the sell side are starting to notice

Against modest expectations, the quarterly report card should
start to beat as their underlying initiatives take hold

With expectations set low, AIG has leverage to beat estimates if
reserves turn from headwind to tailwind, as we expect they will
Visibility
Earnings
Reserves
And finally, we see management succession as a key signal for investors
Well answer with a riddle:

One can think of many CEOs who stay too long,
but how many turnaround CEOs can you think of
who retire before their initiatives inflect?
Why are we so confident that 2014 will be AIGs breakout year?
We believe Benmosches retirement means AIGs turnaround is on
track, and will inflect before he retires at the end of this year
Pulling it all together, we think 2014 will be AIGs breakout year
AIGs operational turnaround should continue, driving
earnings growth and demonstrating progress in 2014.
A lack of visibility has set expectations low, leaving plenty of
room for surprise and positive estimate revisions.
The stock has lagged the market, and is still well below book
and with Benmosche ready for a well-deserved victory lap
before his likely retirement at the year end, we suspect that a
breakout in 2014 was the plan from the very beginning.
AIG
is well
positioned
for a
breakout
year
and any way you cut it, AIGs stock has clear leverage from here
0.0x 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x
AIG
ING
Hartford
CNA
Swiss Re
Prudential
Munich Re
Allstate
Met
Chubb
Travelers
ACE
Allianz
Zurich
Aflac
Sampo
PGR
Generali
Global multi-
line peers
Who they
aspire to be
Where they
are now
AIG's aspiration is to
be the most valuable
insurance company
in the world
Thank you for your time, and coming to the SDC!
AIG Appendix
AIG (Outperform, TP $60)

Looking forward we expect to see
continued earnings momentum
AIG should continue to drive rising earnings
as a result of their turnaround in P&C; and
the company's leverage from fixing
underwriting, claims and managing expenses
should more than offset any headwinds from
the industry's slowing pricing momentum.
With more conservative reserves booked in
recent years, legacy charges are nearing an
end, and, we would not be surprised to see
normalizing loss picks drive earnings.
Rising rates and the recovery of the broader
market are driving a fundamental recovery for
life companies, and AIG's life insurance
business is material to the firmat 50% of
earnings and 40% of capital.
Still at a healthy discount to book, we
expect AIG to continue to recover
Source: FactSet, Bernstein Estimates
0.0x
0.2x
0.4x
0.6x
0.8x
1.0x
1.2x
1.4x
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
AIG SCB Thesis and Bull/Bear Scenarios
Price to Tangible Book Value
Bull Case:
$75, 1.0x '14 TBV
Multiple expands from
operational improvement in core
businesses
Risk spreads come in
Beta for company declines
Target:
$60, 0.8x '14 TBV
Capital management continues
U/W discipline
Continued underlying
improvement in Commericial
Bear Case:
$36, 0.5x '14 TBV
Deteriorating macro
environment, rising rates
Marks to BV from asset leverage
Fed regulation overhang
Significant reserve charges
-32%
13%
42%
AIG Earnings Forecast
Source: Company reports,
Bernstein Research
AIG EARNINGS FORECAST
Fiscal Periods 2011 2012 2013 2014E 2015E 1Q-14 2Q-14E 3Q-14E 4Q-14E
P&C NWP 34,840 34,436 34,388 35,569 37,193 8,334 9,716 9,092 8,427
P&C NEP 35,689 34,873 33,953 34,424 36,391 8,230 8,626 8,725 8,843
Incurred losses 27,949 25,785 22,639 21,574 21,690 5,521 5,291 5,424 5,337
Expenses 10,972 12,088 12,099 11,772 12,137 2,806 2,950 2,987 3,029
Underwriting income (3,232) (3,000) (785) 1,078 2,563 (97) 385 313 476
Net investment income 4,348 4,820 5,267 4,565 4,543 1,256 1,117 1,106 1,086
P&C Operating Income 1,116 1,820 4,482 5,643 7,106 1,159 1,502 1,419 1,563
Premiums 2,549 2,464 2,596 2,570 2,592 597 700 655 618
Policy Fees 2,309 2,349 2,535 2,722 2,988 692 663 676 690
Net Investment Income 9,882 10,718 10,854 10,616 10,623 2,817 2,564 2,611 2,623
Advisory Fees 1,417 1,293 1,709 1,792 1,883 460 415 452 465
Total Revenues 16,157 16,824 17,694 17,700 18,086 4,566 4,342 4,395 4,397
Benefits and expenses 12,880 12,664 12,599 12,899 12,982 3,149 3,220 3,267 3,263
Life & Retirement Operating Income 3,277 4,160 5,095 4,801 5,104 1,417 1,122 1,128 1,134
UGC (Mortgage Guaranty) (95) 9 205 241 280 76 55 55 55
Direct Investment Business (incl ML3) 604 1,215 1,448 1,025 780 440 195 195 195
GCM (11) 557 625 104 100 29 25 25 25
AIA 1,289 2,069 - - - - - - -
Change in fair value of ML III (646) 2,888 - - - - - - -
Parent interest expense (2,001) (1,597) (1,412) (1,300) (1,300) (325) (325) (325) (325)
Parent expenses (267) (882) (1,373) (954) (972) (225) (240) (240) (240)
Parent & Other Operating Income (1,284) 4,259 (507) (680) (710) (5) (290) (192) (192)
Pre-tax earnings ex ML II and AIA 2,466 5,282 9,070 9,764 11,501 2,571 2,334 2,354 2,504
After-Tax Operating Inc Attrib. to AIG 2,086 6,624 6,762 6,816 8,051 1,781 1,634 1,648 1,753
Per Share ($)
Operating EPS - Diluted $1.16 $3.93 $4.56 $4.71 $5.77 $1.21 $1.13 $1.14 $1.22
Common Equity 101,538 98,002 100,470 105,523 107,207 103,833 104,345 104,878 105,523
Book Value Per Share $53.53 $66.38 68.62 $ 73.88 $ 78.79 $ $71.77 $72.21 $73.02 $73.88
AOCI 6,481 12,574 6,360 8,421 7,610
Book Value (ex AOCI) $50.11 57.87 $ $64.28 $67.99 $73.19
DTA 16,084 17,466 21,925 19,473 16,023
Book Value (ex AOCI & DTA) $46.04 49.30 $ 54.35 $ 61.42 $
(27) 1,476 1,464 1,428 1,361
Buybacks $ $70 $13,000 $597 $3,117 $5,000 $867 $750 $750 $750
Buybacks shares 3 421 12 56 73 17 14 13 12
Shares End Period 1,897 1,476 1,464 1,428 1,361 1,447 1,445 1,436 1,428
1,476 1,417 1,385 1,300
Key Ratios - Chartis
AY LR ex Cat Loss & PY Dev 68.5% 65.1% 63.8% 60.3% 58.4% 63.2% 59.9% 59.3% 59.1%
CAT Losses 9.2% 7.6% 2.3% 2.8% 2.2% 3.2% 2.2% 3.6% 2.0%
Prior Year Dev 0.6% 1.3% 1.5% -0.1% -1.0% 1.9% -0.8% -0.8% -0.8%
CY Loss Ratio 78.3% 74.0% 67.6% 63.0% 59.6% 67.1% 61.3% 62.2% 60.4%
Expense Ratio 30.5% 34.7% 34.6% 34.2% 33.4% 34.1% 34.2% 34.2% 34.3%
CY Combined Ratio 108.8% 108.6% 102.2% 97.2% 93.0% 101.2% 95.5% 96.4% 94.6%
Ex. Cat AY CR 99.0% 99.7% 98.4% 94.5% 91.7% 96.1% 94.0% 93.6% 93.4%
ROE (ex AOCI & DTA) 2.2% 8.6% 9.6% 9.1% 10.0% 9.8% 8.9% 8.8% 9.1%
Disclosure Appendix
U.S. Insurance/Nonlife Coverage
Ticker Company Rating Cur
20 May
2014
Closing
Price
Target
Price
TTM
Rel.
Perf.
GAAP P/E
Yield 2013A 2014E 2015E 2013A 2014E 2015E
ACE ACE Ltd M USD 102.67 104.00 1.4% 9.30 8.52 8.65 11.0 12.1 11.9 1.0%
AIG American
International
Group Inc
O USD 52.49 60.00 5.9% 4.56 4.71 5.77 11.5 11.1 9.1 0.8%
ALL Allstate Corp O USD 58.08 60.00 6.0% 5.68 5.25 5.60 10.2 11.1 10.4 1.5%
CB Chubb Corp M USD 92.74 100.00 -8.3% 8.03 7.65 8.50 11.5 12.1 10.9 1.7%
PGR Progressive Corp O USD 25.15 27.00 -12.3% 1.59 1.63 1.69 15.8 15.4 14.9 1.6%
RNR RenaissanceRe
Holdings Ltd
M USD 101.68 94.00 5.2% 14.08 10.62 9.75 7.2 9.6 10.4 1.0%
TRV Travelers Cos Inc M USD 92.67 92.00 -2.1% 9.46 9.60 9.30 9.8 9.7 10.0 1.8%
XL XL Group PLC M USD 32.27 33.00 -12.1% 3.23 3.10 3.50 10.0 10.4 9.2 1.4%
SPX 1872.83 108.66 118.04 131.29 17.2 15.9 14.3 2.0%
O -Outperform, M - Market - Perform, U - Underperform, N - Not Rated
Source: Bloomberg L.P., corporate reports and Bernstein estimates and analysis.
Disclosure Appendix - Valuation Methodology
Our fundamental valuation is based on a blend of both a dividend discount model and a multiples
approach, and in setting our twelve month target prices, we take into account our view of current market
levels, sentiment and recent and historical trading patterns to make our investment recommendations.

Dividend Discount Model and Forward Earnings Analysis
We use a dividend discount model, where we discount cash flows returned to shareholders, via dividends
and share-repurchases. Like all discounted cash flow models, the model's output is highly sensitive to the
discount rate and the calculated terminal value.
We tie our fundamental valuation analyses closely to the market through our calculation of a market
sensitive discount rate. This means if the market appreciates dramatically as risk aversion declines, we'll
adjust our valuations and target prices accordingly. We accomplish this by using near-term, market-
sensitive estimates of beta, the risk-free rate, and a market-implied cost of capital, based on the S&P's
current earnings yield and long-term corporate earnings growth estimates.
Disclosure Appendix - Risks
A major hardening of the commercial lines market, beyond the modest price increases we're currently
seeing, would be a fundamental tailwind for the group, and just as importantly, might lead to dramatic
short-term moves as investors re-position into the sector to enjoy the presumed sustained margin
expansion.

While we expect the macro environment to remain volatile in coming weeks, our concerns regarding
investment risk will become less relevant when investors are feeling bullish and risk-aversion declines,
however, given recent years' volatility, we doubt long term investors will quickly forget downside risk.

Finally, while our proprietary work makes clear several firms' reserve weakness, and our work strongly
suggests it will lead to earnings headwinds in the future, future reserve development is inherently
uncertain, a weakly reserved firm may still enjoy unexpectedly benign losses, and non-life reserving
has always been a 'self-graded exam'.

Of course, we should also note that our firms exist to assume losses from the unexpected, and most of
our firms will be impacted by hurricanes, windstorms, earthquakes and other unpredictable major
insured disasters in the coming years, which, will impact the firms' income, equity and the stocks'
returns.
Disclosure Appendix
SRO REQUIRED DISCLOSURES
References to "Bernstein" relate to Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited, Sanford C. Bernstein (Hong Kong) Limited, and Sanford C. Bernstein (business registration
number 53193989L), a unit of AllianceBernstein (Singapore) Ltd. which is a licensed entity under the Securities and Futures Act and registered with Company Registration No.
199703364C, collectively.
Bernstein analysts are compensated based on aggregate contributions to the research franchise as measured by account penetration, productivity and proactivity of investment ideas. No
analysts are compensated based on performance in, or contributions to, generating investment banking revenues.
Bernstein rates stocks based on forecasts of relative performance for the next 6-12 months versus the S&P 500 for stocks listed on the U.S. and Canadian exchanges, versus the MSCI Pan
Europe Index for stocks listed on the European exchanges (except for Russian companies), versus the MSCI Emerging Markets Index for Russian companies and stocks listed on
emerging markets exchanges outside of the Asia Pacific region, and versus the MSCI Asia Pacific ex-Japan Index for stocks listed on the Asian (ex-Japan) exchanges - unless otherwise
specified. We have three categories of ratings:
Outperform: Stock will outpace the market index by more than 15 pp in the year ahead.
Market-Perform: Stock will perform in line with the market index to within +/-15 pp in the year ahead.
Underperform: Stock will trail the performance of the market index by more than 15 pp in the year ahead.
Not Rated: The stock Rating, Target Price and estimates (if any) have been suspended temporarily.
As of 03/26/2014, Bernstein's ratings were distributed as follows: Outperform - 44.0% (0.4% banking clients) ; Market-Perform - 45.0% (0.4% banking clients); Underperform - 11.0% (0.0%
banking clients); Not Rated - 0.0% (0.0% banking clients). The numbers in parentheses represent the percentage of companies in each category to whom Bernstein provided investment
banking services within the last twelve (12) months.
Josh Stirling maintains a long position in Scottish Re Group Ltd. (SKRUF) and Ram Holdings Ltd. (RAMR).
Accounts over which Bernstein and/or their affiliates exercise investment discretion own more than 1% of the outstanding common stock of the following companies CB / Chubb Corp.
This research publication covers six or more companies. For price chart disclosures, please visit www.bernsteinresearch.com, you can also write to either: Sanford C. Bernstein & Co. LLC,
Director of Compliance, 1345 Avenue of the Americas, New York, N.Y. 10105 or Sanford C. Bernstein Limited, Director of Compli ance, 50 Berkeley Street, London W1J 8SB, United
Kingdom; or Sanford C. Bernstein (Hong Kong) Limited, Director of Compliance, Suites 3206-11, 32/F, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong, or
Sanford C. Bernstein (business registration number 53193989L) , a unit of AllianceBernstein (Singapore) Ltd. which is a licensed entity under the Securities and Futures Act and
registered with Company Registration No. 199703364C, Director of Compliance, 30 Cecil Street, #28-08 Prudential Tower, Singapore 049712.
12-Month Rating History as of 03/26/2014
Ticker Rating Changes
ACE M (RC) 05/01/12
AIG O (RC) 04/04/12
ALL O (IC) 11/08/11
CB M (RC) 05/01/12
PGR O (IC) 11/08/11
RNR M (RC) 07/09/13 O (IC) 11/08/11
TRV M (RC) 05/01/12
XL M (IC) 11/08/11

Rating Guide: O - Outperform, M - Market-Perform, U - Underperform, N - Not Rated
Rating Actions: IC - Initiated Coverage, DC - Dropped Coverage, RC - Rating Change
OTHER DISCLOSURES
A price movement of a security which may be temporary will not necessarily trigger a recommendation change. Bernstein will advise as and when coverage of securities commences and
ceases. Bernstein has no policy or standard as to the frequency of any updates or changes to its coverage policies. Although the definition and application of these methods are based on
generally accepted industry practices and models, please note that there is a range of reasonable variations within these models. The application of models typically depends on forecasts of a
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CERTIFICATIONS
I/(we), Josh Stirling, Senior Analyst(s)/Analyst(s), certify that all of the views expressed in this publication accurately reflect my/(our) personal views about any and all of the subject securities
or issuers and that no part of my/(our) compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views in this publication.

Copyright 2014, Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited, Sanford C. Bernstein (Hong Kong) Limited, and AllianceBernstein (Singapore) Ltd., subsidiaries of
AllianceBernstein L.P. ~1345 Avenue of the Americas ~ NY, NY 10105 ~212/756-4400. All rights reserved.
This publication is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of, or located in any locality, state, country or other jurisdiction where
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We do not undertake to advise you of any change in the reported information or in the opinions herein. This publication was prepared and issued by Bernstein for distribution to eligible
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See Disclosure Appendix of this report for important Disclosures and Analyst Certifications

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