georgetown mba presentation - zurich uae analysis of central asia 3.5.12

Georgetown MBA Residency

Final Project Report

5 March 2012

Michelle Kim, Suvo Nandi, Patrick Ottenhoff, Oscar Scolari

Table of Contents

Executive Summary

Project Objectives and Scope

Objective One: Market Analysis by Country

Objective Two: Entry Method Recommendations

Objective Three: Product Offerings

Objective Four: Forecasting Model

Recommendations: Business Plan by Target Market

Evaluation & Summary

2

Table of Contents

Executive Summary








3

Executive Summary

4

Scope

• Our project examined Zurich’s potential entry into eight Central Asia republics.

Analyses

• Methodology included analysis of the broader market, regulatory environment, and competitive landscape (insurers and product offerings).

Market

Analysis

• Preliminary scoring based on broad market outlook yielded a highest priority group of Azerbaijan, Kazakhstan, and Mongolia.

Entry

Method

• Survey of regulatory environments and entry precedents informed entry method recommendations and revised the highest priority group to include Azerbaijan, Kazakhstan, and Pakistan.

Product

Offering

• The state of insurance markets across target countries indicate that short-tail business would be a sensible entry point for Zurich, along with other niche opportunities.

Forecast

s

• Our high-level forecast model used steady-state assumptions to generate financial performance benchmarks upon entry via greenfield, acquisition, and reinsurance into priority markets.

Business Plan

s

• Recommendations are presented as individual business plans by target market (timeline, entry method, product offering, and benchmark).

Table of Contents

Executive Summary








5 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary

Our project explored Zurich’s potential entry into eight target markets in Central Asia

6

Target Markets:

• Azerbaijan• Kazakhstan• Kyrgyzstan• Mongolia• Pakistan• Tajikistan• Turkmenistan• Uzbekistan

Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary

Our approach used market analyses with various focuses to develop plans by country

7

General Market Analysis

Political & Economic MetricsSocial / Consumer Factors

Overall Stability for Business

Entry Method: Regulations &Case Studies

Insurance RegulationsPast Market Entrants

Insurance Market Product Offerings

Market Size & ConcentrationCompetitive Analysis

Lines of Business Offered

Forecasting ModelEstimates of premium/losses

Market Share, Acquisition drivers

Business Plan by Target Market

Recommendations of:•Entry Phase

•Method•Product Offerings


Table of Contents

Executive Summary









Our general market analysis examined key environmental metrics to tier target markets

• Goal: Tier target markets in phases according to priority level for potential Zurich entry

• Methodology:• Six different indicators were used to assess the

economic, social and political environment in these countries

• We developed a model to score, weight, and rank countries according to key market indicators

• We then assigned preliminary designations (“Tiers”)• Tier I (immediate entry)• Tier II (entry in ~5 years)• Tier III (entry in ~10 years)

9

Political and Social System

Openness

Labor Markets

Product Markets

Capital Markets

Macroeconomic Indicators


• Political Stability Index (includes institutions, corruption,

factionalism and nine other criteria)

Political and Social System

• FDI, Net Inflow• Tariffs• Openness to Media

Openness

• Education Index• Unemployment Labor Markets

• Logistics Performance• Presence of Global Firms Product Markets

• Insurance & Financial Inflows• Total Listed Companies• Domestic Credit to Private Sector

Capital Markets

• GDP• GNI per Capita• GDP Growth• Oil Production• Natural Gas Production• Global Competitive Index

Macroeconomic Indicators

Diverse drivers of the key indicators were collected to measure each country’s potential


11

Tier IKazakhstanAzerbaijanMongolia

Based on economic potential and growth, overall country stability, and other parameters, markets are prioritized as follows:

Tier IITurkmenistanPakistan

Tier IIIUzbekistanTajikistanKyrgyzstan

Preliminary scoring determined a Tier I market group of Azerbaijan, Kazakhstan, and Mongolia

Economic Criteria

Political Stability Openness

Product Markets

Labor Markets

Capital Markets Cumulative

Kazakhstan 1 1 1 1 1 2 1

Azerbaijan 2 2 4 4 3 5 2

Mongolia 6 3 1 8 2 1 3

Turkmenistan 3 4 7 3 4 7 4

Pakistan 3 8 3 6 4 3 5

Uzbekistan 5 5 8 2 4 7 6

Tajikistan 7 6 5 7 8 3 7

Kyrgyzstan 8 6 5 5 4 6 8


Table of Contents

Executive Summary









Regulatory barriers and precedents formed the basis of our entry method recommendations

• Goal: Identify most advisable entry strategy by country

• Methodology:• Research regulatory and other barriers for market

entry• Research case studies of competitor entrance in

target markets• Identify criteria to evaluate entry methods given

market analysis and barriers research• Prioritize entry strategies (acquisition, greenfield,

joint venture, reinsurance) based on classification of market


Zurich’s global competitors provide precedents for entry into some target markets

14

Azerbaijan

• AXA purchased majority stake in privately-held MBASK Insurance Co in 2010.

• Company rebranded AXA MBASK.

• ~$7M share capital company.

Kazakhstan

• Chartis subsidiary registered in 1998 as Closed Joint Stock Company; renamed and registered in 2010.

• Generali – Joint Stock Company subsidiary based in Almaty, specializing in life.

Pakistan

• ACE Home Insurance branch office converted to wholly-owned subsidiary in 2000.

• Allianz joint venture with EFU Group in 2000.

• Allianz EFU specializes in healthcare.

• Chartis operates via a local branch office of one of the company’s subsidiaries.


Two primary environment metrics were used to prioritize entry methods for each country

15

Metric 1: Established Attractiveness of Market

Markets scored high on this dimension due to the following characteristics:• Existing regulations encouraging FDI• Past precedents of market entry• Past reforms to develop insurance /

financial services industry• Mandatory insurance lines

Metric 2: Positive Market Trends

Markets scored high on this dimension due to the following characteristics:• Recent / forthcoming regulation

reducing competition (e.g., raising capital requirements)

• Recent compulsory insurance lines• Growth focused on private sector and

insurance lines of business

Immature insurance market

BUT positive trends…Pursue:

•Joint Ventures•Reinsurance

Established insurance market AND growing…

Pursue:•Acquisitions•Greenfield / Branch Office

Immature market AND poor outlook…

Pursue:•Nothing?

•Reinsurance

Established BUT constrictive

trends…Pursue:

•Branch Office•Reinsurance

•Joint Ventures

Positive

High

Negative

Low


AZERBAIJAN

16

Azerbaijan’s strong established insurance market, combined with its developments in mandatory insurance, past precedent of acquisition, and overall growth trajectory makes this market a prime candidate for

acquisition or greenfield entry.

Established Attractiveness of Market:• Mandatory Insurance Lines: Azerbaijan requires fire insurance for all

commercial premises and third party motor insurance.• Precedent of Success: AXA successfully purchased a majority holding in

MBASK in 2010.• Overall Growth: Though the explosive growth in insurance has slowed

somewhat over the last couple of years, Azerbaijan remains very much a developing market.

Positive Market Trends:• More Mandatory Insurance Lines: Recently, real estate, exploitation of real

estate, and motor passenger insurance have all become compulsory lines.• Decreasing Local Competition (?): Recent increases in capital

requirements may squeeze smaller local players out of the market and/or leave them vulnerable for acquisition.

Areas of Concern:• Confusion in Profit Tax Exemption: Insurers required to pay 10% profit tax

despite earlier government promises of exemption • Potential for Global Competition: Opportunities for Zurich are also

opportunities for the competition, requiring differentiation and speedy entry.

Entry Method Recommendation:


KAZAKHSTAN

17


Kazakhstan enjoys the largest economy in the region with strong macroeconomic trends and created a Financial Supervision Authority to

further develop the local insurance industry. This market is a recommended candidate for acquisition or greenfield entry.

Established Attractiveness of Market:• Existing Market Strength: Largest economy of the region with established

FDI council providing support for foreign companies entering market.• Financial Supervision Authority (FSA): Infrastructure in place to develop

insurance industry and bring local legal / regulatory framework to standards of EU and IAIS.

• Precedents for Market Entry: Relatively straightforward procedures to establish subsidiaries enabled Chartis and Generali to do so successfully.

Positive Market Trends:• Significant Recent Growth: 2011 was a strong year for local insurance,

with 25% year-over-year growth in written premiums.• Anticipated Consolidation: With rising capital requirements, smaller

companies will be vulnerable to acquisitive activity.• Growing Sophistication: FSA developed earthquake insurance evaluation

and risk model in 2010 to better inform decisions of local insurers.

Areas of Concern:• Higher Taxes: Insurers have been moved to the general taxation regime

earlier this year (4% to 20%).• State Competition: Largest four commercial banks were taken into partial

state ownership in 2009; all four have insurance subsidiaries.Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary

PAKISTAN

18

Pakistan offers mature insurance legislation, a move towards increased mandatory lines, and growth opportunities in niche areas, on top of being

one of the largest insurance markets in the region. However, due to the regulatory environment, Pakistan is better suited for a branch office or JV.

Established Attractiveness of Market:• Mature Market with Opportunities: Large insurance market with significant

amount of competition, but still presents opportunities in niche lines, such as terrorism covers and micro-insurance, following SECP report on insurance needs of low-income people in response to 2010 floods.

• More Mandatory Lines: The World Bank and SECP are forming regulations to provide protection to individual victims of terrorism, rain, flood, and earthquake.

• Past Precedents: Successful JV by Allianz to become leader in healthcare; Chartis and ACE able to operate or convert branch offices into subsidiaries to continue growth in this market.

Negative Market Trends:• Instability: Social turmoil and lawlessness are prevalent, and the judicial

system is not entirely reliable.• M&A Difficulty: High cost of financing can negate any synergistic gains

from M&A, and insider trading has led to reluctance among locals in pursuing such deals.



MONGOLIA

19

Mongolia’s insurance market has recently experienced positive steps in both stabilizing regulation and in industry growth. However, due to the still

immature nature of the market and the concentration among few competitors, this market is better suited for JVs and/or reinsurance.

Immaturity of Market:• Small Scale: Relatively large number of insurers fighting over small

premium pot, without benefit of substantial compulsory insurance driving consumption; over 60% of premium written by top three companies.

• Privatization: Two largest insurers, Mongol Daatgal and Tushig Daatgal, were state-owned until 2003, potentially leading to added competition.

Positive Market Trends:• Stabilizing Regulation: New insurance laws passed in 2004; Financial

Regulatory Commission created in 2006 to oversee insurance companies.• Segment-driven Growth: Motor liability made compulsory in January 2012;

volume of mining projects leading to greater standardization for international investors; life insurance growing and encouraged by the IMF and Mongolian government.

• Growth in Reinsurance Spend: Mongol Daatgal recently began purchasing reinsurance treaty from Hannover Re; others are anticipated to follow suit.



KYRGYZSTAN

20

While Kyrgyzstan may pose a growth opportunity in the future, its current small, undeveloped, and unstable insurance market combined with overall turmoil in the country makes this market too risky for near- or

medium-term entry, aside from the possibility of reinsurance.

Immaturity of Market:• Instability of Large Competitors: AUB Insurance shot to the top as the

market leader in 2009, only to go bankrupt and nationalized following inability to meet obligations in April 2010 uprisings.

• Few Compulsory Lines to Drive Adoption: Insurance is not trusted among consumers, and adoption issues are not mitigated via mandating insurance consumption.

• Heavy State Involvement: Insurance is tightly controlled by the state, but given the instability of the state government, this presents a very risky situation for insurers operating in the market.

Negative Market Trends:• Ongoing Market Turmoil: With high degree of civil unrest and corruption,

insurance, among other businesses, remain difficult to penetrate and within which to operate.



TAJIKISTAN

21

Tajikistan has proposed several initiatives that would enhance the stability and growth prospects of the local insurance market. As those initiatives have yet to gain momentum, and the current market is dominated by a

legal monopoly, this market is not advisable for entry at this time.

Immaturity of Market:• Legal Monopoly: State-owned insurer Gosstrakh currently dominates the

compulsory lines of insurance, which makes new entry difficult, since overall insurance consumption is not very high in this market.

• Relatively Novel Stabilization (?): Anticipate stable and growing market in future, but somewhat early to tell (e.g., local currency is only ten years old; export-heavy economy highly vulnerable to exogenous shocks).

Negative Market Trends:• Lack of Momentum: Legislation accompanying ten new compulsory

classes proposed in 2010 have yet to be written; market is limited to basic insurance lines and local players.



TURKMENISTAN

22


Turkmenistan’s insurance market remains dominated by one state-owned insurer following renationalization about a decade prior. Until the market

(that is, the state and the one insurer) show signs of opening up to additional insurers, entry into this market is not feasible.

Immaturity of Market:• Monopoly as Relic of Soviet Era: Turkmen Gosstrakh controls all

government business and most compulsory lines, without indication of opening up the market; cites mission to promote stability and growth of Turkmenistan.

Negative Market Trends:• Renationalization: 15 private insurers/reinsurers closed in 2000 as part of

renationalization effort


UZBEKISTAN

23

Like Tajikistan, Uzbekistan has proposed reforms to the insurance sector. However, these reforms (among other economic reforms) have

been slow to materialize, compounded by the overarching poverty of the country and long-standing state control of insurance. Entry is not

advisable at this time.

Immaturity of Market:• Lack of Openness: Not only is there a legal monopoly on compulsory

lines, but the state insurance regulator is also highly reticent on information / data regarding the insurance market, making due diligence prior to entry very difficult. Neighboring Kazakh investors are unable to enter.

• Domination of State Companies: Though the Uzbek government has acknowledged the importance of privatizing the insurance sector, these reforms have been slow to gain momentum.

Negative Market Trends:• Poverty Stagnates Insurance Growth: Due to high degree of poverty,

insurance is more likely to grow in the commercial sector. However, the commercial sector itself is unable to grow with the current restrictive atmosphere of this market.



Analysis of regulatory environment and entry recommendations led to revised market tiers

24

Tier I Tier IIITier IIPriority

MktEntryMethod

Acquisition

Greenfield

JV

Reinsurance

?

Azerbaijan

Kazakhstan

Pakistan

Mongolia

Turkmenistan

Tajikistan

Uzbekistan

Kyrgyzstan

Going forward, we refer to these tiers as the finalized “Phases” that we recommend.


Table of Contents

Executive Summary









Product offerings depend on competition, consumer trends, and market size / growth

• Goal: Recommend products and services for Zurich to offer upon market entry

• Methodology:• Research insurance market by country (size,

concentration, growth, major lines of business)• Analyze competitors’ presence, both global

insurers and local providers• Identify areas of alignment among Zurich’s

expertise, market trends, and competition

• Key Outcomes:• Sophistication of local insurance market aligns

with overall stability of country• Target markets have significant room for growth• Main concern is high concentration and

competition

26

Market Concentration

Product Mix


Phase I countries present the best opportunity in size and concentration

27

Market Size and Concentration

Azerb

aijan

Kazak

hsta

n

Kyrgy

zsta

n

Mon

golia

Pakist

an

Tajikis

tan

Turkm

enist

an

Uzbek

istan

-

200.00

400.00

600.00

800.00

1,000.00

1,200.00

2010 Written Premium $M

Azerb

aijan

Kazak

hsta

n

Kyrgy

zsta

n

Mon

golia

Pakist

an

Tajikis

tan

Turkm

enist

an

Uzbek

istan

0%10%20%30%40%50%60%70%80%90%

100%

Market Concentration

Other

Top 5

Phase I Countries have the most substantive insurance markets in terms of written

volume

Kazakhstan and Azerbaijan have somewhat more

fragmented markets than the other countries; concentration is

problematic across-the-board


Target markets currently exhibit low insurance consumption with relatively few local insurers

28

Market PenetrationMarket Premium as %

of GDPPer Capita

Expenditure USD

No. of Local Insurers

Azerbaijan 0.37% 21.71 25

Kazakhstan 0.67% 60.29 15

Kyrgyzstan 0.27% 2.10 10

Mongolia 0.60% 6.10 6

Pakistan 0.72% 6.05 20

Tajikistan 0.44% 3.47 15

Turkmenistan 0.56% 10.44 1

Uzbekistan 0.33% 3.47 15Developed Markets 10% - 14% 3,000 – 5,000

All target markets have relatively low insurance spend, which suggests both room for growth as well as potential adoption

issues.


Zurich’s global competitors have largely focused expansion efforts on Phase I countries

29

Global Competitor Presence in Central Asian Countries

Company

PHS ($M) FY2010

converted Central Asia LocationsZurich Insurance 31,900 ACE 23,000 PakistanAIG (Chartis Insurance) 27,000 Kazakhstan, Pakistan, UzbekistanAllianz SE 58,958 Azerbaijan, PakistanAXA 65,848 AzerbaijanAssicurazioni Generali S.p.A. 23,173 KazakhstanING Groep N.V. 55,646 Kazakhstan - Structured finance productsMitsui Sumitomo Insurance Group 21,158 No presenceTokio Marine Group 24,618 No presence

Munich Re 30,473 Azerbaijan, Kazakhstan - out of Moscow offi ce

Swiss Re 25,300 Azerbaijan, Kazakhstan, Turkmenistan,

Uzbekistan - out of Munich offi ce


Property, Liability, Motor, and Marine lines are all widely purchased across target markets

30

Current Primary Lines of Business

Market Property Motor WC & EL Liability Marine PA & HC (Non-Life)

Azerbaijan X X X X X

Kazakhstan X X X X X X

Kyrgyzstan X X X

Mongolia X X X X X

Pakistan X X X

Tajikistan X X X

Turkmenistan X

Uzbekistan Split not valid; insurance classified as compulsory vs. voluntary

Property and Marine Lines make sense for short-term entry tactics:• Widely purchased, short-tail business• Opportunities across personal, commercial, and public customers• Build client base and expand into casualty lines with maturing market


Preliminary business plans by country incorporate potential partners and products

31

Phase of Entry (1, 2, or 3)

Potential Partners / TargetsExamples of existing firms on the

ground in target market to consider buying / pursuing joint venture /

reinsuring

Products Currently WrittenPredominant lines of business of

example target firms, which Zurich in turn will write through targets

Other areas of opportunity in market based on example firms’ areas of expertise and market

conditions

Comments…Notes / Rationale / Caveats regarding comments above


AZERBAIJAN

32

Phase One: Immediate Entry

Potential Partners / TargetsAteshgah

(major player, especially in energy)

International Insurance Co.(possible capability for financial products)

Azersigorta(personal lines powerhouse)

Products Currently WrittenProperty / Motor

Workers’ CompensationHealthcare

Marine

Opportunities in diverse industries (energy, agriculture, food, construction)

Comments…No state insurance companies currentlyAcquisition seems highly feasible

Preliminary Business Plan:


KAZAKHSTAN

33


Potential Partners / TargetsKazkommerts-Policy

(2nd largest; bank-owned)

Nomad Insurance(Strong underwriting operations)

Numerous small players(reinsurance potential)


Workers’ CompensationLiabilityMarine

Growing property cat R/I market

Comments…Main competition likely to be Allianz and Eurasia



PAKISTAN

34


Potential Partners / TargetsNational Insurance(potential for privatization)

EFU General(JV with Allianz)

Numerous small players(including branches of competitors)


MarineMiscellaneous

Uptick in terrorism covers

Comments…Reinsurance market may be difficult due to state-sponsored Pakistan Reinsurance Co Ltd.



Comments…Reinsurance is as yet not well understood among insurers, but likely to grow due to Mongol Daatgal.

MONGOLIA

35

Phase Two: Medium Term Entry (3-5 years)

Potential Partners / TargetsMongolian Insurance Group

(need fac capacity for large engineering risks)

Bodi Daatgal(possible life insurance partner)

Banks / Other Businesses(provide insurance for local operations)


MarineLiability

CAR

Growth in mining sector necessitates large loss protection



KYRGYZSTAN

36

Comments…Reinsurance is likely the best bet for entry, barring rapid reduction in poverty / increase in consumption.

Phase Three: Long-Term Entry, if any

Potential Partners / TargetsKyrgyzinstrakh

(reinsurance needs in P&C and aviation)

Kyrgyzstan Insurance(largely property writer)

New players as market stabilizes long-term

Products Currently WrittenPropertyLiability

Personal & Small Business



TAJIKISTAN

37

Comments…Very small volume of business makes both insurance and reinsurance for Zurich not very attractive.


Potential Partners / TargetsOrien Insurance

(competing with state co.s for lead; Believed to be politically connected)

New players as market opens up to additional competition long-term

Products Currently WrittenPropertyLiabilityMarine

Some specialty lines in construction and engineering, financial and

business risks



TURKMENISTAN

38

Comments…Will need to monitor potential developments leading to opening of market to additional competitors


Potential Partners / TargetsNone available at this time

Products Currently WrittenPropertyLiability

Other Personal Lines



UZBEKISTAN

39

Comments…Market worth monitoring to see if openness problem indicates any signs of relaxing


Potential Partners / TargetsNone available at this time (all

state-owned), but potential for new players writing diverse lines if/when

reforms take effect

Products Currently WrittenInformation not available, but likely

concentrated around Property

MotorConstruction



Table of Contents

Executive Summary






Recommendations: Business Case by Target Market



High-level benchmarks were estimated via market share and acquisition target value

• Goal: Perform projected cost-benefit analysis of market entry with five-year horizon

• Methodology:• Identify comparables for valuation / estimate

Zurich’s performance in market upon entry• Develop high-level forecasting model to

calculate potential profit and conduct sensitivity analysis

• Estimate investment(s) required and performance of Zurich operations within forecast horizon


AssumptionsOverall Market WP Growth Rate 3.00%Target's Market Share Growth Rate 3.00%Target's Premium Base Growth Rate 6.09%Loss Ratio Growth Rate 1.50%Expense Ratio Growth Rate 3.00%Acquisition & Integration Costs 9.68 Investment Hurdle Rate 10.00%

Operating Year 2010 2011 2012 2013 2014Overall Market Written Premium 193.86 199.68 205.67 211.84 218.19 Target's Market Share 7.5% 7.7% 8.0% 8.2% 8.4%Target's Premium Base 14.54 15.42 16.36 17.36 18.42 Loss Ratio 34.7% 35.2% 35.8% 36.3% 36.8%Expense Ratio 35.0% 36.1% 37.1% 38.2% 39.4%Target's Margin Premium 4.40 4.43 4.44 4.42 4.38 Target's Margin % 30.3% 28.7% 27.1% 25.5% 23.8%Discounted to 2013 - - - 4.42 3.98

Steady-state assumptions were used to forecast key markets barring any shocks • General Assumptions

• Investment Hurdle Rate• Market growth rate, based on trend over last few years• Market Average Loss Ratio Growth Rate• Market Average Expense Ratio Growth Rate

• Greenfield / Branch Office Model Assumptions: Azerbaijan, Kazakhstan, Pakistan

• Anticipated Zurich Market Share Growth• Initial Start-up Costs

• Acquisition Model Assumptions: Azerbaijan, Kazakhstan• Target’s Free Cash Flows, based on P&L / Annual Report (if available)• Growth Rate of Target’s Business

• Reinsurance Model Assumptions: Mongolia• Commission and Cession Percentage (Pro Rata)• Cedant’s Market Share Growth Rate


Table of Contents

Executive Summary









AZERBAIJAN

44

Final Business Plan:


Phase of entry: Phase ONE; we recommend immediate entry. Azerbaijan ranks number two in our model finishing in the top three spots for half of our model’s indicators. Openness, capital markets, and product markets still show room for improvement; however, the country has mandatory insurance lines and precedent of success of other insurance companies entering the market. Recently, more insurance lines have become mandatory and higher capital requirements have squeezed out smaller competitors.

Entry Method: Azerbaijan has a strong established insurance market, combined with development of mandatory insurance. Additionally, it has solid past precedent of acquisition and growth trajectories. Taking into account the high capital requirements in Azerbaijan, we recommend acquisition of a local company. Our research shows Ateshgah (major player in energy), International Insurance Co. (possible capability for financial products) and Azersigorta as potential candidates, due to competitive position in the market, experience writing diverse lines of business, and other niche opportunities. Potential concerns include the need to pay 10% profit tax despite promise of exemption and potential global competition.

Product Offering: Predominant lines of business of potential companies to acquire are: i) property / motor, ii) worker’s compensation, iii) healthcare and iv) marine. There are opportunities in diverse industries within Azerbaijan such as energy, agriculture, food, and construction.

Forecast 2013-2018: Acquisition of Target Comparable to Ateshgah yields $20.3M in profit, less $9.7M in acquisition and integration costs

Greenfield Entry yields $12.4M in profit

Phase of entry: Phase ONE; we recommend immediate entry. Apart from the Capital Market indicators, where it is ranked as number two, this country ranks number one in every sector of our model. It represents the best option among the eight countries that we evaluated. Kazakhstan enjoys the largest economy in the region with strong macroeconomic trends and created a Financial Supervision Authority to further develop the local insurance industry.

Entry Method: Given the country’s existing market strength and straightforward procedures for establishing local subsidiaries, we recommend acquisition of an existing company within Kazakhstan or a greenfield entry. Our research shows Kazkommerts-Policy (second largest, bank owned) and Nomad Insurance (strong underwriting operations) as two potential acquisitions. However, there are several other smaller operators that can also represent good opportunities.Potential concerns include higher taxes which have recently been raised from 4% to 20%, as well as state competition which partially owns four of the largest commercial banks.

Product Offering: Predominant lines of business of potential companies to acquire are: i) property / motor, ii) worker’s compensation, iii) liability and iv) marine. A secondary potential opportunity is the growing property cat R/I market within Kazakhstan.

Forecast 2013-2018: Acquisition of Target Comparable to Kazkommerts-Policy yields $263.3M in profit, less $182.6M in acquisition and integration costs

Greenfield Entry yields $155.1M in profit, less start-up costs

KAZAKHSTAN



Phase of entry: Phase ONE; we recommend immediate entry, as Pakistan is both a mature market and trending towards increased mandatory insurance lines. There are opportunities in niche areas such as terrorism insurance and Pakistan is quickly becoming one of the largest insurance markets in Central Asia. However, serious risks remain in political stability and economic development that might offset gains in the insurance sector policy development.

Entry Method: The mergers and acquisitions regulatory environment in Pakistan is not stable and for this reason we recommend opening a branch office or entering into a joint venture. M&A activities are difficult in Pakistan due to lack of industry synergy and large industrial development base and product markets. The World Bank and the SECP are currently developing newer regulations for individual protection for terrorism, flood, rain and earthquakes to allay government reliance in event of such catastrophic events. In the past competitors such as ACE, Allianzs and Chartis have entered into successful JVs and opened new branches.

Product Offering: Predominant lines of business of potential companies to enter into joint venture or branch offices are i) property, ii) motor and iii) marine (transportation) insurance. These represent growing areas in the Pakistani market.

Forecast 2013-2018: Greenfield Entry yields $111.4M in profit, less start-up costs

PAKISTAN



Phase of entry: Phase TWO; we recommend entry within five years. There has been tremendous industry growth in Mongolia and regulations are emerging to stabilize the markets. However, the insurance industry is still small and just beginning to mature.

Entry Method: Joint ventures and reinsurance are the two methods suitable in Mongolia, particularly for entry in the nearer term. The immaturity of the markets makes the scope smaller and the rate of privatization has yet to pick up. The mining sector is experiencing a lot of growth and more insurance lines are being made mandatory. There is potential for growth in reinsurance, with Mongol Daatgal setting a purchase precedent. Overall the country shows a lot of potential in the medium term. However the two largest insurers were state owned until recently, enjoy government support still, and might hinder free market competitors. New regulations are in the pipeline and will aid new entrants in the near future.

Product Offering: Predominant lines of business of potential companies to enter into joint venture or reinsurance are i) property, ii) motor, iii) liability, iv) marine (transportation) insurance and v) non-life insurance lines such as personal accident and health care. These take into account the trends in the market in Mongolia.

Forecast 2014-2018: Pro rata reinsurance treaty with target comparable to Bodi Daatgal yields $4.53M in net premium accruing to Zurich

MONGOLIA



KYRGYZSTAN


Phase of entry: Phase THREE. No entry recommended at this time.

Necessary Developments for Entry: Before entry is worth considering, political and market turmoil must calm and stabilize. Kyrgyzstan must also climb out of recession, show some signs of sustained growth, and indicate signs of an emerging consumer class

Other Areas to Monitor: Expansion of compulsory lines of insurance would also indicate potential growth in insurance consumption.


TAJIKISTAN



Necessary Developments for Entry: Government first would have to open compulsory lines to competition to Gosstrakh. The unemployment rate must stabilize and recede, eventually sparking growth of consumer class.

Other Areas to Monitor: Overall insurance market would need to grow significantly and pending legislation to reform industry must be implemented.


TURKMENISTAN

50




Necessary Developments for Entry: Government would first need to relinquish monopoly of insurance, which it has shown no indication of doing. Additionally, the state must relax overall control of economy, and unemployment must stabilize and recede, enabling growth of consumer class beyond elites.

UZBEKISTAN



Necessary Developments for Entry: Government would first need to open up compulsory lines of insurance to competitors. Inflation must stabilize for sustained periods and the state must harness growth of energy industry in a way that expands overall economy and drives down unemployment.

Other Areas to Monitor: Insurance reforms which have yet to take effect need to be implemented so that the business is sustainable within the country.


Table of Contents

Executive Summary









Evaluation

• High degree of uncertainty in target markets, driven by• Increasing competition in more established markets• Regulatory changes (e.g., taxes in established markets, reforms in immature

markets)• Instability in immature markets• Limited data / information released by more closed, immature markets

• Use of steady-state assumptions underlying recommendations• Assume no shocks, such as new regulations, macroeconomic events, etc.• Realistically can expect consolidation in more established markets• Recommendations and forecast designed as baseline, but need additional

evaluation per Zurich’s operating procedures and risk appetite

• Zurich’s internal evaluation• Recommendations contingent upon areas of expertise within Zurich’s Dubai and/or

Istanbul office• Project hurdle rates and other metrics

53

Discussion Points of Analyses


Summary

• Tiering of target markets• Phase 1 (Immediate): Azerbaijan, Kazakhstan, Pakistan • Phase 2 (3-5 years): Mongolia• Phase 3 (10 years, if at all): Kyrgyzstan, Uzbekistan, Tajikistan, Turkmenistan

• Key regulatory issues & entry recommendations• Acquisition in Azerbaijan is feasible (precedent: AXA)• Largely free foreign entry into Kazakhstan• Pakistan difficult to enter via acquisition, but others have been successful

converting branch offices to wholly-owned subsidiaries

• Product Offerings• Initial entry: Property for personal and commercial clientele; Marine for commercial /

public• Expansion: Liability products for commercial clientele• Maturity: Specialized offerings for larger commercial clients (WC & EL, PA & HC)

54

Overview of Recommendations


55

APPENDIX

Government Structure: Presidential form of government, authoritarian, high corruption

GDP (PPP): $90.8B GDP growth rate (real): 5%Population (2010): 9MInvestment: 17% of GDPInflation: 5.7%Central Bank Interest Rate: 3%Commercial Prime Interest Rate: 21%

Agriculture: Cotton, grain, riceIndustry: Petroleum, natural gas Industrial Prod Growth Rate: 2.6%Oil Production: 1.04M bbl/day Natural Gas: 16.52B cubic meter

Exports: $26.5B; Oil and Gas (90%); Italy, USA, GermanyImports: $6.7B; Machinery & equipment; Turkey, Russia, Germany

AZERBAIJAN

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Background Information:

Government Structure: Presidential, authoritarian rule, little power outside the executive branch; Economic growth was 9% during 2000-2007

GDP (PPP): $196.4B (2010) GDP growth rate (real): 7% (2010)Population (2010): 16.3M Investment: 25.2% of GDP (2010)Inflation: 7.1% (2010)Central Bank Interest Rate: 4.25% (2010)Commercial Prime Interest Rate: 8.161%

Agriculture: Grain (Wheat), CottonIndustry: Oil, Coal, Iron ore Industrial Prod Growth Rate: 10%Oil Production: 1.61 million bbl/day (19th worldwide)Natural Gas: 35.61B cubic meter (25th worldwide)

Exports: $60.8B; mostly oil (59%); China, Germany and RussiaImports: $32B; machinery and equipment; Russia, China and Germany

KAZAKHSTAN

57


Government Structure: Presidential, heavily dominated by military and ISI

GDP (PPP): $464.9B GDP growth rate (real): 4.8%Population (2010): 173.6MInvestment: 13.8% of GDPInflation: 13.9%Central Bank Interest Rate: 0.07%Commercial Prime Interest Rate: 13.462%

Agriculture: Cotton, wheat, riceIndustry: Textile and apparel, food Industrial Prod Growth Rate: 4.6%Oil Production: 63,580 bbl/day Natural Gas: 38.4B cubic meter

Exports: $21.5B; Textiles, rice, leather goods; USA, Afghanistan, UAEImports: $32.9B; Petroleum, Petro products, machinery; China, Saudi Arabia, UAE

PAKISTAN

58


Government Structure: Parliamentary form headed by Prime Minister

GDP (PPP): $11B GDP growth rate (real): 6.1%Population (2010): 2.8MInvestment: 36.1% of GDPInflation: 10.2%Central Bank Interest Rate: 10.99%Commercial Prime Interest Rate: 17.9%

Agriculture: Wheat, barley, vegetablesIndustry: Construction, mining, oil Industrial Prod Growth Rate: 3%Oil Production: None Natural Gas: None

Exports: $2.9B; Copper, Apparel, livestock; China, Canada, RussiaImports: $3.3B; Machinery & equipment, fuel, cars; Russia, China, Japan

MONGOLIA

59


KYRGYZSTAN

Government Structure: Presidential, republic, very slow pace of democratization, poor mountainous country, dominantly agricultural

GDP (PPP): $12.02B GDP growth rate (real): -1.4%Population (2010): 5.4MInvestment: 28% of GDPInflation: 8%Central Bank Interest Rate: 2.5%Commercial Prime Interest Rate: 29.425%

Agriculture: Tobacco, cotton, potatoesIndustry: Small machinery, Textile Industrial Prod Growth Rate: 9.8%Oil Production: 946 bbl/day Natural Gas: 15.4M cubic meter

Exports: $1.78B; Cotton, wool, meat; Russia, Uzbekistan, KazakhstanImports: $2.98B; Oil and Gas, Machinery; China, Russia, Kazakhstan

60


Government Structure: Presidential form, bicameral legislature, Prime minister appointed by the president

GDP (PPP): $14.74B GDP growth rate (real): 6.5%Population (2010): 6.9MInvestment: 20.6% of GDPInflation: 6.4%Central Bank Interest Rate: 5%Commercial Prime Interest Rate: 21.7%

Agriculture: Cotton, grains, fruitIndustry: Aluminum, Cement Industrial Prod Growth Rate: 7.5%Oil Production: 220 bbl/day Natural Gas: 38M cubic meter

Exports: $1.3B; Aluminum, Electricity, Cotton; Turkey, Russia, UzbekistanImports: $2.9B; Petroleum products; Machinery &equipment; China, Russia

TAJIKISTAN

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Government Structure: Presidential republic, secular democracy, but actually power concentrated with presidential administration

GDP (PPP):$36.9B GDP growth rate (real): 9.2%Population (2010): 5MInvestment: 19.7% of GDPInflation: 10%Central Bank Interest Rate: NACommercial Prime Interest Rate: 17.5%

Agriculture: Cotton, grains, livestockIndustry: Natural gas, Oil Industrial Prod Growth Rate: 7.3%Oil Production: 202,400 bbl/day Natural Gas: 38.1B cubic meter (24th)

Exports: $10.5B; Gas, Crude, Petrochemicals; China, Turkey, UAEImports: $8.27B; Machinery & equipment, chemicals; Russia, Turkey, China

TURKMENISTAN

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Government Structure: Republic, authoritarian presidential rule

GDP (PPP): $85.85B GDP growth rate (real): 8.5%Population (2010): 28.2MInvestment: NAInflation: 15%Central Bank Interest Rate: NACommercial Prime Interest Rate: NA

Agriculture: Cotton, vegetables, fruitsIndustry: Textiles, food processing Industrial Prod Growth Rate: 8%Oil Production: 58,650bbl/day Natural Gas: 61.4B cubic meter (14th)

Exports: $12B; Energy products, cotton; China, Russia, TurkeyImports: $8B; Machinery & Equipment, foodstuff; Russia, South Korea, China

UZBEKISTAN

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Economic Factors

APPENDIX: Market Analysis by Country

64

Oil Production (thousand bbl/day)

Natural Gas Production

(billion cubic

meter)

Kazakhstan 196.4 7590.00 13,000 7.00% 1610 35.61 39.30 60.8 32 7.10%Kyrgyzstan 12.02 2100.00 2400 -1.40% 0.946 0.0154 0.00 1.78 2.98 8.00%Tajikistan 14.74 2140.00 2000 6.50% 0.22 0.0380 0.00 1.3 2.9 6.40%Turkmenistan 36.9 7490.00 7,500 9.20% 202.4 38.1 0.00 10.5 8.27 10.00%Uzbekistan 85.85 3120.00 3,300 8.50% 58.65 61.4 0.00 12 8 15.00%Pakistan 464.9 2790.00 2,800 4.80% 63.58 38.4 21.50 21.5 32.9 13.90%Azerbaijan 90.8 9280.00 10,200 5.00% 1040 16.52 18.30 26.5 6.7 5.70%Mongolia 11 3670.00 4,500 6.10% 0.0 0.0 39.60 2.9 3.3 10.20%Kazakhstan 2 2 1 3 1 4 2 1 2 6Kyrgyzstan 7 8 7 8 6 7 8 7 7 4Tajikistan 6 7 8 4 7 5 8 8 8 2Turkmenistan 5 3 3 1 3 3 8 5 3 5Uzbekistan 4 5 5 2 5 1 8 4 4 8Pakistan 1 6 6 7 4 2 3 3 1 7Azerbaijan 3 1 2 6 2 6 4 2 5 1Mongolia 8 4 4 5 8 8 1 6 6 6

Import (billion

USD)Inflation

Natural Resources

GDP (PPP) (billion USD)

GNI per Capita (USD, 2010)

GDP/Capita (PPP)

GDP growth (real)

Domestic Credit to

the Private Sector (% of GDP)

Export (billion

USD)

Political Risk in Central Asian Countries


65

66

Openness


Kazakhstan 9961.0 65.5 4.18Kyrgyzstan 437.6 103.0 3.45Tajikistan 15.8 87.0 3.77Turkmenistan 2083.0 2.3 0.00Uzbekistan 822.0 60.0 0.00Pakistan 2016.0 68.0 3.58Azerbaijan 563.1 55.8 4.31Mongolia 1454.7 107.3 3.86Kazakhstan 1 5 2Kyrgyzstan 7 2 6Tajikistan 8 3 4Turkmenistan 2 8 8Uzbekistan 5 6 8Pakistan 3 4 5Azerbaijan 6 7 1Mongolia 4 1 3

FDI, Net Inflow

Openness to Media

Global Competitiv

67

Product Markets


Kazakhstan 2.66 1Kyrgyzstan 2.09 5Tajikistan 2.00 7Turkmenistan 2.24 3Uzbekistan 2.54 2Pakistan 2.08 6Azerbaijan 2.23 4Mongolia 1.94 8

Logistics Performance Index (1-5, low to high)

68

Labor Markets


UN Education Index (expected and mean years of schooling

Unemploy-ment rate

UN Education Index (expected and mean years of schooling

Unemploy-ment rate

Kazakhstan 0.834 5.40% 1 2Kyrgyzstan 0.716 8.20% 5 6Tajikistan 0.704 60.00% 7 7Turkmenistan 0.739 70.00% 3 8Uzbekistan 0.711 8.00% 6 5Pakistan 0.386 5.95% 8 3Azerbaijan 0.763 6.00% 2 4Mongolia 0.722 3.60% 4 1

69

Capital Markets


Insurance and Financial Sector (% of imports)

Total Listed Domestic Companies

Money and quasi money supply (M2) (% GDP)

Insurance and Financial Sector (% of imports)

Total Listed Domestic Companies

Money and quasi money supply (M2) (% GDP)

Kazakhstan 5.0% 60 36.60 2 3 3Kyrgyzstan 3.0% 11 0.00 4 4 5Tajikistan 7.0% 0 0.00 1 5 5Turkmenistan 0.0% 0 0.00 7 5 5Uzbekistan 0.0% 0 0.00 7 5 5Pakistan 3.0% 644 38.50 4 1 2Azerbaijan 3.0% 0 22.80 4 5 4Mongolia 4.0% 336 44.90 3 2 1

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APPENDIX: Acquisition Forecast - Azerbaijan

Target Market AzerbaijanTarget Comparable AteshgahUSD MillionsAssumptionsOverall Market WP Growth Rate 3.00%Target's Market Share Growth Rate 3.00%Target's Premium Base Growth Rate 6.09%Loss Ratio Growth Rate 1.50%Expense Ratio Growth Rate 3.00%Acquisition & Integration Costs 9.68 Investment Hurdle Rate 10.00%Operating Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 TotalOverall Market Written Premium 193.86 199.68 205.67 211.84 218.19 224.74 231.48 238.42 245.58 Target's Market Share 7.5% 7.7% 8.0% 8.2% 8.4% 8.7% 9.0% 9.2% 9.5%Target's Premium Base 14.54 15.42 16.36 17.36 18.42 19.54 20.73 21.99 23.33 Loss Ratio 34.7% 35.2% 35.8% 36.3% 36.8% 37.4% 38.0% 38.5% 39.1%Expense Ratio 35.0% 36.1% 37.1% 38.2% 39.4% 40.6% 41.8% 43.0% 44.3%Target's Margin Premium 4.40 4.43 4.44 4.42 4.38 4.31 4.20 4.05 3.86 Target's Margin % 30.3% 28.7% 27.1% 25.5% 23.8% 22.0% 20.3% 18.4% 16.6%Discounted to 2013 - - - 4.42 3.98 3.56 3.15 2.77 2.40 20.28

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APPENDIX: Acquisition Forecast - Kazakhstan

Target Market KazakhstanTarget Comparable Kazkommerts-PolicyUSD Mill ionsAssumptionsOverall Market WP Growth Rate 6.00%Target's Market Share Growth Rate 2.00%Target's Premium Base Growth Rate 8.12%Loss Ratio Growth Rate 2.00%Expense Ratio Growth Rate 3.00%Acquisition & Integration Costs 182.61 Investment Hurdle Rate 10.00%Operating Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 TotalOverall Market Written Premium 949.80 1,006.79 1,067.20 1,131.23 1,199.10 1,271.05 1,347.31 1,428.15 1,513.84 Target's Market Share 8.0% 8.2% 8.3% 8.5% 8.7% 8.8% 9.0% 9.2% 9.4%Target's Premium Base 75.98 82.15 88.82 96.04 103.84 112.27 121.38 131.24 141.90 Loss Ratio 10.0% 10.2% 10.4% 10.6% 10.8% 11.0% 11.3% 11.5% 11.7%Expense Ratio 35.0% 36.1% 37.1% 38.2% 39.4% 40.6% 41.8% 43.0% 44.3%Target's Margin Premium 41.79 44.16 46.60 49.12 51.69 54.32 56.99 59.67 62.36 Target's Margin % 55.0% 53.8% 52.5% 51.1% 49.8% 48.4% 46.9% 45.5% 43.9%Discounted to 2013 - - - 49.12 46.99 44.89 42.81 40.76 38.72 263.29

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APPENDIX: Greenfield Forecast - Azerbaijan

Target Market AzerbaijanUSD MillionsAssumptionsOverall Market WP Growth Rate 3.00%Sub / Branch Market Share Growth Rate 3.00%Sub / Branch Premium Base Growth Rate 6.09%Loss Ratio Growth Rate 1.50%Expense Ratio Growth Rate 3.00%Initial Start-up Costs 3.00 Investment Hurdle Rate 10.00%Operating Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 TotalOverall Market Written Premium 193.86 199.68 205.67 211.84 218.19 224.74 231.48 238.42 245.58 Sub / Branch Market Share 0.0% 0.0% 0.0% 5.0% 7.0% 8.0% 8.2% 8.5% 8.7%Sub / Branch Premium Base - - - 10.59 11.24 11.92 12.65 13.42 14.23 Loss Ratio 34.7% 35.2% 35.8% 36.3% 36.8% 37.4% 38.0% 38.5% 39.1%Expense Ratio 35.0% 36.1% 37.1% 38.2% 39.4% 40.6% 41.8% 43.0% 44.3%Sub / Branch Margin Premium - - - 2.70 2.67 2.63 2.56 2.47 2.36 Sub / Branch Margin % 0.0% 0.0% 0.0% 25.5% 23.8% 22.0% 20.3% 18.4% 16.6%Discounted to 2013 - - - 2.70 2.43 2.17 1.92 1.69 1.46 12.37

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APPENDIX: Greenfield Forecast - Kazakhstan

Target Market KazakhstanUSD MillionsAssumptionsOverall Market WP Growth Rate 6.00%Sub / Branch Market Share Growth Rate 2.00%Sub / Branch Premium Base Growth Rate 8.12%Loss Ratio Growth Rate 2.00%Expense Ratio Growth Rate 3.00%Initial Start-up Costs 5.00 Investment Hurdle Rate 10.00%Operating Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 TotalOverall Market Written Premium 949.80 1,006.79 1,067.20 1,131.23 1,199.10 1,271.05 1,347.31 1,428.15 1,513.84 Sub / Branch Market Share 0.0% 0.0% 0.0% 5.0% 8.0% 10.0% 10.2% 10.4% 10.6%Sub / Branch Premium Base - - - 56.56 61.15 66.12 71.49 77.29 83.57 Loss Ratio 10.0% 10.2% 10.4% 10.6% 10.8% 11.0% 11.3% 11.5% 11.7%Expense Ratio 35.0% 36.1% 37.1% 38.2% 39.4% 40.6% 41.8% 43.0% 44.3%Sub / Branch Margin Premium - - - 28.93 30.44 31.99 33.56 35.14 36.73 Sub / Branch Margin % 0.0% 0.0% 0.0% 51.1% 49.8% 48.4% 46.9% 45.5% 43.9%Discounted to 2013 - - - 28.93 27.68 26.44 25.22 24.00 22.80 155.07

74

APPENDIX: Greenfield Forecast - Pakistan

Target Market PakistanUSD MillionsAssumptionsOverall Market WP Growth Rate 8.00%Sub / Branch Market Share Growth Rate 1.00%Sub / Branch Premium Base Growth Rate 9.08%Loss Ratio Growth Rate 1.50%Expense Ratio Growth Rate 3.00%Initial Start-up Costs 12.00 Investment Hurdle Rate 10.00%Operating Year 2008 ~ 2012 2013 2014 2015 2016 2017 2018 TotalOverall Market Written Premium 1,070.60 1,248.75 1,348.65 1,456.54 1,573.06 1,698.91 1,834.82 1,981.61 Sub / Branch Market Share 0.0% 0.0% 3.0% 5.0% 8.0% 8.1% 8.2% 8.2%Sub / Branch Premium Base - - 40.46 44.13 48.14 52.51 57.28 62.48 Loss Ratio 11.0% 11.3% 11.5% 11.7% 11.9% 12.0% 12.2% 12.4%Expense Ratio 35.0% 37.1% 38.2% 39.4% 40.6% 41.8% 43.0% 44.3%Sub / Branch Margin Premium - - 20.33 21.60 22.90 24.25 25.63 27.04 Sub / Branch Margin % 0.0% 0.0% 50.3% 48.9% 47.6% 46.2% 44.7% 43.3%Discounted to 2013 - - 20.33 19.63 18.93 18.22 17.51 16.79 111.40

75

APPENDIX: Pro Rata Reinsurance Forecast - Mongolia

Target Market MongoliaTarget Comparable Bodi DaatgalUSD MillionsAssumptionsOverall Market WP Growth Rate 10%Cedant's Market Share Growth Rate 0%Cedant's Premium Base Growth Rate 10%Loss Ratio Growth Rate 0.50%Expense Ratio Growth Rate 3%Commission 20%Quota Share Percentage 50%Investment Hurdle Rate 10%Operating Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 TotalOverall Market Written Premium 16.27 17.90 19.69 21.66 23.82 26.20 28.82 31.71 34.88 38.36 Cedant's Market Share 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0%Cedant's Premium Base 3.25 3.58 3.94 4.33 4.76 5.24 5.76 6.34 6.98 7.67

Loss Ratio 10.2% 10.3% 10.3% 10.4% 10.4% 10.5% 10.5% 10.6% 10.6% 10.7%Expense Ratio 37.5% 38.7% 39.8% 41.0% 42.3% 43.5% 44.8% 46.2% 47.6% 49.0%

Cedant's Margin Premium 1.70 1.83 1.96 2.11 2.26 2.41 2.57 2.74 2.92 3.10 Cedant's Margin % 52.3% 51.1% 49.9% 48.6% 47.3% 46.0% 44.7% 43.3% 41.8% 40.4%

Commission 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0%Net Premium Accruing to Zurich 0.68 0.73 0.79 0.84 0.90 0.96 1.03 1.10 1.17 1.24 - Net Premium Discounted to 2014 - - - - - 0.96 0.94 0.91 0.88 0.85 4.53