Industry Economic And Ratings Outlook:

Discipline Is The Watchword For U.S. Property/Casualty Insurers

Primary Credit Analysts: Tracy Dolin, New York (1) 212-438-1325; tracy.dolin@standardandpoors.com Neil R Stein, New York 212-438-5906; neil.stein@standardandpoors.com Secondary Contact: Kevin T Ahern, New York 212-438-7160; kevin.ahern@standardandpoors.com

Table Of Contents
Economic Outlook Ratings And Outlook Distribution Industry Credit Outlook: Underwriting Profitability Takes Top Priority Related Criteria And Research

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

JULY 11, 2013 1

1158628 | 301674531

Industry Economic And Ratings Outlook:

Discipline Is The Watchword For U.S. Property/Casualty Insurers

(Editor's Note: The version of this article published May 28, 2013, contained incorrect data in Table 2. A corrected version follows.) The U.S. property/casualty (P/C) insurance industry faces more frequent and extreme catastrophes, lingering low interest rates, a diminishing reserve cushion, and an improving yet competitive rate environment. The days of insurers being able to earn a respectable return on equity with an underwriting loss are gone, in Standard & Poor's Ratings Services' view. Despite these strains, though, we believe the P/C sector (commercial and personal lines) can maintain its stable credit profile in 2013 and 2014, and rating actions are likely to be limited. The sector's strong business profiles, very strong capitalization to withstand large catastrophes, and conservative investment portfolios support our opinion. Insurers are demonstrating disciplined underwriting by taking targeted price increases and showing a willingness to tolerate lower client retention as a consequence. Moreover, we believe insurers' enhanced enterprise risk management (ERM) capabilities will improve underlying margins and likely lead to shorter and less-pronounced market cycles. Overview Heightened weather volatility is translating to less-predictable earnings. The low interest environment makes unsatisfactory combined ratios less forgivable. The industry maintains significant capital levels and conservative investment portfolios. Insurers are unlikely to sustain the sizable reserve releases of recent periods. Mid to high single-digit composite rate increases will likely be sustained through the remainder of 2013 and full-year 2014.

Economic Outlook
We publish monthly our economists' scenarios of where we think the U.S. economy could be heading. Beyond projecting GDP and inflation, we also include outlooks for other major economic categories. We call this forecast our "baseline scenario," and we use it in all areas of our credit analyses (see table 1). Our current ratings in the U.S. P/C insurance sector factor in this scenario.

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

JULY 11, 2013 2

1158628 | 301674531

Industry Economic And Ratings Outlook: Discipline Is The Watchword For U.S. Property/Casualty Insurers

Table 1

2013-2014 Scenarios For U.S. Property/Casualty Insurance

--FORECAST---Upside---Baseline---Downside-Baseline impact on sectors Favorable --ACTUAL--

2013 Real GDP (% change) 3.4

2014 4.5

2013 2.7

2014 3.1

2013 0.8

2014 0.7

Comment/outlook on 2012 baseline forecast 2.2 Sluggish but improving GDP growth should allow for steady volume for most P/C insurance products. 1.8 A moderately higher but still low Treasury note yield is beneficial to capital-market funding but detrimental to fixed-income portfolio returns. Highly accommodative monetary policy likely will persist through 2014. 1,379.6 Equity market gains (S&P 500 index) of about 14% in 2013 precede a significantly more moderate but still beneficial return of about 6% in 2014. Anticipated price appreciation should benefit insurers' capital bases.

10-yr. Treasury note yield (%)

2.9

4.2

2.1

2.6

1.1

1.7

Unfavorable

S&P 500 Common Stock Index

1,747.1

2,028.6

1,569.0

1,657.0

1,150.7

1,251.6

Favorable

Unemployment rate (%)

7.2

5.9

7.5

6.7

8.6

9.0

8.1 Modestly lower Somewhat unemployment should benefit favorable consumer income and confidence. The unemployment rate is now less than 8%. Recent data suggest the job market continues to strengthen. We believe that an improving labor market is the best indication of an economic turnaround. 133.7 A slow increase in payrolls might benefit workers' compensation, health, and group benefits writers. 2.1 Core CPI remains tame, lowering concerns about claims inflation. 0.8 Housing starts improve but remain less than historical levels. This would most benefit personal-lines writers, particularly those that offer bundled homeowners, auto, and umbrella products. 14.4 Strong auto sales will likely increase insurance demand. Slightly negative Somewhat favorable

Payroll employment (mil.) Core CPI (% change) Housing starts (mil. units)

136.6

140.8

136.1

139.0

133.4

133.7

2.3

2.8

1.9

2.2

1.8

1.8

Favorable

1.1

1.5

1.0

1.3

0.7

0.9

Somewhat favorable

Unit sales of light vehicles (mil.) Industry economic outlook

16.2 Slightly positive

17.4 Slightly positive

15.6 Neutral

16.2 Neutral

13.1 Slightly negative

13.4 Slightly negative

Somewhat favorable

However, we realize that financial-market participants also want to know how we think the economy could worsen or

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

JULY 11, 2013 3

1158628 | 301674531

Industry Economic And Ratings Outlook: Discipline Is The Watchword For U.S. Property/Casualty Insurers

improve from our baseline scenario. As a result, once per quarter, we project two additional scenarios: an upside outlook with faster growth and a downside outlook with slower growth. We use the downside case to estimate the credit impact of an economic outlook that is weaker than our base-case expectations. Although our ratings do not directly incorporate these alternative scenarios, they represent an important input into our ratings process, particularly when we are considering an outlook revision or rating change. Our economists consider the risk of the U.S. falling into another recession in the next 12 months as high as 10%-15%. Alternatively, we attribute a 15% to 20% probability to our upside scenarios. Low interest rates are one of the motivations for insurers to push for targeted rate increases. Insurers must rely less on profit from investments to achieve the returns that are consistent with each rating. According to our base-case forecast, we expect the 10-year treasury rate to remain low but start to steepen to 2.1% in 2013 and 2.6% in 2014 from 1.8% in 2012. This suggests to us that challenging conditions will continue at least for the next two years for insurance companies. At the same time, insurers are preparing for an unexpected sharp increase in interest rates accompanying a more normal monetary policy ahead. This could lead to substantial losses for insurance companies if they do not manage this change properly. Several factors are keeping interest rates low. First, monetary policy remains highly accommodative with the Federal Reserve still purchasing Treasuries and mortgage debt and linking the near-zero target rate to the unemployment rate falling to 6.5%. Our economists expect the unemployment rate to drop to 7.5% in 2013 and 6.7% in 2014 from 8.1% in 2012. Next, we believe interest rates will remain low as long as inflation risk remains low. There is no near-term risk of a rise in general inflation according to our consumer price index forecasts (baseline) of 1.4% in 2013 and 1.8% in 2014, down from 2.1% in 2012. (Rising medical inflation is a more immediate threat than general inflation, depressing loss-cost trends.) In addition, because of the eurozone crisis, investors have flooded treasuries, which they view as a safe heaven. Because the fiscal cliff is no longer a near-term risk, demand for treasuries has further increased. We view the P/C insurance sector as being more resilient to low GDP predictions. For example, demand for personal-lines insurance such as automobile and homeowners' is fairly steady because many policy holders consider these nondiscretionary items. Nevertheless, slow economic growth prospects may limit the number of policies written (see chart 1). P/C direct premiums written have paralleled GDP growth with the exceptions of hard market years 2001-2004. In 2011 direct premiums started rising ahead of GDP due to higher premium rates, though we expect the incline to be less steep than in the prior hard market years.

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

JULY 11, 2013 4

1158628 | 301674531

Industry Economic And Ratings Outlook: Discipline Is The Watchword For U.S. Property/Casualty Insurers

Chart 1

According to Insurance Services Office (ISO), commercial lines' net premiums written (excluding mortgage and financial guaranty insurers) increased by 5.7% during 2012 following a 4.9% increase during 2011. Although we expect rate momentum to continue and insurable exposures to benefit from improving GDP, growth will likely come from diversification into noncorrelating business lines (i.e., accident and health) and international growth, particularly in emerging markets. ISO also reported growth in personal-lines insurers' premiums by 3.6% during 2012 and 2.9% in 2011. Modestly improving new car sales and housing starts should increase demand for personal-lines products. We expect steady rate increases in this sector--especially the homeowners' line--mostly due to an uptick in severe-weather losses. Inflation also hits P/C insurers harder than other sectors, as a general rise in prices in the economy could inflate claims costs faster than insurers can update premium rates. We therefore believe inflation represents medium to high risk to the P/C insurance industry, especially to longer-tailed lines of business. The past 10 years represented the highest catastrophe losses for the P/C industry with respect to both frequency and severity. We are starting to view recent catastrophe experience as the new normal and are budgeting greater catastrophe losses in our earnings projections. We also expect more regulatory oversight on insurers' claims-handling practices since Super Storm Sandy. We believe insured losses from man-made or natural catastrophes affect P/C

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

JULY 11, 2013 5

1158628 | 301674531

Industry Economic And Ratings Outlook: Discipline Is The Watchword For U.S. Property/Casualty Insurers

insurers' operating results more than macroeconomic factors do in other sectors.

Ratings And Outlook Distribution

From 2008-2012 the number of downgrades in the U.S. P/C sector outpaced upgrades. Through April 30, 2013, there was one upgrade and no downgrades (see chart 2). Please note, the ratings and outlook distribution statistics reflect rating actions prior to adoption of new criteria on May 7, 2013. We currently rate 50 U.S. P/C groups and independent companies.
Chart 2

Our outlook distribution, which is a good indicator of future rating actions, indicates the potential for equal numbers of upgrades and downgrades during the next 12 months. The distribution of outlooks has changed moderately during the past year (see chart 3). Currently, 34 insurers (70%) have stable outlooks, unchanged from the same time last year. Ten (20%) companies have negative outlooks, unchanged from the same time last year, and five (10%) have positive outlooks, unchanged from the same time last year.

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

JULY 11, 2013 6

1158628 | 301674531

Industry Economic And Ratings Outlook: Discipline Is The Watchword For U.S. Property/Casualty Insurers

Chart 3

The ratings in the sector are mostly in the middle of the investment-grade range ('BBB-' and higher), with 62% in the 'A' (strong) category (see chart 4). The distribution has shifted modestly during the past four years out of the 'AAA' (extremely strong) area and into the 'AA' (very strong) and 'A' ranges. Currently, we rate about 24% of insurers 'AA', which is about the same as a year ago. The proportion of 'BBB' (adequate) ratings increased to 10% from 8% a year ago, and we currently rate only 4% of insurers' as speculative grade ('BB+' or lower).

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

JULY 11, 2013 7

1158628 | 301674531

Industry Economic And Ratings Outlook: Discipline Is The Watchword For U.S. Property/Casualty Insurers

Chart 4

Industry Credit Outlook: Underwriting Profitability Takes Top Priority

The need to improve underlying underwriting profitability is heightened when considering how little this factor has contributed to overall earnings. Underwriting earnings (excluding reserve releases and catastrophe losses) were unprofitable from 2008 through 2011 and only slightly profitable in 2012. Further dampening operating performance and net income are lower reinvestment rates, a diminishing reserve cushion, and a higher frequency and severity of natural catastrophe insured losses during the past 10 years. The picture is not rosy, and insurers know that disciplined underwriting is key to improvement. Investment income has contributed the most to P/C insurers' earnings in recent years, followed by reserve releases and net realized gains (see chart 5). Investment-market improvements somewhat ease our asset-related concerns of a few years ago, but insurers generally are earning less from their investments, which dampens operating performance and net income. According to ISO, net investment gains declined by $2.3 billion to $53.9 billion in 2012 from $56.2 billion in 2011. The 2012 figure includes $47.7 billion in net investment income and $6.2 billion in realized capital gains. Similarly, the P/C investment yield fell to 3.6% in 2012 from 3.8% in 2011 and 4.4% in 2008. We do not expect investment income to improve markedly given our economists' forecast for low interest rates and lower-yielding

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

JULY 11, 2013 8

1158628 | 301674531

Industry Economic And Ratings Outlook: Discipline Is The Watchword For U.S. Property/Casualty Insurers

investments.
Chart 5

Severe weather claims have been sizable. Ten-year and five-year average annual losses of $26 billion and $24 billion, respectively, compare with 10-year and five-year average underlying underwriting income (excluding catastrophe losses and reserve releases) of $17 billion and negative $6 billion, respectively. The U.S. P/C insurance industry's statutory combined ratio (excluding mortgage and financial guaranty insurers) improved to 102.4% in 2012 from 106.3% in 2011, according to ISO. (The combined ratio is the industry's most closely watched underwriting profitability metric. The lower the combined ratio, the more profitable, and a ratio of more than 100% signifies an underwriting loss.) In 2012, commercial lines had a combined ratio of 102.3% (excluding mortgage and financial guaranty insurers), and personal lines' was 101.1%, compared with 104.7% and 105.9%, respectively, in 2011. Underwriting performance improved mainly because of somewhat higher rates and better risk selection and, to a lesser extent, lower catastrophe losses during 2012, even when including Super Storm Sandy. According to ISO's Property Claims Service, the U.S. market recognized $35 billion of direct catastrophe losses. These estimates reflect property-only claims and do not capture the significant commercial flood and business interruption claims that Super Storm Sandy caused. Excluding catastrophe losses and favorable reserve development, the industry (not including mortgage and financial guaranty insurers) posted a 97.2% combined ratio in 2012, down from 101.8% in 2011.

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

JULY 11, 2013 9

1158628 | 301674531

Industry Economic And Ratings Outlook: Discipline Is The Watchword For U.S. Property/Casualty Insurers

Underwriting margins are likely to expand, but so are catastrophe losses

We expect the industry to post a combined ratio (excluding mortgage and financial guaranty insurers) of 98% to 101% in 2013. Our assumptions are as follows: We expect the P/C industry to post one-to-three percentage points of underlying (excluding reserve development and catastrophe losses) underwriting margin expansion in 2013 as earned premiums from pricing increases that began in mid-2011 materialize. In the face of more-frequent weather-related losses, we estimate normal catastrophe losses will contribute four-to-five percentage points to the combined ratio when compared with earned premiums. We expect absolute reserve releases to continue to diminish in 2013. We believe the industry will continue to seek rate increases and potentially pursue stricter terms and conditions. We recognize that these trends will be at varying degrees and will differ by account size, geography, and loss-performance trends. Nevertheless, in our view the largest price increases will be in some commercial casualty businesses (such as workers' compensation) and property coverage (including homeowners').

Commercial-lines reserve releases have nowhere to go but down

We believe that reserves for the overall P/C industry are adequate, but the pace of reserve releases is likely to continue to diminish in the next couple of years. Most of the reserve releases in the last hard market cycle (2002-2006) have likely already boosted earnings, and any further earnings benefit they will have should be smaller. Therefore, we think that insurers are unlikely to repeat the sizable reserve releases of recent periods because of price declines during a multiyear period and unsustainable benign frequency loss-cost trends. We would have concerns if insurers released reserves from recent accident years because this could lead to a reserve deficiency for the P/C industry. Long-tailed commercial-lines insurers with large exposures in workers' compensation, other liability, excess liability, and others are susceptible to more adverse reserve developments than those writing short-tail lines such as personal lines. This is because longer-tailed reserves have more uncertain future claims settlements because they take many years to settle. In contrast, personal lines are usually more predictable and have shorter claims-reporting patterns. The personal-lines sector has a good track record of modest reserve releases. Commercial-lines insurers' (excluding financial guarantee and mortgage insurers) reserve releases have generally bolstered profitability since 2006, when cumulative favorable reserve development amounted to $42 billion. Nevertheless, when the pendulum swings the other way, the effect could be even more devastating. Even a small percentage change in reserves could have a sizable impact on earnings or capital. From 1999 to 2005 (calendar years) the commercial-lines sector recorded a sizable $86 billion of cumulative reserve strengthening.

Insurers are in a position of capital strength

The overall P/C industry and most of the insurers we rate maintain very strong capital adequacy. According to our proprietary risk-based capital model analysis, most insurers that we rate have capital redundancy for the rating level. ISO reported a $33.1 billion increase in surplus during full-year 2012 to record highs of $586.9 billion, despite the impact of Super Storm Sandy. We view these strong capital levels as difficult to sustain given current unsatisfactory combined ratios, lower reinvestment rates, greater weather-related volatility, and lower favorable reserve-development prospects. Nevertheless, we attribute the industry's low operating leverage (premiums-to-surplus ratio less than 1x during the past few years and 0.78x as of Dec. 31, 2012) as an indicator that companies have been holding on to

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

JULY 11, 2013 10

1158628 | 301674531

Industry Economic And Ratings Outlook: Discipline Is The Watchword For U.S. Property/Casualty Insurers

capital rather than using underwriting capacity, which aggravates a highly competitive pricing landscape. Nevertheless, weaker earnings might not support current capital adequacy, and we could lower ratings if insurers fail to produce sustainable earnings. Accessible debt markets, of which many insurers have taken advantage to refinance maturing notes, support financial flexibility. We generally consider P/C insurers' capital management to be prudent, and we haven't seen many aggressive financial leverage strategies. Although we expect P/C insurers to continue to return capital to shareholders, we believe the ultimate levels of share repurchases and dividends will stagnate given lower earnings prospects. We continue to believe that most companies will maintain prudent capital-management strategies, asset-allocation targets, and financial leverage tolerances.

The focus is on core underwriting rather than responding to low yield prospects by taking on increased investment risk
P/C insurers generally maintain conservative investment portfolios to address the largely unpredictable cost and timing of claims. Most of the industry's assets are risk averse, and high-quality investment-grade fixed-income corporate and government securities tend to predominate.
Table 2

Combined U.S. P/C Industry Data

--Year ended Dec. 31-(%) Bond Investment grade Noninvestment ggrade Preferred Common stock Real estate (held of income production) Other invested assets (schedule BA) Cash Total investment assets Average maturity (approximate) Investment yield 10-year Treasury (annual) 2012 74.4 71.4 3.0 0.9 14.4 0.1 8.8 1.4 100.0 5.9 3.6 2.8 2011 76.1 73.7 2.4 0.9 13.2 0.1 8.6 1.1 100.0 6.1 3.8 3.2 2010 76.5 74.2 2.3 1.4 12.1 0.1 8.8 1.1 100.0 6.2 4.0 3.3 2009 79.5 77.5 2.1 1.6 12.3 0.1 5.3 1.1 100.0 6.5 4.0 3.7 2008 80.7 78.8 1.8 2.0 10.5 0.1 5.5 1.3 100.0 6.9 4.2 4.6

Insurers continue to invest in securities with a shorter duration as a defensive strategy against the potential for rising interest rates. Industry data from 1991 through 2012 suggest average maturity is down, and fixed-income investments as a percentage of total investment assets are also down, although an increase in schedule BA or other long-term invested assets has somewhat offset this. Common stock, preferred shares, cash, and real estate remained flat as percentages of the total investment portfolio. The majority of fixed-income securities are investment grade, though noninvestment-grade securities have been increasing slightly as a percentage of total investments. Nevertheless, these actions are all within insurers' established risk tolerances, which for the most part have not changed since 2008.

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

JULY 11, 2013 11

1158628 | 301674531

Industry Economic And Ratings Outlook: Discipline Is The Watchword For U.S. Property/Casualty Insurers

Industry consolidation prospects

Because most insurers' price-to-book valuations are more than 1x, and share prices are higher than they were several years ago, insurers may be more willing to consider alternatives for acquisitions than when valuations were less favorable. Nevertheless, we do not expect a large increase in merger and acquisition activity, and we continue to view transformational acquisitions as achievable but uncommon. However, we expect more smaller, bolt-on purchases that modestly enhance insurers' business profiles. Larger, well-capitalized insurers are likely to benefit from expansion opportunities in emerging markets or from diversifying into new lines of business (i.e., accident and health) with uncorrelated risk.

TRIPRA is set to expire in 2014

We believe Congress will end up renewing the U.S. Terrorism Risk Insurance Program Reauthorization Act of 2007 (TRIPRA) in some capacity after it expires on Dec. 31, 2014. As with most budgeting issues in Washington, the decision will likely be close to the expiration date. Several looming questions are: How much of the backstop protection will Congress reinstate? Absent a renewal of TRIPRA, will terrorism continue to be a mandatory coverage for applicable lines of business, namely workers' compensation and commercial property? How robust is the stand-alone terrorism market? How are insurers changing their risk appetites to prepare themselves if TRIPRA does not renew? We plan to explore these topics and provide additional commentary in the coming months. Any rating actions would consider, among other things, the current high levels of capitalization, how an insurer's losses compare with its peers' and its own risk tolerances, the insurer's financial flexibility to raise capital, and any potential hardening of pricing that may follow such an event. Accordingly, if a given insurer lost more than one year's worth of earnings--which translated to a capital erosion of more than 10%--or experienced terrorism losses outside its stated risk tolerances and appeared as an outlier relative to its peers, we would likely take a negative rating action.

Deft management will be key to success

Stable outlooks tend to predominate and we expect this to continue. Overall, it is our opinion that insurers have strong balance sheets and are able to withstand large catastrophe losses and manage their asset, credit, and underwriting risks. The stable credit quality in the P/C sector hinges upon insurers' efforts and commitment to improve underlying underwriting profitability against the headwinds of weather-related volatility, a sluggish economy, reinvestment risk resulting from low investment yields, and potentially inadequate reserve levels. The insurers that we view as better positioned to succeed are those that are nimble, able to adjust quickly and not incur weaker underwriting performance, outsize catastrophe losses, or suffer a drop in earnings because of investment losses or reserve strengthening compared with peers.

Related Criteria And Research

Special Report: U.S. Insurers Eye Emerging Demographic, Economic, And Climatic Trends In 2013, June 4, 2013 A Bumpy Road Ahead For The Commercial Insurance Sector As Reserve Releases Trend Downward, May 28, 2013 Are Insurers Already Sowing The Seeds Of The Next Soft Market?, May 28, 2013 U.S. Economic Forecast: The Waiting (Is The Hardest Part), April 19, 2013

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

JULY 11, 2013 12

1158628 | 301674531

Copyright 2013 by Standard & Poor's Financial Services LLC. All rights reserved. No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an "as is" basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT'S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages. Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P's opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof. S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process. S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription) and www.spcapitaliq.com (subscription) and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees.

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

JULY 11, 2013 13

1158628 | 301674531