1. Andrea E. Keenan Vice President – Research & Ratings Criteria Session VI: User Perspectives September 27, 2013 A.M. Best - Oldwick, NJ OECD – ASSAL Regional Expert Seminar

2. Disclaimer © AM Best Company (AMB) and/or its licensors and affiliates. All rights reserved. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT AMB’s PRIOR WRITTEN CONSENT. All information contained herein is obtained by AMB from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. Under no circumstances shall AMB have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of AMB or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if AMB is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The credit ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities, insurance policies, contracts or any other financial obligations, nor does it address the suitability of any particular financial obligation for a specific purpose or purchaser. Credit risk is the risk that an entity may not meet its contractual, financial obligations as they come due. Credit ratings do not address any other risk, including but not limited to, liquidity risk, market value risk or price volatility of rated securities. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY AMB IN ANY FORM OR MANNER WHATSOEVER. Each credit rating or other opinion must be weighed solely as one factor in any investment or purchasing decision made by or on behalf of any user of the information contained herein, and each such user must accordingly make its own study and evaluation of each security or other financial obligation and of each issuer and guarantor of, and each provider of credit support for, each security or other financial obligation that it may consider purchasing, holding or selling. September 27, 2013 OECD – ASSAL Regional Expert Seminar

3. Information Flow Initial Requirements Management Meeting Interactive Relationship Rating Decision September 27, 2013 OECD – ASSAL Regional Expert Seminar

4. Information Flow Initial Requirements Management Meeting Interactive Relationship Rating Decision September 27, 2013 OECD – ASSAL Regional Expert Seminar

5. Initial Requirements (1) Each company’s annual and quarterly (if available) financial statements, as filed with the regulator. Annual Reports (Latest Five Years) Audited Financial Statement(s) – Consolidated and Parent Only (Annually) Also… September 27, 2013 OECD – ASSAL Regional Expert Seminar

6. Initial Requirements (2) Actuarial Report(s), Both Internal and External (Annually) Organizational Structure for Parent and Subsidiaries Management Structure, Board of Directors and Key Executive Committees Biographical Information on Principal Officers Strategic Business Plans/Five-Year Projections (Assumptions)/Ownership/Capital Resources Capital Management Strategies/Investor/Sponsor Strategy Enterprise Risk Management Strategies Competitive Advantages/Disadvantages Reinsurance Contracts Catastrophe Management Strategies (P/C Companies Only) Key Distribution Partners Company’s Investment Guidelines Any Other Information Believed to Be Relevant to the Rating Process September 27, 2013 OECD – ASSAL Regional Expert Seminar

7. Initial Requirements (3) Supplemental Rating Questionnaire (SRQ) –Assets (special section on Collateralized Assets) –Marketing –Products –Operations –Catastrophe Mitigation –Reinsurance –Financial Projections –Ratings Triggers –Terrorism Exposure –Enterprise Risk Management September 27, 2013 OECD – ASSAL Regional Expert Seminar

8. Information Flow Initial Requirements Management Meeting Interactive Relationship Rating Decision September 27, 2013 OECD – ASSAL Regional Expert Seminar

9. Management Meeting  CEO Strategic Overview  Corporate Governance  Organisational Structure  Capital Structure  Underwriting  Claims & Loss Reserving  Reinsurance Programs  Investments  Financial Review & Planning  Enterprise Risk Management  Marketing & Business Production September 27, 2013 OECD – ASSAL Regional Expert Seminar

10. Information Flow Initial Requirements Management Meeting Interactive Relationship Rating Decision September 27, 2013 OECD – ASSAL Regional Expert Seminar

11. Interactive Relationship Rating Balance Sheet Strength Operating Performance Business Profile INSURANCE COMPANY FINANCIAL STRENGTH Country Risk Enterprise Risk Management September 27, 2013 OECD – ASSAL Regional Expert Seminar

12. Information Flow Initial Requirements Management Meeting Interactive Relationship Rating Decision

13. 13 Class of Credit Ratings: Insurance Companies (Financial Strength Ratings) 3-Year Ratings Transition FSRImpairedTotalImpairment Rate A++01070.00% A+05440.00% A010550.00% A-28990.22% B++32901.03% B+01830.00% B1681.47% B-43312.12% C++21118.18% C+2540.00% C010.00% C-010.00% D11100.00% Total:1531980.47% September 27, 2013 OECD – ASSAL Regional Expert Seminar

14. Users of Best’s Ratings Insurance Companies Agents Brokers Regulators Policyholders Financial Institutions Investors Academics Employee Benefits Managers Boards of Directors Corporate Risk Managers Consultants Consumers Reinsurers Captive/Alternative Risk Managers Debt and Equity Research Analysts Investment Professionals Government Agencies September 27, 2013 OECD – ASSAL Regional Expert Seminar

15. Beyond the Ratings Process Initial Requirements Management Meeting Interactive Relationship Rating Decision September 27, 2013 OECD – ASSAL Regional Expert Seminar Ratings Processes and Methodologies are Informed in Part by Data and Insights Available from Third Parties Final Ratings Decisions and Resulting Information Matrices Contribute to Global Industry Understanding of Insurers

16. Offerings from Third Parties ARIA - 2013 Annual Meeting August 5, 2013 Available for Multi-Country Comparisons: –Size of Market Split of Life, Non-Life Net, Direct and Gross Premiums Figures –Concentration of Market Still Needed: –Better Line of Business Splits Standard Definitions of Lines AY Loss Triangles When Appropriate –Specific Investments Information

17. Analysis After Ratings Process Peer Reviews AMB Uses for Company and Industry Analysis: September 27, 2013 OECD – ASSAL Regional Expert Seminar

18. Industry Analysis: Peer Review Graphs for comparison: September 27, 2013 OECD – ASSAL Regional Expert Seminar

19. Industry Analysis: Peer Review Graphs for comparison: September 27, 2013 OECD – ASSAL Regional Expert Seminar

20. Closing Remarks Information is an Essential Commodity in Insurance –Capital is Attracted to Known Risks Ratings Are Global Comparisons of Financial Strength and Credit Quality –No Jurisdictional Issues Best’s Ratings Developed Alongside US Regulation –Complimentary Process –Shared Information –More Thorough Data Informs Better Ratings Process September 27, 2013 OECD – ASSAL Regional Expert Seminar

21. Andrea E. Keenan Vice President – Research & Ratings Criteria Thank You OECD – ASSAL Regional Expert Seminar September 27, 2013 A.M. Best - Oldwick, NJ