1. The Art of Risk Management during the Global Credit Crisis from a Direct Insurer’s Perspective 10 th September 2009

2. 2 Amlin - Background  A leading independent insurer operating in the Lloyd’s, UK, continental European and Bermudian markets with combined gross premiums of over £1,043 million in 2008  Specialist in insurance and reinsurance for commercial enterprises writing a diverse portfolio of property, marine, aviation, liability and motor classes  Listed on the London Stock Exchange since 1993 and one of the largest pure non-life insurance stocks in London with a market capitalisation of £1.7 billion  Acquired Fortis Corporate Insurance in July 2009 with a portfolio of marine, property, liability and motor risks in the Netherlands, Belgium and France and combined gross premiums of €763 million in 2008  Strong balance sheet with approx. £600m of available capital in excess of regulatory requirements. Ratings are shown below. AgencySyndicate 2001Amlin BermudaACI AM BestA+ (Superior)A (Excellent)Not rated Moody’sA1 (Stable)A2 (Stable)Not rated FitchNot rated A- (Positive) S&P4 (Stable)A (Stable)A- (Stable)

3. 3 2008 business mix by operating division Marine% Energy20 Cargo16 Yacht15 War & terrorism13 Bloodstock11 Liability11 Hull9 Specie5 Reinsurance% Catastrophe59 Property19 Proportional12 Marine6 Special risks4 Amlin Bermuda% Catastrophe60 Proportional20 Property16 Special Risks3 Marine1 Other1 ACI% Marine49 Fire16 Liability15 Fleet8 Captives7 Engineering5 Amlin UK% Motor46 Employer’s liability18 Professional indemnity16 Products liability9 Commercial package8 Financial institutions3 P&C% Property53 US casualty14 Auto14 Accident & health13 Trade credit6 Aviation% Airline30 General aviation25 Airports liabilities23 Products12 Space11  Amlin (including ACI) wrote £1.7bn of gross premiums in 2008, of which approximately 65% was direct business.

4. 4 Trends in risk management & insurance buying  Recent years have seen a paradigm shift in companies’ attitudes towards and understanding of risk management: it is now a matter discussed at board level and taken extremely seriously by senior management  Companies now have a broader view of their risk universe, and a knowledge that these risks can be addressed in a wide range of ways and with a number of instruments, of which insurance is just one  Insurance remains the key means of balance sheet protection, and the strains of the current economic environment have weakened balance sheets and increased demand for insurance

5. 5 Trends in risk management & insurance buying  Insurance buyers are increasingly sophisticated, and recent economic events have only served to heighten awareness of counterparty risk, with two main effects noted: –the so-called ‘flight to quality’ – preferential selection of the more robustly capitalised insurers –syndication of risk – the subscription market allows buyers to spread and therefore dilute counterparty risk  The credit crisis has enhanced the value of insurance broking expertise: –helping to match the structure of a programme to their client’s financial situation –providing expert advice on insurer security –ability to spread risk across insurers  Amidst all this economic ‘noise’ it is still important to remember that natural catastrophes can happen at any time (even during a recession), as Windstorm Klaus and the L’Aquila earthquake have recently shown

6. 6 Why the insurance industry is well positioned relative to other financials  Comparatively low ratio of invested assets to equity  Risk generally taken on the liability side, not asset side  Largest liability (loss reserves) have no covenants = no “run on the bank”  Matching of assets to liabilities = ability to hold to maturity  Economic distress less a negative on operating results Depository institutions10:1 Investment banks25:1 Special investment vehicles35:1 Life insurers8:1 – 10:1 Property/casualty (re)insurers2.5:1 Source: Dowling & Partners

7. 7 State of European direct insurance business  Pricing remained weak in Q109 but improved a little in Q209 and is expected to continue to do so in 2010 (according to Europe’s largest 4 primary insurers AXA, Allianz, Zurich and Generali): there is broad consensus that we have reached the bottom of the pricing trough  Levels of capital in 2009 appear to be repairing – some evidence of increased share repurchase activity  Suggests that pricing upturn likely to be a response to slim or negative underwriting margins rather than a shortage of capital. Evidence that some markets have already turned: –Aviation –UK motor fleet  Reliance on investment returns no longer feasible with an increased emphasis now on gross underwriting return

8. 8 Increased focus on underwriting profit  As investment returns have declined since the mid 1980s so the importance of delivering positive gross underwriting returns has increased. The chart below shows the decline in investment income for Dowling & Partners’ universe of P&C insurers: Source: Dowling & Partners

9. 9 The credit crisis and its impact on underwriting performance  Reduced asset values and economic activity lowers sums insured, thus diluting the top-line effect of rate increases  Increased claims activity –economic hardship claims (fraud, arson etc.) –anecdotal evidence that increased redundancies and work stress are driving up Workers’ comp/employer liability claims –with increased incentives for companies and individuals to improve stretched cashflows claims now being made more urgently  Some evidence of an increase in D&O and E&O claims but little reported by the large European insurers as yet

10. 10 Responses of Direct Insurers  De-risking of investment portfolios  A more risk-based approach to underwriting  Less acceptance of poor performance  Rate increases where needed / demand for gross underwriting profit  Improvement in service  Counterparty risk analysis  Opportunities for growth where space is created by large corporations’ difficulties

11. 11 Solvency II and regulatory background  Solvency II is the new solvency regime for all EU insurers and reinsurers, due to come into effect in 2012  Solvency II is based on three pillars: 1.Quantitative capital requirements and rules for investments 2.Supervisory review and internal evaluation of risks and controls 3.Disclosure relating to risk and performance  The essence of the Solvency II requirements is pillar 2. which will enforce a direct and more visible relationship between capital and levels of risk and return  The aim is to achieve a consistency of approach across the EU leading to sustainability of insurers’ financial security  Political engagement with the financial services industry is likely to lead to further regulation

12. 12 Amlin’s risk management emphasis  Underwriting risk –Diverse and balanced portfolio –Control over catastrophe exposures –Pricing discipline –Long tail class reserving –Product line size and use of reinsurance  Investment / market risk –Risk controls on asset allocation to preserve balance sheet for underwriting  Credit risk –Reinsurance security  Investment in models for assessment of risk

13. 13 Amlin’s strong balance sheet and stable team  Net tangible assets up 12.5% to £1.11 billion in 2008 (2007: £0.98 billion)  Investments and cash up 8.7% to £2.9bn in 2008 (2007: £2.7bn)  Experienced and stable underwriting team: voluntary turnover of 4.2% in 2008; senior underwriters have 22 years average industry experience

14. 14 Amlin & ACI The acquisition of ACI provides an excellent fit with our declared strategy:  Expansion of the non-catastrophe portfolio  Gives Amlin a strong platform in the continental European market, where opportunities to acquire a significant foothold and dominant market share are rare  Provides access to a new customer base with diversified distribution  Creates opportunities for organic growth as well as a platform for further acquisitions if opportunities arise  Business mix is predominantly in lines where Amlin has established underwriting expertise and resource  Strong local management team with established track record  Transaction expected to be ROE accretive in 2009 and will contribute to Amlin’s cross cycle target ROE of at least 15% 1 1 This statement does not constitute a profit forecast and should not be interpreted to mean that the earnings per share in the first full financial year following the Acquisition, or in any subsequent period, would necessarily match or be greater than those for the relevant preceding financial year

15. 15 Amlin’s proposition to buyers  A specialist insurer for commercial clients and brokers  Emphasis on excellence of service  Consistent approach to underwriting and pricing  Strong balance sheets  Strong risk management capability to ensure financial stability  Long-term client relationships based on sustainable model of fair pricing for reliable coverage