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Finding Opportunities as P&C Insurance Enters Soft Market: A Wall Street Transcript Interview with Amit Kumar, Senior Analyst at Macquarie Group Limited

67 WALL STREET, New York - June 25, 2014 - The Wall Street Transcript has just published its Insurance Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Low Profitability and Low Interest Rates - Commercial Line Brokers and Underwriters - Consolidation Trends - Emerging Market Expansion - Analysis Of Personal, Commercial & Reinsurance Subsectors

Companies include: American International Group, (AIG), The Travelers Companies, Inc. (TRV), The Chubb Corporation (CB), Validus Holdings, Ltd. (VR), Citizens Inc. (CIA), Aspen Insurance Holdings Ltd. (AHL), Endurance Specialty Holdings L (ENH) and many more.

In the following excerpt from the Insurance Report, an expert analyst discusses the outlook for the sector for investors:

TWST: What are your thoughts on P&C insurance? Have we or are we about to enter a soft market, and what is your advice to P&C insurance investors at this stage?

Mr. Kumar: I think the soft market is knocking on our door, and we have nothing to stop it from coming in. If you look at the pricing commentary, the rate environment is quite pessimistic, and if you take the commercial side, recent pricing surveys are indicating that price increases are at the lowest point since 2012.

On the reinsurance side, if you look at catastrophe pricing, if you look at the upcoming renewals, pricing commentary is again indicating a double-digit decline at the June renewal. Then if you look at personal lines, pricing increases are in the single-digit range.

So in my view, I won't say that we are in the midst of a soft market. I think the question is, in the absence of a large loss and as industry capital builds up, pricing sustainability becomes more and more difficult. Hence it seems that we are rapidly approaching that inflection point.

TWST: So against that backdrop, are there some bright spots in P&C insurance? How do you want to be playing the sector at this stage?

Mr. Kumar: I think that's a good question. I think investors should distinguish between pricing, earned returns and margins. A double-digit decline in pricing does not necessarily mean that the ROEs will decline double digits too. So in my mind, if you're thinking about the marketplace, I think there are several opportunities to play the space.

If you look at 2013, a majority of the insurance and reinsurance stocks outperformed the S&P. Now in 2014, in Q1, both...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.