The OIL Group of Companies www.oil.bm www.ocil.bm “Tools for Risk Transfer” Presentation to University of Houston April 11, 2013 The Evolution of Energy Mutuals TOPS 1993-99 OIL 1972 sEnergy 2002-2011 Traditional Insurance Market AEGIS 1975 NEIL 1980 OCIL 1986 EIM 1986 Insurance Crisis # 1 Why was OIL Formed in 1971? • Inability of petroleum companies to purchase all-risk property damage coverage at realistic rates and capacity. – Incident – 1967 Explosion and Fire at Cities Service Oil Co. refinery in Lake Charles , Louisiana. • Unwillingness of the commercial insurance industry to sell third party pollution liability to petroleum companies at any price. – Incident – 1969 Union Oil Co. oil spill in Santa Barbara Channel, California. • Realization on the part of 16 oil companies that the combined capital & surplus of the petroleum industry greatly exceeded that of the insurance industry. Insurance Crisis # 2 (1985-86) Oil Casualty Insurance, Ltd. (OCIL) • Energy industry-owned company insuring • • • Excess General Liability D&O Liability (now discontinued) Assumed Reinsurance (Energy Industry Risks) • Formed in 1986 by 14 interested members of OIL. • Lack of D&O capacity was key driver in OCIL’s formation. • Today – 99 Shareholders and Policyholders headquartered around the world with total gross assets in excess of $3.5 Trillion. …and again in 1993 TOPS (Total Loss Only Platform Structures) • Petroleum industry-owned company providing highlevel Excess Property Damage coverage for large production structures located in the North Sea. • Established in response to commercial insurance market’s overpricing of coverage specifically related to such structures. • Formed in 1993 by 16 petroleum companies headquartered in Europe and North America. • No losses in entire history of operations. • Liquidated in 1999 when rational pricing returned to the commercial market. …and once again in 2002! sEnergy Insurance Limited (sEnergy) • Energy industry-owned company providing • Business Interruption • Property Damage (excess of OIL) • Lack of affordable, long-term and stable commercial market capacity was key driver in sEnergy’s formation. • Formed in 2002 by 12 energy companies. • sEnergy operated with an “OIL-like” Rating & Premium Plan. • Closed down in 2011. OIL INSURANCE LIMITED A Case Study…. The OIL Group of Companies • Two energy industry mutual insurance companies: • Headquartered in Hamilton, Bermuda. • Established when commercial market: – Ceased to provide adequate coverages/limits. – Priced high risk energy operations at unacceptable levels. • The two companies have a total combined membership of over 121 different Shareholders/Policyholders who are world-class energy companies headquartered around the world. Why Mutualize? • Industry ownership ensures fair treatment of Policyholders. • Being a mutual or member owned provide ‘hedge’ against a frequently volatile commercial insurance market. • Shareholders maintain active control of the coverages available to them. • Highly cost-effective catastrophe insurance facility. • Generates long-term benefits for Policyholders. • World’s Largest Energy Mutual • –by the numbers Who is OIL? • Over $2 trillion in assets insured globally for 52 members • $300 million broad and stable “cornerstone” capacity • $6 billion in assets • Over $3.0 billion in shareholder’s equity • Over $11 billion in claims paid over 40 years • S&P A- rating (stable outlook) • Expense ratio = approx. 3-6 % • Not dependent upon reinsurance • World’s Largest Energy Mutual Who is OIL? • OIL is an Energy Industry Mutual Insurance Company headquartered in Hamilton, Bermuda • Formed by 16 major energy companies in 1972 after two incidents in the late 60’s that resulted in inadequate coverage / pricing • Today, OIL is a world leader in global energy insurance • 52 Shareholders / Policyholders medium to large public / private worldclass energy companies headquartered around the world • 46% of membership has been with OIL for over 20 years Why “Bermuda”? • Bermuda is one of the three largest insurance markets in the world (London and New York being the others.) • More than 1,600 international insurers and 1,200 captive insurers are registered in Bermuda. • Favorable tax/regulatory/legal environment. • Highly developed markets in all lines of insurance coverage. • Sophisticated on-Island business infrastructure. Why Bermuda? • • • Source: Bermuda Monetary Authority 2011 Annual Report • Second largest insurance / reinsurance market in the world – Over 1200 international insurers and reinsurers listed on its books – Writes nearly $108 billion in gross written premium – Capital & Surplus nearly $185 billion – Total assets of approximately $525 billion World’s largest captive domicile – Home to 600+ licensed captives – Total assets over $86Bn and $21Bn in annual gross premium Location: quick access from main hubs (East Coast / London) Friendly regulatory environment The OIL Group of Companies “Mutual/Member Owned” Structure • Basic structure similar to any other corporations:Shareholders, Board of Directors, Board Committees, Officers & Staff. • Major differences: Shareholders are the Customers (Insureds.) Directors are elected from the Shareholder Body. • The Investment companies are directed by a separate Board of Directors, which includes senior financial officers from major Shareholder companies. • In case of OIL, no “Underwriting” per se - each Policyholder treated equitably; premiums are formula-based—”Post lost funding”. Corporate Governance Elects Board Annually BOARD OF DIRECTORS (3-5) Meetings per year) Chairman Nominates Committee members and Board Approves Governance Committee Audit Committee SHAREHOLDERS (Annual Meeting) Compensation Committee All Officers and Support STAFF reside in Management Company Executive Committee OMSL MANAGEMENT The OIL Group of Companies Operational Structure OCIL and OIL have no employees, The Companies are administered by Oil Management Services Ltd. Oil Management Services Ltd. (“OMSL”) Oil Insurance Limited (52 members) Oil Investment Corp. Ltd. (OICL) Property Damage Well Control, Pollution Oil Casualty Insurance, Ltd. (112* members) Oil Casualty Investment Corp. Ltd. (OCICL) Excess General Liability Excess Property Facultative Reinsurance *112 Members at December 31, 2012 58 Shareholders. OIL: An Alternative Insurance Solution • Today, OIL continues to be a very real and attractive option to many insurance buyers in the energy industry. • OIL’s $300 Million limit is one of the largest net line capacity insurers currently available to the energy industry. • OIL does not buy reinsurance so it is not subject to annual changes in conditions or restrictions on terms offered – in this way full terrorism coverage continued to be offered after September 11th. • Any rate increase in OIL is due to increased losses by the membership - not internal or external pressures - and hence is transparent. Who are OIL’s 52 Members? • Big Companies, such as: ConocoPhillips TOTAL Chevron • Small Companies, such as: Tesoro Petroleum Murphy Oil LOOP LLC • Electric Utility/Power Generation Companies, such as: Electricity de France (EDF), DTE Energy • Other members of varying sizes and business focus within the broadly-based Energy Industry. Current OIL Members Apache Corporation Arkema* BASF SE* BG Group plc* BHP Billiton Petroleum (Americas) Inc. Buckeye Partners, L.P. Canadian Natural Resources Ltd* Canadian Oil Sands Limited CEPSA* Chevron Corporation Chevron Phillips Chemical Company LLC CITGO Petroleum Corporation* ConocoPhillips* DONG Energy A/S* Drummond Company Inc. DTE Energy Company EDF Group* Energy Transfer Partners, L.P. ENI S.p.a.* Galp Energia S.A.* Hess Corporation* Hovensa LLC Husky Energy Inc. LOOP LLC. Lyondell Chemical Company* Marathon Oil Company Marathon Petroleum Corporation MOL Hungarian Oil and Gas Company* Murphy Oil Corporation Nexen Inc.* Noble Energy, Inc. Nova Chemicals Corporation* Occidental Petroleum Corporation* OMV Aktiengesellschaft* Paramount Resources Phillips 66 Company Puerto Rico Electric Power Authority Repsol YPF, S.A.* Royal Vopak N.V.* Santos Ltd.* Sempra Energy Sinclair Companies (The) Statoil ASA * Suncor Energy Inc. Talisman Energy Inc.* Tesoro Petroleum Corporation TOTAL* Valero Energy Corporation* Westlake Chemical Corporation Williams Companies, Inc. (The) Woodside Petroleum Limited.* Yara International ASA* Membership “Count”* 100 87 90 78 80 84 82 83 70 60 61 50 40 30 20 10 0 * Year-end member count, net year on year change. 60 56 56 54 52 2012- 2013 Membership Changes Members as @ 1/1/2012 New Members 52 2 Merger/Acquisitions (1) Departures as @ 12/31/2012 (1) Members as @ 1/1/2013 52 2013 Membership by Industry Segment 2% 2% 8% 26% Electric Utilities Integrated Oil 19% Chemicals Pipelines E&P Refining & Marketing 24% 11% 8% Mining Other OIL Shareholders by Headquarter Location 12-31-2013 Globally diversified membership with an increasing interest from non-US companies. Canada 15% USA 49% Europe 30% Australasia Caribbean 4% 2% OIL: Risks Insured Eight Business Sector Coverages 1. Physical damage to first party property. 2. Well Control, including Restoration and Redrilling. 3. Third party Pollution Liability, (non-gradual). 4. Limits = $300 million per occurrence, no annual aggregate. 5. Single Event Limit = $900 Million. 6. Deductibles = $10 Million minimum, increasing in $5 million increments. Winstorm Coverages: Onshore and offshore (ANWS only) Coverage Grants same as 1, 2, and 3 above. Limits= $150 Million p/o $250 million per occurrence Single Event Limit = $750 Million. Coverage is automatic for exposed assets, but member can effectively opt out of the coverage. What’s Covered? Automatic coverage for: • Worldwide Coverage for an Energy Company and its Consolidated Subsidiaries / Affiliates • A member’s interest in a JV or other non-consolidated affiliate (if interest equates to less than 1% of Gross Assets) • Coverage for non-owned assets where a member has a contractual obligation to repair / replace OIL vs. Commercial Market • Membership is exclusive to energy companies • Members are all shareholders / policyholders and have vested interests • “Mutualized” sharing of losses • Easy annual renewal. • Premiums are formula and performance based i.e. no underwriting • One policy form for all members per the OIL Shareholders’ Agreement • OIL uses gross assets from audited balance sheets while the market uses insured values Oil Limits – 8 Business Sectors • No Annual Aggregate. • Joint Ventures – full Limits available. Limits do not scale for working interest but deductibles scale for interest. • Aggregation Limit – maximum payout of $900 Million (non-windstorm) on multiple shareholder claims arising out of one occurrence. • Reduced limits are available (minimum limit is $100M) subject to a warranty as respects the absence of other insurances (warranty does not apply to windstorm). • Limits can apply as primary, excess, quota share, ventilated and different limits may be elected by sector. Rest of the World (RoW) • For windstorm coverage outside of the ANWS zone (i.e. South China Sea, North Sea, Australia etc.), the windstorm limit is $300M (not $150M part of $250M) and the Aggregation Limit is $900M. • ROW coverage, by geographic region, will be restricted only after incurring a Loss Trigger Event: – A single loss event of $750M – Cumulative losses of $1B over a 5 year rolling basis • After a threshold trigger is met, windstorm coverage and pricing will automatically change in the next policy year unless the Board of Directors determines otherwise OIL Rating & Premium Plan Eight Business Sector Coverages only • Formula basis – no traditional “underwriting.” • Premiums paid by Policyholders is a function of their Gross Assets. • Gross Assets = Gross value (historic cost) of property, plant & equipment before deprecation, depletion, and amortization, plus inventories, materials, and supplies. • Gross Assets are then adjusted for operational risk and coverage profile (i.e., sector and deductible weightings) = Weighted Gross Assets. • By Geographic Region of Physical Loss $4.0 $3.5 $3.0 Net Incurred Losses Since 1972* $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 USA Europe Canada W/Storm GOM As at December 31, 2012 Expressed in billions of U.S. dollars * untrended North Sea Other Areas Repayment Schedule for Losses Incurred 2007-2011 Sector Weighting for Risk • Policyholders’ Gross Assets are adjusted to recognize differences in operational risk between Business Sectors: – Offshore E&P -- Pharmaceuticals – Onshore E&P -- Mining – Pipelines -- Other – Electric Utilities – Refining & Marketing/Chemicals – ANWS-Onshore – ANWS-Offshore • Weighted Gross Assets are used to calculate individual Policyholders premiums. 8 Business Sector Pricing (Non-Windstorm) • ELECTRIC UTILITY PIPELINES* • Utilizes sector and deductible •weightings. • MINING • Gross Assets are adjusted for operational • OTHER* risk (sector weighting) and coverage profile (limit/deductible weighting) to generate Weighted Gross Assets which is used to determine pool % and calculate individual premiums. 8 Business Sector Gross Assets Unmodified Gross Assets by Industry Segment ($2,214 Bn)* Weighted Gross Assets by Industry Segment ($1,166 Bn)* E&P Offshore 51% Business Sectors * as of December 31, 2011 E&P Offshore Mining E&P Onshore Utilities R&M / Chemicals Pipelines Pharmaceuticals Other R&M Chemical s 26% Other 2% Utilities 7% Mining Pipelines 2% E&P 3% Onshore 9% •Premium Calculator Example •- 8 Business Sector GROSS ASSETS BY BUSINESS SECTOR X X Weighting Factors Offshore E&P = 1.50 Pipelines = 0.25 Gross Assets Offshore E&P = $25B Pipelines = $5B Total = $30B WGA = 38.75B / $1,046B (GROUP WGA) = 3.7% SECTOR / DEDUCTIBLE / LIMIT WEIGHTING FACTORS X MEMBERSHIP ANNUAL LOSSES (20%) WEIGHTED GROSS ASSETS (WGA) Weighted Gross Factors Offshore E&P = $37.50B Pipelines = $1.25B Total = $38.75B = ANNUAL PREMIUM OIL’s History: 40 Years Membership Shareholders’ Equity Assets Gross Assets Insured 1972 16 $160 Thousand $160 Thousand $48 Billion 12/31/2012 52 $3.6 Billion $5.5 Billion $2.3 Trillion Inception To Date: +$13.5 Billion Net Premiums Earned - $13.8 Billion Net Losses & Loss Expense * +$ 5.2 Billion Investment Income ** - $ .8 Billion Dividends Paid *** +$ .4 Billion Preference Shares Operating, Financing & Other Costs - $ .9 Billion $ 3.6 Billion * Includes IBNR/IBNE ** Net of Interest Expense *** Excluding Preference Share dividends paid Consolidated Balance Sheet Assets Cash and Cash Equivalents Investments Investment sales pending settlement Accrued investment income Accounts receivable Amounts due from affiliates Retrospective premiums receivable Other assets Total assets 31-Dec-12 ($ in 000's) 31-Dec-11 ($ in 000's) 671,927 5,603,471 32,488 25,936 12,584 36 102,115 2,100 6,450,657 282,441 5,255,944 82,853 30,220 22 59 91,741 2,725 5,746,005 Consolidated Balance Sheet 31-Dec-12 ($ in 000's) 31-Dec-11 ($ in 000's) Liabilities Outstanding loss and loss expense Retrospective premiums payable Premiums received in advance Securities sold short Investments purchases pending settlement Accounts payable Amounts due to affiliates 2,461,518 3,769 25,587 224,842 109,235 11,112 2,823 2,280,278 1,313 22,666 116,433 285,023 5,622 1,523 Total liabilities 2,838,886 2,712,858 Shareholders' equity Preferred shares Common shares Retained earnings Total shareholders' equity 344,654 530 3,266,587 3,611,771 402,458 520 2,630,169 3,033,147 Total liabilities and shareholders' equity 6,450,657 5,746,005 Statutory capital and surplus 4,867,109 4,221,387 Consolidated Income Statement 31-Dec-12 ($ in 000's) 633,963 38,522 672,485 31-Dec-11 ($ in 000's) 558,141 (14,716) 543,425 Discount earned on retro-premium receivable Losses and loss expenses incurred Acquisition costs Underwriting income (loss) 215 (612,540) (526) 59,634 1,062 (599,109) (323) (54,945) Interest income Dividend income Investment gains (losses) [realized & unrealized] Interest expense and financing costs Investment advisory and custodian Net investment income 102,052 27,486 506,652 (705) (27,631) 607,854 103,667 31,807 (143,904) (787) (22,619) (31,836) General and administrative expenses Net income (loss) (21,385) 646,103 (17,855) (104,636) Other changes in Shareholders' Equity: Preferred share dividend Gain on preferred share repurchase (12,687) 3,002 (24,515) 3,060 Premiums written Retrospective premiums Premiums written & earned The OIL Group: Efficiency & Control Why we are different from the Commercial Market… PREMIUM Insured (Buyer) Member Commercial Market LOSS PAYMENT ~30-40% Expense Ratio PREMIUM “OIL Group” • LOSS PAYMENT • OWNERSHIP • CONTROL • RETURN ON CAPITAL ~ 5% Expense Ratio Marketing • Broker Consulting Agreements – OIL has signed global service agreements with 4 key brokers to assist OIL in its efforts to attract “Quality” new members. – The services include: o Prospect Identification & Qualification. o Market Intelligence/Research o Product Development o Member opportunities/issues o Training – These agreements do not include any contingent compensation arrangements. Marketing • In 3rd year of a global marketing plan – Building global broker network capabilities o Oil has been “on the road” globally engaging brokers – Delivering new global marketing materials o Web site o Brochures o Tools – Launching the OTA (Oil Technical Accreditation) o Launched in December 2012 • Oil Technical Accreditation • New On-Line Tutorial & Official Accreditation Register @ www.oil.bm “OTA” • Investment Management Investment Objectives Investment objectives are to provide adequate liquidity to meet OIL’s future obligations, and endeavor to both preserve and enhance value over a market cycle. The Investment Board reviews the investment objectives, investment policy, and asset allocation strategy at least annually. Current Asset Allocation as at December 31, 2012 6% 6% 31% Cash Bonds backing Pref Shares Global Bond Fund of Hedge Funds 10% 47% Global Equity Update: as approved by the Investment Board, 25% of Global Bonds (benchmark and portfolio) were shifted to short duration on October 1, 2012. This shift was made to reduce interest rate risk, locking in gains following a period of declining interest rates and protecting against potential losses from future interest rate rises. Investment Portfolio Returns as at December 31, 2012 25 20 20 15 10 10 13 14 13 11 8 10 8 % Return 5 0 0 -1 -5 -1 Update: 1 Month ended January 31, 2013 -10 -15 -20 OICL Benchmark 1.6% OICL Portfolio 2.1% OIL Total (incl cash) 1.9% -17 -19 -25 -24 -30 2012 2011 OICL Benchmark 2010 OICL Portfolio 2009 2008 OIL Total (incl cash) Current Events: Natural Catastrophes Historical Hurricane “Tracks” Impacting OIL Ivan $581M 121132mph Ike $750M 104109mph Rita $1,000M 121-138mph Katrina $1,000M 127161mph Gustav 109115mph Hurricanes – Past Payout Patterns As of 31 Dec 2012 Hurricane Lili (2002) Hurricane Ivan (2004) Hurricane Katrina (2005)* Hurricane Rita (2005)* Hurricane Ike (2008)* < 1 Year 0% 9% 5% 2% 2% < 2 Years 81% 78% 42% 20% 27% < 3 Years 97% 79% 56% 35% 57% Current 100% 99% 100% 100% 74% Total Reserve $96M $558M $1,000M $1,000M $750M Members 6 8 19 20 13 Years Net Incurred Losses since 1972* by Geographic Region of Physical Loss $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 As at December 31, 2011 Expressed in millions of U.S. dollars * untrended Net Incurred Losses by Industry 1972-2011 (39 yrs) *Aggregate Value = $11.8Bn (untrended) Pipelines 4% Onshore E&P 7% Other 2% Mining 2% Electric Utilities 1% Petrochemicals 9% Offshore E&P 48% Refining & Marketing 27% * Pure Loss—Excludes loss expense Net Incurred Losses By Industry Sector – 2012 only 1% Aggregate Value = $599M* 1% 5% 7% Offshore E&P Onshore E&P 11% Refining & Marketing Electric Utilities Pipelines 75% *$294M – North Sea Blowout Loss Other OIL Capital Structure Summary $5,000 $ in Millions $4,000 $3,000 $2,000 $1,000 $0 2006 2007 2008 2009 2010 Catalyst Statutory Capital Credit TWP BMA Statutory Capital Credit Perpetual Preferred Shares Shareholders' Equity (excluding preferred shares) 2011 2012 OIL Capital Structure • In June 2006, OIL issued 600,000 Series A perpetual preferred shares (“Series A preference shares”) and received proceeds from the issuance, net of direct issuance costs, of approximately $586,842,000. Upon dissolution of OIL, the holders of the Series A preference shares are entitled to receive a liquidation preference of $1,000 per share, plus accrued unpaid dividends. • Dividends on the Series A preference shares from the date of original issuance through June 30, 2011 are payable semi-annually in arrears in cash, when and if declared by the Board of Directors, out of funds legally available for the payment of dividends under Bermuda law. Such dividends are payable on June 30 and December 30 of each year, at the annual rate of 7.558% per $1,000 liquidation preference until June 30, 2011. • After June 30, 2011 if the shares are not called, dividends will accrue at an annual rate of 3-month LIBOR plus a margin equal to 298.2 basis points per $1,000 liquidation preference, payable quarterly in arrears. The Company may redeem the Series A preference shares on or after June 20, 2011, at a redemption price of $1,000 per share. • During 2012, the Company repurchased and retired 59,100 of the Series A preference shares. As of December 31, 2012, OIL had 352,382 Series A shares outstanding. Theoretical Withdrawal Premium (TWP) • Both Standard & Poor’s and the Bermuda Monetary Authority now give OIL capital credit for TWP • Credit is calculated as follows: ─ Remove all sub-investment grade TWP amounts for individual members from the aggregate TWP amount ─ Discount future premium flows by 5% for 3 years ─ Discount each member’s TWP amount by their credit default risk factor (S&P Capital Model) What about OCIL: The Evolution of Energy Mutuals TOPS 1993-99 OIL 1972 sEnergy 2002 (in runoff) Traditional Insurance Market AEGIS 1975 NEIL 1980 OCIL 1986 EIM 1986 OCIL’s Historical Mission and Value Proposition • OCIL = historically significant – Founded at a time when capacity was scarce – Hedge against commercial market “knee-Jerk” reactions, irrational underwriting and erratic pricing – Owned and controlled by Shareholders • OCIL’s original mission – To provide its policyholders with Directors & Officers Liability coverage on policy forms that were comparable to or broader than coverage available in the commercial market – To offer substantial limits at reasonable prices, which are reliable over the long-term in lines (Excess General Liability and D&O) that are often volatile or restrictive by commercial markets – To maintain capacity, pay claims that arise, and ensure fair treatment of members Major Differences: OCIL vs. OIL Organization Premium calculation OCIL OIL Member owned Mutual Flexible; Underwriting discretion Formula driven Mutualization of losses No Yes Avoided Premium Surcharge & Theoretical Withdrawal Premium No Yes Aggregation limit No Yes Follow Form capability Yes No Ability to Assess Membership No Yes Financial Ratings OIL Financial Strength Standard & Poor’s A.M. Best A- A2 OCIL Financial Strength BBB+ Moody’s A- Stable Consolidated Balance Sheet 30-Nov-12 30-Nov-11 ($ in 000's) ($ in 000's) Assets Cash and Cash Equivalents Investments Investment sales pending settlement Accrued investment income Losses recoverable from reinsurers Accounts receivable Funds withheld Prepaid reinsurance premiums Other assets Total assets 116,120 780,541 14,640 5,894 220,912 35,978 30,840 16,517 10,428 1,231,870 52,934 740,982 43,475 6,621 187,179 12,620 19,359 13,684 5,409 1,082,263 Consolidated Balance Sheet 30-Nov-12 30-Nov-11 ($ in 000's) ($ in 000's) Liabilities Outstanding loss and loss expense Unearned premiums Securities sold short Investments purchases pending settlement Loan payable Reinsurance premium payable Amounts due to affiliates Accounts payable Total liabilities 429,412 78,273 10,294 36,785 150,334 27,578 490 9,233 742,399 307,448 44,327 5,383 86,573 150,334 21,537 544 5,000 621,146 Shareholders' equity Common shares Retained earnings Total shareholders' equity 300 489,171 489,471 305 460,812 461,117 1,231,870 1,082,263 629,398 606,306 Total liabilities and shareholders' equity Statutory capital and surplus Consolidated Income Statement 30-Nov-12 30-Nov-11 ($ in 000's) ($ in 000's) UGL premium written Assumed reinsurance premium Premiums written 59,460 86,410 145,870 53,345 28,760 82,105 Premiums earned Premiums ceded Net premiums earned 111,924 36,551 75,373 64,919 27,588 37,331 Losses and loss expenses incurred Commission and brokerage fees, net Underwriting income (loss) (100,583) (7,782) (32,992) (193) (1,296) 35,842 Interest income Dividend income Investment gains (losses) [realized & unrealized] Interest and debt expenses Investment advisory and custodian Net investment income 21,624 1,344 65,018 (12,523) (3,125) 72,338 22,114 1,435 (4,665) (12,482) (2,834) 3,568 General and administrative expenses (10,987) (9,796) Net income (loss) 28,359 29,614 OCIL Asset Allocation as at November 30, 2011 10% 4% Global Fixed Income 11% Fund of Hedge Funds Global Equity Cash 75% Portfolio Returns By Asset Class Fiscal Year Ended November 30 40 34 25 % Return 20 0 4 -20 -40 -60 2 2 6 6 8 5 9 9 5 -1 -2 Update: 3 Months ended February 29, 2012 Global Equity Benchmark -9 -16 -19 11.6% Hedge Fund Benchmark 2.8% Global Bond Benchmark 3.2% 2011 Global Bond 8 22 2010 2009 Fund of Hedge Funds Global Equity 13 15 10 8 -12 -41 2008 OCICL Portfolio 2007 OCICL Benchmark Investment Portfolio Returns Fiscal Year Ended November 30 18 20 % Return 10 6 2 2 9 9 17 7 6 9 2 0 -10 -10 -16 -16 -20 2011 2010 OCICL Benchmark 2009 OCICL Portfolio 2008 OCIL Total 2007 8 Cat Bond Definition • Cat Bond is short for Catastrophe Bond: – A corporate bond with special language that requires the bondholders to forgive or defer some or all payments of interest or principal if actual Catastrophe losses surpass a specified amount, or trigger. • Cat Bonds were originally developed by insurance companies in the early to mid 1990’s who were looking for additional capacity to reinsure natural Catastrophes, ie: earthquakes, wind storms, hurricanes. • Historically, Cat bonds have provided risk securitization for purely Catastrophic events – Avalon Re, Ltd. was the FIRST (and probably last) company to issue a Casualty Catastrophe Bond Conclusions OIL Business Model • Business model that has worked successfully to service the energy industry for over 30 years. • Insurance facility is tailored to the needs of the energy industry. • Mutualization of losses assures fairness and recovery of losses. • Among the largest limits available in the world market. • Highest form and reliability of coverage. • Strong access to capital markets when necessary. • Investment strategy promotes capital growth, as well as, security. • Low cost, most efficient vehicle for managing major risk transfer. • Biggest Challenge: Natural Catastrophes. How do we insure them? How do we allocate premium for them in a mutual setting? Thank you!