President s Report. Board of Governors. December 12, 2018

Transcription

1 President s Report Board of Governors December 12, 2018

2 Industry Overview Source: Florida Domestic Insurance Market Primary Personal Property Writers (excluding Citizens), Willis Towers Watson Page 2

3 Assessment Risk Public Summary of Citizens Assessment Reduction Efforts Over Time Notes: 1. Storm Risk is as measured by 1-in-100 year probable maximum loss (PML) plus estimated loss adjustment expenses using the Florida Hurricane Catastrophe Fund (FHCF) account allocation where PLA and CLA are combined. PLA/CLA combined PMLs are added to the Coastal PMLs to be consistent for surplus distribution. In general, the PMLs presented are as projected at the beginning of storm season; with the exception of 2017 which is as of August 31, Surplus and Assessments are as projected at beginning of storm season. Not all PLA/CLA surplus is needed to fund storm risk in In , not all surplus in PLA/CLA and the Coastal Account is needed to fund storm risk. Remaining surplus is available to fund a second event. 3. Florida Hurricane Catastrophe Fund (FHCF) is as projected at beginning of storm season; with the exception of 2017 and 2018 which are Citizens' initial data submission to the FHCF. 4. Depopulation PMLs are not included in storm risk totals and are presented as year end totals; with the exception of 2018, which is as of May 31, PMLs from use a weighted average of 1/3 Standard Sea Surface Temperature (SSST) and 2/3 Warm Sea Surface Temperature (WSST) PMLs reflect only SSST event catalog. Page 3

4 Historical Expense and Premium Comparison 04/ 05 Storm Season Poe Assumption Premium Rates held at 2006 rate level through 2009 Wind Mitigation Credits introduced; Discounts doubled in second year High volume of depopulation Wind Mitigation Inspection Outreach Insolvency of 3 domestic insurers Premium Rate Glide Path Core Policy System Implementation High volume of depopulation Page 4

5 Market Share Based on Total Insured Value Page 5

6 Challenges in 2019

7 Carrier Litigation Expense Litigation has been increasing steadily for all carriers Q3 Citizens Property Insurance Company All 9,146 9,525 7,653 10,061 7,624 10,357 AOB 860 1,062 1,250 3,242 2,718 2,617 AOB % 9% 11% 16% 32% 36% 25% All Other Carriers All 18,270 22,122 30,167 31,790 41,524 53,160 AOB 4,613 4,820 6,645 5,968 9,772 12,843 AOB % 25% 22% 22% 19% 24% 24% Total All 27,416 31,647 37,820 41,851 49,148 63,517 Total AOB 5,473 5,882 7,895 9,210 12,490 15,460 Total AOB % 20% 19% 21% 22% 25% 24% Data source DFS LSOP Q3 Note: 2018 Q3 data includes Hurricane Irma which represents around 60% of all new Litigation for Citizens Property Insurance in Page 7

8 Claims Litigation Total Pending Matters Over the twelve months ended September 2018 Citizens closed 9,420 matters while receiving a total of 13,282, for a net add of approximately 4,000 pending litigated cases. Of the new matters received, 6,654 or 50% were related to catastrophe claims, primarily as a result of Hurricane Irma. Page 8

9 Claims Litigation Monthly Legal Bills Received Page 9 Over the twelve months ended September 2018 Citizens received 183,937 legal bills with a review rate of approximately 92.2%. Appeals processed following review total approximately 13,000 over the twelve month period ended 9/30/2018.

10 Litigated Indemnity Decreases while ALAE Increases PLA HO Non-Sinkhole/Non-Cat Litigated Severity Non-Litigated Severity Accident Year Loss ALAE Loss ALAE 2008 $ 35,068 $ 8,727 $ 9,831 $ ,289 7,806 8, ,770 8,038 7, ,843 8,213 7, ,373 8,499 6, ,250 7,001 6, ,594 6,322 6, ,837 8,926 5, ,372 10,662 4, ,584 10,063 6,206 1,279 Page 10 Note: 85% of the claims volume is Non-Weather Water. Indemnity loss dollars are decreasing over time indicating that the non-litigated claims handling has improved along with effectiveness in the overall litigation strategy. ALAE expenses are increasing indicating that more litigated claims are identified as trial candidates leading to additional expenses to prepare those claims for trial.

11 Tri-County Market Share Increasing

12 Citizens has Largest Concentration of Policies in the Tri-County Region Page 12

13 Concentration of Tri-County Policies Increases Litigation on Average 6 Times Page 13

14 Impacts Resulting from Book of Business Changes

15 Direct Written Premium Recent and Projected Trends ($ millions) $1,000 $973.8 Combined $550 PLA $518.9 $545.9 $900 $894.0 $864.2 $848.2 $500 $450 $470.6 $495.4 $800 $ : Upper (871.2); Lower (855.0) 2019: Upper (878.8); Lower (762.5) 2018: Upper (523.2); Lower (513.0) 2019: Upper (560.9); Lower (486.4) $40 $37.1 CLA $500 $466.1 Coastal $30 $400 $20 $10 $19.8 $16.1 $11.6 $300 $378.8 $329.2 $290.7 $- $ : Upper (16.3); Lower (16.0) 2019: Upper (12.3); Lower (10.8) Page : Upper (331.8); Lower (326.1) 2019: Upper (305.6); Lower (264.2)

16 Exposure Recent and Projected Trends ($ millions) $140,000 $133,552 Combined $70,000 PLA $130,000 $65,000 $63,254 $64,837 $120,000 $110,000 $100,000 $109,084 $112,309 $103,019 $60,000 $55,000 $50,000 $55,810 $59, : Upper (110,124); Lower (107,408) 2019: Upper (106,699); Lower (92,147) $20,000 $15,000 $14,907 CLA 2018: Upper (63,838); Lower (62,134) 2019: Upper (66,585); Lower (57,574) $70,000 $60,000 $62,836 Coastal $10,000 $50,000 $5,000 $5,049 $3,917 $2,828 $40,000 $47,433 $41,914 $35,354 $- $30, : Upper (3,953); Lower (3,880) 2019: Upper (3,016); Lower (2,635) Page : Upper (42,447); Lower (41,231) 2019: Upper (37,505); Lower (31,860)

17 Loss / LAE Ratio Recent and Projected Trends (excludes catastrophe) 60% 55% 50% 45% 52% Combined 47% 55% 52% 85% 80% 75% 70% 65% 80% PLA 70% 73% 70% 40% 60% 2018: Upper (65%); Lower (46%) 2019: Upper (71%); Lower (37%) 2018: Upper (84%); Lower (62%) 2019: Upper (93%); Lower (52%) 160% CLA 135% 30% 29% Coastal 120% 80% 25% 24% 40% 0% 15% 1% 14% 20% 23% 22% 2018: Upper (162%); Lower (112%) 2019: Upper (28%); Lower (5%) 2018: Upper (33%); Lower (17%) 2019: Upper (35%); Lower (12%) Page 17

18 Hurricane Update Hurricane Irma 68,997 Claims Received (as of December 3, 2018) $1.810 billion combined losses and LAE incurred (gross) $1.150 billion combined losses and LAE incurred (net) Hurricane Michael 3,261 Claims Received (as of December 3, 2018) 4,000 Forecasted Claims $142 million projected losses and LAE (modeled results) Page 18

19 Net Income (Loss) Recent and Projected Trends ($ millions) excluding Catastrophes $160 $120 Combined $124.4 $10 $- $8.8 PLA $80 $40 $59.6 $(10) $(20) $(14.7) $- $(40) $(27.1) $23.7 $(30) $(40) $(35.0) $(32.3) 2018: Upper (100.2); Lower (-66.8) 2019: Upper (183.9); Lower (-97.9) 2018: Upper (19.9); Lower (-89.2) 2019: Upper (82.9); Lower (-133.2) $70 $60 $50 $40 $30 $60.1 CLA $53.3 $37.4 $80 $60 $40 $20 $- Coastal $62.4 $43.0 $36.8 $20 $(20) $10 $- $13.0 $(40) $(60) $(52.2) 2018: Upper (17.2); Lower (8.2) 2019: Upper (38.6); Lower (35.3) Page : Upper (67.0); Lower (12.1) 2019: Upper (63.8); Lower (-4.9)

20 Trends in Depopulation 1,600,000 1,472, % 35.0% 1,400,000 1,314, % 30.0% 1,200,000 1,000, % 1,021, % 20.0% 800, , , , % 661, , % 455, , , , , % 244, , % 3.0% 61,186 33,006 16,805 12, P B 15.0% 10.0% 5.0% 0.0% PIF Count at Beginning of Year Number of Assumed Policies Over Year Percent Assumed Page 20

21 Rate Differential Citizens and Private Market

22 Homeowners Rate Comparison Competitive rate comparison performed with 38 insurance companies 75% of Citizens HO-3 policies premium is less than the average competitor s rate Page 22

23 Statewide Homeowners Rate Comparison Page 23

24 Tri-County Homeowners Rate Comparison Since the tri-county area homeowners insurance market is not as strong as the rest of the state, only companies committed to tricounty were used to effectively evaluate the comparison Citizens average premium is 10% less than the average competitors premium in the tricounty area Page 24

25 Tri-County Homeowners Rate Comparison County Broward Miami- Palm South Dade Beach East CPIC $ 3,808 $ 4,841 $ 3,581 $ 4,372 Company 1 3,530 3,898 4,269 3,827 Company 2 3,883 4,202 3,468 4,017 Company 3 6,702 7,085 4,434 6,655 Company 4 4,057 4,488 5,355 4,456 Company 5 6,295 6,722 6,507 6,564 Company 6 4,031 4,949 3,544 4,499 Company 7 3,706 4,290 2,855 3,940 Competitor Average $ 4,600 $ 5,090 $ 4,348 $ 4,851 Difference -17% -5% -18% -10% Page 25

26 Administrative Expenses Given Revenue Reduction

27 Annual Trends Administrative Expenses Administrative expenses decline $35.7 million or 20.5% ( B) Written premiums decline $2.3 billion or 73.3% ( B) Page 27

28 Annual Trends Expense Ratio As DWP decreases, despite relative stabilization of administrative expenses since 2015, Citizens Expense Ratio increases. YOY Chg Exp Ratio % 17.7% % 16.7% % 17.3% % 22.0% % 24.8% % 25.3% 2018-P 0.2% 25.5% 2019-B 1.1% 26.6% Page 28

29 Employee Costs FTEs and Total Compensation Page 29 Total Compensation includes employee salaries, benefits and payroll tax obligations.

30 Solutions

31 Solutions One-way attorney fee revisions Alternative dispute resolution options Requirements prior to initiating litigation Policy language changes / Managed-Repair Program Licensing of all mitigation contractors Referral fee restrictions Fraud and abuse networks Page 31