Europe Insurance by GS

June 25, 2012

Europe: Insurance

Equity Research

Messages from EFC: Constrained by the macro but no need to panic

EFC presentations focused on well known constraints

Most presentations from our 16th European Financials Conference focused

on two well worn themes: European sovereign and bank debt exposure

and coping in a low interest rate environment. Both are obvious

constraints, whose impact is difficult to anticipate or quantify using current

disclosure. We expect a drip feed of information on the impact of low

interest rates on insurance company earnings (similar to that released at a

recent Aegon investor event).

Companies still have options, time is on their side

Despite macro constraints, companies have time to manage their balance

sheets; both the current and future European capital regimes treat European

sovereign debt as risk free and, according to the EC representative

overseeing Solvency II, progress is being made on contentious Solvency II

issues such as a counter-cyclical adjustment and US equivalence. On the

latter point, should US equivalence not be granted, a 5-year transition period

would allow companies to adapt accordingly. Continued macro uncertainty

is likely to push companies towards in-force solutions to release economic

capital. In this respect, Axa has released an SEC filing in preparation for

making an offer to a small group of GMDB variable annuity policyholders to

recapture their policies. This has the potential to increase economic capital

and may be replicated in other parts of the business.

Adjusting ratings, price targets, transferring coverage

Following market and currency moves we make minor adjustments to our

estimates and price targets. Recent underperformance has resulted in

inadequate downside to support our Sell ratings on Resolution and Swiss

Life and we consequently upgrade both to Neutral. Conversely, we add

both Topdanmark and Trygvesta to our Sell List (from Neutral) on

valuation grounds. We remove Delta Lloyd from our Conviction List but

retain a Buy rating. Colin Simpson assumes primary coverage of: Ageas

SA/NV (AGES.BR); CNP Assurances (CNPP.PA), Delta Lloyd (DLL.AS),

Fondiaria-Sai (FOSA.MI), Fondiaria-Sai (Savings) (FOSAn.MI), Assicurazioni

Generali (GASI.MI) and Unipol (Ordinary Shares), (UNPI.MI), Unipol

(Preference Shares) (UNPI_p.MI). Vinit Malhotra assumes primary coverage

of: Baloise (BALN.VX), Helvetia Holding AG (HELN.S), Swiss Life Holding

(SLHN.VX) and Vienna Insurance Group (VIGR.VI).

RATINGS AND 12-MONTH PRICE TARGETS

Source: Datastream, Goldman Sachs Research estimates

Coverage view: Neutral

Colin L.Simpson +44(20)7552-2852 [email protected] Goldman Sachs International Goldman Sachs does and seeks to do business with

companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.

Vinit Malhotra, CFA +44(20)7774-3488 [email protected] Goldman Sachs International Ron Heydenrijk +44(20)7552-9356 [email protected] Goldman Sachs International Ravi Tanna +44(20)7774-2948 [email protected] Goldman Sachs International

The Goldman Sachs Group, Inc. Global Investment Research

Old New Old New

Aegon € Neutral Neutral 4.41 4.00 3.6 12%Ageas € Neutral Neutral 2.0 1.8 1.4 31%

Allianz € Buy* Buy* 110 110 76.4 44%

Generali € Neutral Neutral 13.5 12.0 10.2 18%

Aviva £ Buy Buy 399 370 278.0 33%AXA € Buy* Buy* 17.0 15.1 10.2 48%

Baloise CHF Buy Buy 90 90 62.8 43%

CNP € Buy Buy 15.0 11.9 8.6 38%Delta Lloyd € Buy* Buy 20 16 10.8 48%

Fondiaria‐Sai € NR NR na na 1.0 na

Fondiaria‐Sai (Sav) € NR NR na na 0.5 naGjensidige NKR Neutral Neutral 74 77 68.4 13%

Hannover Re € Neutral Neutral 47 51 45.7 12%

Helvetia CHF Neutral Neutral 370 350 281.3 24%Mapfre € Neutral Neutral 2.73 2.16 1.7 30%

Resolution £ Sell Neutral 273 235 202.7 16%

Swiss Life CHF Sell Neutral 102 102 89.7 14%Topdanmark DKR Neutral Sell 964 1006 1005.0 0%

Tryg DKR Neutral Sell 336 329 327.8 0%

Unipol € NR NR na na 19.3 na

Unipol (Pref) € NR NR na na 9.5 naVienna € Neutral Neutral 40.0 37.5 31.4 19%

*denotes Conviction List membershipNR = Not Rated

Rating Price Target %

upsidePrice

Currency

June 25, 2012 Europe: Insurance

Goldman Sachs Global Investment Research 2

Exhibit 1: EPS changes for a number of companies

Source: Goldman Sachs Research estimates.

Exhibit 2: Changes to ratings and price targets

Prices as of the close of June 21, 2012

Source: Goldman Sachs Research estimates.

Company Currency

2012E 2013E 2014E 2012E 2013E 2014E 2012E 2013E 2014E

Aegon € 0.53 0.61 0.68 0.53 0.56 0.58 0% ‐8% ‐15%

Aviva £ 57.37 60.71 64.19 54.53 57.85 61.31 ‐5% ‐5% ‐4%

AXA € 1.90 2.16 2.56 1.77 2.13 2.37 ‐7% ‐1% ‐7%

CNP € 1.73 1.79 1.85 1.69 1.75 1.81 ‐2% ‐2% ‐2%

Delta Lloyd € 2.48 2.60 2.72 2.43 2.49 2.55 ‐2% ‐4% ‐6%

Hannover Re € 5.59 5.62 5.79 5.59 5.91 6.09 0% 5% 5%

Resolution £ 30.02 35.10 37.65 29.09 34.08 36.53 ‐3% ‐3% ‐3%

Vienna € 3.25 3.39 3.54 3.17 3.37 3.60 ‐2% ‐1% 2%

EPS (New) % changeEPS (Old)

Old New Old New

Aegon € Neutral Neutral 4.41 4.00 3.6 12%

Ageas € Neutral Neutral 2.0 1.8 1.4 31%

Generali € Neutral Neutral 13.5 12.0 10.2 18%

Aviva £ Buy Buy 399 370 278.0 33%

AXA € Buy* Buy* 17.0 15.1 10.2 48%

CNP € Buy Buy 15.0 11.9 8.6 38%

Delta Lloyd € Buy* Buy 20 16 10.8 48%

Hannover Re € Neutral Neutral 47 51 45.7 12%

Mapfre € Neutral Neutral 2.73 2.16 1.7 30%

Resolution £ Sell Neutral 273 235 202.7 16%

Swiss Life CHF Sell Neutral 102 102 89.7 14%

Topdanmark DKR Neutral Sell 964 1006 1005.0 0%

Tryg DKR Neutral Sell 336 329 327.8 0%

Vienna € Neutral Neutral 40.0 37.5 31.4 19%

Gjensidige NKR Neutral Neutral 74 77 68.4 13%

Helvetia CHF Neutral Neutral 370 350 281.3 24%

*denotes Conviction List membership

% upsideCurrency Rating Price Target

Share Price



Exhibit 3: Reasons for our estimate and price target changes

Source: Compiled by Goldman Sachs Research.

Company Reasons for changes to earnings and price targets

Aegon Lower interest rates, lower equity markets impacting Aegon's economic balance sheet

Ageas Impact of lower interest rates and lower equity markets

Generali Decline in Generali's economic book value as a result of widening Italian sovereign spreads, lower swap

rates, and equity markets

Aviva Lower interest rates and equity markets impacting both earnings and economic book value

AXA Lower interest rates and equity markets impacting both earnings and economic book value

CNP Lower interest rates and equity markets impacting both earnings and economic book value

Delta Lloyd Lower interest rates and equity markets impacting both earnings and economic book value

Hannover Re We increase our 12m SOTP based PT to €51 (€47) with the increase split about equally between revised

earnings (due to higher life technical margin) and higher PE multiple for non life of 8.5x (vs. 8.0x previously).

The higher PE multiple is to reflect the credit given by the market to Hannover’s €1.1bn reserve buffer.

Mapfre We cut our 12m SOTP based PT to €2.16 (€2.73) as we factor in a lower PE multiple for the Spanish business

at 5x (previously 8x) to reflect the markets’ concerns on the ongoing Spanish sovereign crisis

Resolution We reduce our ROIC‐derived 12 month price target from 273p to 235p following declines in the equity

market, which has impacted back book cash generation. We also increase the cost of equity assumption in

our ROIC valuation to reflect the execution risks of the new strategy. This new price implies 16% potential

upside, which is sufficient to upgrade the stock from Sell to Neutral

Swiss Life We upgrade Swiss Life to Neutral (Sell) with our unchanged 12m Price target of Sfr102, offering a 15% upside

which we believe no longer merits a Sell recommendation.

Topdanmark We increase our 12‐month SOTP‐based price target to Dkr1006 (Dkr964) as we increase the multiple on

Topdanmark’s technical results to 12x (previously 11x) and reduce the multiple on the investment income to

10x (previously 10.5x)

Tryg We make a minor revision to our 12‐month SOTP‐based price target to Dkr329 per share (Dkr336) as we now

use 12x for the technical result and 10x for the investment result applied to our 2013 net income forecasts

(vs. previously 12x for investment result as well)

Vienna We cut our PT from €40 to €37.5 as we now apply a 10x multiple to our 2013 estimates on P&C and Life and

a 12x for the more stable health business. We previously applied an MCEV based approach to valuing Vienna

Insurance

Gjensidige We increase our PT to Nkr77 (Nkr74) as we lower the cost of equity for fair value of operations from 9.5% to

9.0%

Helvetia We cut our 12m SOTP based PT to Sfr350 per share where we value 2013 earnings at a PE multiple of 8.0x

for P&C and Life (vs. 8.5x previously). (To reflect higher cost of equity from lower swiss yields).



Exhibit 4: Key risks to our earnings estimates, price targets and ratings

Source: Goldman Sachs Research

Company Key risks PT period Price target methodology

Aegon Key downside risks include lower interest rates in the US, weaker US dollar and credit losses. 12 months ROIC

Ageas Key downside risks include continued sovereign concerns in Europe and a sustained period of low interest

rates. Key upside risks include a faster‐than‐expected recovery in the non‐life operations.

12 months SOTP

Generali Key downside risks include a sustained period of low interest rates and continued net outflow in the French

life business. Key upside risks include an improvement in the European sovereign situation.

12 months MCEV/ROIC

Aviva Key downside risks include deterioration in risky asset prices or European economic growth and significant

disruption to Aviva's operations from its current restructuring program.

12 months MCEV/ROIC

AXA Lower bond yields and losses on credit and equity holdings are key risks to our rating and price target. 12 months MCEV/ROIC

CNP Key downside risks include deterioration in the peripheral sovereign landscape, changes in the Livret product

structure in France after the elections and term deposit rates for French banks remaining sticky. The low

free float (24.5%) may also introduce some liquidity risk.

12 months MCEV/ROIC

Delta Lloyd Key downside risks include concerns over a potential share placement from Aviva, continued sovereign

concerns in Europe, lower interest rates, a fall in equity markets, loss of key investment personnel, low

coverage ratio for Dutch pension funds and unexpected large losses in Dutch non‐life.

12 months MCEV/ROIC

Hannover Re Key upside risks: greater underlying COR improvement and faster earnings delivery than our forecast 6.6%

CAGR (2011‐14E). Key downside risk: greater earnings volatility due to large nat cat losses.

12 months SOTP

Mapfre The key upside risk to our view and price target is stronger‐than‐forecast earnings from the fastgrowing

South American business. The key downside risk is a higher‐than‐forecast impact on commercial lines from a

weakening European economy and a continuing impact on the share price from macro concerns.

12 months SOTP

Resolution Disposal of part or all of its business and stronger‐than‐expected equity markets enabling strong cash

generation are key risks to our view.

12 months ROIC

Swiss Life Key upside risks to our price target include a slow and gradual recovery in interest rates, recovery in sales in

PPLI, FINMA relaxing certain SST restrictions and greater than expected cost reductions.

12 months MCEV/ROIC

Topdanmark The key upside risk is the market continuing to reward Topdanmark’s strong underwriting with higher

multiples.

12 months SOTP

Tryg Key upside risk is stronger benefit from claims and expense initiatives or from the stock benefiting from its 12 months SOTP

Vienna Key downside risks include: (1) sustained period of low interest rates, (2) political, economical and financial

instability within the CEE region, (3) potential decline in value of the 26% of financial bonds in the bond

portfolio. Key upside risks include stronger‐than‐expected premium growth in the CEE region.

12 months MCEV/ROIC

Gjensidige Key upside risks are a stronger earnings delivery on the personal lines leading to a beat on our 90.9% COR

forecast for FY12, and more clarity on the intention around the Storebrand stake. Key downside risk is

deterioration in the underwriting cycle in Norway owing to increased competition from new entrants.

12 months SOTP

Helvetia Key risks include greater‐than‐expected weather‐related claims costs, a sustained period of low interest

rates in Switzerland, and a weaker‐thanexpected Swiss Solvency Test ratio.

12 months MCEV/ROIC



Delta Lloyd (DLL.AS): Remove from Conviction List, still a Buy

What happened

On May 8, 2012, Delta Lloyd’s majority shareholder, Aviva, announced

a new set of priorities, which includes building the capital and financial

resources of the Aviva group. One of the options open to Aviva is a

disposal of some or all of its 43% stake in Delta Lloyd, as Aviva has

already identified Delta Lloyd as non-core and it disposed of 15% of its

stake in April 2011. This, in our opinion, has contributed to the

subsequent 10% underperformance of Delta Lloyd shares vs. the SXIP.

While we still believe there to be significant value in Delta Lloyd’s

shares, we believe the Aviva overhang could hamper the speed of any

share price recovery. Subsequently, we increase our cost of equity

assumption in our valuation, reducing our 12-month price target from

€20 to €16. We also remove Delta Lloyd shares from our Conviction List

but maintain our Buy rating. Since adding Delta Lloyd to the Conviction

List on April 16, 2010, shares are down 39.2% vs. FTSE World Europe

down 9.0%.

Colin Simpson assumes primary coverage of Delta Lloyd.

Current view

Should interest rates and equity markets rise, we believe Delta Lloyd

would be one of the key beneficiaries within European insurance.

Should rates and equities stay where they are, investors could earn a

c.10% dividend yield based on our estimates. Should rates and equities

fall, we believe the current valuation (4.4x 2013E EPS, 0.57x 2102E IFRS

NAV) should provide some downside protection. We therefore believe

that the shares offer an attractive risk/reward for investors.

Our 12-month ROIC/MCEV price target of €16 implies 48% potential

upside.

Risks to our rating and price target include an Aviva share placement,

continued sovereign concerns in Europe, lower interest rates, falls in

equity markets, loss of key investment personnel, low coverage ratio

for Dutch pension funds and large losses in Dutch non-life.

Source: Company data, Goldman Sachs Research estimates, FactSet.

Growth

Returns *

Multiple

Volatility Volatility

Multiple

Returns *

Growth

Investment Profile

Low High

Percentile 20th 40th 60th 80th 100th

* Returns = Return on Capital For a complete description of the investment

profile measures please refer to the

disclosure section of this document.

Delta Lloyd (DLL.AS)

Europe Insurance Peer Group Average

Key data Current

Price (€) 10.84

12 month price target (€) 16.00

Upside/(downside) (%) 48

Market cap (€ mn) 1,831.2

Debt/EV (%) --

12/11 12/12E 12/13E 12/14E

PBT (€ mn ) New 686.0 630.7 646.5 662.5

PBT revision (%) 0.0 (2.3) (4.4) (6.4)

Net inc. (€ mn) New 484.4 409.9 420.2 430.6

Net income revision (%) 10.6 (2.3) (4.4) (6.4)

EPS (€) New 2.87 2.43 2.49 2.55

EPS (€) Old 2.59 2.48 2.60 2.72

Dividend yield (%) 9.5 9.5 9.7 9.7

P/E (X) 3.8 4.5 4.4 4.3

P/EVPS (X) 0.4 0.4 0.4 0.3

270

280

290

300

310

320

330

340

350

9

10

11

12

13

14

15

16

17

Jun-11 Sep-11 Jan-12 Apr-12

Price performance chart

Delta Lloyd (L) FTSE World Europe (EUR) (R)

Share price performance (%) 3 month 6 month 12 month

Absolute (18.4) (15.3) (32.6)

Rel. to FTSE World Europe (EUR) (12.0) (17.4) (26.2)

Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 6/22/2012 close.



Exhibit 5: Share price performance versus peer group Prices as of the close of June 22, 2012

Source: FactSet, Quantum database.

Company Ticker Primary analystPrice

currencyPrice as of Jun

22, 2012Price performance since Apr 16, 2010

3 month price performance



Europe Insurance Peer Group Delta Lloyd DLL.AS Kent Choi € 10.84 -39.2% -18.4% -15.3% -32.6%Admiral Group Plc ADML.L Colin L.Simpson p 1158.00 -11.8% -0.2% 41.3% -30.5%Aegon N.V. AEGN.AS Colin L.Simpson € 3.56 -33.5% -15.9% 13.6% -21.4%Ageas SA/NV AGES.BR Kent Choi € 1.38 -49.2% -16.5% 15.2% -23.6%Allianz SE ALVG.DE Vinit Malhotra, CFA € 75.75 -18.0% -17.1% -0.1% -20.4%Amlin AML.L Colin L.Simpson p 346.10 -13.9% 1.9% 11.2% -14.8%Assicurazioni Generali GASI.MI Kent Choi € 10.22 -40.6% -17.3% -8.8% -28.5%Aviva plc AV.L Colin L.Simpson p 274.60 -29.0% -21.2% -8.3% -36.0%AXA AXAF.PA Colin L.Simpson € 10.07 -40.9% -20.4% -1.9% -34.0%Baloise BALN.VX Kent Choi SFr 62.50 -33.8% -12.0% -2.1% -27.8%Catlin Group CGL.L Colin L.Simpson p 420.90 13.1% 0.7% 8.7% 2.2%CNP Assurances CNPP.PA Kent Choi € 8.79 -48.4% -26.5% -9.7% -40.3%Euler Hermes ELER.PA Vinit Malhotra, CFA € 50.10 -19.2% -15.3% 16.7% -13.1%Fondiaria-Sai FOSA.MI Kent Choi € 1.02 -84.2% -19.6% 45.0% -60.4%Fondiaria-Sai (Savings) FOSAn.MI Kent Choi € 0.50 -90.0% -24.8% 39.1% -70.5%Gjensidige Forsikring ASA GJFS.OL Vinit Malhotra, CFA Nkr 68.00 NA 1.5% -1.5% 4.1%Hannover Ruckversicherung HNRGn.DE Vinit Malhotra, CFA € 45.39 22.7% 4.8% 20.2% 27.9%Helvetia Holding AG HELN.S Kent Choi SFr 278.00 -23.4% -16.6% -5.3% -23.9%Hiscox HSX.L Colin L.Simpson p 419.50 21.2% 3.8% 13.5% 0.2%Legal & General Group LGEN.L Colin L.Simpson p 121.50 34.0% -9.1% 19.5% 7.2%Mapfre S.A. MAP.MC Vinit Malhotra, CFA € 1.69 -38.6% -33.1% -31.6% -33.4%Munich Re (reg) MUVGn.DE Vinit Malhotra, CFA € 105.70 -12.4% -8.1% 13.6% 2.0%Old Mutual plc OML.L Colin L.Simpson p 154.70 29.5% -2.6% 13.6% 22.7%Powszechny Zaklad Ubezpieczen PZU.WA Vinit Malhotra, CFA PLN 326.30 NA 3.3% 5.6% -13.5%Prudential Plc PRU.L Colin L.Simpson p 728.50 24.6% -6.1% 18.1% 2.6%Resolution Ltd. RSL.L Colin L.Simpson p 200.00 -35.1% -28.3% -19.4% -33.1%RSA Insurance Group RSA.L Colin L.Simpson p 105.70 -15.6% -7.4% 1.9% -20.0%Sampo SAMAS.HE Vinit Malhotra, CFA € 20.19 12.4% -6.9% 8.2% -9.3%SCOR SCOR.PA Vinit Malhotra, CFA € 18.73 -1.0% -7.4% 6.5% -0.9%St. James's Place plc SJP.L Colin L.Simpson p 330.20 23.5% -8.8% 3.1% 0.2%Standard Life Plc SL.L Colin L.Simpson p 226.50 10.3% -3.1% 13.1% 10.1%Swiss Life Holding SLHN.VX Kent Choi SFr 87.25 -38.3% -20.7% 1.0% -35.7%Swiss Re SRENH.VX Vinit Malhotra, CFA SFr 57.10 22.3% 4.3% 29.8% 28.3%Topdanmark A/S TOP.CO Vinit Malhotra, CFA Dkr 997.50 40.9% 1.4% 11.9% 6.3%Tryg A/S TRYG.CO Vinit Malhotra, CFA Dkr 326.10 -8.9% 4.2% 3.5% 12.5%Unipol (Ordinary Shares) UNPI.MI Kent Choi € 19.38 -73.6% -26.4% -23.9% -49.9%Unipol (Preference Shares) UNPI_p.MI Kent Choi € 9.34 -81.6% -44.2% -46.8% -68.5%Vienna Insurance Group VIGR.VI Kent Choi € 30.05 -21.7% -10.1% -0.8% -18.9%Zurich Insurance Group ZURN.VX Vinit Malhotra, CFA SFr 207.60 -7.7% -7.4% 7.4% 5.2%

FTSE World Europe (EUR) 309.05 -9.0% -7.3% 2.5% -8.7%

Note: Prices as of most recent available close, which could vary from the price date indicated aboveThis table shows movement in absolute share price and not total shareholder return. Results presented should not and cannot be viewed as an indicator of future performance.



Resolution (RSL.L): Up to Neutral following underperformance

What happened

In our opinion, the market has historically over-estimated Resolution’s

cash generating capability and under-appreciated the poor industrial

positioning of the businesses it has acquired. However, recent share

price underperformance (shares are down 19% ytd) has removed

downside to our revised price target and with the shares now trading at

5.9x 2013E EPS with little balance sheet risk owing to its low exposure

to risky assets, we upgrade Resolution from Sell to Neutral. Since we

added the stock to the Sell List on June 27, 2011, the shares are down

30.6% vs. FTSE World Europe down 16.3% (-33.1% and -17.8% over the

past 12 months).

Current view

Despite what on our revised estimates is an attractive valuation, we

believe Resolution’s new strategy to split the current group into two

businesses, a back-book (‘HeritageCo’) and new business venture

(‘OpenCo’) could introduce financial dis-synergies and disruption to the

business. In addition, we would expect both companies (if separately

listed) to be excluded from the FTSE100 index, which could potentially

narrow its shareholder base. We believe the group is unlikely to meet

its £400 mn cash generation target in the current market conditions.

However, Resolution has over £700 mn of cash that is theoretically

freely distributable. While management has in the past guided to a

further £250 mn share buyback, we believe this will only happen after

an improvement in the group’s sustainable cash generation (this was

£196 mn in 2011, below the £280 mn we expect to be paid out in

ordinary dividends in 2012). Once cashflow improves (potentially

through a reduction in new business strain and further expense

synergies), we believe the group will be in a position to return some of

this excess cash.

We reduce our ROIC-derived 12 month price target from 273p to 235p

following equity market declines, which has affected back book cash

generation. We also increase the cost of equity assumption in our ROIC

valuation to reflect the execution risks of the new strategy. This new

price implies 18% potential upside, hence our upgrade from Sell to

Neutral.

Upside risks include greater than expected cash generation leading to

capital repatriation. Downside risks include an unsuccessful split of the

business and worse than expected cash generation.


Growth

Returns *

Multiple


Multiple

Returns *

Growth

Investment Profile

Low High





Resolution Ltd. (RSL.L)


Key data Current

Price (p) 200

12 month price target (p) 235


Market cap (£ mn) 2,747.1

Debt/EV (%) --

12/11 12/12E 12/13E 12/14E

Pretax pft (£ mn) New 262.0 115.3 379.3 518.2

Pretax pft revision (%) 0.0 NM 136.0 71.4

Net inc. (£ mn) New 719.0 389.7 456.6 489.3

Net inc.revision (%) 0.0 (3.1) (2.9) (3.0)

EPS (p) New 50.43 29.09 34.08 36.53

EPS (p) Old 50.43 30.02 35.10 37.65

Dividend yield (%) 9.9 10.6 10.6 10.6

P/E (X) 4.0 6.9 5.9 5.5

P/EVPS (X) 0.5 0.5 0.4 0.4

300

320

340

360

380

400

420

180

200

220

240

260

280

300



Resolution Ltd. (L) FTSE World Europe (GBP) (R)


Absolute (28.3) (19.4) (33.1)

Rel. to FTSE World Europe (GBP) (19.9) (18.7) (18.7)





Source: FactSet, Quantum database.



22, 2012Price performance since Jun 27, 2011




Europe Insurance Peer Group Resolution Ltd. RSL.L Colin L.Simpson p 200.00 -30.6% -28.3% -19.4% -33.1%Admiral Group Plc ADML.L Colin L.Simpson p 1158.00 -29.1% -0.2% 41.3% -30.5%Aegon N.V. AEGN.AS Colin L.Simpson € 3.56 -18.2% -15.9% 13.6% -21.4%Ageas SA/NV AGES.BR Kent Choi € 1.38 -18.6% -16.5% 15.2% -23.6%Allianz SE ALVG.DE Vinit Malhotra, CFA € 75.75 -17.3% -17.1% -0.1% -20.4%Amlin AML.L Colin L.Simpson p 346.10 -14.4% 1.9% 11.2% -14.8%Assicurazioni Generali GASI.MI Kent Choi € 10.22 -26.2% -17.3% -8.8% -28.5%Aviva plc AV.L Colin L.Simpson p 274.60 -34.6% -21.2% -8.3% -36.0%AXA AXAF.PA Colin L.Simpson € 10.07 -31.1% -20.4% -1.9% -34.0%Baloise BALN.VX Kent Choi SFr 62.50 -24.7% -12.0% -2.1% -27.8%Catlin Group CGL.L Colin L.Simpson p 420.90 5.6% 0.7% 8.7% 2.2%CNP Assurances CNPP.PA Kent Choi € 8.79 -39.5% -26.5% -9.7% -40.3%Delta Lloyd DLL.AS Kent Choi € 10.84 -30.4% -18.4% -15.3% -32.6%Euler Hermes ELER.PA Vinit Malhotra, CFA € 50.10 -11.6% -15.3% 16.7% -13.1%Fondiaria-Sai FOSA.MI Kent Choi € 1.02 -51.8% -19.6% 45.0% -60.4%Fondiaria-Sai (Savings) FOSAn.MI Kent Choi € 0.50 -57.3% -24.8% 39.1% -70.5%Gjensidige Forsikring ASA GJFS.OL Vinit Malhotra, CFA Nkr 68.00 7.3% 1.5% -1.5% 4.1%Hannover Ruckversicherung HNRGn.DE Vinit Malhotra, CFA € 45.39 33.5% 4.8% 20.2% 27.9%Helvetia Holding AG HELN.S Kent Choi SFr 278.00 -18.7% -16.6% -5.3% -23.9%Hiscox HSX.L Colin L.Simpson p 419.50 1.9% 3.8% 13.5% 0.2%Legal & General Group LGEN.L Colin L.Simpson p 121.50 10.9% -9.1% 19.5% 7.2%Mapfre S.A. MAP.MC Vinit Malhotra, CFA € 1.69 -29.8% -33.1% -31.6% -33.4%Munich Re (reg) MUVGn.DE Vinit Malhotra, CFA € 105.70 4.2% -8.1% 13.6% 2.0%Old Mutual plc OML.L Colin L.Simpson p 154.70 24.8% -2.6% 13.6% 22.7%Powszechny Zaklad Ubezpieczen PZU.WA Vinit Malhotra, CFA PLN 326.30 -13.9% 3.3% 5.6% -13.5%Prudential Plc PRU.L Colin L.Simpson p 728.50 6.0% -6.1% 18.1% 2.6%RSA Insurance Group RSA.L Colin L.Simpson p 105.70 -19.0% -7.4% 1.9% -20.0%Sampo SAMAS.HE Vinit Malhotra, CFA € 20.19 -4.9% -6.9% 8.2% -9.3%SCOR SCOR.PA Vinit Malhotra, CFA € 18.73 0.4% -7.4% 6.5% -0.9%St. James's Place plc SJP.L Colin L.Simpson p 330.20 3.5% -8.8% 3.1% 0.2%Standard Life Plc SL.L Colin L.Simpson p 226.50 12.4% -3.1% 13.1% 10.1%Swiss Life Holding SLHN.VX Kent Choi SFr 87.25 -31.9% -20.7% 1.0% -35.7%Swiss Re SRENH.VX Vinit Malhotra, CFA SFr 57.10 33.9% 4.3% 29.8% 28.3%Topdanmark A/S TOP.CO Vinit Malhotra, CFA Dkr 997.50 7.7% 1.4% 11.9% 6.3%Tryg A/S TRYG.CO Vinit Malhotra, CFA Dkr 326.10 15.7% 4.2% 3.5% 12.5%Unipol (Ordinary Shares) UNPI.MI Kent Choi € 19.38 -46.2% -26.4% -23.9% -49.9%Unipol (Preference Shares) UNPI_p.MI Kent Choi € 9.34 -65.9% -44.2% -46.8% -68.5%Vienna Insurance Group VIGR.VI Kent Choi € 30.05 -17.1% -10.1% -0.8% -18.9%Zurich Insurance Group ZURN.VX Vinit Malhotra, CFA SFr 207.60 8.9% -7.4% 7.4% 5.2%

FTSE World Europe (GBP) 320.58 -16.3% -10.5% -0.8% -17.8%




Swiss Life (SLHN.VX): Upgrade to Neutral post underperformance

What happened

We upgrade Swiss Life to Neutral (from Sell) as our unchanged 12-

month price target of SFr102, which implies 17% upside, no longer

merits a Sell recommendation. The stock has underperformed the

sector by 4% over the last three months (-15% in absolute terms with

the SXIP down 11%), which we believe is partly driven by the market’s

concerns around the low level of Swiss 10-year yields. Since we added

the stock to the Sell List on March 19, 2012, the shares are down 23.6%

vs. FTSE World Europe down 10.0% (-35.7% and -9.1% over the past 12

months).

Current view

Swiss Life’s MCEV sensitivity to interest rate movements has seen a

reduction over the last two years, hence we believe the upcoming

1H2012 results (August 17) should bring updates from the company

around its strategy for low interest rates (e.g. higher technical margins,

lower duration mismatch).

We maintain our MCEV/ROIC 12-month price target of SFr102, which

implies 17% potential upside vs. the sector median upside of 28%.

Key upside risks include a slow and gradual recovery in interest rates,

recovery in sales in PPLI, FINMA relaxing certain SST restrictions and

greater than expected cost reductions. Key downside risks are pressure

on new business margins from tough markets.


Growth

Returns *

Multiple


Multiple

Returns *

Growth

Investment Profile

Low High





Swiss Life Holding (SLHN.VX)


Key data Current

Price (SFr) 87.25

12 month price target (SFr) 102.00


Market cap (SFr mn) 2,799.1

Debt/EV (%) 39.8

12/11 12/12E 12/13E 12/14E

Pretax profit (SFr mn) 585.0 702.7 729.9 758.6

Net income (SFr mn) 605.0 524.0 544.4 566.0

EPS (SFr) 18.68 16.18 16.81 17.47

ROEV (%) 7.3 5.6 5.6 5.6

Dividend yield (%) 5.2 5.2 5.2 5.2

P/E (X) 4.7 5.4 5.2 5.0

P/EVPS (X) 0.4 0.4 0.4 0.4

300

320

340

360

380

400

420

440

460

70

80

90

100

110

120

130

140

150



Swiss Life Holding (L) FTSE World Europe (GBP) (R)


Absolute (20.7) 1.0 (35.7)

Rel. to FTSE World Europe (GBP) (11.4) 1.9 (21.8)





Source: FactSet, Quantum database



22, 2012Price performance since Mar 19, 2012




Europe Insurance Peer Group Swiss Life Holding SLHN.VX Kent Choi SFr 87.25 -23.6% -20.7% 1.0% -35.7%Admiral Group Plc ADML.L Colin L.Simpson p 1158.00 -4.1% -0.2% 41.3% -30.5%Aegon N.V. AEGN.AS Colin L.Simpson € 3.56 -20.2% -15.9% 13.6% -21.4%Ageas SA/NV AGES.BR Kent Choi € 1.38 -23.0% -16.5% 15.2% -23.6%Allianz SE ALVG.DE Vinit Malhotra, CFA € 75.75 -20.2% -17.1% -0.1% -20.4%Amlin AML.L Colin L.Simpson p 346.10 -2.3% 1.9% 11.2% -14.8%Assicurazioni Generali GASI.MI Kent Choi € 10.22 -24.0% -17.3% -8.8% -28.5%Aviva plc AV.L Colin L.Simpson p 274.60 -27.2% -21.2% -8.3% -36.0%AXA AXAF.PA Colin L.Simpson € 10.07 -23.8% -20.4% -1.9% -34.0%Baloise BALN.VX Kent Choi SFr 62.50 -18.0% -12.0% -2.1% -27.8%Catlin Group CGL.L Colin L.Simpson p 420.90 -0.4% 0.7% 8.7% 2.2%CNP Assurances CNPP.PA Kent Choi € 8.79 -31.2% -26.5% -9.7% -40.3%Delta Lloyd DLL.AS Kent Choi € 10.84 -21.4% -18.4% -15.3% -32.6%Euler Hermes ELER.PA Vinit Malhotra, CFA € 50.10 -14.8% -15.3% 16.7% -13.1%Fondiaria-Sai FOSA.MI Kent Choi € 1.02 -21.1% -19.6% 45.0% -60.4%Fondiaria-Sai (Savings) FOSAn.MI Kent Choi € 0.50 -20.0% -24.8% 39.1% -70.5%Gjensidige Forsikring ASA GJFS.OL Vinit Malhotra, CFA Nkr 68.00 0.6% 1.5% -1.5% 4.1%Hannover Ruckversicherung HNRGn.DE Vinit Malhotra, CFA € 45.39 4.2% 4.8% 20.2% 27.9%Helvetia Holding AG HELN.S Kent Choi SFr 278.00 -18.9% -16.6% -5.3% -23.9%Hiscox HSX.L Colin L.Simpson p 419.50 1.6% 3.8% 13.5% 0.2%Legal & General Group LGEN.L Colin L.Simpson p 121.50 -9.9% -9.1% 19.5% 7.2%Mapfre S.A. MAP.MC Vinit Malhotra, CFA € 1.69 -34.6% -33.1% -31.6% -33.4%Munich Re (reg) MUVGn.DE Vinit Malhotra, CFA € 105.70 -9.0% -8.1% 13.6% 2.0%Old Mutual plc OML.L Colin L.Simpson p 154.70 -6.4% -2.6% 13.6% 22.7%Powszechny Zaklad Ubezpieczen PZU.WA Vinit Malhotra, CFA PLN 326.30 -1.2% 3.3% 5.6% -13.5%Prudential Plc PRU.L Colin L.Simpson p 728.50 -8.0% -6.1% 18.1% 2.6%Resolution Ltd. RSL.L Colin L.Simpson p 200.00 -29.5% -28.3% -19.4% -33.1%RSA Insurance Group RSA.L Colin L.Simpson p 105.70 -8.1% -7.4% 1.9% -20.0%Sampo SAMAS.HE Vinit Malhotra, CFA € 20.19 -8.9% -6.9% 8.2% -9.3%SCOR SCOR.PA Vinit Malhotra, CFA € 18.73 -8.6% -7.4% 6.5% -0.9%St. James's Place plc SJP.L Colin L.Simpson p 330.20 -11.3% -8.8% 3.1% 0.2%Standard Life Plc SL.L Colin L.Simpson p 226.50 -8.6% -3.1% 13.1% 10.1%Swiss Re SRENH.VX Vinit Malhotra, CFA SFr 57.10 3.1% 4.3% 29.8% 28.3%Topdanmark A/S TOP.CO Vinit Malhotra, CFA Dkr 997.50 0.3% 1.4% 11.9% 6.3%Tryg A/S TRYG.CO Vinit Malhotra, CFA Dkr 326.10 4.2% 4.2% 3.5% 12.5%Unipol (Ordinary Shares) UNPI.MI Kent Choi € 19.38 -31.2% -26.4% -23.9% -49.9%Unipol (Preference Shares) UNPI_p.MI Kent Choi € 9.34 -46.1% -44.2% -46.8% -68.5%Vienna Insurance Group VIGR.VI Kent Choi € 30.05 -14.1% -10.1% -0.8% -18.9%Zurich Insurance Group ZURN.VX Vinit Malhotra, CFA SFr 207.60 -8.7% -7.4% 7.4% 5.2%

FTSE World Europe (GBP) 320.58 -12.6% -10.5% -0.8% -17.8%Index performance in stock price currency 4.78 -10.0% -7.6% 0.7% -9.1%




Topdanmark (TOP.CO): Strong underwriting in the price; Sell

Source of opportunity

Topdanmark has been a beneficiary of its Nordic presence as well as its

very strong underwriting franchise in both the Danish P&C space and

within a European context. However, on our estimates and with 1%

potential upside to our revised price target, we believe that the current

valuation now prices in this underwriting strength and we downgrade

the stock to Sell (from Neutral).

Catalyst

Our downgrade is entirely a function of valuation and we would review

our rating if the stock were to offer more compelling potential upside.

Our 2013 net profit estimate of Dkr1,222 mn is already 3.5% ahead of

company-compiled consensus (Dkr1,181 mn). We therefore see limited

upside risk to our estimates.

Valuation

We increase our 12-month SOTP-based price target to Dkr1,006

(Dkr964) as we increase the multiple on Topdanmark’s technical results

to 12x (previously 11x) and reduce the multiple on the investment

income to 10x (previously 10.5x).

Key risks

The key upside risk is the market continuing to reward Topdanmark’s

strong underwriting with higher multiples.


Growth

Returns *

Multiple


Multiple

Returns *

Growth

Investment Profile

Low High





Topdanmark A/S (TOP.CO)


Key data Current

Price (Dkr) 997.50

12 month price target (Dkr) 1,006.00


Market cap (Dkr mn) 13,298.7

Debt/EV (%) 25.7

12/11 12/12E 12/13E 12/14E

Pretax profit (Dkr mn) 1,348.4 1,711.4 1,607.7 1,655.5

Net income (Dkr mn) 1,023.4 1,300.7 1,221.8 1,258.2

EPS (Dkr) 74.45 103.11 107.77 123.04

ROEV (%) 24.2 30.7 28.6 28.2

Dividend yield (%) 0.0 0.0 0.0 0.0

P/E (X) 13.4 9.7 9.3 8.1

P/EVPS (X) 3.0 2.6 2.3 1.9

300

320

340

360

380

400

420

750

800

850

900

950

1,000

1,050



Topdanmark A/S (L) FTSE World Europe (GBP) (R)


Absolute 1.4 11.9 6.3

Rel. to FTSE World Europe (GBP) 13.3 12.8 29.3




Tryg (TRYG.CO): Restructuring now priced in, down to Sell

Source of opportunity

We believe Tryg’s share price has benefited from a restructuring that

began with the new CEO in January 2011. The group now aims to pay

out a more stable and higher level of dividends. With a forecast

dividend yield some 200bp lower than the sector average of 6.4%, we

believe that the shares are pricing in these benefits. Hence we

downgrade the stock to Sell (from Neutral) with a revised SOTP-based

price target of Dkr329, which offers 1% potential upside.

Catalyst

Tryg has been among the best performing insurance stocks in our

coverage during the market turmoil this quarter, with 15% relative

outperformance 2Q to date. We believe the market will need to see

greater evidence of improving combined ratios with Tryg set to reach

its 90% COR target from 3Q2013 (we forecast 90.9% for 2014).

Valuation

We make a minor revision to our 12-month SOTP-based price target to

Dkr329 per share (Dkr336) as we now use 12x for the technical result

and 10x for the investment result applied to our 2013 net income

forecasts (vs. previously 12x for investment result as well).

Key risks

Key upside risk is stronger benefit from claims and expense initiatives

or from the stock benefiting from its Nordic exposure.


Growth

Returns *

Multiple


Multiple

Returns *

Growth

Investment Profile

Low High





Tryg A/S (TRYG.CO)


Key data Current

Price (Dkr) 326.10

12 month price target (Dkr) 329.00


Market cap (Dkr mn) 19,687.7

Debt/EV (%) 16.4

12/11 12/12E 12/13E 12/14E

Pretax profit (Dkr mn) 1,569.0 2,357.4 2,213.3 2,333.9

Net income (Dkr mn) 1,140.0 1,791.6 1,682.1 1,773.8

EPS (Dkr) 18.90 29.68 27.86 29.38

ROEV (%) 14.4 21.1 17.3 16.4

Dividend yield (%) 2.0 4.6 4.6 4.6

P/E (X) 17.3 11.0 11.7 11.1

P/EVPS (X) 2.3 2.0 1.8 1.7

300

320

340

360

380

400

420

440

460

480

500

240

250

260

270

280

290

300

310

320

330

340



Tryg A/S (L) FTSE World Europe (GBP) (R)


Absolute 4.2 3.5 12.5

Rel. to FTSE World Europe (GBP) 16.4 4.4 36.8




Appendix: European Financials Conference – Key Takeaways

Exhibit 1: Insurance Agenda, Goldman Sachs Sixteenth Annual European Financials

Conference

INSURANCE AGENDA ‐ JUNE 13, 2012

09.00 Legal & General

Nigel Wilson, Group Chief Executive Designate

09.45 Standard Life

Jackie Hunt, Chief Financial Officer

10.05 Delta Lloyd

Emiel Roozen, Chief Financial Officer

10.45 Old Mutual

Philip Broadley, Group Finance Director

11.30 Allianz

Oliver Bäte, Chief Financial Officer

12.15 European Commission

Karel Van Hulle, Head of Insurance and Pensions

Directorate General Internal Market and Services

14.00 Munich Re

Nikolaus von Bomhard, Chief Executive Officer

14.45 Swiss Re

George Quinn, Group Chief Financial Officer

15.30 Hannover Re

Ulrich Wallin, Chief Executive Officer

16.30 SCOR

Paolo De Martin, Group Chief Financial Officer

17.15 AXA

Denis Duverne, Deputy Chief Executive Officer

Source: Compiled by Goldman Sachs Research.

1. Legal & General, LGEN.L

CEO designate, Nigel Wilson, opened the Insurance day of our European Financials

Conference. His presentation, Navigating macro hazards and moral hazards marked a

change from the focus on capital and cash generation that he is so well known for in his

CFO role.

Nigel Wilson acknowledged the current fiscal problems coupled with what he deemed

inadequate margins in banking business and distortions in labour competitiveness as a

result of currency agreements. A key message is that solutions to these problems should

involve the cash rich corporate sector, rather than governments alone. This may be

through large corporates taking an increasing role in retail financial services or the

insurance industry assuming a greater role in the provision of savings.

Mr Wilson argued that UK insurers have strongly defensive characteristics sheltering them

from the key macro and political threats posed by the Eurozone fragmentation. Earnings

from protection, pensions & annuities and institutional asset management businesses

should remain resilient, and indeed have the potential to benefit from demographic and

regulatory changes. In this context, he believes that Legal & General possesses a strong set



of core businesses. This, combined with a de-risking of its asset allocation, minimizing

exposure to Eurozone turbulence, makes him confident in Legal & General's ability to

deliver strong cash generation and dividend paying capacity.

Despite all the macro uncertainty, Legal & General's simple business model, strong cash

generation and high visibility on earnings stands out. The Q&A concentrated on L&G's

strategy, which reflected an intent for L&G to use its capital strength to continue investing

and writing new business in its core markets. From a regulatory perspective, Mr Wilson

highlighted the social role that insurers can play in matching long-dated liabilities with

long-term investments to the potential benefit of the UK economy. In terms of the group's

asset allocation, he noted that equity investments have been brought down over time and

now stand at c.£800 mn; a level with which they are comfortable.

2. Standard Life, SL.L

Jackie Hunt, Standard Life's CFO, gave a brief overview of the Standard Life's key

businesses, and particularly emphasised the opportunities for growth in the UK.

Three areas were addressed in the Q&A:

Capital – how long will Standard life appear to have excess capital while pursuing a

capital-light strategy? The CFO highlighted that its current IGD surplus of £3.1 bn puts

Standard Life towards the more conservative end of the range vs. other insurers. All of

Standard Life's businesses are capital generative (with exception of the small JV in China),

and the group has taken actions to lower fixed costs, boosting the capital position overall.

There appears to be no intention of changing the capital strategy at this time.

How is Standard Life finding the competitive environment in the US? Within the US,

Standard Life's product proposition (revolving around a Liability Driven Investment

strategy) is proving popular. An agreement has been signed with John Hancock and

Standard Life is in various stages of negotiation with various US corporations.

GARS has been particularly successful in the past few years; is there a cap on how

much it can grow? Jackie Hunt mentioned that a cap of £40 bn has been mentioned in the

past, with the fund currently at approximately £15 bn. However, a bond version of GARS

has just been ceded, which has been successful.

The message prior to the Q&A highlighted the following.

The UK business mix is shifting ever more towards fee based revenues (89% of total

income at FY2011) through the sale of unit-linked, capital-light products. Standard Life

views two major regulatory changes (Auto-enrolment and the Retail Distribution Review)

as the key opportunities for growth in the UK Corporate and Retail markets respectively.

The Canadian business continues to be more reliant on its spread/risk business than other

divisions, although the new CEO is intent on growing the unit-linked businesses, with a

focus on wealth management in particular.

The International businesses are benefiting from progress in Standard Life's JVs in China

and India, which made positive contributions to operating profit for the first time in 2011.

Its Hong Kong and offshore businesses are also growing rapidly.

Enhanced efficiency: Standard Life's strategic shift towards fee-based business has

lowered the group's acquisition costs from 180bp in 2008 to 140bp in 2011. Maintenance

expenses for the group have also declined from 49bp to 41bp over the same period,

reflecting its scalable business model.



3. Delta Lloyd, DLL.AS

Delta Lloyd's presentation focused on the core strengths of its pensions businesses in the

Netherlands and Belgium, where operating profits are being driven by market leading

positions and continued focus on cost reduction. The Group also prides itself on its

proactive capital management.

The Q&A addressed a range of issues:

Delta Lloyd retains a c. 10% allocation to equities, but do not foresee a major de-risking of

this position despite the upcoming Solvency II regime. Delta Lloyd still believe in the

strength and reliability of their equity portfolio, and cited Royal Dutch Shell as a company

that has yet to miss a dividend payment since WWII. In this context, they remain happy, for

the time being, with their stake in the van Lanschot bank, which they believe pays a regular

dividend and has minimal exposure to Southern European debt.

On the Group's capital position Delta Lloyd highlighted the benefit to its IGD surplus from

its equity investments. They also stressed the active management of the asset side of their

balance sheet in helping to ensure a strong solvency position going forward - in 1Q 2012,

equity hedging was increased, exposure to interest rates reduced, and the Group held

minimal exposure to South European & Irish sovereign debt (just €87mn).

On the issue of M&A, Delta Lloyd were asked whether they would be keen to further

consolidate in the Dutch market. While the Dutch regulator is in favour of consolidation,

Delta Lloyd are confident in their market position and do not need to make acquisitions.

However, they would be keen to extend their ties in Belgium, and are open to a deal that

would enhance their distribution akin to their current agreement with ABN Amro Insurance

in the Netherlands.

4. Old Mutual, OML.L

Old Mutual's CFO, Phillip Broadley, presented on Old Mutual's unique set of businesses

across Africa, the US and Europe. The focus was on the scale of GDP growth and

demographic change across Africa. This, coupled with the inherent need for Africans to

purchase insurance (owing to income volatility), creates a natural demand for life insurance

products, in his view.

Old Mutual's listing in London gives the group a strong international brand, which has

strong resonance in Africa, enabling it to capture demand for life insurance. They possess

the largest tied distribution force in Africa (both rural and urban) and are complementing

this with new channels like mobile telephony. Its South African administrative centre gives

the group operational efficiency and once group debt has been repaid, it has the scale and

funds to expand further.

The Q&A revolved around the African business and the US asset manager:

Given that Old Mutual has had a presence in Africa for decades, what makes 2012 the

time to buy the stock? The CFO emphasised that GDP and population growth are now at

the stage where Africa has truly become relevant and will feed into strong earnings growth.

Today's technology also means that these markets can be exploited much more easily; the

CFO contrasted Old Mutual's ability to distribute products via mobile phones in Africa with

Prudential's sales in Asia back in 2000/01, when premiums could only be collected in cash.

If insurance distribution is increasingly through the mobile phone channel, what gives

Old Mutual an edge over its competitors? Old Mutual has very low administrative costs

with its central administration base in South Africa. This gives it an advantage over new

entrants. For instance, Old Mutual's policies sold in Namibia are all processed in Cape

Town. Although part of OId Mutual's revenue goes to mobile telephony providers, this is

only a piece of the total revenue, and is no different from paying bancassurance partners

for their distribution capabilities.



Might Old Mutual struggle to compete with local African insurers, in light of its

London listing? Mr Broadley believes that a dual listing should not be perceived as a

weakness, but rather a major strength, as it helps to engender trust in the group's stability

among its customer base. He also argued that Old Mutual is very much seen as a 'local

player'; one-third of the adult South African population holds an Old Mutual product,

reflecting a much higher level of penetration than it has in the UK.

Update on the US asset manager? Old Mutual has set out a strategy to reverse the

pattern of outflows that has developed over the last two years. In 1Q2012 positive inflows

were achieved and the sale of two affiliates also represents progress.

5. European Commission

Professor Karel Van Hulle, Head of Insurance and Pensions at the European Commission,

presented on the evolution of EU insurance regulation and specifically, the development of

Solvency II.

He argued that the focus of Solvency II is to deal with volatility in insurers' capital

requirements, ensuring that they have adequate technical provisions, while also allowing

these companies to fulfill their role of providing long-term guarantees to their customers.

He argued that the key to achieving this was not solely about capital requirements, but

required strong risk management and good governance by insurance companies such that

they can handle volatility.

The Q&A touched upon the eventual winners and losers from Solvency II, as well as the

issue of convergence of European and US regulatory regimes towards equivalent states.

Q) For insurance companies to continue providing long-term guarantees, will they

not invariably have to either increase prices or raise capital requirements? If so,

where is the burden likely to fall – on policyholders or shareholders? Professor Van

Hulle agreed that under Solvency II certain products will become cheaper, owing to lower

capital requirements, while others will become more expensive because their risks have

not been properly priced. Winners and losers are inevitable therefore. However, whether

the burden falls on policyholders or shareholders is entirely at the discretion of individual

insurers, not the regulator. Professor Van Hulle did also stress the importance of insurance

companies retaining a long-term perspective – they are offering policyholders long-term

guarantees, and therefore, unlike banks, they simply cannot operate as institutions that

take on significant volatility. He also mentioned that the market should not focus on the

share price of insurers, but instead try to focus on their underlying businesses. The current

lack of transparency around insurance business is one of the reasons why these

companies' share prices suffer, in his view.

Q) What is the current timeline with regards to the US regulatory regime achieving

'Equivalence'? Professor Van Hulle stipulated that there will be a transitional period of five

years during which the US will be able to converge with Solvency II requirements. He

noted that some progress has already been made in this regard, on issues such as Group

Supervision, for instance. Only three countries have actually been granted equivalence

thus far: Switzerland, Japan and Bermuda.

Prior to the Q&A, Professor Van Hulle shed further light on some of the technical

developments in Solvency II.

From a political perspective, Prof. Van Hulle stressed the need for greater commonality and

greater harmony among European regulators in order for progress to be made. In light of

this, full implementation of SII has been delayed until January 1, 2014.

In terms of the transition towards implementing the regime, he noted that a 'Soft SCR'

could be introduced, whereby a breach of the SCR during the first year was completely

acceptable. Having said that, a breach of the SCR beyond this was simply an invitation for



the regulator to make contact with the company and not necessarily make drastic changes

to the set up of the insurer.

6. AXA, AXAF.PA

AXA's Deputy CEO, Denis Duverne, gave the closing presentation on the Insurance day of

our conference. The presentation emphasised AXA's track-record of generating earnings

through volatile market conditions (underlying earnings have been steady at around €4 bn

for the last five years). This is due, in part, to the fact that most of its earnings are derived

from defensive, non-market sensitive businesses - 80% of underlying earnings from P&C,

International and G/A Protection & Health. It is also helped by the strength of the group's

balance sheet.

The Q&A covered a range of issues from AXA's variable annuity portfolio to the impact of

the recent French elections on flows into life insurance products in France.

Following the volatility in the markets so far in 2012, should we expect further

hedging losses? Denis Duverne commented that, while he cannot make a prediction for

FY2012, the investment portfolio has been performing in line with expectations. AXA has

hedged volatility in 2012, which is not something it has always done. This reinforces our

view that, following large losses in the US in 2011, earnings could rebound in 2012.

How has the General Account asset portfolio been managed to deal with a potential

break-up of the euro? Is there any intention to alter the mix of the bond portfolio?

Overall, AXA is relatively happy with the management of its General Account portfolio. It

has only suffered one mishap – the 78% impairment of its Greek sovereign portfolio at

FY2011 upon acceptance of PSI. However, more generally, the company is content with its

ALM and its risk management.

AXA has stopped investing in financials credit (with the exception of secured funding or

covered bonds) since 2008. The allocation to government bonds has also been reduced –

the asset portfolio backing the back-book is split between c.50% government bonds and

c.50% corporate bonds or loans, whereas new business is split 2/3 to 1/3 respectively. Mr

Duverne did add, however, that AXA will need to continue to invest in at least some

government bonds in order to obtain sufficient asset duration and to avoid the potentially

higher Solvency II capital charges applied to corporate credit.

In light of the recent French elections, and the potential doubling of the Livre A cap,

what is the outlook for life insurance flows in France, and more generally, what is the

French government's attitude toward the life insurers? It is too early to judge how the

new government will treat insurers. That said, life insurance reserves in France amount to

€1.8 trn, and with c.80% of these invested in government bonds, it would be risky for the

government to take actions that might deplete this source of funding too quickly, in the

opinion of Mr Duverne. Although some negative flows have been experienced, the

doubling of the Livret A cap was a measure announced during the presidential campaign

that has been watered down in subsequent statements. The change could be phased in

over the next five years or arguably may not materialise at all, so it is of little concern to

AXA. Tax concerns are probably the main impediment to investments in life insurance

products, but AXA is actively mitigating this by selling more group and Protection business.

7. Allianz, ALVG.DE

Allianz CFO, Oliver Bäte in his presentation focused on the resilience of its diversified

business model and reiterated its ability to pay dividends even in the low interest rate

environment. Allianz also updated on its life new business investments where it now

invests 60% of new money in government bonds (19-years’ maturity) vs. 47% at FY 11 (and

with 15-years’ maturity). Allianz also highlighted the 0.9% combined ratio benefit it saw in

1Q2012 from price increases in the non life businesses. Overall, Allianz reiterated its



outlook for 2012E operating profit €8.2 bn +/-€0.5 bn and we remain comfortable with our

forecasts towards the top end of this range.

Aside from these details, a key theme discussed was the Group’s preparedness for future

uncertainties – the CFO stressed that Allianz has low exposure to peripheral European

sovereign debt, however it also noted that its ventures in these regions remain highly

profitable. In light of the systemic issues facing the financial sector, they also have focused

on de-risking their exposure to the banking sector over the last three years, either through

hedging or selling down.

8. Munich Re, MUVGn.DE

Munich Re’s presentation focused on the theme of dividend stability as the company

benefits from a diversified business model (e.g. combined reinsurance and primary

business). The focus on reinsurance risks for instance reduces the gearing to capital

markets. Munich also talked about the ongoing June-July renewals where it expects

ongoing nat cat price increases accompanied by improving portfolio mix. This was a topic

of interest given that Munich had given up 3% of its April renewals owing to its more

cautious stance on Japanese earthquake risk. Overall, Munich reiterated its strong balance

sheet (194% economic solvency at Solvency II calibration at FY2011) and defensive stock

attributes, even in the face of the market volatility in 2Q2012.

The CEO conveyed a clear message regarding the group's strategy: it aims to run a reliable

and predictable business, focused on reinsurance risk (which should remain resilient to

macroeconomic developments), while remaining conservatively positioned on the asset

management side, with the simple goal of avoiding losses, rather than taking outsized risks

or chasing alpha. Given this philosophy and a strong capital position, the CEO believes the

company is well placed to withstand volatility in the markets.

The Q&A touched on two issues.

To what extent do Munich Re's liabilities and its diversified business model help to

protect it from turbulence in the Eurozone? Munich Re tries to avoid excessive exposure

to the macroeconomy, by limiting exposure to business lines that are correlated with the

macroeconomy, and in the main taking on liabilities that are entirely uncorrelated. This

strategy makes Munich Re relatively defensive in times of crisis.

Within the non-life business, Munich Re has highlighted that it is seeing the benefit of

price increases coming through. However, would the IRR of this business not give a

better picture of the overall profitability of the business being written, particularly in

an environment where yields are decreasing? Munich Re prefers to take a return on risk

capital view, rather than looking at IRRs. The CEO also stressed that price increases reflect

the pure, underlying improvement in the quality of the book of business, and so it is a fair

reflection of trends in profitability.

9. Swiss Re, SREN.VX

Swiss Re Group CFO George Quinn reiterated the target guidance driven by reallocation of

capital away from the underperforming life business and into non-life businesses. Swiss Re

continues to focus on measures it intends to take on the unprofitable L&H businesses (US

pre-2004 book), the moderate re-risking of assets into corporate bonds and portfolio

restructuring at Admin Re while maintaining high RoEs in P&C Re and Corporate Solutions

businesses. Mr Quinn reiterated the S&P AA level excess capital level of “greater than

$7 bn”; we believe that the excess capital options are priced in.

Q&A focused on the recent restructuring of Admin Re, as well as the redeployment of

Swiss Re's excess capital.

Is it not the case that the restructuring of Admin Re will help you to achieve your ROE

target, but creates an uplift in an undesirable manner? Although there is a negative



impact via a reduction in EPS in the short term, the restructuring does indeed benefit the

ROE in the long run. However, Swiss Re's CFO emphasised his belief that the changes to

Admin Re are the right ones to make regardless of their impact on the ROE. There is no

intention to dispose of other parts of Admin Re at this time.

You have mentioned having an 11% hurdle rate, but how do you foresee your capital

being used? P&C Re is a business that it would like to grow, whereas it has little desire to

expand the Life & Health businesses. The Corporate Solutions business is already

capitalised for the growth it expects to achieve. Swiss Re is keen to enter into JVs in Asia,

and there are certain markets (such as China) where, although it does not wish to expand

via insurance or reinsurance, it would be happy to invest directly.

10. Hannover Re, HNRGn.DE

Hannover Re’s presentation centered on the lower volatility of earnings, a key focus for

management in recent years. Growth has been driven increasingly by the Latin American

and Asian businesses, while Germany has become a smaller part of the group where it has

become more selective about writing business. The market has also rewarded Hannover

for its reserving buffers (we estimate around €1.1 bn), which were further strengthened in

the low-nat-cat 1Q2012. As a further evidence of conservatism, Hannover has also been

managing down shares to keep its nat cat exposure unchanged despite increasing prices.

Hannover also highlighted its track record of delivering higher than sector RoEs, but we

believe this premium RoE is reflected in the price.

Hannover also made a number of specific comments on the Group’s asset allocation: the

group has increased its allocation to non-bank corporate bonds in recent times, which has

proved a good strategy thus far. Within asset-backed securities, it has focused primarily on

real estate-backed securities, although it has less exposure to Spain, for instance, since

collateral pools are less transparent there. It stated that it has no intention to re-risk into

quoted equities, given the high level of volatility and the punitive capital requirements

under Solvency II. Real estate investments are small (2%) and are confined to high-quality

assets.

11. SCOR, SCOR.PA

SCOR’s presentation reinforced our view that the market is not giving full credit to the

restructuring story. SCOR reiterated not only a zero exposure to peripheral Europe on the

asset side, it also pointed out that it has no legal entities in peripheral Europe thus reducing

liability side risks as well. SCOR remains defensive on its asset portfolio (18%-19% cash

allocation, and average duration of 2.5 years including cash) and has put on hold the

rerisking of assets that occurred in 1Q2012. The reinsurance business continues to grow

very strongly (13.5% up ytd renewals) and we believe the business momentum should

remain strong on the back of recent rating upgrades.

SCOR further gave examples of how it has been avoiding certain lines of business (such as

Banks D&O) where it is unable to fully model the financial markets risk. SCOR also pointed

out that Florida renewals price increases have not been as strong as April, but this was also

seen in broker reports so should not come as a surprise, and in any case Florida renewals

are a very small amount for SCOR (around €70 mn) so should not have a major impact on

its combined ratios.



Financial advisory disclosure

Goldman Sachs is acting as financial advisor to Fondiaria-Sai SpA on strategic solutions.

Goldman Sachs is acting as financial advisor to another party in an announced strategic transaction which may be material to Unipol Gruppo

Finanziario SpA.



Disclosure Appendix

Reg AC

We, Colin L.Simpson, Vinit Malhotra, CFA, Ron Heydenrijk and Ravi Tanna, hereby certify that all of the views expressed in this report accurately

reflect our personal views about the subject company or companies and its or their securities. We also certify that no part of our compensation was,

is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Investment Profile

The Goldman Sachs Investment Profile provides investment context for a security by comparing key attributes of that security to its peer group and

market. The four key attributes depicted are: growth, returns, multiple and volatility. Growth, returns and multiple are indexed based on composites

of several methodologies to determine the stocks percentile ranking within the region's coverage universe.

The precise calculation of each metric may vary depending on the fiscal year, industry and region but the standard approach is as follows:

Growth is a composite of next year's estimate over current year's estimate, e.g. EPS, EBITDA, Revenue. Return is a year one prospective aggregate

of various return on capital measures, e.g. CROCI, ROACE, and ROE. Multiple is a composite of one-year forward valuation ratios, e.g. P/E, dividend

yield, EV/FCF, EV/EBITDA, EV/DACF, Price/Book. Volatility is measured as trailing twelve-month volatility adjusted for dividends.

Quantum

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in-depth analysis of a single company, or to make comparisons between companies in different sectors and markets.

GS SUSTAIN

GS SUSTAIN is a global investment strategy aimed at long-term, long-only performance with a low turnover of ideas. The GS SUSTAIN focus list

includes leaders our analysis shows to be well positioned to deliver long term outperformance through sustained competitive advantage and

superior returns on capital relative to their global industry peers. Leaders are identified based on quantifiable analysis of three aspects of corporate

performance: cash return on cash invested, industry positioning and management quality (the effectiveness of companies' management of the

environmental, social and governance issues facing their industry).

Disclosures

Coverage group(s) of stocks by primary analyst(s)

Colin L.Simpson: Europe-Insurance. Vinit Malhotra, CFA: Europe-Insurance.

Europe-Insurance: AXA, Admiral Group Plc, Aegon N.V., Ageas SA/NV, Allianz SE, Amlin, Assicurazioni Generali, Aviva plc, Baloise, CNP Assurances,

Catlin Group, Delta Lloyd, Euler Hermes, Fondiaria-Sai, Fondiaria-Sai (Savings), Gjensidige Forsikring ASA, Hannover Ruckversicherung, Hansard

Global, Helvetia Holding AG, Hiscox, Jardine Lloyd Thompson, Legal & General Group, Mapfre S.A., Munich Re (reg), Old Mutual plc, Powszechny

Zaklad Ubezpieczen, Prudential Plc, RSA Insurance Group, Resolution Ltd., SCOR, Sampo, St. James's Place plc, Standard Life Plc, Swiss Life Holding,

Swiss Re, Topdanmark A/S, Tryg A/S, Unipol (Ordinary Shares), Unipol (Preference Shares), Vienna Insurance Group, Zurich Insurance Group.

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compendium can be found in the latest relevant published research

Distribution of ratings/investment banking relationships

Goldman Sachs Investment Research global coverage universe

Rating Distribution Investment Banking Relationships

Buy Hold Sell Buy Hold Sell



Global 31% 54% 15% 48% 41% 36%

As of April 1, 2012, Goldman Sachs Global Investment Research had investment ratings on 3,507 equity securities. Goldman Sachs assigns stocks as

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Price target and rating history chart(s)

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Documents

table shows movement

regional investment lists

proprietary trading desks

helvetia holding ag

financial services authority

cfa vinit malhotra

investment profile measures

simpson vinit malhotra