The Henry Fund Henry B. Tippie School of Management Aasim Shaik [aasim-shaik@uiowa.edu] Property and Casualty Insurance (P&C) February 10, 2013 Investment Thesis (+) Rising auto sales, expanding manufacturing Index (PMI), growing new private housing and improving labor market are positive signals for overall P&C Industry growth. (+) The big players of P&C Industry will remain well capitalized and financially prepared to pay very large scale losses in 2013 and beyond despite the fourth quarter impact of Hurricane Sandy. One commonly used measure of capital adequacy, the ratio of net premiums written to surplus, currently stands at 0.80, close to its strongest level in modern history. 1 Fitch already indicated that Sandy would have a limited impact on the Insurer Ratings, which should benefit most insurance companies (+) The insurance rates have been steadily climbing since 2012 and we expect this pricing momentum to stabilize in 2013. The Net Income for the P&C Industry is estimated to be $38.1 billion in 2012, a 90% increase from the 2011 figure of $20.1 billion. 4 Fitch projects the 2013 growth to be a nominal 6% to $40.3 billion. The industry combined ratio deteriorated drastically to 108.4 in 2011 and picked up in 2012 to 101.1. In 2013, it is expected to come in slightly lower to 100.3. (+) Policyholders Surplus stood at a high of $583.5 billion in 2012 indicating growing sign of healthy P&C industry. (-) The fiscal uncertainty in economic policies, slow global GDP growth, on-going debt crisis in Europe and low interest rates could affect the insurance industry negatively and also the overall economy in general. Source: FactSet Recommendation OVERWEIGHT Industry fundamentals Price Data Current Price $269.82 52wk Range $212.68 272.59 1 year price change 25.12% Key Statistics Market Cap (B) $7,478.80 Dividend Yield 1.6% Price/Earnings (TTM) 21.20 Price/Free Cash Flow 46.80 Price/Book (mrq) 1.71 Long-Term Debt/Equity 80.44 Profitability Net Profit Margin 9.7% Return on Equity (TTM) 7.3% 12 Month Performance Recent Developments in 2012 25 20 15 10 5 0 21.2 19.3 P&C 1.6 Financial 7.3 2.3 6.4 1.7 1.5 P/E Div. Yield ROE P/Book Source: Yahoo Finance 1. In March, severe storms and tornadoes in US resulted in insured losses of $2.5 billion. 3 2. In July, the floods in China caused the insured losses of about $180 million. 3 3. In May, the Earthquake in Italy resulted in insured losses of about $1.6 billion. 3 4. The drought period from June-September in USA resulted in losses ranging $15-$17 billion. 3 5. In October, Super-storm Sandy caused havoc in US/Caribbean with estimated insured losses of $25 billion. 3 Important disclosures appear on the last page of this report.
EXECUTIVE SUMMARY We issue an OVERWEIGHT recommendation to the P&C Industry. We believe that there is a potential upside resulting from increased premium rates, improved combined ratio and low company valuations. Recently, Insurance Information Institute president and economist Robert Hartwig estimated that the insured losses in 2012 climbed to $57.9 billion, increasing from $35.9 billion in 2011. Despite that huge loss, the combined ratio for the P&C industry is roughly 100% for 2012, improving from 106.4% in 2011. The combined ratio is the sum of incurred losses and expenses divided by earned premiums. 4 We forecast that combined ratio for industry next year will be 96% on average. Improved combined ratio is usually a good sign for the improved underwriting profit margins. We also expect the insurers to continue enjoy the increased premium rates in 2013. According to Goldman Sachs latest report, in 2012, the P&C stocks trading below 90% of book value were up at an average of 32%, while the ones trading above 110% were up at an average of 12%. The report suggested a hybrid approach for 2013 by investing in the picks that are best positioned to grow book value and benefit from low valuation. But, we advise the investors to choose the companies that stood strong among the recent disasters because the firms with better risk management, strict underwriting and efficient modeling techniques will eventually outperform its rivals in the long run. Some of the companies that fall under this category are: ACE, TRV and ALL. Overall investment gains were down last year because of historically low yields on fixed income securities. Nevertheless, premium growth, while still modest, accelerated to its fastest pace in the post-crisis era. 2 We believe that the industry s recent momentum will carry through into 2013 and beyond. Fundamentally, the P&C insurance industry remains quite strong financially, with capital adequacy ratios remaining high relative to longterm historical averages. 2 INDUSTRY DESCRIPTION Property and casualty (P&C) insurance is a critical component of economic infrastructure, promoting economic growth and stability principally through risk management. P&C insurers manage risk by assessing the likelihood and cost of losses, pricing premiums sufficiently to cover all or part of predicted losses, and risk pooling. Risk pooling is the collection of premiums from many policyholders to cover the insurable losses experienced by a few. P&C insurers also provide economic incentives, in the form of lower premiums, to encourage policyholders to reduce their exposure to loss. Successful risk management yields significant economic benefits, such as mitigating the financial volatility that could follow large, noninsured losses; motivating investment in property and commercial activity with inherent risk; and facilitating commerce and trade through vehicles such as marine, aviation, and transport (MAT) insurance. The P&C insurance industry also promotes the efficient allocation of capital by gathering and assessing information in the underwriting process and extending insurance to (and perhaps investing in) commercial enterprises that are deemed to have a high likelihood of success. 1 54% 2011 P&C Market Share by Premium 11% 3% Source: NAIC s Research and Actuarial Dept. Company Segments 6% P&C insurance is frequently divided into personal insurance (or personal lines), which covers individuals, and commercial insurance (or commercial lines), which covers businesses. Although personal lines consist primarily of automobile and homeowners insurance, a large number of additional insurance products are written as personal lines, including renters, condominium, flood, personal liability, travel, boat, and valuable items insurance. Commercial lines largely consist of automobile, multiple peril, and workers compensation insurance, as well as insurance products protecting against legal liability resulting from negligence, carelessness, or failure to act. 1 5% 5% 5% 4% 4% 3% STATE FARM ZURICH INS LIBERTY MUTUAL ALLSTATE AIG TRAVELERS BERKSHIRE HATH PROGRESSIVE NATIONWIDE OTHERS Page 2
Industry Drivers How the P&C firms operate It is quite important to understand how the P&C firms operate and make money as this would help us build a perspective on the industry drivers. The P&C insurance industry operates in essentially the same way worldwide, although differences do exist between countries and regions. 1 In simple terms insurance helps individuals to share the burden of unexpected losses associated with damage or destruction to property or incurred liability. 1 P&C insurance companies collect payments, known as premiums, from insurance policyholders that face similar risks, including, for example, automobile accidents and house fires. 1 Such premiums are pooled together by the insurance company, with payments made from the pool to individuals and entities that experience losses. Although some participants do not suffer losses or receive payments from the pool associated with such losses, they still benefit from this risk-sharing arrangement by avoiding the risk of large-scale financial loss. 1 Premium payments are placed in an unearned premium reserve. Such funds are then earned, or recognized as revenue, over the policy s term, typically on a monthly basis. P&C insurers use revenues to pay a wide variety of expenses, with the single largest expense being losses, otherwise known as policyholder claims. Other expenses include agent/broker commissions, workforce salaries, claims-related expenses such as litigation fees and insurance adjusters fees, and general overhead expenses. P&C insurance companies are also required to set aside funds to cover claims, referred to as loss reserves. Overall, the underwriting portion of a company s profit (or loss) is determined by subtracting such expenses from total premiums. Due to highly competitive conditions in many countries, which restrict insurers ability to raise prices, P&C insurance companies tend to set premium prices at levels that closely match premium revenues with expected loss payouts. Due to the complexity of accurately estimating loss payouts, however, the underwriting operations of many insurance companies often experience losses. 1 Expenses Commissions, Taxes, fees Loss reserves Investment gain or loss Premiums Invested until needed Net operating income/loss Source: Compiled by Commission staff using sources from Standard & Poor's and the American Insurance Association Supply & Demand factors Unearned premium reserves. Claims payment Policyholder s surplus A wide range of factors affect P&C insurance companies willingness to supply insurance in global markets as well as consumers decisions to purchase insurance. Supply factors include NTMs, input costs, and government regulations requiring the approval of new types of insurance. Demand factors include economic and demographic factors, mandatory government requirements for coverage, and the likelihood of catastrophic events. Some factors may affect both supply and demand decisions, such as the number of insurers operating in a given market, institutional and business climate factors, and price regulation. ( Industry Description section is sourced from an insightful thesis on Competitive conditions in Foreign Markets. This is referenced on page # 10) The picture below explains the flow of funds. Page 3
RECENT DEVELOPMENTS WORLD NATURAL CATASTROPHE LOSSES, 2012 Source: 2013 Munich Re, Geo Risks Research, NatCatSERVICE. Although there were huge number of natural catastrophes in 2012, Hurricane Sandy caused the major loss to the insurers, roughly totaling $25 billion. 3 However, it is to be noted that losses because of Hurricane Katrina were $41 billion. 3 So, this gives a perspective to understand that Sandy losses are not too worse for insurers as being projected as indicated by the chart below. The majority of losses due to all catastrophes in 2012: Figures are expressed in $ billion: Storms and Tornadoes( Mar-Jul), $7 Drought(Jun- Sep), $16 Others, $2 Hurricane Sandy (Oct), $25 Low interest rates affected Net Investment gains and Capital gains The insurance companies invest the premium in variety of instruments for better yields. But, the low interest rates have affected the investment gains. We expect this trend to continue till late 2013. For the first three quarters of 2012, net investment gains totaled $38.1 billion, compared to $42.2 billion in the first three quarters of 2011, a $4.1 billion drop (-9.7 percent). 2 The industry s net investment income for the first three quarters of 2012 was $35.1 billion, compared to $36.6 billion in the first three quarters of 2011 (down 4.1 percent). 2 The majority of this income came from the industry s bond investments involving corporate and municipal bonds. Corporate bond market yields in the first three quarters of 2012 remained at unusually low levels. 2 Moody s AAArated seasoned bond index yields ranged between 3.8 percent and 4 percent during last year s first half, while yields ranged from 3.3 percent to 3.5 percent during most of the third quarter. 2 Realized capital gains from the first three quarters of 2012 were $3.0 billion compared to $5.5 billion for the first three quarters of 2011. 2 We believe that this decline is due to the QE policy of Fed to maintain the low interest rates. It is also to be noted that P&C insurers have also shown more resilience to the economic problems around the globe than life insurers in terms of bottom line performance. Policyholder s Surplus hits record high Policyholders Surplus refers to the excess capital an insurance company holds after it theoretically meets all the payable benefits to its total policyholders. As of September 30, 2012, the figures stood at $583.5 billion, up 2.2 percent from a record $570.7 as of March 31, 2012, and up $33.2 billion or 6.0 percent from $550.3 billion at year-end 2011. 2 The increase in surplus is a growing sign of healthy P&C industry. During 2011, policyholders surplus actually shrank by 4.6 percent as catastrophes took their toll. The fact that the industry was able to rapidly recoup those losses and maintain such a strong capital position through the first nine months of 2012 ahead of Hurricane Sandy is further evidence of the P&C insurance industry s remarkable resilience in the face of extreme adversity. 2 Source: 2013 Munich Re, Geo Risks Research, NatCatSERVICE. Page 4
Strengthened P&C Underwriting standards We believe that the previous economic downturn has forced P&C insurers to become more focused on underwriting discipline. Whereas in the past many P&C insurers would chase market share through offering lower premiums, while making a healthy return from their investments, the low interest rate environment has forced companies to change their behavior. Going forward, we forecast better profit margins for the insurance companies in underwriting. Increase in reserves for insurers Reserves are the amounts that an insurer must have on hand that will satisfy all claims from insurance policies and other liabilities. Favorable reserve development continued to bolster the industry s underwriting performance and bottom line through the first nine months of 2012. 2 According to ISO/PCI, favorable prioryear reserve development, excluding mortgage and financial guaranty insurers, totaled $10.2 billion through September 30, down slightly (5.4 percent) from $10.6 billion through the same period in 2011. 2 Favorable reserve development has been an important contributor to industry underwriting performance and profitability in recent years. Going forward, the expenses will increase for the insurance companies because they need to maintain higher reserves. This will cut down the operating margins in future. We believe that a string of natural disasters and the residual effects of the economic downturn have been the main causes for this change in the insurance industry cycle from soft to hard market. In 2011, we experienced numerous high-level tornadoes in the Southeast and Midwest, significant flooding on the East coast, a drought in the South and a massive winter blizzard and summer hailstorms in the Midwest. And in 2012, the trend has continued with the impact of Hurricane Sandy, one of the strongest earthquakes ever recorded shook Japan, a widespread drought struck East Africa, the worst flooding in 50 years occurred in Thailand and a major typhoon hit the Philippines. 2 For insurance carriers, all of these significant natural disasters meant a large increase in claims. When losses are high due to natural disasters, carriers reserves are reduced and insurance companies look to replenish reserves by increasing rates. However, we expect the prices to stabilize in late 2013 or early 2014. Below chart indicates the price trend. Premium Pricing Trend: 1999:Q4 to 2012:Q4 INDUSTRY TRENDS Hard markets will drive premium in 2013 Source: CIAB data cited here are based on a survey Page 5 Stable growth in future The growth in P&C industry is usually dependent on policy volumes and premium prices. As discussed above, the premiums are expected to rise. Also, immediately after the natural disasters more companies start to invest in new policies. So, we expect the volumes to rise as well. Overall, we expect a normal growth for the insurance companies in coming quarters. The P&C insurance industry reported an annualized statutory rate of return on average surplus of 6.3 percent during the first nine months of 2012 (6.6 percent after excluding mortgage
97.0 98.5 102.0 100.0 101.0 102.7 107.0 105.1 103.6 104.6 108.6 110.4 112.6 115.3 118.2 116.6 117.1 116.0 121.7 130 125 120 115 110 105 and financial guaranty insurers), up from 2.0 percent in the first nine months of 2011. 2 There was a notable acceleration in premium growth, which rose 4.2 percent in the first nine months of 2012, a full percentage point above the year earlier reading. 2 During the third quarter itself, net premiums written rose by 5.1 percent, the sharpest quarterly gain in nearly six years. 2 We believe that the growth among carriers writing commercial lines is on the rise mainly because of strong growth in the workers compensation. The growth increased to 6.1 percent through the first nine months (up from 4.0 percent in the year earlier period) compared to 3.3 percent for insurers writing predominantly personal lines (up from 3.2 percent a year earlier) and 3.8 percent for those with a more balanced mix of business (up from 2.4 percent a year earlier). 2 We strongly feel that the P&C insurance industry is on track to record its strongest growth in the post-crisis era. Workers compensation line Workers Compensation Combined Ratio: 1994-2012 Labor Market Trends Unemployment and Underemployment rates January 2000 through Dec 2012 seasonally adjusted (%) Source: US Bureau of Labor Statistics; Insurance Information Institute Labor market trends play a key role for insurance sector, mainly the payroll and workers compensation lines. The high unemployment and underemployment rates usually stifle the economic growth. But, we are expecting lower rates in the future around 7.5%. We have seen that in private sector, new jobs are being created over last few quarters. Private employers added $5.42 million jobs since Jan 2010 after having shed $4.66 million jobs in 2009. 5 But, on the negative side, half a million jobs shed in Government at all levels since Jan 2010. On a cumulate basis, the unemployment and underemployment rates could take the downward trend, benefitting the insurers. 100 95 90 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12F Source: Insurance Information Institute Workers compensation line of P&C provides coverage for losses related to medical care, rehabilitation, lost wages and death benefits for injured workers and their families. By observing the trend in combined ratio highlighted in the chart, we believe that the underwriting results in this line have been the worst they have been in a decade. Background MARKETS AND COMPETITION In-order to understand the market, it is essential to learn about the insurance industry cycles. The P&C insurance industry cycle is characterized by periods of soft market conditions, in which premium rates are stable or falling and insurance is readily available, and by periods of hard market conditions, where rates rise, coverage may be more difficult to find and insurers profits increase. 2 We believe that the dominant factor in the P&C insurance cycle is the intense competition within the industry. We say this because of the below mentioned reasons. Page 6
Premium rates drop as insurance companies compete vigorously to increase market share. As the market softens to the point that profits diminish or vanish completely, the capital needed to underwrite new business is depleted. 2 In the up phase of the cycle, competition is less intense, underwriting standards become more stringent, the supply of insurance is limited due to the depletion of capital and, as a result, premiums rise. The prospect of higher profits draws more capital into the marketplace leading to more competition and the inevitable down phase of the cycle. 2 Inflation-adjusted growth of P&C net written premiums Source: ISO, a Verisk Analytics company The chart above shows the real, or inflation-adjusted, growth of P&C net written premiums over more than three decades and three hard markets. The cycles of hard and soft growth can be visualized from the crests and troughs of the below chart. Underwriting business There are several companies that undertake the writing for P&C. With stringent underwriting discipline prominent in today s world, most insurers carefully select their writers. Below provides a list of few writers. Reinsurance The Reinsurance plays a key role for majority of insurance companies. Investopedia defines Reinsurance as the practice of insurers transferring portions of risk portfolios to other parties by some form of agreement in order to reduce the likelihood of having to pay a large obligation resulting from an insurance claim. The intent of reinsurance is for an insurance company to reduce the risks associated with underwritten policies by spreading risks across alternative institutions. Despite the growth potential, we are concerned that the US reinsurance segment is expected to remain exposed to the fundamental shift in the global economy, for example, the ongoing sovereign debt crisis in EU member states and the projected growth changes in the emerging economies such as China and India. However, Fitch Ratings say that the outlook for the global reinsurance sector remains stable, as capital, underwriting and operating trends are expected to support reinsurers' current ratings over the next one to two years. Fitch anticipates further strengthening of the sector's alreadystrong capitalization and continued premium growth into 2013. There was variation regionally in the Guy Carpenter Regional Property Catastrophe Reinsurance Rate on Line (ROL) index. U.S. property catastrophe pricing was most affected by the landfall of Superstorm Sandy while other regions were flat to down. Source: SNL Financial LC Page 7
Below is the list of top reinsurance companies ordered by gross premiums written in 2012: Figures in 000 s 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 - Source: Reinsurance Association of America ECONOMIC OUTLOOK Fundamentally, there are two principal drivers of growth in the P&C insurance industry: exposure growth and interest rates. Exposure growth refers to increase in the value of insurable interests (such as property and liability risks). We feel that exposure growth is fueled primarily by the rebounding economy. For instance, the Nominal GDP increased by 4.3 percent in the third quarter of 2012 relative to the third quarter of 2011, approximating the 4.2 percent growth in net written premiums during the first nine months of the year. 2 We observed that auto, home and major commercial lines are trending positively, so overall industry growth is poised to outpace overall economic growth. With third quarter 2012 net written premiums up 5.1 percent year-over-year, this trend may already be underway. 2 The forces that affected interest rates in the first three quarters of 2012 are the same forces that have been at work for the past few years: unused capacity in both capital resources and high unemployment; slack in the economy and low near-term future expectations for the economy, leading to an unwillingness to lend/borrow and invest; and Federal Reserve actions to keep both shortterm and longer-term interest rates low, all of which contributed to low inflation expectations. 2 But, we expect the inflation rates to sharply rise in late 2013 or early 2014. As a result, the P&C companies could expect better yields on their investment income, resulting in increased investment gains compared to 2011-12 results. CATALYSTS FOR GROWTH Labor Market Conditions We believe that labor market conditions influence the top line growth in P&C industry. Job growth not only benefits the entire economy, but also results in associated expansion of payrolls benefits, such as workers compensation insurers in particular. The United States economy added 1.36 million jobs in the first nine months of 2012. 2 Combined with modest increases in the hourly earnings of employees, payrolls expanded by $87.8 billion over the same period, leading to billions of dollars in new premiums written for workers compensation insurers. 2 About 1% improvement in unemployment rate roughly translates into 0.5% increase in premiums written 4. Macro-economic factors Overall strengthening of the economy has the potential to cause declines in the industry's combined ratio due to increases in demand and income from equity investments. Uncertainty regarding catastrophes and premium prices going forward should have a direct effect on industry risk and may indirectly affect profitability by encouraging insurers to strengthen reserves. Overseas Expansions Most insurers are looking for growth opportunities by expanding into emerging markets, mostly by mergers and acquisitions. Last year, we saw this trend by companies such as ACE and MET. We believe that there is still a huge potential for insurers in such markets to cater to the growing upper class insurance needs. In the overseas markets, the pricing is flat. But, the volume of policies is more because of growing middleclass population. Growing Auto Sales Because of growing consumer confidence and aging vehicles, we believe that the auto sales will increase in coming years recovering from 2009 low point. As a result, the auto insurance industry will look to improve its net premiums. Page 8
19 18 17 16 15 14 13 12 11 10 (Millions of units) 9 17.4 17.8 17.5 Auto/Light Truck Sales, 1999 2014F 17.1 16.6 16.9 16.9 Source: U.S. Department of Commerce; Blue Chip Economic Indicators (1/13); Insurance Information Institute. Growing New Private Housing With rising consumer optimism and low interest rates, we believe that new home sales will pick up. New home starts plunged 72% from 2005-2009; A net annual decline of 1.49 million units, lowest since records began in 1959. 2 Job growth, low inventories of existing homes, low mortgage rates and demographics are stimulating new home construction for the first time in years. Homeowners Insurers are starting to see meaningful Exposure Growth for the first time since 2005. 2 Commercial Insurers with construction risk exposure and Surety are also likely to benefit. New Private Housing Starts, 1999 2014F Source: U.S. Department of Commerce; Blue Chip Economic Indicators (1/13); Insurance Information Institute. 16.5 99 00 01 02 03 04 05 06 07 08 09 10 11 12F 13F 14F (Millions of units) 16.1 13.2 10.4 11.6 12.7 14.4 15.0 15.6 INVESTMENT POSITIVES The P&C Industry will remain extremely well capitalized and financially prepared to pay very large scale losses in 2013 and beyond despite the fourth quarter impact of Hurricane Sandy. One commonly used measure of capital adequacy, the ratio of net premiums written to surplus, currently stands at 0.80, close to its strongest level in modern history. 2 We expect the P&C insurers to enter into the Hard cycle in early 2013 given the insured losses due to Hurricane Sandy roughly totaling $25 billion as of now. However, the insured losses due to Hurricane Katrina were roughly $41 billion.3 S&P and Fitch already indicated that Sandy would have a limited impact on the Insurer Ratings, which should benefit most insurance companies. The insurance rates have been steadily climbing since 2012 and we expect this pricing momentum to stabilize in 2013. The Net Income for the P&C Industry is estimated to be $38.1 billion in 2012, a 90% increase from the 2011 figure of $20.1 billion. 4 Fitch projects the 2013 growth to be a nominal 6% to $40.3 billion. The industry combined ratio deteriorated drastically to 108.4 in 2011 and picked up in 2012 to 101.1. 4 In 2013, it is expected to come in slightly lower to 100.3.4 The big players in the insurance industry are seeking expansions in emerging markets. Recently, ACE announced 2 acquisitions in Mexico and continues to consider M&A opportunities globally, while MET is expanding into emerging markets. Rising auto sales, expanding manufacturing Index (PMI), growing new private housing and improving labor market are positive signals for P&C Industry growth. Page 9
INVESTMENT NEGATIVES We believe that if current macroeconomic factors continue, it could eventually lower the future revenue for insurance companies. Few of our concerning factors are listed below. o Lackluster growth in worldwide GDP. o Ongoing debt crisis in Europe. o Fiscal uncertainty in the US. o Low investment returns. The Dow Jones U.S. Property & Casualty Insurance Index and Dow Jones U.S. Insurance Brokers Index have already climbed up to its highs. So, some may argue that potential upside in insurance is not realistic. But, the subgroup of Life Insurance has still not reached its multi-year highs. Also, we believe that momentum of last year s growth in P&C will be carried forward in coming years. There is always the risk of a major calamity in 2013, but the catastrophe (CAT) models are sophisticated. The problem is that the insurers fail to provide accurate data into the CAT models, causing volatility to modeling results, underwriting decisions and pricing. There are more stringent regulatory actions at place. According to NERA, the pace of FDIC lawsuits relative to failed financial institutions increased in Q4 2012 23 lawsuits in 2012 vs. 16 in 2011 and 2 in 2010. The settlements rose 6.6% compared with 2011, to 714.3 IMPORTANT DISCLAIMER This report was created by a student(s) enrolled in the Applied Securities Management (Henry Fund) program at the University of Iowa s Tippie School of Management. The intent of these reports is to provide potential employers and other interested parties an example of the analytical skills, investment knowledge, and communication abilities of Henry Fund students. Henry Fund analysts are not registered investment advisors, brokers or officially licensed financial professionals. The investment opinion contained in this report does not represent an offer or solicitation to buy or sell any of the aforementioned securities. Unless otherwise noted, facts and figures included in this report are from publicly available sources. This report is not a complete compilation of data, and its accuracy is not guaranteed. From time to time, the University of Iowa, its faculty, staff, students, or the Henry Fund may hold a financial interest in the companies mentioned in this report. REFERENCES 1. US International Trade Commission Property and Casualty Insurance Services: Competitive conditions in Foreign Markets 2. http://www.iii.org/articles/2012-first-nine-monthsresults.html 3. MARSH The new reality of risk US insurance markets and risk trends in 2013 4. http://www.propertycasualty360.com/2012/08/20/fit ch-pc-pricing-momentum-may-subside-in-2013 5. http://www.iii.org/presentations/overview-andoutlook-for-the-p-c-insurance-industry-focus-on-texasmarkets.html Page 10