THE HALES REPORT

1185 Avenue of the Americas, 32nd Floor, New York, NY, 10036 | [email protected] Issue #21, Vol: 2 October 15, 2018

Inside This Issue Travelers To Work With Amazon: Part Lead Gen / Part Loss Mitigation pg 1 Amazon In , We’ve Only Just Begun. Commercial Lines In Sight pg 6 Hurricane Michael, Another Reminder of How Bad Things Could Be pg 7 IVANS Index Holding Steady With Commercial Rates +2.2% In September pg 11 Cincinnati Fin’l Acquires Lloyd’s Platform, Broadens Specialty Expertise pg 12 Personal Auto Rates Moderating As Favorable Frequency (Surprising) Persists pg 14 Private Market Alternatives For Flood? NFIP Removes Barriers To Entry pg 18 Deloitte Sees “Second Wave” Of InsurTech Focusing On Proven Platforms pg 20 Agent & Brokers Employment Decreases (0.1%), First Time Since 2011 pg 21 Hales Hits & Bindable Quotes pg 22 Hales Q4 Deal Diary & Broker Valuations pg 24

Travelers To Offer Home Insurance Through Amazon (Lead Generation) Along With Smart Home Products & Discounts (Loss Mitigation).

At the time of Traveler’s acquisition of Simply Business (online broker) in 2017, Travelers CEO Alan Schnitzer remarked: “This is a medium and long-term strategic transaction for us … it’s about making sure that we’re positioned to serve the customer however, whenever and from wherever they choose to engage with us.”

This was/is “CEO speak” for exploring new distribution partners and the possibility of going direct in any line of business. While this was a clear change from the historic agent centric/only model under prior CEO Jay Fishman, we suggested then, and still believe now, it’s the right move. Independent agents will lose share over time in personal lines and small commercial (although not going away soon). Travelers needs to have multiple distribution channels and also improve customer experience(s).

We were reminded of the company’s evolving strategy with the announced “partnership” between Amazon and Travelers last week. While the company’s carefully worded press release focused on the sale of “smart home” risk management devices and providing differentiation to agents, Travelers will now offer insurance (homeowners) through an Amazon webpage. To us the move is another example of Travelers being increasingly open to new / alternative forms of distribution and customer touch points while improving the existing offering (homeowners) available from independent agents.

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Amazon.com/Travelers is the first Companies With Alexa Capabilities insurance industry “digital storefront” Exhibit 1 on Amazon, but it is not likely the last. We understand the relationship is not exclusive to Travelers. Several insurers have already developed Alexa capabilities, recognizing evolving consumer buying habits.

Travelers initial Alexa skills include billing/payment support and property maintenance and safety tips, to be expanded over time.

We believe the announcement is best considered independently in terms of (i) what it means for Travelers’ strategically and (ii) what it signals about Amazon’s foray into the insurance business – more on that in the subsequent article.

Strategically, Travelers secures another avenue for growth (in a very profitable business for the company) and addresses loss cost / mitigation through smart home devices – a virtuous cycle for lower rates in the future? Given Travelers leading position in the independent agency marketplace the move makes sense.

Since it appears only Travelers itself will be directing leads to the Travelers/Amazon page, the relationship can be thought of as part of a larger lead generation strategy and an additional value added service for existing customers. While the press release focuses on the sale of discounted smart home devices, the home page immediately prompts a user to “start your quote now,” which goes to the Travelers direct website. In addition, there is an icon to “find an agent.”

Exhibit 2

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The “smart home device” aspect has been a growing focus for insurance companies in an effort to better understand/manage homeowners’ losses. Travelers “kit” includes security cameras, water sensors, motion detectors, a Wi-Fi hub and an Amazon Echo Dot (free even without the purchase of a kit). Four states are currently eligible (CA, CO, MO & WI), to be expanded over the year.

Customers receive not only a discount on the products (approx. 10-20%) but also policy discounts, consistent with those already offered for smart home devices.

Management was careful to highlight how the new offerings will be a positive to the current/future growth of agent-generated homeowner’s premium. The press release…

“This is an exciting example of Travelers executing on our innovation agenda to be the undeniable choice for the customer and an indispensable partner for our agents and brokers…It advances our priorities of extending our lead in risk expertise and providing great experiences for our customers, agents and brokers.” - Alan Schnitzer, Travelers Chairman & CEO

“Smart home technology is making it easier for all of us to monitor our homes and help protect us from some of the most common causes of damage. Our Amazon digital storefront conveniently brings together smart home devices, installation services, discounts and insurance knowledge in one central location to help our customers and agents manage risk and take a more proactive approach to home safety…We continually look for innovative ways to help our agents grow their business, and we’re thrilled that this collaboration with Amazon will give them another way to differentiate themselves and Travelers in the marketplace.” - Michael Klein, EVP and President of Travelers Personal Insurance

For Amazon’s part, it’s just the beginning of what will surely be a multifaceted foray into “insurance.” We expect Amazon to concentrate on the fee-based side of the business and have no interest in assuming risk. We expect additional partners on consumer lines and participation in commercial insurance at some point (in the likely not too distant) future. See subsequent article.

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Homeowners Industry Perspective: For perspective, Travelers is the #6 U.S. homeowners’ writer with a 4% market share & 2017 direct premiums of $3.6B. The company has communicated a strong appetite for continued growth (average combined ratio is < 90%), including a focus on more property oriented distribution partners and increasing the # of policies per customers (i.e. cross selling to auto policyholders).

Exhibit 3 Top Homeowners Writers 2017 2017 2017 Mkt Sh Rank Home YOY ∆ H/O YOY ∆ H/O % of '17 '16 Group Name DPW H/O DPW Mkt Sh Mkt Sh Ttl Co GPW 1 1 State Farm $17,557 0% 18.7% -0.5 27% 2 2 Allstate $7,957 1% 8.5% -0.2 25% 3 3 Liberty Mutual $6,471 5% 6.9% 0.2 18% 4 5 USAA Grp $5,704 7% 6.0% 0.0 28% 5 4 Farmers $5,618 2% 6.1% 0.2 28% 6 6 Travelers $3,547 5% 3.8% 0.1 13% 7 7 Nationwide $3,291 0% 3.5% -0.1 17% 8 8 American Family $3,046 7% 3.2% 0.1 35% 9 9 Chubb $2,776 3% 3.0% 0.0 8% 10 10 Erie Ins Grp $1,596 4% 1.7% 0.0 24% 11 11 Auto-Owners $1,417 14% 1.5% 0.1 20% 12 14 Ameri Int'l Grp $1,123 3% 1.2% 0.0 3% 13 12 Met P&C $1,105 -3% 1.2% -0.1 30% 14 15 Progressive $1,092 18% 1.2% 0.2 4% 15 13 Hartford Fncl $1,038 -7% 1.1% -0.1 4% 16 16 Universal Ins $982 12% 1.0% 0.1 93% 17 17 CSAA Grp $899 3% 1.0% 0.0 23% 18 18 Auto Club Ent. $892 4% 1.0% 0.0 22% 19 19 Amica Mutl $848 9% 0.9% 0.1 37% 20 N/A Heritage $785 4% 0.8% 0.0 84% 21 21 National General $742 11% 0.8% 0.1 17% 22 22 United Ins Hldg $712 13% 0.8% 0.1 68% 23 20 Country Ins $673 0% 0.7% 0.0 28% 24 23 Tower Hill $612 1% 0.8% 0.1 80% 25 24 Assurant $609 9% 0.7% 0.0 14%

Source: NAIC, Hales Analysis

The Hales Report Contact: [email protected] Page 4 Dowling Hales Acted as Exclusive Financial Advisor to Anderson McTague & Associates in the Sale of its MGA operations to Totten Insurance Group

Dowling Hales served as the exclusive financial advisor to Anderson McTague & Associates Ltd. (“Anderson McTague” or the “Company”) in the sale of its MGA operations to Totten Insurance Group Inc, a division of Hub International.

Headquartered in Saint John, New Brunswick, Canada and with an additional office in St. John’s, Newfoundland, Anderson McTague has been a trusted brand since 1937 and is the largest independent managing general agency in Atlantic Canada. The Company was named MGA of the Year at the Insurance Business Canada Awards in 2017 and is Canada’s longest-standing Lloyd’s MGA coverholder, since 1966. Anderson McTague underwrites a wide array of commercial multi-peril and property, professional liability, vacant / rented / seasonal dwelling, builders and other specialty product risks.

OTHER RECENT DOWLING HALES TRANSACTIONS

Amazon In Insurance: We’ve Only Just Begun; Commercial Lines In Sight.

As we’ve written previously, Amazon represents a competitive / disruptive threat to nearly every industry on the planet, and insurance is no exception. It’s a matter of “when” (and how) rather than “if” Amazon will take a more meaningful step into commercial insurance. To our minds, one of the most obvious areas where Amazon will show up in commercial insurance, as a lead generator and/or intermediary, is as part of its Amazon Home Services offerings (launched in 2015).

This AHS platform connects Amazon customers to vetted service providers (SP). Proof of liability insurance is a gating issue for potential SP’s to be accepted. The integrated platform already schedules the work and manages the payments / paperwork involved. Amazon is already serving as the “lead gen” service for contractors, keeping a piece of the revenue generated on each job. It’s no great leap to foresee Amazon acting as / getting paid to be a similar “intermediary” for small business insurance. It makes perfect sense for Amazon to offer/quote/bind the SP insurance requirements on the same platform.

Note, these are generally micro small business customers (house cleaners, plumbers, electricians, etc). Given the importance of customer experience / control (and NPS score) to Amazon, we foresee Amazon requiring inclusion as an “additional insured” so as to be involved in any disputes between the customer / service provider / insurance company.

Exhibit 4

Source: Amazon.com

Travelers’ storefront also was not the only insurance-related Amazon announcement of the week, with Spain-based MAPFRE also announcing a strategic partnership with Amazon, including a “virtual office” on Amazon and participation in ‘Amazon Familia’ (family care/support). Initially in Spain, the agreement could expand internationally (MAPFRE has a presence in 100+ countries). The webpage/process is similar to the Amazon/Travelers. The agreement contemplates other strategic pairings such as installing Amazon lockers at MAPFRE offices and/or incorporating Amazon Pay onto the insurer’s website.

The Hales Report Contact: [email protected] Page 6

Hurricane Michael … Another Bullet Dodged, But A Reminder of How Bad Things Could Be. Industry Facing Mid-Single To Low-Double Digit $B Losses.

Hurricane Michael was the 4th most powerful storm at landfall that we’ve seen in the past century but, given the low exposure concentrations in the “Big Bend” area of Florida, insured losses are expected to be manageable at mid-single digit to low- double digit billions. Just imagine if the storm had landed in a populated area.

Perhaps more importantly, the storm serves as yet another reminder that (i) weather events are becoming more extreme, and we may someday soon face the reality of a “Category 6” Hurricane and (ii) 2017 activity was not so unusual, it was the prior decade that saw an unprecedented period of low hurricane activity (no major hurricane landfalls). Just returning to “normal” will have major consequences for (re)insurers.

Exhibit 5 U.S. Landfalling Hurricanes By Decade 30 Major U.S. Landfall Hurricane U.S. Landfalling Hurricane (ex. Major) 25

20 20 15 13 15 13 12 9 9 11 12 10 10 11 9 9 9 13 8 7 1 5 9 10 6 6 7 8 8 8 6 6 7 5 5 5 4 5 3 3

0 2

2017

1850's 1870's 1900's 1920's 1940's 1960's 1980's 1990's 2010's 1860's 1880's 1890's 1910's 1930's 1950's 1970's 2000's

Source: NOAA 2007-2016

Preliminary Michael Insured Loss Estimates …

Karen Clark & Co (KCC) “flash” estimate Thursday suggests insured losses “close to $8 billion” (ex NFIP). Only ~10% of the estimated $3.7B in storm surge losses are covered by insurance. Notably KCC highlights that peak wind speeds were equivalent to an EF-3 tornado! AIR Worldwide estimates losses between $6B and $10B. CoreLogic estimates insured losses from wind and storm surge of $3.0-5.0B, up from its initial (pre-landfall) estimate of $2.0-4.5B.

The majority of losses will come from Florida and (to a lesser extent) Georgia, South Carolina and North Carolina. The fast moving storm will be more of a wind event rather than rain/flood (like Harvey & Florence). That said, the storm quickly weakened to Tropical Storm force upon exiting Florida, so wind damage further north should be limited.

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The Florida residential primary market is unique (dysfunctional) in that it is dominated by single-state “specialist” writers that have emerged at the same time larger (better capitalized) companies have backed away from the peak hurricane exposure. These thinly capitalized Florida companies have very low reinsurance retentions, thus much of the loss will be passed on to reinsurers (again). The state is also at peak cycle for fraud (Assignment of Benefits + lawyer involvement) which will pressure losses higher than they otherwise would be (and higher than models would suggest).

Exhibit 6 Georgia Cat Exposed Market Share % of Ttl. Rank Company CML PL Auto Total U.S. DPW 1 State Farm 4.5% 26.3% 19.8% 19.7% 2% 2 Allstate Corp 2.7% 11.8% 9.5% 9.2% 2% 3 USAA 3.1% 9.6% 8.2% 7.8% 3% 4 Liberty Mutual 10.4% 5.8% 4.1% 5.9% 1% 5 Berkshire Hathaway Inc. 1.8% 0.0% 12.3% 5.4% 1% 6 Progressive 1.0% 1.4% 10.7% 5.1% 1% 7 Travelers Companies Inc. 6.3% 6.0% 3.4% 5.0% 2% 8 Nationwide Mutual Group 4.3% 3.8% 3.3% 3.7% 2% 9 Georgia Farm Bureau 0.6% 5.6% 3.1% 3.7% 60% 10 Auto-Owners Insurance 3.5% 4.0% 3.3% 3.6% 4% 11 Farmers Insurance Group of Cos 1.2% 3.4% 1.6% 2.2% 1% 12 COUNTRY Financial 0.4% 2.9% 1.6% 1.9% 6% 13 American Family Insurance Grp 0.7% 2.3% 1.5% 1.7% 2% 14 Chubb Ltd. 4.2% 1.7% 0.5% 1.6% 1% 15 Cincinnati Financial Corp. 3.5% 1.5% 0.9% 1.6% 3% 16 Hartford Financial Services 2.7% 0.5% 0.5% 0.9% 1% 17 Assurant Inc. 0.7% 1.6% 0.2% 0.8% 1% 18 Tiptree Inc. 1.8% 0.0% 1.0% 0.7% 11% 19 Hanover Insurance Group Inc. 1.8% 0.6% 0.4% 0.7% 1% 20 American International Group (PF) 2.5% 0.5% 0.1% 0.7% 0% 21 1.0% 1.2% 0.1% 0.7% 2% 22 Central Insurance Companies 1.0% 0.8% 0.4% 0.7% 7% 23 Amica Mutual Insurance Co. 0.1% 0.9% 0.6% 0.7% 2% 24 2.8% 0.0% 0.3% 0.6% 0% 25 MetLife Inc. 0.0% 0.7% 0.8% 0.6% 1% Source: Statutory Data, SNL; Hales Analysis

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Exhibit 7 Florida Cat Exposed Mkt Share % of Ttl. Rank Company CML PL Auto Total U.S. DPW 1 Berkshire Hathaway Inc. 1.9% 0.2% 26.4% 8.4% 4% 2 State Farm 1.1% 6.5% 13.9% 7.5% 2% 3 Progressive 2.8% 3.4% 15.5% 6.8% 5% 4 Universal Insurance Holdings 1.3% 9.1% 0.0% 4.6% 86% 5 Citizens Property Ins Corp. 9.1% 4.9% 0.0% 4.4% 97% 6 USAA 0.6% 4.2% 6.8% 4.1% 4% 7 Allstate Corp 0.4% 1.7% 9.1% 3.6% 2% 8 Tower Hill 1.2% 6.4% 0.0% 3.3% 89% 9 American International Group (PF) 6.7% 3.0% 0.4% 3.1% 0% 10 United Insurance Holdings 5.5% 3.3% 0.0% 2.9% 53% 11 Chubb Ltd. 5.5% 2.9% 0.7% 2.8% 3% 12 Liberty Mutual 5.0% 1.4% 3.4% 2.8% 2% 13 Heritage Insurance Hldgs Inc 2.8% 4.2% 0.0% 2.6% 56% 14 FEDNAT 0.0% 4.7% 0.0% 2.2% 71% 15 Security First Insurance Co. 0.0% 3.4% 0.0% 1.6% 83% 16 HCI Group, Inc. 0.2% 3.2% 0.0% 1.6% 89% 17 Florida Peninsula Holdings LLC 0.0% 3.3% 0.0% 1.6% 100% 18 Assurant Inc. 0.9% 2.7% 0.1% 1.5% 4% 19 First Protective Insurance Co. 0.0% 3.0% 0.0% 1.4% 72% 20 Amer Integrity Ins Co. of FL 1.5% 2.3% 0.0% 1.4% 96% 21 Zurich Insurance Group 5.7% 0.0% 0.4% 1.4% 2% 22 Nationwide Mutual Group 3.7% 0.6% 0.8% 1.4% 1% 23 St. Johns Insurance Co. 0.4% 2.5% 0.0% 1.3% 92% 24 Travelers Companies Inc. 1.8% 0.3% 2.3% 1.2% 1% 25 People's Trust Insurance Co. 0.0% 2.3% 0.0% 1.1% 89% Source: Statutory Data, SNL; Hales Analysis

Hurricane Michael adds to an already active year for global catastrophes, with ISO PCS estimating insured losses from domestic cats at $7.3B in Q3 and $29.6B YTD. Internationally, the current insured loss estimate for Q3 stands in the range of $9-15B and YTD in the range of $14-21B. See our previous cat update in Hales #20 for a by event breakdown of Q3 cats.

Since our latest edition of Hales, ISO PCS released an initial insured loss estimate of $2.5B for Hurricane Florence ($2.2B of losses in North Carolina). This estimate excludes losses from NFIP, which cat-modelling agencies have estimated to be in the range of $1-3B. In addition, ISO revised its insured loss estimate upward by $600M to $1.0B for the early July wind and hailstorm, which mainly affected Iowa.

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Exhibit 8

ISO PCS Historical Q3 Cat Losses $68.4 $68.4

10 Year Median ($2.5B) $70.0

$60.0

$48.4 $48.4 $50.0

$40.0

$30.0 $23.7 $23.7

$19.1 $19.1 $20.0 $16.1 $16.1

$8.4 $8.4 $10.0

$7.0 $7.0

$3.7 $3.7

$3.6 $3.6

$0.3 $0.3 $0.7 $1.3 $2.1 $1.8 $2.1 $1.3 $1.3 $2.6 $1.9 $2.5

$0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Hales Analysis, ISO PCS

Hurricanes “HIM” Loss Creep …

In other news, (re)insurers continue to face loss creep from upward movement on insured loss estimates from 2017 storms. ISO PCS increased its insured loss estimate for Hurricane Irma by $1.2B to $22.0B, with the increase mainly concentrated in Florida homeowners. The increase for Irma follows ISO’s upward insured loss revision for Hurricane Harvey by $0.8B to $18.4B in September and Hurricane Maria by $1.6B to $27.3B in August. In total, ISO’s “HIM” estimate is now $67.7B vs. $55.8B initially.

Exhibit 9 ISO PCS "HIM" Insured Loss Estimates ($,B) Harvey Irma Maria $30 $27.3 $28 $25.3 $25.7 $26 $24.0 $24 $21.9 $22.4 $22.0 $20.8 $22 $19.5 $20 $18.7 $18.0 $17.2 $18 $15.9 $18.4 $16 $17.1 $17.6 $17.6 $15.9 $14 $15.1 $15.7 $12 Initial Second Third Fourth Fifth Sixth Seventh Estimate # Source: ISO PCS; Hales Analysis

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IVANS Rate Index Holding Steady With Commercial Rates +2.2% In September

IVANS’ premium renewal rate index shows commercial pricing was +2.2% in September, consistent with the Q2 rate change and marginally behind +2.4% for August.

Most lines saw incremental improvement in Q3 (average of the last 3 months), including Commercial Auto leading at +4.5% (vs. +4.3% in Q2), Commercial Property +3.3% (vs. +3.1% in Q2) and Umbrella +1.9% (vs. +1.8% in Q2). General Liability movement was consistent with Q2 at +2.3%. Weaker rate momentum was seen in BOP +3.8% (vs. +4.0% in Q2) and Workers’ Comp remaining in negative territory at -2.8% (vs. -2.5% in Q2).

Exhibits 10 to 15 IVANS Cml Auto Trends IVANS BOP Trends

5.0% 4.5% 5.0% 4.5% 4.5% 4.0% 4.0% 3.6% 3.5% 3.5% 3.0% 3.0% 2.5% 2.5% 2.0% 2.0% 1.5% 1.5% 1.0% 1.0% 0.5% 0.5% 0.0% 0.0%

IVANS GL Trends IVANS Cml Property Trends 3.0% 4.0% 3.5% 3.5% 2.5% 2.3% 3.0% 2.0% 2.5% 1.5% 2.0% 1.5% 1.0% 1.0% 0.5% 0.5% 0.0% 0.0%

IVANS Umbrella Trends IVANS Workers' Comp Trends 3.0% 1.0% 0.5% 2.5% 2.3% 0.0% -0.5% 2.0% -1.0% 1.5% -1.5% -2.0% 1.0% -2.5% -3.0% 0.5% -2.7% -3.5% 0.0% -4.0%

The Hales Report Contact: [email protected] Page 11

U.S. “Super Regional” Cincinnati Financial Acquires Lloyd’s Platform, Broadening Expertise, Product Breadth And Geography

Cincinnati Financial announced the purchase of Lloyd’s holding company MSP Underwriting Limited from Munich Re. The purchase provides direct access to the Lloyd’s/London market. The deal was the company’s first acquisition in decades as Cincinnati’s historical growth preference has typically been “build” (e.g. adding new agency relationships) rather than “buy.” In explaining “why now” management highlighted the acquisition (a) does not create “channel conflict at all” and (b) supports the company’s agency force by adding expertise, product breadth and geographical diversification through the market’s worldwide licenses, which total 200 plus.

"We have an agency strategy. We're trying to do everything we can to increase our expertise so that we can better partner with the independent agents that represent us. We've added an awful lot of expertise in our excess and surplus lines company that we have, with the people that we've hired in commercial lines that are heading up our new key accounts, and we're taking on more complex risks from our agency partners. And we think the expertise that we are going to be able to partner with here in Lloyd's is going to be very helpful." - Steven Johnston, Cincinnati Financial CEO

MSP’s net written premiums ended 2017 at $162M (3% of Cincinnati’s premiums on a pro forma basis) and were largely comprised of property lines. Specifically, (1) 62% property (direct & facultative) focused on global medium-to-large commercial risks; (2) 31% property (binder) focused on North American commercial property & homeowner; and (3) 7% aviation, mostly smaller airlines and some general aviation, generally no U.S. risks. Going forward, management is targeting compound annual growth of 8% to 12% over the next 5 years as it looks to expand into non-property lines. For example, management highlighted opportunities in areas involving financial risks such as cyber.

Exhibit 16

MSP Business Mix 2017 MSP Geographic Mix 2017 Aviation, Central & Pacific Other, 6% Asia, 4% 7% Property (D&F), Europe, 5% U.S. & Property 62% Canada, (Binder), Caribbean, 5% 73% 31% Central & South America, 7%

The Hales Report Contact: [email protected] Page 12

Transaction Details: The purchase price was £102M cash ($134M) or 1.3x MSP’s net asset value, below other recent Lloyd’s/London transactions which have generally been completed around 1.5-1.6x – Exhibit 17.

We believe the lower price relates to the MSP’s smaller size and potentially the higher concentration to catastrophe and property lines of business.

In regards to the seller, Munich Re, the company has held MSP since October 2007, when it acquired the company for a “mid double-digit million” euro price. The platform is the smaller of two syndicates on which Munich Re participates.

Cincinnati’s acquisition of MSP is expected to close in the first quarter of 2019. The announcement comes on the heels of The Hanover’s Group’s divestiture of Lloyd’s specialist Chaucer announced last month.

Exhibit 17 Recent Lloyd’s/London M&A

Year Lloyd's Takeover Target Buyer Price Multiple (P/TBV) 2018 MSP Underwriting Ltd Cincinnati Financial $134M 1.3x 2018 Chaucer China Re $865M 1.66x 2017 Novae AXIS $604M 1.47x 2016 Ariel Re Argo $235M 1.25x 2016 Ascot Canadian Pension Plan Inv Board $1,100M 1.6x estimated 2016 ANV AmTrust $218.7M Unknown 2015 Amlin MS&AD $5.3B 2.4x 2015 RSA Zurich $8.6B 1.95x 2015 Brit Insurance Fairfax $1.88B 1.6x (1) 2015 Catlin XL $4.2B 1.6x (2) 2014 Sportscover Hamilton £10M-£15M (Est) Unknown (£10M is book value) 2014 Ariel Re BTG Pactual Undisclosed Unknown 2014 Antares Qataris c.£180M >1.4x 2013 Canopius Sompo c.$1B 1.5x 2013 Ark Syndicate Management Ian Beaton and management $420M 1.55x 2013 Jubilee Managing Agency ANV Undisclosed Unknown Notes: (1) 1.6x estimated Brit NTA as of 12/31/14; (2) 1.6x Catlin NTA as of 6/30/14; Source: Co Reports, Hales Analysis

The Hales Report Contact: [email protected] Page 13

State of The Personal Auto Market: Near Term Rates Should Moderate As Profitability Improves. Ultimately, A Shrinking Business Over The Long Term.

In Hales #16 we presented the idea/fact that frequency trends in personal auto have “de- coupled” from actuals miles driven. Simply put, miles driven remain elevated/increasing, while auto frequency has unexpectedly been on the decline.

While advances in car technology & autonomous features will ultimately drive a long- term secular decline in frequency, and shrinking of the auto industry to a fraction of what it is today, it appears too early to conclude the recent frequency declines represent the effect of safer cars entering the fleet. It is impossible to pinpoint the actual cause of the decline, but we nonetheless have been asked to expand upon the current “state of play” in the personal auto market & likely trajectory of premiums (& commissions).

Industry Perspective/Size of Personal Auto… Exhibit 18

Personal Auto has historically been the largest individual line of business across all P&C insurance (40% in 2017). Ultimately, we envision a world where auto premiums decline toward ~10% given spreading usage of advanced / autonomous cars and also more transportation via rideshare and auto manufacturers increasingly looking for ways to “bundle” insurance at the point of sale.

We see the implications coming in 2 broad stages: (1) The intermediate term, where a critical mass of safety improvements, legal/regulatory alignment, and customer acceptance causes frequency to begin to decline, and pricing declines will follow and (2) The longer term, when driverless vehicles reduce frequency to extremely low levels, with much of the remaining liability handled through commercial-type coverages. The follow on implications from this long term view to the entire U.S. insurance industry will be significant and include unneeded capital, excess expenses, and incentives for carrier consolidation.

Notably, the two largest public auto writers have begun to build out “optionality” for a shrinking auto market. Progressive added homeowners to its balance sheet in 2015 (ASI) and has taken “first steps” in small commercial. Allstate has made investments in potential growth areas including forming Arity (provides flexibility in the use of the telematics) and the acquisition of SquareTrade (warranty and service contract business

The Hales Report Contact: [email protected] Page 14

for consumer devices / appliances). Both companies have become commercial insurance partners with Uber.

Exhibit 19 Private Passenger Auto 2017 2016 2017 2016 YOY 2017 2016 Mkt Shr Mkt Shr Company DPW ($M) DPW ($M) Chg Mkt Shr % Mkt Shr % 1 1 State Farm $41,817.39 $39,194.66 6.7% 18.2% 18.3% 2 2 Berkshire Hathaway (GEICO) $29,596.40 $25,531.76 15.9% 12.9% 11.9% 3 4 Progressive $22,786.03 $19,634.83 16.0% 9.9% 9.2% 4 3 Allstate $21,430.40 $20,813.86 3.0% 9.3% 9.7% 5 5 USAA $13,154.94 $11,691.05 12.5% 5.7% 5.5% 6 6 Liberty Mutual $11,585.98 $10,756.23 7.7% 5.0% 5.0% 7 7 Farmers $10,364.45 $10,304.62 0.6% 4.5% 4.8% 8 8 Nationwide $7,341.48 $7,640.56 -3.9% 3.2% 3.6% 9 10 Travelers $4,396.70 $3,896.79 12.8% 1.9% 1.8% 10 9 American Family $4,381.96 $4,005.55 9.4% 1.9% 1.9% 11 11 Auto Club $3,111.85 $2,753.35 13.0% 1.4% 1.3% 12 12 Erie $2,977.42 $2,725.03 9.3% 1.3% 1.3% 13 14 National General $2,905.54 $2,506.08 15.9% 1.3% 1.2% 14 13 CSAA $2,806.07 $2,523.70 11.2% 1.2% 1.2% 15 18 Auto Owners $2,517.76 $2,047.22 23.0% 1.1% 1.0% 16 16 Mercury $2,453.39 $2,423.83 1.2% 1.1% 1.1% 17 17 MetLife $2,404.56 $2,339.25 2.8% 1.0% 1.1% 18 15 Hartford $2,309.96 $2,484.24 -7.0% 1.0% 1.2% 19 20 Auto Club of MI $1,771.55 $1,654.53 7.1% 0.8% 0.8% 20 19 Mapfre $1,681.85 $1,664.73 1.0% 0.7% 0.8% 21 22 Kemper $1,399.81 $1,241.75 12.7% 0.6% 0.6% 22 23 Amica $1,319.59 $1,210.73 9.0% 0.6% 0.6% 23 21 Infinity P&C $1,233.89 $1,256.11 -1.8% 0.5% 0.6% 24 24 Country Ins $1,109.44 $1,035.50 7.1% 0.5% 0.5% 25 25 The Hanover Group $1,107.00 $1,013.64 9.2% 0.5% 0.5% Industry $229,706.25 $214,127.55 Source: NAIC, SNL

Recent Rate & Loss Cost Trends …

Rate increases previously taken, as well Exhibit 20 as an unexpected decline in accident Personal Auto Premium CPI frequency, have helped most major auto 12% insurers see greater profits year over year 10% through the first half of 2018. Given the 8% 6.6% trend of improving profitability witnessed 6% in recent periods, personal auto YOYChange 4% insurance premium increases are now 2% decelerating. The latest CPI data shows 0% Sep- Sep- Sep- Sep- Sep- Sep- Sep- Sep- Sep- Sep- auto premium growth of 6.6% in 09 10 11 12 13 14 15 16 17 18 September (down from peak of nearly Source: Bureau of Labor Statistics 10% in February).

The Hales Report Contact: [email protected] Page 15

As personal auto insurance premiums decelerate, the Dowling & Partner’s CPI “Loss Cost Index” has begun to moderate for the three months that make up the 3rd quarter. Recall, there are 3 key components to the Loss Cost Index: Medical Care (50%), Auto Body Work (40%) and Used Cars & Trucks (10%).

Medical Care increased to +1.7% in September vs +1.5% August. This was offset by a decrease in Used Cars and Trucks, which was back to negative at -1.5% vs +1.3% in August. Auto Body work also was lower at +2.7%, reverting from its upward trajectory that it was on since March. As cars become more complex, we expect the Auto Body Work index to realign and continue on its upward trajectory.

Driven by the deceleration in premium, the gap between premium and loss costs expanded in September to 4.8% vs 4.2% in August.

Exhibit 21 2017 2017 2017 2017 2017 2017 2018 2018 2018 2018 2018 2018 2018 CPI - Auto Related Sep Oct Nov Dec Jan Feb Mar Apr May June July Aug Sep Motor Vehicle Ins. Premium 8.2% 8.2% 8.0% 7.9% 8.5% 9.7% 8.9% 9.0% 8.3% 7.6% 7.4% 6.4% 6.6% Medical Care (Bodily Injury - 50%) 1.6% 1.7% 1.7% 1.8% 2.0% 1.8% 2.0% 2.2% 2.4% 2.5% 1.9% 1.5% 1.7% Auto. Body Work (PD - 40%) 3.1% 2.3% 1.3% 1.9% 2.4% 2.7% 2.4% 2.2% 2.5% 2.9% 2.9% 3.3% 2.7% Used Cars & Trucks (PD - 10%) -3.7% -2.9% -2.1% -1.2% -0.6% -0.1% 0.4% -0.9% -1.7% -0.7% 0.8% 1.3% -1.5% Weighted Avg. Phys. Dam. 1.7% 1.2% 0.6% 1.2% 1.8% 2.2% 2.0% 1.6% 1.7% 2.2% 2.5% 2.9% 1.9% D&P Loss Cost Index 1.6% 1.5% 1.1% 1.5% 1.9% 2.0% 2.0% 1.9% 2.0% 2.3% 2.2% 2.2% 1.8% Premium-Loss Severity Gap 6.6% 6.7% 6.8% 6.4% 6.6% 7.8% 6.9% 7.1% 6.3% 5.3% 5.3% 4.2% 4.8% Other Auto Related Motor Vehicle Main. & Repair 2.5% 2.8% 1.9% 1.8% 1.4% 1.5% 1.5% 1.5% 1.6% 2.3% 2.3% 2.3% 2.2% Motor Vehicle Parts & Equip. 0.3% -0.6% -0.3% -0.5% -0.3% -0.3% -0.4% -0.7% 0.2% 0.3% 0.1% 0.4% 0.4% Prof. Medical Services 0.2% 0.4% -0.3% -0.3% -0.2% 0.1% 0.6% 1.3% 1.1% 1.5% 1.4% 0.8% 0.9% Hospital & Related Services 4.3% 4.5% 4.7% 5.1% 5.6% 4.7% 4.9% 4.2% 4.5% 4.5% 4.3% 4.1% 3.7% New Vehicles -1.0% -1.4% -1.1% 0.7% -1.2% -1.5% -1.2% -1.6% -1.1% -0.5% 0.2% 0.3% 0.5% Source: Bureau of Labor Statistics, Dowling & Partners

For over 10 years (2007-2017) miles Exhibit 22 driven and paid claims frequency have Miles Driven vs Fast Track TTM Total PD Claims Frequency TTM PD Paid been positively correlated. However, Miles Driven (M) Claims Freq. TTM Miles Driven TTM Frequency over the past year this positive 3,250 3.65 3,200 3.60 correlation has turned negative. This 3,150 3.55 3,100 interesting trend has led many to ask 3.50 3,050 3.45 the question whether we are becoming 3,000 better at driving “distracted” or rather 2,950 3.40

the safety features embedded in the 2,900 3.35

Jan-06 Jan-07 Jan-08 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-10 Jan-11 modern auto fleet are finally coming Jan-09 into fruition. Source: Fast Track, Federal Highway Admin, Bureau of Transportation

While surprisingly persistent, it seems too early to conclude the recent declines in frequency are a return to the long-term secular decline alluded to above, but the steady upward trend over the past few years had been broken in 2017-18.

The Hales Report Contact: [email protected] Page 16

Whatever the cause, the favorable frequency trend has caused profit margins to rise and, with the earn-through of recent rate increases, has helped to produce some of the best combined ratios seen in years for the Auto industry. Competition is on the rise, but rising severity should keep auto rates in positive territory.

Growth Aspirations Differ By Company … Auto writers always need to engage in a balancing act between growth and profitability. The two metrics often (but not always) have an inverse relationship. Growth (or the wrong kind of growth) can cause margin compression, while reducing growth often can generate margin improvement.

For those currently trying to maximize growth, the market situation may vary: Progressive has carved out their position as the leader in growth. Allstate has begun to show positive growth after decreases through 2016-2017. Kemper’s acquisition of Infinity allows it to gain the scale necessary to build its position in the auto market. GEICO’s growth has slowed down the past few quarters due to rate increases taken during late 2017 and into 2018, which may have helped Progressive’s recent growth. Travelers and The Hartford have just begun to direct their attention to growth metrics, after nearing the latter stages of their efforts to restore profitability.

For context, GEICO has added nearly 769K PIF over the past 12 months which is larger than stand-alone Infinity. However, GEICO’s PIF growth has dropped off significantly vs. Progressive, which, over the last 12 months, has more than doubled GEICO’s PIF growth and added 1.7M PIF, or larger than The Hartford.

Exhibit 23 GEICO & PGR PIF Increase Vs. Peer Total Auto PIF Count 3,000 YOY Incr. in PIF # PIF (000s) 2,517 2,500 PF Kemper/ 2,000 1,715 Infinity larger 1,589 entity, but 1,500 1,432 KMPR Auto 1,134 PIF N/A 1,000 769 732 471 500 0 Progressive GEICO Travelers Hartford Esurance Mercury Infinity P&C Horace Source: Company Reports Mann

The Hales Report Contact: [email protected] Page 17

NFIP Removes Barriers To Entry For Flood Insurance Market In An Apparent Effort To Spur Growth Of Private Market Alternative.

In the lead up to the National Flood Insurance Program’s (“NFIP”) reauthorization, effective 10/1/18 the Federal Emergency Management Agency (“FEMA”) removed its non-compete restrictions on write-your-own (“WYO”) flood carriers. The change will allow private insurers participating in the WYO program to offer flood insurance and compete directly with the NFIP.

With debt exceeding $20B and rates that have long been below actuarially sound levels, it appears that FEMA is taking some initial steps to depopulate the NFIP. Evolution in the private flood market is an important topic to watch as it is a tremendously underinsured peril (as evidenced in 2017, where a fraction of total economic losses were insured). Chubb CEO Evan Greenberg recently weighed in on the topic.

“The way the NFIP is crafted today, it discourages more private sector participation. The private sector can do much more than it is doing in terms of taking on flood risk. The government’s role, I would suggest, would be in two areas. Number one, for those who can’t afford flood insurance protection, they can’t afford to pay for it but they live in a flood-exposed area, subsidizing… that’s a social decision. To subsidize those people because you can’t charge an actuarially sound rate, that I see as a role for government. The industry should be charging actuarially sound pricing. Number two, there is a tail on flood that goes for a while beyond the industry’s wherewithal or appetite and I see the government, like TRIA or like in crop insurance, playing a role. But I do not think that over time, given the global balance sheet and both traditional capital and alternative capital, that tail risk over time could be displaced – could – the private sector could displace the federal role.” Evan Greenberg, Chubb Chairman & CEO, Q4:17 Conference Call

We suspect some WYO carriers will take advantage of the opportunity in the near-term, but the pace of private market growth remains a topic to watch. It’s likely many WYO carriers currently do not have enough data and underwriting & claims management expertise to offer flood coverage on a large scale… but that doesn’t mean they won’t get there. Assurant, as an example, made the investment in flood data/ mapping and has already successfully navigated the “rules” of the WYO program to offer both NFIP and private coverage. All said, in our view the actions taken by FEMA are a positive step towards helping develop the private market by changing how the NFIP operates.

The Hales Report Contact: [email protected] Page 18

Exhibit 24 Currently, ~86% of NFIP policies are sold by 70 WYO participating 2017 Federal Flood Market Share insurers. The remaining ~14% of ($2.9B DPW) policies are sold directly with All Other Wright Marsh McLennan subsidiary 25% National 21% Torrent acting as service provider. Farmers 4% Broker Brown & Brown subsidiary Assurant 19%

Wright National is the largest USAA 5% Selective 8% Hartford 9% provider of WYO coverage and Allstate 9% through a sister company also provides flood risk management Source: Hales Analysis, ISO PCS and claim adjusting services.

From a legislative perspective, the topic of non-compete restrictions for WYO carriers has been one of many sticking points amongst federal legislators. Those opposing the lifting of the restriction have consistently cited that private carriers will “cherry pick” the better risks, potentially leaving the NFIP in a worse financial position than it already is. It’s possible WYO non-compete restrictions will be formally written into law once the program is officially reauthorized, but it’s unclear when that will occur.

The program will expire on 11/30/18 but there has been little legislative movement since the House of Representatives passed a 5-year reauthorization in November of last year. The midterm elections will likely serve as an additional distraction. It’s more likely the program will continue “as is” through a short-term extension (as it has over the past several years).

The Hales Report Contact: [email protected] Page 19

Deloitte Sees “Second Wave” of InsurTech Focusing On Proven Platforms; Start-Up Activity Slows

Deloitte published a report on InsurTech entering its “second wave,” shifting from new start-ups to more established innovators.

While start-up activity has plummeted (only 4 in H1:18), Deloitte acknowledges investors are channeling more capital into proven entities, often in late-stage and follow-on funding rounds.

“The dramatic decline in startup activity does Exhibit 25 not mean the InsurTech gold rush of the past InsurTech Funding By Stage ($M) decade is coming to an end. On the contrary, $2,000 $1,956 Series A Series B money continues to pour in, with first-half Series C Late Stage

2018 InsurTech investments of $869M $1,500 seemingly on track to at least equal the $1,177 $1,131 $1.83B in funds raised last year” (industry’s $1,000 2nd highest level; driven mostly by personal $751 lines). Late-stage InsurTech investment in the $500 $333 first half—defined as Series D and above—is $219 $261 $162 $128 64% higher than for all of 2017, while Series A $73 $59 $- funding topped out in 2015 at $1.156B (only $233M in H1:18 vs. $311M YOY). Ventur e Scanner data, Deloitte Center for Financial Ser vices

“Many of those interviewed indicated that the ‘gee whiz’ investment stage has likely passed for most InsurTech areas at the moment, with capital providers focusing instead on giving an additional boost to those showing real progress rather than just potential.” - Deloitte’s InsurTech Report, October 2018

That said, Deloitte suspects start-up activity could see a resurgence, but the focus is likely to shift away from personal lines and more towards commercial P&C and life & annuity. M&A is also likely to accelerate in the coming years (currently about 1 in 10 start-ups have been acquired) as both traditional and newer start-up companies seek to merge capabilities.

Deloitte detailed 4 strategic benefits that could be harnessed through digital transformations, while warning incumbents not to be too resistance to more holistic and broader change. “Going forward, carriers should reconsider the broader and longer-term strategic implications for their business as they engage with InsurTechs, or risk defaulting to ongoing incrementalism.”

The Hales Report Contact: [email protected] Page 20

Agent & Brokers Employment Decreases (0.1%), First Time Since 2011

The latest U.S. Labor Department’s Bureau of Labor Statistics (BLS) employment data shows the agent/broker segment lost 700 jobs in August 2018 vs. August 2017, a decrease of 0.1% YOY. A total of 807,800 are employed.

The trend of low, sub-2% employment growth seen for over 2 years continued in July. Agency and broker growth (-0.1%) again lagged total nonfarm U.S. employment which was +1.7% for September.

Exhibit 26 U.S. Agency & Brokerage Employment History 850 Recession # Employed (000s) 1 800 1 750 1 700 1 650 0 600 -0.1% in August 2018 550 [Compares to P/C Carriers 0 -1.3% & U.S. Nonfarm +1.7%]

500 0

Jan-90 Jan-91 Jan-92 Jan-93 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-18 Source: U.S. Bureau of Labor Statistics

Comparatively, the 0.1% decrease for agents/brokers is less significant than the 1.3% decrease in P/C carrier employment (fifth consecutive decrease). Life/annuity carrier employment increased 1.0% (largest since April 2017). Health carriers remain in the lead at +2.3%, having moderated and at its lowest growth levels since 2016.

Exhibit 27 U.S. Agency & Brokerage Employment History Year-on-Year Change By Industry Agency & Brokers Total P&C Total U.S. Nonfarm 10.0%

5.0%

0.0%

-5.0%

-10.0%

Source: U.S. Bureau of Labor Statistics

The Hales Report Contact: [email protected] Page 21

Hales Hits:

 Brown & Brown filed a suit against former employees and 3 affiliated companies they’ve recently formed (allegedly planned while employed by B&B), seeking an unspecified amount in monetary damages as well as an injunction. Foundation Risk Partners, founded January 2017, is led by Charlie Lydecker as CEO (was President of B&B Retail) Corey Walker as CFO (was longtime CFO of B&B), Thomas Tinsley as Chief Admin Officer (was B&B Retail CFO) and Benjamin Barbieri as Chief Sales Officer (was a producer for B&B). Alan Florez (former leader of B&B’s Daytona Beach profit center) is CEO of affiliated Halifax Insurance Partners. Note, this follows the suit against Assured Agencies and its leaders Jim Henderson (former B&B Chief Ops Officer) & Tom Riley (B&B Chief Acquisition Officer) which resulted in a $20M net gain.

 LendingTree will acquire Seattle-based QuoteWizard.com, an online insurance comparison marketplace founded in 2006, for possible total consideration of $370M. Based on 6-month revenue and adj. EBITDA of $76M and $13M, the valuation appears to be ~2.5x and ~14x, respectively. QuoteWizard is essentially an insurance lead generation operation focused on auto, home & health with 30+ carrier relationships and a network of ~10K agents. For Lending Tree, the deal also brings potential cross selling potential of insurance with mortgage and/or auto loans.

 Bernie Sanders introduced a bill that would require the breakup of any financial company with exposure totaling >3% of U.S. GDP, which would include Berkshire, Prudential, MetLife and AIG. This follows Elizabeth Warren’s bill that would require directors of companies with >$1B of annual revenue “to consider the interests of all major corporate stakeholders—not only shareholders—in company decisions.”

 Thank deer for favorable auto frequency? State Farm’s 16th annual study of auto collisions with deer shows that the rate of the nation’s drivers involved in collisions with deer, elk, moose or caribou fell to 1 in 167 (vs. 1 in 162 in last year’s study).

 Marsh Agency announced the acquisition of Louisiana-based Eustis Insurance & Benefits; terms were not disclosed. This is MMA’s 3rd acquisition this year (1st ever in Louisiana) compared to 4 in 2017. Recall, amidst the acquisition of #6 broker JLT for $6.4B, MMC management suggested they will continue to support Marsh Agency M&A, albeit on a more “selective” basis. While falling outside of the Hales Top 100 ($25M revenue threshold) Eustis still appears to be a decent sized agency with ~100 employees.

The Hales Report Contact: [email protected] Page 22

 Brown & Brown acquired FNI Management Group, a provider of F&I products and training based in Chicago with $1.5M of revenues. B&B has now acquired 18 firms so far in 2018 with ~$97M of annual revenue (compared to 11 deals with $17M of revenue in 2017).

 Willis Towers Watson announced an international InsurTech partnership with Plug and Play, a global innovative platform. The agreement extends Willis’ access to early stage InsurTech start-ups across all Plug and Play’s platforms, including Beijing, Munich, New York, Silicon Valley, Singapore, and Tokyo.

 Arthur J. Gallagher announced the acquisition of Mississippi-based Wellington Associates, a full service agency providing P/C and employee benefits. AJG has now acquired 30 firms so far in 2018, compared to 31 acquisitions this time last year (acquired revenues are provided on a quarterly basis; through 6 months acquired revenues totaled $172M vs. $93M YOY).

 Chubb pre-announced Q3-18 catastrophe losses of $450M, noting an aggregation of more than 20 separate events, including Hurricane Florence, a rain/ hail event in CO, Typhoons Jebi and Mangkhut and the CA wildfires. London-listed underwriter Lancashine also pre-announced cat losses of $55-75M, with nearly ½ relating to its marine portfolio and a sizeable “super yacht” loss.

 Startup surplus lines broker Jumpstart announced its launch, offering CA homeowners/ renters parametrically triggered earthquake coverage ($10K limit). The product is designed to provide insureds with immediate access to cash post event via a direct deposit into a bank account. Jumpstart will partner with wholesaler AmWINS and Lloyd’s Channel Syndicate 2015 (capacity to the syndicate is provided by SCOR).

 Kittyhawk, the market leader in enterprise drone operations software, announced an investment from Travelers, which will help the company “bring unified drone operations to new markets.” Kittyhawk has supported Travelers by streamlining data, hardware and software into one single record system. Travelers currently has ~600 dedicated claim professionals that are FAA- certified drone pilots.

The Hales Report Contact: [email protected] Page 23

U.S. Deal Diary – Q4 Updates: The 25 deals over the past 2 weeks put the total Q4 count of deals at 22 (vs. 149 total in Q4 2017). So far this year, the deal tally of 462 is slightly lower than 469 at this time last year.

Exhibit 28 U.S. Middle Market Agency Transactions By Quarter / Year

Q1 Q2 Q3 Q4 591 600

500 464 149 439 462 388 22 400 348 354 366 104 119 331 338 127 157 289 106 300 277 268 91 95 86 106 144 95 108 59 220 236 71 101 160 200 94 67 85 75 86 80 79 146 61 72 68 118 130 72 69 75 42 60 77 60 83 100 57 89 80 48 52 155 109 49 98 122 107 137 91 88 66 91 58 62 91 74 48 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD Source: SNL(Preliminary), Factset, other public sources

Exhibit 29 2018 Most Active Acquiring Brokers - Monthly (Domestic Deals) 2017 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 2018 YTD National Brokers Acrisure, LLC 92 9 7 13 6 3 4 9 9 11 7 78 AssuredPartners, Inc. 23 2 5 - 3 3 3 4 - 7 - 27 Broadstreet Partners 35 4 2 2 5 3 1 3 3 3 - 26 Alera Group 16 1 4 2 2 4 3 1 1 3 2 23 Hub International 42 1 3 3 3 3 2 1 2 2 1 21 Arthur J. Gallagher & Co. 26 3 1 1 1 3 5 2 - 3 1 20 Brown & Brown 6 - 1 1 2 2 2 5 1 4 1 19 Seeman Holtz 19 - 1 1 2 2 - 3 4 - 2 15 NFP Corp. 26 - 1 2 3 2 - 3 1 1 - 13 Marsh & McLennan Companies 6 - 1 - - - 2 2 - 1 1 7 RSC Insurance Brokerage, Inc. 8 - 1 - - 3 - 1 - 1 - 6 Hilb Group, LLC 13 - - - - 1 2 1 - - - 4 USI, Inc. 8 - - 1 - 1 - - - 1 - 3 Sub-Total 320 20 27 26 27 30 24 35 21 37 15 262 Other 271 27 21 16 23 20 22 26 19 19 7 200 Total Broker Deals 591 47 48 42 50 50 46 61 40 56 22 462 Source: SNL, Factset, and other public sources through YTD

Exhibit 30 2018 U.S. Middle Market Brokerage M&A Since October Acquiree Date Acquirer Acquiree State 1-Oct J. Edwards Insurance Agency, Inc. Johanson Agency, Inc. NY 1-Oct Seeman Holtz Property and Casualty, Inc. Spencer Insurance Agency LLC FL 2-Oct Alliant Insurance Services, Inc. Zande Group Member of Robertson Ryan & Associates, Inc. IL 2-Oct Stewart Information Services Corporation Bay Area Title Services LLC TX 2-Oct Worldwide Facilities, LLC Draco Insurance Solutions, Inc. MA 3-Oct Marsh & McLennan Companies, Inc. Eustis Insurance & Benefits LA 3-Oct Sharpline Insurance Brokerages LLC Genesis Asset Protection, Inc. PA 4-Oct Hub International Liberty New Gate Insurance Services, LLC CA 8-Oct Kapnick & Company, Inc. A. E. Mourad Agency, Inc. MI 9-Oct Alera Group, Inc. Distinctive Insurance NV 9-Oct Alera Group, Inc. GLB Insurance Group of Nevada NV 9-Oct Seeman Holtz Property and Casualty, Inc. Allstar Assurance FL 11-Oct American Financial Group, Inc. ABA Insurance Services Inc. OH 11-Oct Arthur J. Gallagher & Co. Wellington Insurance MS 11-Oct Edgewood Partners Insurance Center, Inc. Total Management Corporation NY Source: SNL, Factset, other public sources; Note: Does not include deals where target was not disclosed, Excl. Acrisure Deals. The Hales Report Contact: [email protected] Page 24

Public Broker Valuations:

Exhibits 31, 32, & 33

Broker Price Performance vs. S&P 500 (Since YE'16) 35.0% S&P 500 (23.6%) Broker Composite (24.8%) 30.0%

25.0%

20.0%

15.0%

10.0%

5.0% Source: Factset

0.0%

1/31/17 2/28/17 3/31/17 4/30/17 8/31/17 9/30/17 3/31/18 4/30/18 5/31/18 6/30/18 5/31/17 6/30/17 7/31/17 1/31/18 2/28/18 7/31/18 8/31/18 9/30/18

10/31/17 11/30/17 12/31/17 12/31/16

Historical Public Broker EV/EBITDA Brokers Middle Market Brokers 16.0

14.0 13.4x

12.0 12.8x

10.0

8.0

Source: Company Reports, Factset

6.0

Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Current

Public Broker P/E vs. S&P 500 - 5 Year Brokers S&P 500 22.5

20.0 17.3x 17.5

16.4x 15.0

12.5

Source: Company Reports, Factset

10.0

2/14 6/14 8/14 2/15 6/15 6/16 8/16 2/17 6/17 8/17 6/18 4/14 4/15 8/15 4/16 4/17 2/18 4/18 8/18

12/13 12/14 12/15 12/16 12/17 10/18 10/13 10/14 10/15 10/16 10/17

The Hales Report Contact: [email protected] Page 25

Important Disclosures

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. This report is not an offer to buy or sell any security or to participate in any investment. The firm has no obligation to tell you when the opinions or information in this report change. The information and statistics contained herein are based upon sources which we believe to be reliable, but have not been independently verified by us. The firm makes every effort to use reliable comprehensive information, but makes no representation that it is accurate or complete. The firm may, at any time, hold a position in the public shares or private equity of any companies discussed in this report.

The Hales Report Contact: [email protected] Page 26