16th annual

BErmuDa InSurancE SurvEy 2010

With
Analysis by

BERMUDA INSURANCE MARKET 2010

2009 Delivers Strong Earnings But Long-Term Performance Still Lags
by lalIne carvalho, dIrector
In a decade marked by sIgnIfIcant operatIng performance volatIlIty, 2009 wIll be remembered as one of the good years for bermuda-based Insurers
and reInsurers. after a stIcky start, the combInatIon of few catastrophe losses and ultImately sIgnIfIcant Investment gaIns led partIcIpants In our
bermuda Insurance survey to report very strong operatIng results wIth an average return on equIty (roe) of 23%, aggregate comprehensIve
Income of $15 bIllIon, and an ImpressIve 37% growth theIr aggregate capItal and surplus. thIs Is In stark comparIson wIth a dIsappoIntIng roe
of -5%, comprehensIve loss of $8 bIllIon, and 16% contractIon In aggregate capItal and surplus reported by these companIes In 2008. whIle the
market’s Improved operatIng performance In 2009 helped bermuda (re)Insurers sIgnIfIcantly boost theIr capItal posItIon and strengthen theIr
balance sheets, It also hIghlIghted the contInued rollercoaster experIenced by these players over the past 10 years.
sImIlar to most global reInsurers and many u.s. prImary property/casualty Insurers, over the past decade bermuda wrIters have endured
sIgnIfIcant losses stemmIng from the soft u.s. casualty cycle of the late 1990s, the september 11 terrorIsm events In 2001, the devastatIon of
hurrIcane katrIna In 2005, and unprecedented Investment losses resultIng from the fInancIal markets crIsIs In 2008, among others. but these
companIes also saw strong operatIng results In a number of years, wIth low catastrophe actIvIty sIgnIfIcantly contrIbutIng to strong operatIng
performance In 2003, 2006, 2007, and 2009. all In all, our surveyed partIcIpants reported a 5-year average roe of 10% from 2005-2009, a
relatIvely low fIgure when rIsk-adjustIng thIs sector’s returns for the Inherent uncertaInty In property/casualty (re)Insurance lInes and the
sIgnIfIcant volatIlIty experIenced by these players on a year-over-year basIs. lookIng out at a longer track record, bermuda (re)Insurers’ f
THE BERMUDA TOP 10
BY CAPITAL AND SURPLUS ($ 000s) BY PREMIUMS EARNED ($ 000s)
1 XL Capital Ltd 9,615,090 1 XL Capital Ltd 5,151,739
2 PartnerRe Ltd. 7,645,727 2 PartnerRe Ltd. 4,119,825
3 AXIS Capital Holdings Limited 5,500,244 3 Catlin Group Limited 2,917,862
4 Arch Capital Group Ltd. 4,323,349 4 Arch Capital Group Ltd. 2,842,745
5 Validus Holdings, Ltd. 4,031,120 5 AXIS Capital Holdings Limited 2,791,764
6 RenaissanceRe Holdings Ltd. 3,840,786 6 Aspen Insurance Holdings Limited 1,823,000
7 Aspen Insurance Holdings Limited 3,305,000 7 Hiscox Ltd. 1,724,020
8 Catlin Group Limited 3,278,051 8 Everest Reinsurance (Bermuda), Ltd. 1,715,254
9 Allied World Assurance Company Holdings, Ltd 3,213,295 9 Endurance Specialty Holdings Ltd. 1,633,192
10 Endurance Specialty Holdings Ltd. 2,787,283 10 Validus Holdings, Ltd. 1,449,577

BY TOTAL ASSETS ($ 000s) BY NET INCOME ($ 000s)

1 XL Capital Ltd 45,579,675 1 PartnerRe Ltd. 1,536,854
2 PartnerRe Ltd. 23,732,544 2 Oil Insurance Limited 1,100,270
3 Arch Capital Group Ltd. 15,375,790 3 Validus Holdings, Ltd. 897,407
4 AXIS Capital Holdings Limited 15,306,524 4 Arch Capital Group Ltd. 851,101
5 Catlin Group Limited 11,681,740 5 RenaissanceRe Holdings Ltd. 838,858
6 Allied World Assurance Company Holdings, Ltd 9,653,153 6 Allied World Assurance Company Holdings, Ltd 606,887
7 Aspen Insurance Holdings Limited 8,257,000 7 Endurance Specialty Holdings Ltd. 536,104
8 RenaissanceRe Holdings Ltd. 7,801,041 8 Catlin Group Limited 508,903
9 Endurance Specialty Holdings Ltd. 7,666,694 9 AXIS Capital Holdings Limited 497,886
10 Max Capital Group Ltd. 7,339,746 10 Aspen Insurance Holdings Limited 474,000

Source: Bermudian Business / Deloitte.

 performance falls even further, with an
estimated 10-year ROE of 9%.
Despite the market’s disappointing long-
term performance, we believe there is
reason for optimism with regard to Bermuda
players’ future earnings streams. One of the
key reasons is the continued investment by
(re)insurers on the island in their enterprise
risk management (ERM) programs to minimize
the impact of future large loss events and
optimize risk adjusted returns. As a result,
a number of Bermuda (re)insurers are, in
our opinion, in the vanguard of embedding
modeling capabilities among property/casualty
(re)insurers around the world. Most have Chief
Risk Officers and have continued to formalize
and expand their ERM programs. Improved
risk aggregation and risk monitoring resulting
from these processes should help these writers
better define their risk appetite and translate
this into risk limits for peak catastrophe zones,
achieve improved portfolio diversification,
and avoid concentrations in any one line
of business, geographic zone, or investment
class. Their more sophisticated emerging risk,
risk-adjusted pricing and capital allocation
techniques should also provide these companies
with tools enabling them to refrain from the
predatory pricing seen in U.S. casualty markets
in the late 1990s. Compensation systems for
many (re)insurers on the island have also been
changed to reward underwriters and senior
management based on long term bottom line
profits, rather than top line growth. Ultimately,
Return on Equity
Oil Insurance Limited
Lancashire Insurance
Company Limited
Oil Casualty Insurance, Ltd.
Validus Holdings, Ltd.
Hiscox Ltd.
Montpelier Re Holdings Ltd.
Amlin Bermuda Ltd.
PartnerRe Ltd.
RenaissanceRe Holdings Ltd.
Catlin Group Limited
0 20
Percentages based on Return on Average Equity
36 Bermudian Business April/May 2010
all these improvements should lead to better
operating results in future years.
Some of the fruits of this effort could already
be seen in 2008, when Bermuda players’
relatively conservative and well diversified
investment portfolios helped them avoid
steeper investment losses during the capital
markets crisis. In addition, efforts to reduce
catastrophe exposure concentrations since
Hurricane Katrina helped these companies post
relatively good underwriting results in 2008
(as seen in our survey participants’ average
combined ratio of 91%) despite significant
industry losses related to U.S. Hurricanes
Ike and Gustav. Bermuda (re)insurers have
also remained prudent in their underwriting
approach, in our view, cutting back exposures
in regions of the world where pricing has been
under greatest pressure. For those players on
the island with significant casualty writings,
such discipline has meant substantially cutting
back their U.S. casualty reinsurance writings
following several years of pricing decline in
that market since 2004.
Despite these positive factors, we believe
Bermuda writers still face significant challenges.
Pricing for property and (to a lesser extent)
casualty reinsurance covers saw increased
pressure during this January 1, 2010 renewal
cycle as a result of the combination of increased
risk appetite by reinsurance players (given their
stronger capital positions) and weaker demand
due to the global economic slowdown and
increased retentions by primary companies.
40 60
% pricing in property and casualty writings in
In addition, after a slowdown in premium rate
declines through most of 2009, pricing erosion
for U.S. property/casualty insurance lines has
picked up again due to similar dynamics of
increased availability of capital and lower
product demand. Given this scenario, we see
limited opportunity for profitable growth both
in insurance and reinsurance during 2010.
Uncertainty with regard to the pace and
shape of recovery for most global economies
in coming months also leaves several questions
unanswered for property/casualty (re)insurance
writers, including how stable the capital
markets (and thus their investment returns)
might be over the next 12-24 months, when
demand for (re)insurance products may pick up
again, and how factors such as unemployment
and potential inflationary pressures may affect
profitability margins. Because of inflation’s
potential to erode casualty insurance and
reinsurance margins by increasing the severity
of losses, we believe that property/casualty
(re)insurers offering casualty covers are at
particular risk of adverse inflationary trends.
For Bermuda players participating in our
survey, this concern is slightly diminished
by the fact that approximately two-thirds of
their aggregate writings consist of property,
property/catastrophe, and other short-tail lines
of business. However, companies on the island
with relatively large casualty portfolios such
as PartnerRe, Everest, XL, Platinum, Harbor
Point, and Arch could face significant margin
compression if future pricing for casualty fails
to keep up with inflationary trends.
Earnings volatility is also expected to remain
a challenge for Bermuda (re)insurers, given the
island’s significant role in providing severity-
driven property/catastrophe and other short-tail
coverages to clients around the world. The first
quarter of 2010 was no exception, with the recent
earthquake in Chile and European Windstorm
Xynthia expected to lead many Bermuda writers
to report only break-even results for the quarter.
For those players with more significant property/
catastrophe books of business and significant
exposure to Chile, their loss could exceed one
quarter’s worth of earnings.
Although these losses are within our
expectations given the size of estimated
industry losses for Chile ($5-$10 billion in
estimated insured losses) and Xynthia ($2-$4
billion), the occurrence of these events so early
in the year places doubt on earnings prospects
for Bermuda writers in 2010, particularly
if the Atlantic hurricane season generates
significant insured losses this fall. Many writers
on the island expect the Chilean earthquake
and Xynthia to use up as much as 50%-
80% of their allocated catastrophe budget
for 2010. This factor, combined with weaker
Copyright © 2010 Bermudian Business / Deloitte.
recent months, is likely to prevent Bermuda Investment Portfolio by %
(re)insurers from seeing their 2010 ROEs
anywhere close to the very strong levels
reported in 2009.
100

2009 In REVIEw – StROnG YEAR OVERALL 90

2009 will surely go on record as the best year
80
for Bermuda (re)insurers over the past decade
if judged by reported GAAP net income of 70
$11 billion and ROE of 23%. The only other
60
year coming close to this figure was 2006,
when our survey participants reported net
%
50
income of $9 billion and ROE of 22.5%.
Due to significant differences in investment 40
accounting methods by Bermuda (re)insurers, 30
however, net income and ROE have become
less accurate guides to underlying earnings 20
since 2008. This is because GAAP net income 10
(the numerator for our GAAP ROE calculation)
includes realized investment gains/losses for 0
all, but only captures unrealized investment 2005 2006 2007 2008 2009
gains/losses for those Bermuda writers that
have chosen to fully adopt fair value guidelines Year
under FAS 159 (about half of our surveyed
Corporate Debt Securities Other
participants). For the other writers, their
unrealized investment losses are not part of net Foreign Government Debt Securities US Government & Government
income but flow as a direct adjustment to these Equities Agency Debt Securities
companies’ shareholders equity (which we Mortgage & Asset Backed Securities
refer to as capital and surplus in this survey).
Given the significant volatility experienced
in the capital markets during 2008 and
net Income, Gross & net Premium written and
2009, Bermuda (re)insurers experienced large
movements in their unrealized investment Capital & Surplus by Incorporation Date
gains/losses during these two years, leading (All amounts in billions of US dollars)
to abnormally different reported net income
30
and ROE figures depending on their chosen
accounting method. For this reason, for the
purposes of 2008 and 2009 calendar years, we
25
view comprehensive income (which normalizes
all surveyed participants by including
unrealized losses for all companies) as a more
20
meaningful measure than net income.
When judging Bermuda’s performance based
on comprehensive income, 2009 comes out $ 15
as an even stronger year with $2 billion in
unrealized investment gains contributing to a
record $15 billion in comprehensive earnings.
This represented a 30% return on surveyed 10
participants’ aggregate capital and surplus at the
beginning of 2009, and was a key contributor
to the extraordinary 37% growth in aggregate 5
capital and surplus during 2009. The strength
of this performance enabled survey participants
as a group to fully recover from their worst 0
year on record in 2008, when aggregate capital 1975 and 1976- 1986- 1991- 1996- 2001- 2006-
and surplus dropped by 16% due to deep prior 1985 1990 1995 2000 2005 Current
realized and unrealized investment losses. Incorporation Date
These companies ended 2009 with aggregate
capital and surplus of $66 billion, significantly net Income
higher than $49 billion at year-end 2008, and Gross Premium written
even higher than the pre-capital market crisis net written Premium
level of $58 billion at year-end 2007.
Capital and Surplus

Copyright © 2010 Bermudian Business / Deloitte. April/May 2010 B er m ud i a n B u s i n e s s 37

 Although large realized and unrealized
investment gains accounted for a significant
portion of earnings in 2009, operating results
were also helped by low catastrophe activity,
good accident year performance and continued
favorable loss reserve development for prior
years (particularly accident years 2002 to
2006). This enabled survey participants to
report what we consider to be a strong
average combined ratio of 73% in 2009,
compared with 84% in 2008. For those
players with shorter-tail, catastrophe-driven
portfolios, combined ratios were even lower.
This included companies such as Montpelier
(with combined ratio of 38% for 2009),
Lancashire (41%), Tokio Millenium (43%),
RenRe (45%), and Amlin Bermuda (58%).
Players with a greater proportion of casualty
and specialty writings (including professional
liability covers) as part of their business mix
also performed well, with most reporting
combined ratios in the mid-80%/low 90%
range. Among them were companies such as
Allied World (with a combined ratio of 76%),
Everest (90% based on the consolidated
group), AXIS (81%), Arch (88%), and
PartnerRe (75%).
Similar to 2008 and in line with other
global reinsurers and U.S. primary companies,
Bermuda (re)insurers reported significant
favorable loss reserve development for prior
years in calendar year 2009. For global
reinsurers and many Bermuda (re)insurers,
these reserve releases have contributed to
reduce 2008 and 2009 calendar-year combined
ratios by between 5% to 20% depending on
the company. We expect moderate reserve
releases to continue into 2010.
While current data suggest that accident
years 2002-2006 were conservatively reserved
by global reinsurers and U.S. primary writers
in their initial years (thus leading to current
reserve releases), we are concerned that the
continued high levels of reserve releases may
weaken these companies’ reserve adequacy
and balance sheets over the next two to three
years. In addition, although global reinsurers
and U.S. primary insurers appear to be well
reserved for potential claims related to the
capital market crisis (particularly in Directors
& Officers and Errors & Omission lines), we
have concerns that loss reserves for accident
years 2007-2009 may not be as robust as those
for 2002-2006 given a number of factors. These
include changes in ultimate loss picks in recent
years to reflect the industry’s more favorable
experience since 2002 (which translates
into lower estimated ultimate loss ratios);
potentially higher than expected losses due to
the capital markets fallout and as a result of the
global economic slowdown; and the potential
that frequency trends and/or inflation could
38 Bermudian Business April/May 2010
Cashflows (All amounts in billions of US dollars)
15
10
5
0
$
(5)
(10)
(15)
(20)
Operating Investing
increase. These factors create the potential for
loss reserve strengthening at some point in
the not too distant future. This concern also
applies to Bermuda (re)insures, since most
of these companies write a combination of
primary and reinsurance covers, and many of
them have significant U.S. risk exposure.
EVER GROwInG COMPAnIES
When looking at the Bermuda (re)insurance
market on a year-over-year basis, one of its
most noticeable features is the fast pace of
growth of companies on the island. Through a
combination of organic growth, capital raising
initiatives, and acquisitions, participants in our
survey have experienced a 5-year compound
growth rate of 83% in their aggregate capital
and surplus from 2005 through 2009. While
at year-end 2005 only 6 out of our 22 survey
participants had more than $2 billion in
capital and surplus, this figure doubled to
12 companies at year-end 2009. Even more
impressive, the number of market participants
with capital and surplus above $3 billion
tripled from 3 at year-end 2005 to 9 at year-
end 2009.
It is also interesting to note that during this
5-year period aggregate premium writings
grew by a much more modest 15%. We
believe this can be explained by a number
of factors. Among them is a more stringent
view of required capital to support property/
catastrophe lines of business by many
Bermuda players following substantial losses
incurred by the market due to U.S. hurricanes
Katrina, Rita, and Wilma (KRW) in 2005.
2005
2006
2007
2008
2009
Financing Total
As a result, many of these writers currently
allocate significantly higher levels of capital to
the same amount of risk today as compared to
prior years. Many Bermuda writers have also
strategically decided to keep significant levels
of excess capital in their companies as a means
of offering higher security to their clients and
as a reflection of their desire to limit the need
to tap the capital markets in the case of a large
catastrophe loss (following KRW a significant
number of Bermuda (re)insurers needed to
tap the capital markets to replenish their
capital position). A number of players on the
island have also engaged into acquisitions in
recent years as a means of broadening their
platform, diversifying their risk profiles, and
just as importantly, achieving a larger capital
base. This reflects the premise by a number of
Bermuda management teams that clients may
prefer to do business with a larger company.
Lastly, premium growth in recent years has
been dampened in part by gradual softening
of premium rates in a number of lines of
business (particularly casualty) since 2004.
This last factor is fairly important because to
the degree that current pricing for property
and casualty (re)insurance covers may not
support profitable growth opportunities over
the near-term, the increased capital position
of most Bermuda players in 2009 has left
many of them with significant excess capital
and limited means of deploying it. This is
already leading many of these writers to look
for ways to return capital to shareholders
either through share repurchases or
special dividends.
Copyright © 2010 Bermudian Business / Deloitte.
tHE tOP 10
XL stood at the top of our ranking this
year as the largest Bermuda (re)insurer based
on 2009 capital and surplus of $9.6 billion
and premiums earned of $5.1 billion. While
maintaining its position as the largest player
for many years, XL has reported some of the
most modest rates of growth in capital among
companies on the island, with capital and
surplus growing by a compound 13% from
2005 through 2009. In addition, XL has seen
a contraction of 32% in reported premiums
earned over the last five years. This is partially
explained by this group’s continued operating
difficulties, with a poor 5 year-ROE of -5%.
This has resulted in significant restructuring of
XL’s operations in recent years.
Although XL’s underwriting performance was
good in 2009 with a combined ratio of 94%,
this group reported the weakest ROE of 1%
among survey participants. This was partially
reflective of XL’s significant restructuring of
its investment portfolio in 2009, following
substantial investment losses in 2008. The
investment portfolio restructuring led to $900
million in realized investment losses in 2009, and
contributed to the group’s modest net income of
$74 million for the year. This represented a
significant improvement, however, compared to
a $2.6 billion loss in 2008.
PartnerRe ranked as the second largest
player in 2009 based on total capital and
surplus of $7.6 billion and based on premiums
earned of $4.1 billion. PartnerRe’s total capital
and surplus increased significantly at year-
end 2009 from $4.2 billion at year-end 2008,
reflective of its acquisition of Swiss-based
reinsurer PARIS RE S.A. in the fourth quarter
of 2009. With the benefit of this acquisition
we estimate that PartnerRe’s net writings could
total Asset Composition
Goodwill & Other Cash & Cash
Intangible Assets
2%
Other Assets
14%
Reinsurance
Balances
Receivable
7%
Other
Investments
5%
Copyright © 2010 Bermudian Business / Deloitte.
be closer to $5.0 billion in 2010. PartnerRe
reported what we consider to be strong
operating results in 2009, ranking #10 based
on ROE of 26%.
AXIS ranked #3 based on total capital and
surplus of $5.5 billion and #5 based on net
premiums earned of $2.8 billion. A consistent
performer, AXIS has achieved an average ROE
of 14% over the past five years. Its capital base
has also grown by a significant 57% from year-
end 2005. AXIS had one of the lowest ROEs
among market participants in 2009 at 10%
(although still good), partially reflecting $312
million in other than temporary investment
losses related to its medium term notes. The
group’s underwriting performance, however,
remained strong, in our view, with an 81%
combined ratio. Arch, which reported just
slightly higher net premiums earned than AXIS
and took the #4 spot based on 2009 premiums,
also ranked #4 based on capital and surplus
of $4.3 billion. Another consistent performer,
Arch ranked #14 based on ROE of 22%.
Validus, which ranked #12 based on total
capital and surplus in our survey last year
jumped to #5 this year following its acquisition
of IPCRe. Validus’ capital base virtually
doubled from $1.9 billion at year-end 2008
to $4.0 billion at year-end 2009. Part of the
Class of 2005 Bermuda formations, Validus
has been successful in establishing itself in
the reinsurance marketplace (particularly in
property/catastrophe and other short-tail lines),
and has significantly expanded and diversified
its platform since 2006. This group’s operating
performance track record has been strong so
far, in our view, with a 4-year average ROE
of 19%. RenRe, one of the longer-standing
and most respected property and property/
catastrophe writers on the island, ranked #6
All Companies Surveyed
Equivalents
7%
Quoted Investments
by Composition
Other
10%
Equities
Quoted 3%
Investments
65%
Mortgage & Asset
Backed Securities
28%
based on total capital and surplus of $3.8
billion, #12 based on premiums earned of $1.3
billion, and #9 based on ROE of 24%.
Not surprisingly for a low catastrophe year, the
Top ROE performers in 2009 were companies
with the greatest proportion of catastrophe-
driven books of business. These players’ very
strong ROEs largely benefited from very strong
underwriting results during 2009, in our
opinion. This included companies such as OIL,
Lancashire, Validus, Hiscox and Montpelier.
OIL and Oil Casualty’s (OCIL) ROEs of 55%
and 32%, respectively, which we consider to
be very strong, placed them as the #1 and
#3 best ROEs in 2009. Their performance
not only reflected strong underwriting results
but also exceptionally large investment gains
related to the recovery in the capital markets.
OIL and OCIL have traditionally held more
aggressive investment portfolios compared
to other Bermuda (re)insurers, with a greater
proportion of their investments allocated to
equities. This contributed to these companies
seeing some of the greatest swings in investment
performance between 2008 and 2009. During
2008 OIL and OCIL suffered deep investment
losses. OIL’s 2008 underwriting results were also
significantly affected by large losses incurred by
its members, with the company reporting the
highest 2008 combined ratio (138%) among
surveyed participants. In a reverse picture from
2009, these players reported the worst ROE
performance in 2008 among survey participants,
with ROE of -39% for OCIL and -66% for OIL.
MARkEt PROFILE
Bermuda writers have broadly embraced a
‘hybrid’ business model under which they
offer both insurance and reinsurance products,
rather than concentrating in just one of these
Selected data
Fiscal 2009
US Government &
Government Agency
Debt Securities
16%
Foreign
Government Debt
Securities
10%
Corporate Debt
Securities
33%
April/May 2010 B er m ud i a n B u s i n e s s 39
segments. Among the few remaining pure Gross Premiums by Line of Business
reinsurers on the island are PartnerRe, Harbor
Point, and Platinum, although Harbor Point
is expected to merge with Max later this year, 100
with the merged group expected to offer a
combination of insurance and reinsurance
products. And among our survey participants 80
OIL is the only 100% direct insurer. All other
survey participants have a more blended profile
between these two segments of the business. 60
The motivation for most management %
teams to offer a combination of insurance
and reinsurance products is the flexibility this 40
business strategy allows to allocate capital
and resources to segments of the market
that offer the best pricing and competitive 20
conditions at the time, thus allowing for
better cycle management and improved risk
and earnings diversification. The challenge 0
we see with this strategy is that insurance
2005 2006 2007 2008 2009
and reinsurance are very different businesses,
with different needs in terms of staffing, local Year
presence, and risk characteristics. Achieving Accident & Health Professional Liability
comparable levels of competence in both is
challenging. We also believe there is potential Excess Liability General Liability
for risk aggregation among different insurance Financial Guarantee Casualty
and reinsurance lines, with the potential for Finite Property
higher than expected losses for companies
improperly capturing such risks. So far we Life Property Catatrophe
believe Bermuda (re)insurers have approached Marine & Aviation Terrorism
this hybrid model prudently, with no adverse Other Workers Compensation
impact on their earnings or operations.
Most have actively moved writings between
their insurance and reinsurance segments Gross Premiums Written by Geographic Region*
depending on their view for profitability in
different markets. In addition, continued 100
improvements in their ERM processes has
increased our confidence in these companies’
ability to manage potential aggregation of 80
risk among their business segments and to
minimize other potential operational hazards
derived from running distinct insurance and 60
reinsurance operations. %
Geographic and line of business diversification
has continued to be a key strategic theme for 40
many Bermuda (re)insurers. Over the last five
years many of these companies have expanded
their platform to encompass a broader range 20
of products. A number have also opened new
offices in parts of Europe, North America and
elsewhere, with the intent of sourcing more local 0
business that typically does not reach Bermuda. 2005
2006
This has included a number of players from the 2007
Class of 2005 formations, which have achieved 2008
2009
improved diversification through a combination North America Year
of organic growth, acquisitions, and the entrance
Europe
into the Lloyd’s market. This partially explains
the decline in the proportion of aggregate gross UK * At 2009, the above graph represents 91% of
writings among survey participants sourced Rest of World the gross premium written of all participants,
as not all participants reported this data.
directly out of Bermuda, which stood at 10% Bermuda
in 2009 compared to 16% in 2005. Market Asia, Australia & New Zealand
participants have also seen an increase in gross

40 Bermudian Business April/May 2010 Copyright © 2010 Bermudian Business / Deloitte.

 net Premiums written to Capital & Surplus
(All amounts in billions of US dollars)
70
60
50
40
30
$ to incorporate this risk into their pricing and
20
10
0
2005
2006
2007
Capital & Surplus
net Premiums written Year
writings sourced from the UK and continental
Europe (35% in 2009 versus 28% in 2005) as
well as Asia, Latin America and other emerging
regions (11% in 2009 versus 4% in 2005).
Similar to prior years, North America remains
the largest source of premium production for
Bermuda, representing 50% of aggregate gross
premiums in 2009.
Another feature to note among Bermuda
writers this year is the increasing conservatism
in their investment portfolios. While most
already held fairly conservative investment
portfolios prior to 2008, appetite for
investment volatility among those players that
strategically took more risk on the portfolio
appears to have declined. Recognizing
that conditions in the capital markets have
improved from a year ago but are still not
back to normal, management teams on the
island have also continued to place significant
emphasis on their liquidity position. This
has led many of these players to increase the
amount of cash and short term investments
as a proportion of their holdings over the
last two years. Many have also curtailed their
equity and alternative investment (which
declined to 12% of surveyed participants’
aggregate investment portfolio in 2009 versus
15% in 2007). Most companies have also
focused on maintaining a fairly short duration
in their investment portfolios (with many with
duration around 2.0-2.5 years) as a means of
protecting it from potential gyrations in credit
spreads and future inflationary pressures. We
expect this conservative investment posture
to remain in place among Bermuda writers at
least over the next 12-18 months.
Copyright © 2010 Bermudian Business / Deloitte.
2008
2009
tHE nEVER EnDInG PRICInG CYCLE
Our survey participants ranked ‘renewal
pricing rates’ and ‘growing market share versus
profitability’ as either #1 or #2 among their
management teams’ key strategic concerns
over the near term. This is not surprising,
considering increased pressure on property
and casualty pricing seen in global reinsurance
and U.S. commercial lines in recent months.
So far it is unclear whether the Chilean
earthquake and Windstorm Xynthia will have
any meaningful impact on pricing trends for
property/catastrophe risks on the June 1 and
July 1 reinsurance renewal season. During the
January 1 2010 reinsurance renewal season
pricing for US property/catastrophe risks fell
about 5%-10%, while Europe was about flat to
down 5%.
While we believe property/catastrophe risks
are still offering higher returns than casualty
reinsurance at this stage, the downward trend
in pricing in this line could significantly
erode risk-adjusted returns in this segment if
it continues for a protracted period of time.
Beyond the recent catastrophe events, it is
unclear how global warming and expected
changes in weather patterns might affect the
frequency and severity of natural catastrophe
events in coming years. With a significant
proportion of their business consisting of
property/catastrophe writings, this concern is
directly relevant to writers on the island.
We also believe U.S. casualty insurance and
reinsurance pricing, which has been under
continued pricing pressure since 2004, could
present challenges for writers in Bermuda.
While the decline in U.S. casualty insurance
and reinsurance rates has been partially driven
by lower frequency of losses for most casualty
lines over the last five years, there is significant
divergence of opinion among insurers and
reinsurers as to how much credit to provide in
the pricing of the business for such favorable
trends, and whether these trends will continue
into the future (most market players currently
believe this trend is unsustainable). There is also
significant uncertainty as to whether inflation
will creep up over the next three to five years,
with management teams left to figure out how
claims estimates. Further raising the stakes in
casualty underwriting is the fact that current
market conditions will make it very difficult
for reinsurers to make up for underwriting
losses through earnings in their investment
portfolios. This reflects the expectation of
lower investment returns in coming years
as a result of more conservative investment
portfolios and relatively low interest rates. We
believe premium rate adequacy is particularly
tenuous in casualty reinsurance, where further
weakening in premium rates and/or terms and
conditions could easily tip the scale toward
unprofitable underwriting.
REtURnInG ExCESS CAPItAL
With the return to a significant excess capital
position at year-end 2009, many Bermuda
(re)insurers have started returning capital to
shareholders either through stock buybacks
or special shareholder dividends. Given
the relatively weak pricing conditions for
insurance and reinsurance risks and limited
potential for growth at the moment, we believe
such measure is prudent as long as companies
are able to balance the need to reduce excess
capital with the risk of needing to reload in the
capital markets if a major catastrophe event
occurs.
We believe that the majority of Bermuda
(re)insurers rated by Standard & Poor’s entered
2010 with capital adequacy levels in the ‘AA’ to
‘AAA’ range, according to our capital adequacy
model. To the extent that most Bermuda
writers plan to return capital in 2010 that is
either commensurate with, or lower than their
expected earnings for the year, this should
enable these companies to still end 2010 with
very strong capital adequacy. Significant losses
from the Chilean earthquake and Windstorm
Xynthia, however, may change management
teams’ appetite to return capital this year or at
least until the Atlantic hurricane season is over
and a better picture of 2010 earnings emerges.
Increased merger and acquisition activity is
also a likely outcome of Bermuda (re)insurers’
strengthened capital position and limited
growth opportunities over the near term. Over
the past year the market already saw Validus’
April/May 2010 B er m ud i a n B u s i n e s s 41
acquisition of IPCRe, PartnerRe’s acquisition composition of net Premiums earned
of PARIS RE, and the recent announcement (all amounts in billions of uS dollars)
by Harbor Point and Max on their intention
to merge. We believe Class of 2005 reinsurers 30
are among the most likely players to entertain
M&A activity in coming months, given 25
their relatively narrow line of business focus
(primarily property and other short-tail lines) 20
and their desire to further diversify their
business profile. While many of the right 15
elements seem to be in place to foster mergers
and acquisitions among (re)insurance players 10
$
over the next 1-2 years (including improved
liquidity in the capital markets), there are some 5
deterrents to more significant M&A activity. An
important one is the continued low valuation of 0
the stock of most publicly traded (re)insurers
on the island, which could make valuation (5)
discussions among interested parties difficult.
As of year-end 2009, most publicly traded (10)
companies participating in our survey had their
stock trading at 70%-85% of book value.
2005
Bermuda domicile under threat? 2006
Between 2001 and 2005 Bermuda’s significance
in the global (re)insurance markets increased 2007
significantly. In that period the island 2008
witnessed a flurry of formation activity. This Year
appeared to solidify Bermuda’s position as underwriting Profit/loss 2009
(re)insurers’ domicile of choice. As we look underwriting expenses
at 2010 and beyond, however, management
teams of many global (re)insurers seem to be losses & lae
looking at other locations around the world
as potentially attractive domiciles. Several
European countries in particular (such as
Ireland and Switzerland) appear to be gaining
Stock Prices over 2009/2010
90
allied World assurance company
holdings, ltd

80 arch capital Group ltd.

argo Group ltd.

70 aspen insurance holdings ltd.

aXiS capital holdings limited

60 catlin Group limited

endurance Specialty holdings ltd.

50 Flagstone reinsurance holdings limited

$ hiscox ltd.

40 max capital Group ltd.

montpelier re holdings ltd.

30 Partnerre ltd.

renaissancere holdings ltd.

20 Validus holdings, ltd.

Xl capital ltd.

10 Standard & Poor’s 500 insurance

index (1:10)

0
Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

2008 2009 month 2010

42 Bermudian Business April/May 2010 Copyright © 2010 Bermudian Business / Deloitte.

momentum given their proximity to the All Companies Surveyed (All amounts in billions of US dollars)
European markets, a talented workforce, and
favorable tax treaties with the U.S.
Of particular concern to (re)insurers
currently is potential tax changes that could be 70
enacted by President Obama’s administration
that could change the tax treatment of US- 60
sourced business going to Bermuda and
other low tax domiciles. With one of the 50
key operating advantages for (re)insurers
operating in Bermuda consisting of its tax-
40
free status, the prospect of taxation for US
business would have significant implications. $ 30
In addition, planned regulatory changes in 20
Europe related to Solvency II is viewed
by some (re)insurance management teams 10
as potentially offering a more stable and
sophisticated regulatory environment, even 0
though the Bermuda Monetary Authority
(BMA) has been aggressive in introducing (10)
enhancements to its oversight of Bermuda
(re)insurers to keep up with Solvency II 2005 2006 2007 2008
expectations. Given these factors, discussion 2009
among (re)insurers on the island about pros
and cons of a potential redomestication Year
of their companies to other domiciles has
become a more frequent topic over recent Net Income Premiums Earned
years. To-date, however, few companies have Losses & LAE Total Capital & Surplus
moved from Bermuda although over the
(continued on page 50)

PUBLICLY-TRADED COMPANIES
Selected data Fully diluted
Fiscal 2009 Stock Common Stock Price 52 Week High/Low Book value per Market/book Basic earning earnings per
Exchange (as of Dec. 31) ($) (Jan. 1 - Dec. 31) ($) P/E Ratios common share ($) value ratio ($) per share ($) share ($)
Symbol Curr Prior Curr Prior Curr Prior Curr Prior Curr Prior Curr Prior Curr Prior
Allied World Assurance
Company Holdings, Ltd
AWH 46.07 40.60 48.74/33.00 49.72/22.46 3.76 10.83 64.61 49.29 0.71 0.82 12.26 3.75 11.67 3.59
Arch Capital Group Ltd. ACGL 71.55 70.10 72.25/44.68 75.31/54.80 5.21 17.14 73.01 51.36 0.98 1.28 13.74 4.09 13.74 4.09
Argo Group Ltd. AGII 29.14 33.92 36.66/25.33 41.44/25.84 7.63 16.55 52.37 44.18 0.56 0.77 3.82 2.05 3.81 2.05
Aspen Insurance Holdings Limited AHL & AHL BH 25.45 24.25 28.44/18.46 29.90/14.33 4.37 26.35 35.43 28.95 0.72 0.84 5.82 0.92 5.64 0.89
AXIS Capital Holdings Limited AXS 28.41 29.12 31.46/17.92 41.81/17.27 8.46 11.65 37.84 29.08 0.75 1.00 3.36 2.50 3.07 2.26
Catlin Group Limited (1) CGL 3.40 4.34 £4.49/2.83 £4.54/2.66 3.61 n/m 7.68 6.61 1.00 1.00 1.52 -0.16 1.47 -0.16
Endurance Specialty Holdings Ltd. ENH 37.23 30.53 38.44/19.71 42.22/20.0 4.30 23.30 47.74 35.76 0.78 0.85 9.14 1.41 8.69 1.31
Flagstone Reinsurance Holdings Limited FSR ^ ^ 12.45/7.24 14.26/7.26 ^ ^ 14.37 11.53 ^ ^ 2.87 -2.20 2.87 -2.20
Hiscox Ltd. (3) HSX.L 3.17 3.40 £3.64/2.73 £3.61/1.92 4.22 18.09 4.81 3.72 1.06 1.32 1.18 0.35 1.14 0.33
Max Capital Group Ltd. MXGL 22.30 17.70 23.69/13.00 30.27/09.96 5.16 n/m 28.01 22.94 0.80 1.08 4.32 -3.10 4.26 -3.10
Montpelier Re Holdings Ltd. MRH 17.32 16.79 17.95/10.55 17.94/10.13 3.23 n/m 21.08 15.88 0.82 1.06 5.36 -1.69 5.36 -1.69
PartnerRe Ltd. (4) PRE 74.66 71.27 80.99/54.65 82.23/48.48 3.12 n/m 84.51 63.95 0.88 1.11 23.93 0.22 23.51 0.22
RenaissanceRe Holdings Ltd. RNR 53.15 51.56 57.37/39.37 59.27/35.16 3.94 n/m 51.68 38.74 1.03 1.33 13.50 -0.21 13.40 -0.21
Validus Holdings, Ltd. VR 26.94 26.16 27.24/20.93 26.22/14.84 2.83 42.19 31.38 25.64 0.86 1.02 9.51 0.62 9.24 0.61
XL Capital Ltd XL 18.33 3.70 18.95/2.67 51.48/2.68 6.77 1.06 24.60 15.46 0.75 0.24 0.61 -10.94 0.61 -10.94

(1) Catlin Group Limited stock price denominated in GBP but reports in USD.
(2) P/E ratio with n/m - due to the net loss attributable to common shareholders per common share for the year ended December 31, 2008, the P/E ratio is not meaningful.
(3) Hiscox Ltd.'s common stock price and 52 week high/low are denominated in GBP; all other amounts shown in USD.
(4) PartnerRe Ltd. P/E ratio based on fully diluted earnings per share.
^ Information not provided by respondent

Copyright © 2010 Bermudian Business / Deloitte. April/May 2010 B er m ud i a n B u s i n e s s 43

 16TH ANNUAL BERMUDIAN BUSINESS
(All amounts in U.S. $ 000s)
Fiscal 2009

Basis of Capital & Surplus Insurance

S&P’s Rating (1) S&P’s Outlook accounting for Current Prior Premiums Net Income Regulation Date of
(3) survey response Current
as of 15 March 10 2009 Period End Earned Current Class Incorporation

Allied World Assurance Company Holdings, Ltd A- Stable 12/31/09 US GAAP 3,213,295 2,416,862 1,316,892 606,887 Class 4 11/13/01
Amlin Bermuda Ltd. A Stable 12/31/09 UK GAAP 1,580,570 1,389,485 582,743 390,971 Class 4 10/28/05
Arch Capital Group Ltd. A Positive 12/31/09 US GAAP 4,323,349 3,432,965 2,842,745 851,101 Class 4 3/1/95
Argo Group Ltd (4) A- Stable 12/31/09 US GAAP 1,614,900 1,352,900 1,414,900 117,500 Class 4 10/5/99
Aspen Insurance Holdings Limited A Stable 12/31/09 US GAAP 3,305,000 2,779,000 1,823,000 474,000 Class 4 5/23/02
AXIS Capital Holdings Limited A+ Stable 12/31/09 US GAAP 5,500,244 4,461,041 2,791,764 497,886 Class 4 11/8/01
Catlin Group Limited A Stable 12/31/09 US GAAP 3,278,051 2,469,235 2,917,862 508,903 Class 4 6/25/99
Endurance Specialty Holdings Ltd. A Stable 12/31/09 US GAAP 2,787,283 2,207,283 1,633,192 536,104 Class 4 11/30/01
Everest Reinsurance (Bermuda), Ltd. (2) A+ Stable 12/31/09 Bermuda Statutory 2,572,527 2,095,152 1,715,254 441,748 Class 4 3/1/00
Flagstone Reinsurance Holdings Limited NR - 12/31/09 US GAAP 1,211,018 986,013 758,455 242,192 Class 4 11/10/05
Harbor Point Limited A- Stable 12/31/09 US GAAP 1,889,700 1,691,472 548,450 250,126 Class 4 10/24/05
Hiscox Ltd. A Stable 12/31/09 Other 1,805,270 1,369,477 1,724,020 440,380 Class 4 12/12/06
Lancashire Insurance Company Limited NR - 12/31/09 Other 1,268,100 1,138,800 538,300 389,500 Class 4 10/28/05
Max Capital Group Ltd. A- Stable 12/31/09 US GAAP 1,564,633 1,280,331 834,356 246,215 Class 4 8/20/99
Montpelier Re Holdings Ltd. A- Stable 12/31/09 US GAAP 1,728,500 1,357,600 573,200 463,500 Class 4 11/14/01
Oil Casualty Insurance, Ltd. BBB+ Stable 11/30/09 US GAAP 450,785 326,174 15,875 124,616 Class 3 5/14/86
Oil Insurance Limited A- Stable 12/31/09 US GAAP 2,481,884 1,471,395 891,115 1,100,270 Class 2 12/14/71
PartnerRe Ltd. AA- Negative 12/31/09 US GAAP 7,645,727 4,199,108 4,119,825 1,536,854 Class 4 8/24/93
RenaissanceRe Holdings Ltd. AA- Stable 12/31/09 US GAAP 3,840,786 3,032,743 1,273,816 838,858 n/a 6/7/93
Tokio Millennium Re Ltd. AA Negative 12/31/09 US GAAP 1,241,504 1,054,014 356,686 200,522 Class 3B 3/15/00
Validus Holdings, Ltd. NR - 12/31/09 US GAAP 4,031,120 1,938,734 1,449,577 897,407 Class 4 10/19/05
XL Capital Ltd A Negative 12/31/09 US GAAP 9,615,090 6,616,831 5,151,739 74,991 Class 4 3/16/98
66,949,336 49,066,615 35,273,766 11,230,531

(1) All the ratings in this table are financial strength ratings of the lead rated operating companies with each group as of March 15, 2010.
(2) All Everest Reinsurance (Bermuda) Ltd.'s financial information provided in this survey is unaudited.
(3) Outlooks can be positive, negative, or stable, and signal a potential change in an interactive rating over the next 2-3 years.
(4) For Argo Group Ltd., ratings refer to the financial strength ratings on the lead companies in Argo Group U.S.

NR - Not Rated by Standard & Poor's.

^ Information not provided by respondent.
^^ Geographic breakdown represents those companies which provided this information.

44 Bermudian Business April/May 2010 Copyright © 2010 Bermudian Business / Deloitte.

 and DELOITTE INSURANCE SURVEY
Type of Insurance Line of Business as Gross Premiums Written by
as % of Premiums % of Premiums Geographic Area ^^

th

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ity
tro

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ity

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ent

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ud
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Lia al
via

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anc

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ess

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ner

rke

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Lia

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Pro
Ma

Exc
Pro

r
Direct Reinsurance
Fin

Pro

Oth
Ca

UK
Wo
Ge

Be
Ac

As
Lif

Eu
No
Ter

Re
73% 27% - - - 14% - 21% 30% 7% - - - - 27% - 55% 11% - 34% -
- 100% 2% - - 21% 37% - - - - - - - 40% 47% 41% 5% 6% - 1%
70% 30% 2% - 2% 31% 7% 13% 12% - - 6% - 1% 26% - 72% 17% 4% 5% 2%
^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^
49% 51% 17% - - 30% 13% 2% 4% 2% 23% - - - 9% 6% 77% 4% 4% - 9%
49% 51% 8% - - 24% 13% 28% - 14% - - - 1% 12% - 48% 29% - 23% -
70% 30% 23% - 3% 18% 21% 10% - 12% 3% - - 4% 6% 63% 17% 5% 4% 11% -
46% 54% 2% 2% - 17% 15% 10% 12% - 13% 1% - - 28% 1% 67% 1% 1% 30% -
- 100% 3% - 2% 49% - 5% 13% 20% 4% 4% - - - 17% 67% 12% - 4% -
9% 91% - - - 20% 47% - - - - - - - 33% - 40% 12% 6% - 42%
- 100% 7% - - 14% 27% 27% 2% 19% - 2% - - 2% 17% 65% 5% 1% 12% -
69% 31% 7% - 2% 22% 4% 16% - - - - - 3% 46% 20% 34% 13% 1% - 32%
72% 28% 20% - - 44% 26% - - - - - - 10% - - 45% 6% 4% - 45%
57% 43% 14% - 2% 25% - 20% 8% - 9% 6% 3% - 13% - 79% 21% - - -
12% 88% - - - 15% 47% - - - - - - - 38% 4% 56% 6% 4% - 30%
95% 5% - - - - - - 100% - - - - - - ^ ^ ^ ^ ^ ^
100% - - - - 100% - - - - - - - - - ^ ^ ^ ^ ^ ^
- 100% 10% - - 17% 10% - - - 12% - 15% - 36% - 41% 41% 8% - 10%
28% 72% - - - 10% 63% - - - - - - - 27% - 85% 3% 2% - 10%
- 100% 2% - - - 80% - - - - 5% - 2% 11% - - - - 100% -
28% 72% 36% - 1% 16% 24% - - - - 1% - 2% 20% - 26% 7% 2% - 65%
66% 34% 11% - - 23% 5% 24% - - - - 9% - 28% - 45% 43% - 12% -

Copyright © 2010 Bermudian Business / Deloitte. April/May 2010 B er m ud i a n B u s i n e s s 45

 BALANCE SHEET
(All amounts in U.S. $ 000s)

assets

Reinsurance Goodwill and

Cash & Cash Balances Other Intangible Unearned Premium
Equivalents Quoted Investments Other Investments Receivable Other Assets Assets Total Assets Loss Reserves Reserve

Allied World Assurance Company Holdings, Ltd 379,751 6,971,394 184,869 1,106,601 681,803 328,735 9,653,153 4,761,772 928,619
Amlin Bermuda Ltd. 14,767 1,261,903 582,134 229,489 213,978 - 2,302,271 386,044 297,758
Arch Capital Group Ltd. 334,571 10,759,855 109,026 1,720,270 2,427,896 24,172 15,375,790 7,873,412 1,433,331
Argo Group Ltd 18,100 4,237,300 97,000 1,379,400 916,300 248,700 6,896,800 3,203,200 803,600
Aspen Insurance Holdings Limited 748,000 5,970,000 27,000 794,000 710,000 8,000 8,257,000 3,331,000 908,000
AXIS Capital Holdings Limited 864,054 10,051,828 570,276 1,292,877 2,435,984 91,505 15,306,524 6,564,133 2,209,397
Catlin Group Limited 2,499,655 5,193,237 - 1,441,234 1,829,436 718,178 11,681,740 5,392,283 1,723,971
Endurance Specialty Holdings Ltd. 528,944 5,094,319 351,352 565,348 935,281 191,450 7,666,694 3,157,026 832,561
Everest Reinsurance (Bermuda), Ltd. (1) 351,664 5,580,381 155,736 543,241 364,662 - 6,995,684 3,669,263 541,531
Flagstone Reinsurance Holdings Limited 438,101 1,461,285 45,934 278,956 290,169 52,323 2,566,768 480,660 330,416
Harbor Point Limited 360,530 2,079,501 144,951 242,363 138,141 257,929 3,223,415 707,840 374,491
Hiscox Ltd. (2) 418,032 3,885,413 11,782 676,403 1,073,238 81,165 6,146,033 2,494,410 922,575
Lancashire Insurance Company Limited 128,300 1,651,700 11,000 1,000 214,300 - 2,006,300 411,800 255,400
Max Capital Group Ltd. 702,278 4,241,999 314,849 567,301 1,464,633 48,686 7,339,746 4,550,607 628,161
Montpelier Re Holdings Ltd. 202,100 2,374,700 94,100 288,900 137,800 4,700 3,102,300 680,800 215,400
Oil Casualty Insurance, Ltd. 50,241 677,882 - 281,300 51,678 - 1,061,101 343,000 20,123
Oil Insurance Limited 488,385 5,165,385 - - 353,260 - 6,007,030 3,331,281
PartnerRe Ltd. 738,309 15,075,978 2,350,358 2,249,181 2,615,916 702,802 23,732,544 12,426,676 1,706,816
RenaissanceRe Holdings Ltd. (3) 260,716 4,295,792 1,957,619 589,827 620,399 76,688 7,801,041 1,702,006 446,649
Tokio Millennium Re Ltd. 81,981 991,791 181,889 104,622 135,791 5,130 1,501,204 84,412 102,797
Validus Holdings, Ltd. 387,585 5,351,144 37,615 196,547 902,801 143,448 7,019,140 1,622,134 724,104
XL Capital Ltd 3,643,697 29,307,171 2,514,860 374,844 8,893,974 845,129 45,579,675 20,823,524 3,651,310
13,639,761 131,679,958 9,742,350 14,923,704 27,407,440 3,828,740 201,221,953 87,997,283 19,057,010

(1) All Everest Reinsurance (Bermuda) Ltd's financial information provided in this survey is unaudited.
(2) Hiscox Ltd. balance sheet amounts were translated from GBP to USD using the year end closing rate of $1.61.
(3) Included in other liabilities is $786.6 million related to RenaissanceRe Holdings Ltd.'s redeemable noncontrolling interest in DaVinciRe Holdings Ltd.

46 Bermudian Business April/May 2010 Copyright © 2010 Bermudian Business / Deloitte.

 DATA, FISCAL 2009
L I A B I L I T I E S A N D C A P I TA L & S U R P L U S

Additional Paid Unrealised Investment Total Capital & Total Liabilities and
Debt Other Liabilities Total Liabilities Common Stock Preferred Stock in Capital Retained Earnings Gains (Losses) Other Surplus Capital & Surplus

498,919 250,548 6,439,858 1,492 - 1,359,934 1,702,020 149,849 - 3,213,295 9,653,153

- 37,899 721,701 1,000 - 1,000,765 578,692 - 113 1,580,570 2,302,271
400,000 1,345,698 11,052,441 548 130 578,336 3,605,809 138,526 - 4,323,349 15,375,790
380,600 894,500 5,281,900 31,000 - 702,400 779,200 107,400 (5,100) 1,614,900 6,896,800
250,000 463,000 4,952,000 - - 1,763,000 1,285,000 155,000 102,000 3,305,000 8,257,000
499,476 533,274 9,806,280 1,903 500,000 2,014,815 3,569,411 85,633 (671,518) 5,500,244 15,306,524
- 1,287,435 8,403,689 3,589 589,785 1,937,661 997,547 (250,531) 3,278,051 11,681,740
447,664 442,160 4,879,411 55,116 8,000 929,577 1,742,442 38,247 13,901 2,787,283 7,666,694
- 212,363 4,423,157 1,250 - 1,326,453 1,090,670 236,130 (81,976) 2,572,527 6,995,684
252,402 292,272 1,355,750 850 (20) 892,817 324,347 - (6,976) 1,211,018 2,566,768
200,000 51,384 1,333,715 16,039 - 1,651,355 222,306 - 1,889,700 3,223,415
223,048 700,730 4,340,763 32,454 - 507,627 1,204,447 - 60,742 1,805,270 6,146,033
- 71,000 738,200 1,000 - 281,500 29,000 956,600 1,268,100 2,006,300
90,464 505,881 5,775,113 55,867 - 752,309 731,026 25,431 - 1,564,633 7,339,746
331,700 145,900 1,373,800 100 - 1,541,200 222,400 (2,900) (32,300) 1,728,500 3,102,300
200,000 47,193 610,316 300 - 450,485 - - 450,785 1,061,101
- 193,865 3,525,146 560 474,625 2,006,699 - - 2,481,884 6,007,030
450,000 1,503,325 16,086,817 82,586 20,800 3,357,004 4,100,782 - 84,555 7,645,727 23,732,544
300,000 1,511,600 3,960,255 61,745 650,000 3,087,603 41,438 - 3,840,786 7,801,041
- 72,491 259,700 250,000 - 400,000 569,687 21,817 - 1,241,504 1,501,204
289,800 351,982 2,988,020 22,480 - 2,675,680 1,337,811 - (4,851) 4,031,120 7,019,140
2,451,417 9,038,334 35,964,585 3,421 10 10,502,981 94,460 (1,187,559) 201,777 9,615,090 45,579,675
7,265,490 19,952,834 134,272,617 623,300 2,243,330 33,893,914 29,984,344 (161,988) 366,436 66,949,336 201,221,953

Copyright © 2010 Bermudian Business / Deloitte. April/May 2010 B er m ud i a n B u s i n e s s 47

 OPERATING DATA,
(All amounts in U.S. $ 000s)

% change from
ratio
prior period
(xx to 1)

Net
Premiums Loss
Written to Reserve to Net Gross
Loss Ratio (1) Expense Ratio (1) Combined Ratio (1)
Capital & Capital & Capital & Premiums Loss Ratio (6) Premiums Ceded
Current Prior Current Prior Current Prior Surplus Surplus Surplus Written (5 year average) Written Premiums

Allied World Assurance Company Holdings, Ltd 45.87% 57.40% 30.18% 26.78% 76.05% 84.18% 41.11% 148.19% 32.95% 19.32% 65.57% 1,696,345 (375,220)
Amlin Bermuda Ltd. 37.30% 65.09% 20.16% 34.37% 57.46% 99.46% 39.37% 24.42% 13.75% 13.37% 44.24% 628,330 (6,025)
Arch Capital Group Ltd. 58.21% 64.97% 29.97% 29.98% 88.18% 94.95% 63.91% 182.11% 25.94% -1.52% 60.85% 3,592,931 (829,819)
Argo Group Ltd (4) 60.29% 64.32% 36.60% 36.12% 96.90% 100.43% 88.02% 198.35% 19.37% 23.49% 61.25% 1,988,900 (567,500)
Aspen Insurance Holdings Limited (3) 52.00% 65.80% 32.14% 29.79% 84.15% 95.59% 55.58% 100.79% 18.93% 0.05% 62.02% 2,067,000 (230,000)
AXIS Capital Holdings Limited 51.00% 63.74% 30.21% 24.85% 81.21% 88.59% 51.21% 119.34% 23.30% 5.61% 59.31% 3,587,295 (770,866)
Catlin Group Limited 57.60% 62.90% 31.50% 32.00% 89.10% 94.90% 96.65% 164.50% 32.76% 21.32% 57.03% 3,715,493 (547,207)
Endurance Specialty Holdings Ltd. 53.06% 64.28% 30.69% 29.45% 83.75% 93.73% 57.62% 113.27% 26.28% -9.99% 62.58% 2,021,450 (415,400)
Everest Reinsurance (Bermuda), Ltd. (9) 60.61% 67.18% 29.37% 21.03% 89.98% 88.21% 68.12% 142.63% 22.78% -24.56% 68.17% 1,979,152 (226,835)
Flagstone Reinsurance Holdings Limited 37.34% 58.07% 37.39% 31.30% 74.73% 89.37% 65.44% 39.69% 22.82% 14.07% 42.39% 988,491 (196,022)
Harbor Point Limited 44.32% 69.95% 36.29% 29.28% 80.61% 99.23% 31.85% 37.46% 11.72% 18.76% 52.08% 607,520 (5,647)
Hiscox Ltd. (5) (11) (12) 41.80% 52.70% 44.20% 22.60% 86.00% 75.30% 100.62% 138.17% 31.82% 9.30% 49.20% 2,253,580 (437,054)
Lancashire Insurance Company Limited 15.36% 60.40% 25.12% 22.44% 40.48% 82.83% 40.55% 32.47% 11.35% 0.12% 31.05% 526,200 (12,000)
Max Capital Group Ltd. (10) 71.28% 85.47% 25.59% 23.32% 96.87% 108.79% 57.17% 290.84% 22.21% 6.46% 83.73% 1,375,001 (480,481)
Montpelier Re Holdings Ltd. 24.20% 55.84% 14.04% 15.88% 38.24% 71.71% 34.84% 39.39% 27.32% 11.27% 74.25% 634,900 (32,700)
Oil Casualty Insurance, Ltd. -17.05% -114.73% 3.91% 8.11% -13.14% -106.62% 4.40% 76.09% 38.20% 175.34% 202.77% 49,028 (29,198)
Oil Insurance Limited 58.21% 134.94% 1.56% 1.06% 59.77% 136.00% 35.90% 134.22% 68.68% 24.01% 90.11% 891,115 -
PartnerRe Ltd. (7) 52.70% 63.90% 21.90% 23.30% 74.60% 87.20% 51.65% 162.53% 82.08% -1.02% 63.82% 4,000,888 (52,184)
RenaissanceRe Holdings Ltd. 15.49% 54.84% 29.79% 24.21% 45.28% 79.04% 31.41% 44.31% 26.64% -10.88% 50.15% 1,728,932 (522,535)
Tokio Millennium Re Ltd. 5.83% 19.72% 37.47% 37.46% 43.30% 57.18% 29.04% 6.80% 17.79% 13.29% 23.12% 417,622 (57,044)
Validus Holdings, Ltd. 36.13% 61.45% 32.81% 30.72% 68.94% 92.17% 34.44% 40.24% 107.93% 12.12% 43.18% 1,621,241 (232,883)
XL Capital Ltd (8) 61.51% 66.16% 32.14% 28.79% 93.65% 94.94% 49.34% 216.57% 45.31% -17.33% 72.25% 6,111,311 (1,367,599)
42,482,725 (7,394,219)

(1) Loss, expense & combined ratio only for non-life business. (5) Hiscox Ltd.'s return on equity is calculated based on adjusted opening equity which takes
(2) Return on Equity = Net Income / Average of CY Capital & Surplus and PY Capital into consideration the weighted average of capital from share option exercises less weighted
& Surplus. average payment of capital to shareholders by dividend and treasury stock.
(3) Aspen Insurance Holdings Ltd.'s return on equity is calculated based on net income adjusted (6) Loss ratio (5 year average) = sum of loss and LAE (five years) / sum of premiums earned (5
for preference share dividends divided by average equity for the period excluding preference years). For those respondents that provided less than five years of data, the average has been
shares, the average after tax unrealized appreciation or depreciation on investments and the calculated over the number of periods provided.
average after tax unrealized foreign exchange gains or losses. (7) PartnerRe Ltd.'s ratios exclude life business.
(4) On March 14, 2007 (and as amended and restated on June 8, 2007), PXRE Group Ltd. (8) XL Capital Ltd underwriting income / (loss) on general operations excludes life and financial
(“PXRE”) and Argonaut Group, Inc. (“Argonaut Group” or “Argonaut”) entered into a merger operations.
agreement (the “Merger Agreement”) pursuant to which Argonaut Group became a wholly- (9) All Everest Reinsurance (Bermuda), Ltd's financial information provided in this survey is
owned subsidiary of PXRE on August 7, 2007 (the “Merger”). PXRE changed its name to Argo unaudited.
Group International Holdings, Ltd. upon the closing of the Merger. Immediately following the (10) Max Capital Group Ltd.'s ratios include long-term life and annuity business.
Merger, Argonaut Group’s pre-Merger shareholders held approximately 73% of Argo Group’s (11) Hiscox Ltd. income statement translated from GBP to USD using average rate of $1.57 for the
shares, with PXRE’s pre-Merger shareholders retaining approximately 27% of Argo Group’s relevant year.
shares. Notwithstanding the fact that PXRE was the legal acquirer under the Merger and (12) Hiscox Ltd. expense ratio and combined ratio excluding FX impact is 40.4% (2008: 38.9%)
remained the registrant for Securities and Exchange Commission (“SEC”) reporting purposes, and 82.20% (2008: 91.6%), respectively.
the Merger was accounted for as a reverse acquisition with Argonaut Group as the accounting
acquirer. Consequently, the financial data submitted for this survey for the period prior to the
Merger consists of the results of Argonaut (the GAAP accounting acquirer), while the stock and
security information relates to PXRE (the legal acquirer).

48 Bermudian Business April/May 2010 Copyright © 2010 Bermudian Business / Deloitte.

 FISCAL 2009
CURRENT PERIOD

Investment
Income
Earned
Other (excluding Change in Interest Other Income Comprehensive
Net Premiums Premiums Losses Commissions Underwriting Underwriting realized Realized Gains/ Unrealized Expense on (Expenses) Net Income/ Income/ Return on
Written Change in UPR Earned & LAE & Brokerage Expenses Income/(Loss) gains/losses) (Losses) Gains/(Losses) Debt and (Taxes) (Loss) (Loss) Equity(2)

1,321,125 (4,233) 1,316,892 604,060 148,847 248,592 315,393 300,675 76,775 - (39,019) (46,937) 606,887 787,952 21.56%
622,305 (39,562) 582,743 217,354 92,101 25,360 247,928 32,788 (77,608) 161,379 - 26,484 390,971 390,971 26.33%
2,763,112 79,633 2,842,745 1,654,674 490,098 361,907 336,066 390,131 77,449 - (24,440) 71,895 851,101 207,903 21.95%
1,421,400 (6,500) 1,414,900 853,100 318,800 199,100 43,900 145,500 (16,700) - (25,500) (29,700) 117,500 253,600 7.92%
1,837,000 (14,000) 1,823,000 948,000 334,000 252,000 289,000 248,000 11,000 (8,000) (16,000) (50,000) 474,000 591,700 15.58%
2,816,429 (24,665) 2,791,764 1,423,872 420,495 422,762 524,635 464,478 (311,584) - (32,031) (147,612) 497,886 1,328,352 10.00%
3,168,286 (250,424) 2,917,862 1,681,099 585,634 464,538 186,591 187,239 232,020 - - (53,447) 508,903 620,851 24.30%
1,606,050 27,142 1,633,192 866,640 267,971 233,240 265,341 284,200 (13,948) - (30,174) 30,685 536,104 754,164 21.47%
1,752,317 (37,063) 1,715,254 1,039,689 480,581 23,200 171,784 277,039 6,265 - (954) (12,386) 441,748 721,755 18.93%
792,469 (34,014) 758,455 283,185 136,471 147,138 191,661 28,531 50,921 - (12,105) (16,816) 242,192 243,487 22.05%
601,873 (53,423) 548,450 243,074 117,734 81,318 106,324 70,653 (314) 83,300 (1,428) (8,409) 250,126 250,126 13.97%
1,816,526 (92,506) 1,724,020 727,252 402,915 176,825 417,028 118,912 30,981 137,676 (8,310) (255,907) 440,380 331,126 30.10%
514,200 24,100 538,300 82,700 108,400 26,800 320,400 52,300 22,400 - - (5,600) 389,500 392,300 32.37%
894,520 (60,164) 834,356 594,692 96,874 116,657 26,133 246,255 (1,193) 3,366 (21,339) (7,007) 246,215 317,045 17.31%
602,200 (29,000) 573,200 138,700 80,500 - 354,000 81,000 30,800 159,100 (26,300) (135,100) 463,500 463,800 30.04%
19,830 (3,955) 15,875 (2,707) 621 - 17,961 23,047 (45,097) 155,349 (16,922) (9,722) 124,616 124,616 32.08%
891,115 - 891,115 518,734 14,636 (741) 358,486 117,096 (198,817) 840,021 (320) (16,196) 1,100,270 1,100,270 55.66%
3,948,704 171,121 4,119,825 2,295,296 885,214 - 939,315 596,071 171,265 508,869 (28,301) (650,365) 1,536,854 1,598,973 25.95%
1,206,397 67,419 1,273,816 197,287 189,775 189,686 697,068 323,981 82,069 (11,388) (15,111) (237,761) 838,858 923,407 24.41%
360,578 (3,892) 356,686 20,784 53,633 80,030 202,239 28,834 - - - (30,551) 200,522 187,490 17.47%
1,388,358 61,219 1,449,577 523,757 262,966 212,605 450,249 118,773 (11,543) 84,796 (27,086) 282,218 897,407 900,414 31.80%
4,743,712 408,027 5,151,739 3,168,837 775,869 879,727 327,306 1,319,823 (955,084) - (216,504) (400,550) 74,991 2,297,451 0.92%
35,088,506 185,260 35,273,766 18,080,079 6,264,135 4,140,744 6,788,808 5,455,326 (839,943) 2,114,468 (541,844) (1,702,784) 11,230,531 14,787,753

Copyright © 2010 Bermudian Business / Deloitte. April/May 2010 B er m ud i a n B u s i n e s s 49

 COMPANY OFFICERS*
* As of year end 2009

Chief Executive Officer Chief Underwriting Officer Chief Financial Officer

Allied World Assurance Company Holdings, Ltd Scott Carmilani Frank D'Orazio Joan Dillard
Amlin Bermuda Ltd. Stuart MacKellar Robert Wyatt Elizabeth Murphy
Arch Capital Group Ltd. Constantine Iordanou ^ John C.R. Hele
Argo Group Ltd Mark Watson ^ Jay Bullock
Aspen Insurance Holdings Limited Christopher O'Kane Kate Vacher (Underwriting Director) Richard Houghton
AXIS Capital Holdings Limited John Charman ^ David Greenfield
Catlin Group Limited Stephen Catlin Paul Brand Benjamin Mueli
Endurance Specialty Holdings Ltd. David S. Cash ^ Michael J. McGuire
Everest Reinsurance (Bermuda), Ltd. Mark de Saram ^ ^
Flagstone Reinsurance Holdings Limited David Brown Guy Swayne (International) & Gary Prestia (North America) Patrick Boisvert
Harbor Point Limited John Berger Greg Richardson Andrew Cook
Hiscox Ltd. Bronek Masojada Robert Childs Stuart Bridges
Lancashire Insurance Company Limited Greg Lunn Charles Mathias Elaine Whelan
Max Capital Group Ltd. W. Marston Becker Angelo Guagliano Joseph Roberts
Montpelier Re Holdings Ltd. Christopher Harris David Sinnott Michael Paquette
Oil Casualty Insurance, Ltd. Robert D. Stauffer Jerry Rivers Ricky E. Lines
Oil Insurance Limited Robert D. Stauffer George F. Hutchings Ricky E. Lines
PartnerRe Ltd. Patrick Thiele Costas Miranthis (Global (Non-U.S)), Tad Walker (U.S.) Albert Benchimol
RenaissanceRe Holdings Ltd. Neill Currie Kevin O'Donnell Jeffrey Kelly
Tokio Millennium Re Tatsuhiko Hoshina Jerome Faure Shumpei Takizawa
Validus Holdings, Ltd. Edward J. Noonan Conan Ward Joseph E. (Jeff) Consolino
XL Capital Ltd Michael S. McGavick N/A Simon Rich

^ Information not provided by respondent

past year insurance broker Willis Group
redomiciled to Ireland.
Among Bermuda (re)insurers rated by
Standard & Poor’s, we believe a change in U.S.
taxation, if enacted, would have a modest to
moderate impact on Bermuda (re)insurers’ tax
position. In addition, because most Bermuda
writers are already global in nature with
offices and staff in several locations around
the world, a potential redomestication of any
of these players would likely be neutral to
their ratings since it likely would have no
significant impact on their business. This
also helps explain why management teams of
companies participating in our survey ranked
‘Bermuda Market Presence’ and ‘Regulation’
as less pressing concerns among their top 5
strategic challenges in the near term compared
to issues such as pricing and growth vs.
profitability. Bermuda would invariably
suffer the greatest impact if more Bermuda
(re)insurers redomesticated elsewhere, given
the importance of the (re)insurance market as
part of its economy.
COnCLuSIOn
We believe Bermuda (re)insurers are likely to
see weaker operating performance in 2010
compared to 2009. Key factors contributing
to this in our view are the significant losses
incurred by companies on the island due to the
Chilean earthquake and Windstorm Xynthia
during the first quarter, weaker pricing on
most property and casualty (re)insurance lines,
and the expectation of a more normalized
level of investment gains/losses in 2010. In
addition, Bermuda writers remain exposed to
potential further catastrophe losses through
the remainder of 2010, which could lead them
to exceed their catastrophe budgets and miss
their earnings targets for the year.
Given the severity-driven portfolios of
(re)insurance players on the island, we expect
their earnings to be volatile on a year-over-year
basis. But over the long run, these companies
should be able to compensate their shareholders
for this increased risk through above-average
returns. Bermuda writers currently have many
of the right tools to help them accomplish this
goal. Among them are their strong balance
sheet position, enhanced competitive position
through their expanding global platforms,
increasingly sophisticated risk management
tools, and compensation systems that place
emphasis on bottom line profitability. The jury
is still out, however, as to whether management
teams on the island will succeed in leveraging
these strengths against the challenges they face
to produce much needed strong, risk-adjusted
profits over the long term.

HOW THE SURVEY WAS DONE

For this 16th Annual Bermudian Business/
Deloitte Bermuda Insurance Survey, financial
data was obtained from Bermuda-based
insurance and reinsurance companies with
fiscal years ending in 2009.
Deloitte compiled the financial data provided
by survey participants. Industry commentary
and analysis contained in the survey was prepared
by Standard & Poor’s based upon the compiled
financial data.
The 16th Annual Bermudian Business/
Deloitte Bermuda Insurance Survey will
go online at both the Bermudian Business
and Deloitte websites. Find the sites at
www.bermudianbusiness.com and www.deloitte.bm.

50 Bermudian Business April/May 2010 Copyright © 2010 Bermudian Business / Deloitte.