Polar captial insurance portfolio fund citywire 2011

POLAR CAPITAL

Insurance Portfolio FundCitywire Montreux 11th-13thMay 201111th-13thMay 2011

1This is a new product proposal for one-on-one use with non-US professional investors only

Introduction• A leading financials fund specialist

• Acquired by Polar Capital in September 2010

• 5 strong investment team with unique skills and 94 years combined experience

• Balanced portfolio of funds with excellent track records

Outperformance since launch*

Polar Asian Financial Fund (Dec 1996) +125.6%

Polar European Financial Fund (Mar 1993) +133.6%

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• Ongoing relationship with Hiscox Group, including advice on $4bn investment portfolio

Please refer to the important information at the end of this presentation

Hiscox Insurance Fund (Oct 1998) +94.9%

Polar Financial Income Fund (Oct 2009) +21.3%

* Outperfomance as at 28 April 2011 for the funds’ respective benchmarks: Datastream Asia ex Japan Financials Index,Datastream European Financials Index, Datastream World Insurance Index and Dow Jones STOXX Financial Index respectively.

Fund performance

60

80

100

120

140

160

180

200

220

Oct-98 Nov-99 Dec-00 Jan-02 Feb-03 Mar-04 Apr-05 May-06 Jun-07 Jul-08 Aug-09 Sep-10

%

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April(%) YTD (%) 1 yr (%) 5yrs (%) Launch (%)

Hiscox Insurance Portfolio Fund (£) +0.1 +0.6 +5.8 +19.4 +110.1

Datastream World Insurance Index (£) -0.2 +1.9 +3.2 -10.4 +15.2

MSCI World Index (£) +0.2 +1.4 +6.1 +10.4 +41.0


Source: Williams De Broe (28 April 2011)

Source: Polar Capital (28 April 2011)

Oct-98 Nov-99 Dec-00 Jan-02 Feb-03 Mar-04 Apr-05 May-06 Jun-07 Jul-08 Aug-09 Sep-10

Hiscox Insurance Portfolio Fund (£) Datastream World Insurance Index (£) MSCI World Index (£)

Investment philosophy

• Internal research driven

• Invest in companies we understand

• 30/35 stock portfolio

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• Management ownership

• Long term investors


• Property/casualty insurers account for c. 90% of the portfolio

• Life and composite insurers account for under 5% of the portfolio

• Strong quality overlay – stocks are held for the long term

Portfolio construction

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• Mid-cap focus with strong emphasis on US, Bermuda and UK

• Significant US Dollar exposure both direct and by nature of sector


Value creation in the non-life insurance sector

• Shares prices historically track book value growth and dividends

• This broke down in 2007 as we entered the financial crisis and insurance rates continued to soften

• To the end of 2010, the Fund has compounded share price growth of c.7% p.a. vs 12% p.a. compound growth in book value and dividends

HIP Price Tracked Book Value Growth Until End 2007

280.0%

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-20.0%

30.0%

80.0%

130.0%

180.0%

230.0%

Oct-

98

Apr-

99

Oct-

99

Apr-

00

Oct-

00

Apr-

01

Oct-

01

Apr-

02

Oct-

02

Apr-

03

Oct-

03

Apr-

04

Oct-

04

Apr-

05

Oct-

05

Apr-

06

Oct-

06

Apr-

07

Oct-

07

Apr-

08

Oct-

08

Apr-

09

Oct-

09

Apr-

10

Oct-

10

Implied HIP Book Value HIP Price

Source : Polar Capital

Long term improvement in pricing through the cycle

• Robust reinsurance pricing encourages discipline

• Systems advance aid risk management, pricing

• Rating agencies/ Regulators/Sarbanes – Oxley

• WTC terrorist attack changed insurance buying and improved underwriting

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Source : Swiss Re

Reinsurance pricing

• 2011 catastrophe pricing down 5-10% at key 1 January renewal - US catastrophe rates remain historically attractive

• Overall 2010 catastrophes have been estimated at $43bn compared with $29bn for 2009 (Source: Swiss Re). This was despite no significant US Atlantic hurricanes making landfall.

• 2010 was second costliest year on record for earthquakes with Chile costing $8bn and New Zealand $4.4bn.

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New Zealand $4.4bn.

• BP Deepwater Horizon disaster driving energy rates up over 30%. Increased demand for “top-up” covers

• $15bn of catastrophes in 1Q11 (Australia flooding, /Cyclone Yasi and Christchurch New Zealand Earthquake) even before the Japan Earthquake on 11 March. These losses are likely to be sufficient to turn reinsurance rates upward in near term.


Reinsurance pricing vs Catastrophe Losses

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Insurance pricing

• Rate declines bottomed in mid 2008 but have struggled to improve due to the tough economic environment and financial market recovery (rebuilding balance sheet)

• Loss development due to recession (financial institutions, trade credit, political risk) and heightened loss activity (aviation, energy) has accelerated rate rises in specific classes

• Recent underwriting losses are expected to influence pricing

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• Terms and conditions remain firm

• The premium drag from the declining economic environment appears to be easing and demand for insurance is increasing. Q410 was the first uplift in exposures since mid 2008 for a number of companies

• Increasing signs of pain in the market with some companies having to materially increase loss reserves


US / Bermuda companies trading at 25 year low

90%

110%

130%

150%

170%

190%

210%D&P P/C (RE)INSURANCE COMPOSITE PRICE TO STATED BOOK VALUE

Ex. AIG and Berkshire Hathaway

Hurricane Andrew

Northridge EQ

Commercial lines pure rate increases peak near 50%

Cheating phase "bubble"WTC

Rates "roll"

Internet "Bubble" Peak

Rates Begin To Rise

Current = 91%

Katrina Subprime/Credit hits

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Source: Dowling & Partners

Average price to book (to 31 March 2011):

1 year 3 years 5 years 10 years

15 years

20 years

91% 98% 117% 131% 138% 141%


(Source : Dowling & Partners as at 4/4/11)

70%Jan-86 Jan-87 Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10

• Sector performance typically counter-cyclical, offering portfolio diversification

• Unusual lack of valuation differentials for quality companies - opportunities for stock pickers

• Historically, (re)insurers have delivered

Attractive returns over the long term

Hiscox Insurance Portfolio

FTSE

All-Share

Index

S&P

500

Index

2008 -0.8% -32.7% -38.5%

2010 +16.8% +10.9% +12.8%

Source: Williams De Broe, Bloomberg (31 December 2010)

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• Historically, (re)insurers have delivered sustained performance across different economic cycles, insurance cycles, investment markets


• Book values continue to grow at c. 10-15% p.a.

• Attractive returns even without re-rating

• Quality companies trading at or below book value

• Companies continue to return capital

Summary

Dowling & Partners (Re)insurance industry share repurchases

0

1,000

2,000

3,000

4,000

5,000

6,000

Q106

Q206

Q306

Q406

Q107

Q207

Q307

Q407

Q108

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

Q210

Q310

Q410

80%

100%

120%

140%

160%

180%

200%

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• Companies continue to return capital through special dividends and buybacks

• M&A has picked up (Zenith National; Max Capital/Harbor Point merger; Brit/private equity)

• Early indications of an imminent upturn in rates could act as a catalyst for a sector re-rating

Source: Dowling & Partners


Q106

Q206

Q306

Q406

Q107

Q207

Q307

Q407

Q108

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

Q210

Q310

Q410

$m repurchased (LHS) Average P/B paid (RHS)

Hiscox Insurance Portfolio Fund – 28 April 2011

Top 10 holdings:

Arch Capital PartnerReWR Berkley Berkshire Hathaway ‘B’ ACETransatlantic HoldingsMunich ReAmlinMarkel

6.8%6.1%5.9%5.7%4.7%4.4%4.2%4.1%3.8%

Cash

4.6%

Broker

4.1%

Life & Health

4.5%

Composite

5.9%

Lloyd's

6.3%

Commercial

38.1%

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MarkelAlleghany

3.8%3.3%

Geographical breakdown:

USBermuda UKEuropeCash

45.9%26.0%13.2%10.4%4.6%


Source: Polar Capital as at 28 April 2011

Retail

7.1%

Reinsurance

29.4%

Fund summary

• Only European fund dedicated to investing in the insurance industry worldwide

• Structure: UK domiciled OEIC to be collapsed into Polar UCITS at the end of May 2011.

• Launch date: 19 October 1998

• 11 year track record with same manager

• $196.1 million AUM as at 28 April 2011

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• $196.1 million AUM as at 28 April 2011


Contact Details

For further information on the fund please contact either:

International

James Brandt [email protected] Tel: 0207 227 2708

Clarissa Watkins [email protected] Tel: 0207 227 2749

UK

Iain Evans [email protected] Tel: 0207 227 2740

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Iain Evans [email protected] Tel: 0207 227 2740

Richard Oates [email protected] Tel: 0207 227 2732

Polar Capital

4 Matthew Parker Street

London SW1H 9NP

Tel: 0207 227 2700

www.polarcapital.co.uk

Polar Capital OverviewAs at 31st March 2011

Ownership

Business

Infrastructure

Sales and Marketing

Management

Total Assets

Under Management

$3.9bn

UKPhilip Hardy

Nick Shenton

2 funds

USD 171m

Funds

JapanJames Salter

Gerard CawleyUSD 1,063m

European Robert Gurner 2 funds

TechnologyBen Rogoff

Nick Evans

2 funds

USD 1,402m

Polar Capital was established in 2001 and has $3.9bn AUM, with 66 employees.

The Firm was listed on the London Stock Exchange (AIM) in February 2007. The firm offers managers a level of infrastructure

XL

11%

Caledonia

14%

Free Float

25%

Polar Capital

50%

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Operational Support

Compliance

Risk Management

Management

Tom Bartlam

Non Executive Chairman

Tim WoolleyCEO/ Co- Founder

John Mansell

Chief Operating Officer

European Robert Gurner 2 funds

USD 575m

HealthcareDan Mahony

Gareth Powell2 funds

USD 233m

Technology

Finance

level of infrastructure and corporate governance normally found in much larger organisations

Financials

John Yakas

Alec Foster

Nick Brind

4 funds

USD 296m

Emerging MarketWilliam Calvert 2 funds

USD 96m

ConvertiblesDavid Keetley USD 39m

Appendix

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Appendix

Fund managers

Alec Foster joined Polar Capital in September 2010 and is manager of the Hiscox Insurance Portfolio Fund together withNick Martin. Alec has 43 years experience in the insurance business, initially as an insurance broker in the London market.He joined Hiscox plc in 1976 and became group investment officer as well as managing director of Hiscox InvestmentManagement Ltd prior to the management buyout in 2007 when the business was renamed HIM Capital Ltd. Alec launchedthe Hiscox Insurance Portfolio Fund in 1998. He was also non executive chairman of Universal Salvage plc and a nonexecutive director of Midas Capital Partners. He is currently non executive chairman at Navigators Underwriting AgenciesLtd.

Alec Foster – Fund Manager

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Nick Martin – Fund Manager

Nick Martin joined Polar Capital in September 2010 and is co-manager of the Hiscox Insurance Portfolio Fund, workingclosely with Alec Foster. He has 12 years experience in the financial services industry. He joined Hiscox plc in September2001 working with Alec Foster at Hiscox Investment Management Ltd prior to participating in its management buyout in2007 when the business was renamed HIM Capital Ltd. He has developed a broad knowledge of the insurance sectorduring this time and from working for the chartered accountants, Mazars Neville Russell, where he specialised in audit andconsultancy work for insurance companies and brokers. He is a qualified chartered accountant and obtained a first classhonours degree in Econometrics and Mathematical Economics at the London School of Economics.

Investment team

John Yakas joined Polar Capital in September 2010 and is the manager of the Polar Capital Asian Financials Fund andPolar Capital European Financials Funds. John has over 20 years experience in the financial services industry and hasbeen involved with the Asian Financials Fund since its launch in 1996 and has also been responsible for the EuropeanFinancials Fund for the past three years. Previously, he worked for HSBC in Hong Kong and was the head of Asianresearch at Fox-Pitt, Kelton in 1995 and established their office in Hong Kong in 2000. John joined Hiscox InvestmentManagement in 2003 (subsequently HIM Capital).

George Barrow joined Polar Capital in September 2010 and is an investment analyst working closely with John Yakas onthe Polar Capital European Financials Fund and the Polar Capital Asian Financials Fund. He was previously at HIM Capitalfrom 2008 where he completed his IMC. George holds a Masters degree in International Studies from SOAS where hegraduated with merit.

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Nick Brind joined Polar Capital in September 2010 and is manager of the Polar Capital Financials Income Fund. He has 16years investment experience across a wide range of asset classes including UK equities, closed end funds, fixed-incomesecurities, European financials, private equity and derivatives. Prior to joining HIM Capital, Nick managed a high-incomefinancials fund investing in the equity and fixed-income securities of European financial companies at New Star AssetManagement. He also co-managed a mid-market private equity fund-of-funds and had previously worked at Exeter AssetManagement and Capel-Cure Myers.

Polar CapitalFour Matthew Parker Street

London SW1H 9NP

House view

This document has been produced based on Polar Capital research and analysis and represents our house view. All sources are Polar Capital unless otherwise stated.

Important information

The information provided in this presentation is for the sole use of those attending the presentation it shall not and does not constitute an offer or solicitation of an offer to make aninvestment into any fund managed by Polar Capital. It may not be reproduced in any form without the express permission of Polar Capital and is not intended for private investors.

This presentation is only made available to professional clients and eligible counterparties. Shares in the fund should only be purchased by professional investors. Any other personwho receives this presentation should not rely upon it. The law restricts distribution of this document in certain jurisdictions, therefore, persons into whose possession this document

comes should inform themselves about and observe any such restrictions.

This document does not provide all information material to an investor’s decision to invest in the Polar Capital Funds Plc – Hiscox Insurance Portfolio Fund, including, but notlimited to, risk factors. For more information, please refer to the fund’s offer document and read it carefully before you invest.

Statements/Opinions/Views

All opinions and estimates in this report constitute the best judgment of Polar Capital as of the date hereof, but are subject to change without notice, and do not necessarily

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All opinions and estimates in this report constitute the best judgment of Polar Capital as of the date hereof, but are subject to change without notice, and do not necessarilyrepresent the views of Polar Capital. Polar Capital is not rendering legal or accounting advice through this material; readers should contact their legal and accounting professionalsfor such information.

Third-party data

Some information contained herein has been obtained from other third party sources and has not been independently verified by Polar Capital. Polar Capital makes norepresentations as to the accuracy or the completeness of any of the information herein. Neither Polar Capital nor any other party involved in or related to compiling, computing orcreating the data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties herebyexpressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such data.


London SW1H 9NP

Holdings

This portfolio data is “as of” the date indicated and should not be relied upon as a complete or current listing of the holdings (or top holdings) of the fund. The holdings mayrepresent only a small percentage of the aggregate portfolio holdings, are subject to change without notice, and may not represent current or future portfolio composition.Information on particular holdings may be withheld if it is in the fund’s best interest to do so. A complete list of the portfolio holdings may be made available upon request. Itshould not be assumed that any of the securities transactions or holdings discussed was or will prove to be profitable, or that the investment recommendations or decisions wemake in the future will be profitable or will equal the investment performance of the securities discussed herein. The information provided in this document should not beconsidered a recommendation to purchase or sell any particular security.

Benchmarks

The following benchmark indices is used: Datastream World Insurance Index, MSCI World Index FTSE and S&P. These benchmarks are generally considered to be representative of the world insurance universe. This benchmarks is a broad-based index which are used for comparative/illustrative purposes only and have been selected as it is well known and is easily recognizable by investors. Please refer to http://thomsonreuters.com/products_services/financial/financial_products/investment_management_research/portfolio_management/datastream, and

http://www.standardandpoors.com/home/en/us and http://www.ftse.com/ for more information and www.msci.com. Comparisons to benchmarks have limitations because

benchmarks have volatility and other material characteristics that may differ from the fund. For example, investments made for the fund may differ significantly in terms of security holdings, industry weightings and asset allocation from those of the benchmark. Accordingly, investment results and volatility of the fund may differ from those of the benchmark.

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holdings, industry weightings and asset allocation from those of the benchmark. Accordingly, investment results and volatility of the fund may differ from those of the benchmark. Also, the indices noted in this presentation are unmanaged, are not available for direct investment, and are not subject to management fees, transaction costs or other types of expenses that the fund may incur. In addition, the performance of the indices reflects reinvestment of dividends and, where applicable, capital gain distributions. Therefore, investors should carefully consider these limitations and differences when evaluating the comparative benchmark data performance. The information regarding the indices are included merely to show the general trends in the periods indicated and is not intended to imply that the fund was similar to any of the indices in composition or risk

Regulatory status

This document is Issued in the UK by Polar Capital.

Polar Capital LLP is a limited liability partnership number OC314700. It is authorised and regulated by the Financial Services Authority. A list of members is open to inspection atthe registered office, 4 Matthew Parker Street, London SW1H 9NP


London SW1H 9NP

Information subject to change

The information contained herein is subject to change, without notice, at the discretion of Polar Capital and Polar Capital does not undertake to revise or update this information inany way.

Forecasts

References to future returns are not promises or even estimates of actual returns Polar Capital may achieve, and should not be relied upon. The forecasts contained herein arefor illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. In addition, the forecasts are based upon subjective estimates andassumptions about circumstances and events that may not yet have taken place and may never do so.

Performance

Performance is shown net of fees and expenses and includes the reinvestment of dividends and capital gain distributions. Many factors affect fund performance includingchanges in market conditions and interest rates and in response to other economic, political, or financial developments. Investment return and principal value of your investmentwill fluctuate, so that when your investment is sold, the amount you receive could be less than what you originally invested. Past performance is not a guide to or indicative offuture results Future returns are not guaranteed and a loss of principal may occur. Investments are not insured by the FDIC (or any other state or federal agency), are notguaranteed by any bank, and may lose value .

Investment process - Risk

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Investment process - Risk

No investment process or strategy is free of risk and there is no guarantee that the investment process or strategy described herein will be profitable. Investors may lose all oftheir investments.

Allocations

The strategy allocation percentages set forth in this document are estimates and actual percentages may vary from time-to-time. The types of investments presented herein willnot always have the same comparable risks and returns. Please see the private placement memorandum for a description of the investment allocations as well as the risksassociated therewith. Please note that the fund may elect to invest assets in different investment sectors from those depicted herein, which may entail additional and/or differentrisks. The actual performance of the fund will depend on the Investment Manager’s ability to identify and access appropriate investments, and balance assets to maximize returnto the fund while minimizing its risk. The actual investments in the fund may or may not be the same or in the same proportion as those shown herein.

All photography © Martin Hartley

Polar captial insurance portfolio fund citywire 2011

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