1. State of the Workers’ Compensation Market Mark A. Wilhelm Chief Executive Officer May 20, 2013

2. More Catastrophes – Bad Surprises Are Growing – More natural disasters – More pandemics H7N9 CRE (Drug resistant bacteria) – More jihadists, terrorists, and acting out Boston, Sandy Hook, Colorado, etc. Cyber attacks Mega Trends Affecting WC 2

3. Medical Breakthroughs – Pros and Cons – Longevity will continue to increase – Costs will continue to escalate More Government and Regulation Slow Growth Economy Lousy Bond Investment Environment Mega Trends Affecting WC 3

4. 4

5. 5

6. 6

7. Inflation Threat? The Age of Big Data More Movement of People, Processes and Capital – Immigration reform impact? Mega Trends Affecting WC 7

8. WC is a Poor Investment – Capital charges – ERM Specific Trends and Threats Affecting WC 8

9. 9

10. 10

11. 11

12. The Reinsurance Business Model is Changing – Overcapacity is forcing stock buy backs, mergers – Insurance linked securities – Cat bonds Complexity of Excess WC Reserving Specific Trends and Threats Affecting WC 12

13. Former Competitors 13  AIG  Fireman's Fund  Legion  Alea/Rhine Re  Fremont  Lloyds  American Centennial  Frontier  Majestic  American Excess  General Re  Mead Re  American Re  Great American  Midland Insurance  Centaur Insurance  Hanover (LDG)  Mission  Clarendon  Harbor  Pennsylvania Mfg. (PMA)  Crum & Forster  Hartford  PHICO  Discover Re  Home Insurance Co.  Pine Top  Drake Insurance  INA  Praetorian  EBI  ISLIC  Reliance  Employers Re  Industrial Indemnity  Twin City  Evanston Insurance Co.  Kemper  Wexford

14. 14 Specific Trends and Threats Affecting WC Big Data – TPAs and Insurance Companies Race for Predictive Modeling TRIPRA (TRIA) – Covers Foreign and Domestic Terrorism – Expires end of 2014 – What is terrorism? Boston Marathon? Cyber? RICO – Racketeer Influenced and Corrupt Organizations Act – Walmart and Cassens

15. Medical – Cost of Severity Continues to Skyrocket – People survive horrific accidents – Pain Meds – Robotics – Impact of the (Un)Affordable Care Act Specific Trends and Threats Affecting WC 15

17. The CBO estimates that 32 million more people will have health insurance by 2019. This growth will increase demand for primary care services and the shortage of primary care physicians is likely to worsen. 17 Primary Care Shortage

18. 18 Waiting Room – a Shortage of Doctors Could Strain Health-care Services

19. Non-subscription/Opt Out – Oklahoma – Is this the future? Specific Trends and Threats Affecting WC 19

20. OK Non-Subscriber Summary OK passed and signed into law (May 2013), SB 1062 which, in part, expanded coverage options to include a non-subscriber product in OK. Key highlights include: – Greater Employee Accountability – Improved and Efficient Medical Management – Defined Adjudication Process – Effective February 2014 20

21. Key Differences OK vs. TX Opt Out Some key differences include: – OK law does not allow an employer to “go bare” as does TX. – OK benefit schedule follows the mandatory benefit levels that are equal to or greater than those set in the reformed workers’ compensation system. – OK mandates that the employer must purchase a high level of insurance coverage to satisfy stricter bonding or financial requirements. – Due to higher level of mandatory benefit commitment, OK employers will not be subject to negligence liability claims by injured workers and the “exclusive remedy” rule will apply. – OK will have structured regulatory oversight that will be able to build on the data from day one and provide access to this data promptly to ensure the program is being properly administered. 21

22. Regulatory Activism – Self-Insurance Under Attack Are We an Industry in Transition? – Are the lessons and knowledge of the current generation being instilled in the next generation? Specific Trends and Threats Affecting WC 22

23. Questions?