Coastal Account Senior Secured Bonds Series 2015A Series 2015A-1 (Fixed Rate Bonds) Series 2015A-2 (Floating Rate Notes) Presentation to Investors

Transcription

1 Coastal Account Senior Secured Bonds Series 2015A Series 2015A-1 (Fixed Rate Bonds) Series 2015A-2 (Floating Rate Notes) Presentation to Investors May

2 Disclaimer This investor presentation that you have viewed is provided as of May 11, 2015 for a proposed offering of Citizens Property Insurance Corporation, Coastal Account Senior Secured Bonds, Series 2015A-1 and Series 2015A-2 (the Bonds ). This presentation has been prepared for information purposes only and for your institution s sole and exclusive use in connection with the proposed transaction.. It does not purport to include every item which may be of interest, nor does it purport to present full and fair disclosure with respect to any of the Citizens bond programs within the meaning of applicable securities laws. The information contained herein is subject to completion and amendment. Any offer or solicitation with respect to the Bonds will be made by means of a final official statement. If you are viewing this investor presentation after the date stated above, events may have occurred that have a material adverse effect on the financial information presented. This presentation does not constitute nor does it form part of an offer to sell or purchase, or the solicitation of an offer to sell or purchase, any securities or an offer or recommendation to enter into any transaction described herein nor does this presentation constitute an offer, commitment or obligation on the part of the issuer, underwriter or any of its affiliates to provide, issue, arrange or underwrite any financing or enter into any other transaction. You will be responsible for making your own independent investigation and appraisal of the risks, benefits, appropriateness and suitability of the proposed transaction and any other transactions contemplated by this presentation and neither the issuer nor the underwriter is making any recommendation (personal or otherwise) or giving any investment advice and will have no liability with respect thereto. Neither the issuer nor the underwriter makes a representation or warranty as to the (i) accuracy, adequacy or completeness of any information in this investor presentation or (ii) legal, tax or accounting treatment of any purchase of Bonds by you or any other effects such purchase may have on you and your affiliates. This investor presentation contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results may differ materially from those expressed or implied by such forward-looking statements. Accordingly, we caution you not to place undue reliance on these statements. All statements other than the statements of historical fact could be deemed forward-looking. All opinions, estimates, projections, forecasts and valuations are preliminary, indicative and are subject to change without notice. THE RETENTION OR CAPTURE OF THIS PRESENTATION BY ANY MEANS IS STRICTLY PROHIBITED. By viewing this investor presentation you acknowledge that you understand and agree to the provisions of this page. (2)

3 Contacts Citizens Property Insurance Corporation Barry Gilway, CEO/President and Exec. Director Jennifer Montero, Chief Financial Officer Raymond James (Financial Advisor to Citizens) Kapil Bhatia, Managing Director Rick Patterson, Managing Director ; ; ; ; Bank of America / Merrill Lynch (Lead Underwriter for Series 2015A-1 Bonds) Coleman Cordell, Managing Director ; Coleman.W.Cordell@baml.com Matt Williams, Director J.P. Morgan (Lead Underwriter for Series 2015A-2 Bonds) Henry Reyes, Managing Director Nathaniel Johnson, Vice President ; Matthew.J.Williams@baml.com ; Henry.P.Reyes@jpmorgan.com ; Nathaniel.Johnson@jpmorgan.com Citizens Home Page: Citizens Investor Relations Web Address: (3)

4 Table of Contents Section I Section II Section III Section IV Section V Overview Policy Count, Exposure, Premiums and PML Overview Capital Structure Coastal Account Security Structure Series 2015A Financing Plan (4)

5 Section I: Overview (5)

6 Citizens Overview Organization Citizens is a Florida State-created, not-for-profit, tax-exempt government entity established principally to provide property insurance for those unable to procure it in the voluntary market 9-member Board appointed 2 each by the Chief Financial Officer, Speaker of the House, and President of the Senate, and the remaining 3, including the Consumer Advocate Member, appointed by the Governor Operates pursuant to a plan of operation which is reviewed and approved by the Financial Services Commission and subject to regulation by Florida Office of Insurance Regulation Citizens corporate governance remains very strong and is actively managed by a strong Board of Governors with significant industry experience The leadership team of Citizens has over 200 years of insurance industry experience Under current leadership, Citizens policy count has decreased from approximately 1.5 million in 2011 to 661,161 as of December 31, 2014 and year PML has decreased from approximately $24.0 billion in 2011 to approximately $11.2 billion as of December 31, 2014 The Coastal Account policy count has decreased from 460,161 in 2011 to 282,863 as of December 31, 2014 and Year PML has decreased from $14.8 billion in 2011 to approximately $8.2 billion as of December 31, 2014 (6)

7 Citizens Overview Executive Leadership Team Board of Governors Christopher Gardner (Chairman) Board of Governors Bette Brown Board of Governors Gary Aubuchon Board of Governors Donald Glisson Board of Governors Freddie Schinz Board of Governors Juan Cocuy Board of Governors Jim Henderson Board of Governors James Holton Board of Governors John Wortman Inspector General Bruce Meeks President/CEO and Executive Director Barry Gilway Chief of Internal Audit Joe Martins Chief Risk Officer John Rollins Chief Financial Officer Jennifer Montero Chief Systems & Operations Officer Kelly Booten General Counsel and Chief Legal Officer Daniel Sumner Director Corporate Analytics March Fisher Controller Andrew Woodward Approximately 1,100 Total Employees Chief Human Resources Officer Charles Johnson Chief of Consumer & Agent Services Steve Bitar VP of Communications, Legislative & External Affairs Christine Ashburn Chief of Claims James Jay Adams (7)

8 Citizens Accounts Overview Citizens has three accounts: Coastal Account: Coastal policies, mostly wind-only; includes personal residential, commercial residential, and commercial nonresidential in a defined geographic area Coastal Account Exposure by Zip Code Date as of December 31, 2014 Personal Lines Account: Multi-peril personal residential outside the Coastal Account territory, and Commercial Lines Account: Commercial residential and commercial nonresidential, multi-peril policies outside the Coastal Account territory Note: Risk count differs from policy count. Series 2015A financing is for the Coastal Account only (8)

9 Financial Resources Citizens has significant resources far above and beyond typical insurance company financial resources, with resources unique to it as a governmental entity with assessment power Typical Financial Resources Operating Surplus from Prior Years Investment Income Insurance Premiums Florida Hurricane Catastrophe Fund Reimbursements Unique Financial Resources Citizens Policyholder Surcharges (15% per account, total 45%) Regular Assessments (Coastal Account only, 2%) Emergency Assessments (up to 10% per account per year) Traditional Reinsurance Capital Markets Risk Transfer (9)

10 Governance, Financial Strength and Credit Governance Citizens corporate governance remains robust and the organization is actively managed by an effective, pro-active Board of Governors, with significant industry experience Financial Strength Citizens is in its best financial position ever with projected total liquidity sources for the Coastal Account of approximately $10.4 billion, including the projected $1 billion of Series 2015A bonds, and projected claims-paying resources of over $12.4 billion for the 2015 season, as compared to a year PML of $8.2 billion Credit Citizens credit is stronger due to lower PML and increased surplus and assessment base as evidenced by Citizens recent ratings upgrades from two of the three rating agencies Moody s upgraded Citizens from A2 to A1 and Fitch upgraded Citizens from A+ to AA- Multi-tiered credit mechanism with significant assessment capability Citizens Coastal Account bondholders continue to benefit from multiple Coastal Account pledged revenues net premiums, FHCF reimbursements, Regular Assessments, Citizens Policyholder Surcharges, and Emergency Assessments Prior to an event requiring draws, pre-event bondholders are fully collateralized by bond proceeds, and Citizens must sign a stringent draw certificate before it can access any proceeds to pay claims Repayment of pre-event bonds is not dependent on future market access Pre-event bonds do not require assessments or place a direct or indirect debt burden on the State of Florida (10)

11 Citizens Coastal Account Financial Highlights 2014 net income of $152.8 million 2014 year-end surplus of over $3.3 billion 2015 risk transfer of $3.905 billion Claims-paying ability before assessments of over $12.4 billion projected to be available for the 2015 season Includes surplus, traditional reinsurance, capital markets reinsurance, pre-event liquidity and FHCF reimbursements No assessments projected to be required for an event up to years for the 2015 season (11)

12 Coastal Account Liquidity and Claims-Paying Capacity Single Event Citizens Coastal Account has claims-paying ability before assessments of over $12.4 billion projected to be available for the 2015 season, including: $3.337 billion of surplus $2.034 billion of FHCF reimbursements $3.905 billion of risk transfer $2.142 billion of outstanding preevent bonds and $1 billion of proposed Series 2015A bonds, which are a liquidity tool and not reflected in the accompanying chart LAE - $82MM Coastal (Proj.) - Single Event SSST (Preliminary) 2015 Everglades Re II Cat Bonds - $300 Million 2014 Everglades Re Cat Bonds (Aggregate) - $1.5 Billion Surplus - $1.078 Billion Surplus - $140 Million Surplus - $494 Million 2015 Traditional Aggregate, Multi-Yr - $241.3 Million 2015 Traditional Aggregate, Single Yr - $556.7 Million 2013 Everglades Re Cat Bonds - $250 Million 2015 Traditional - Wrap - $425 Million 2014 Traditional Aggregate - Multi Yr - $202 Million FHCF Coverage (90% of $2.260B xs $825MM) $2.034 Billion Surplus - $825 Million 2015 CNR Traditional - $430.5MM (70% of $615MM) CNR - $185MM CNR - $385MM CNR - $148MM paid from surplus Ground Up Losses ($MM) PML (Yrs) Prob. $9, % $8, % $7, % $7, % $4, % $3, % $3, % $1, % Note: Chart is not to scale. Claims-paying capacity excludes pre-event liquidity. Please see Slide 29 regarding notes and assumptions for this slide. (12)

13 Claims-Paying Resources For 2015, Citizens Coastal Account claims-paying resources are projected to be over $12.4 billion, or 151% of year PML of $8.2 billion (Dollars in Millions) 2015 (Projected with 12/31/2014 PMLs) Claims-Paying Sources PLA / CLA Coastal Total Internal Claims-Paying Resources Beginning Surplus (Statutory) $4,047 $3,337 $7,384 Net Income A. Total Internal Claims-Paying Sources $4,225 $3,337 $7,562 External Claims-Paying Resources FHCF Coverage $987 $2,034 $3,021 Reinsurance - Traditional and Capital Markets 0 3,905 3,905 Pre-Event Liquidity (Including Preliminary Series 2015A Pre-Event Bonds) 1,025 3,142 4,167 B. Total External Claims-Paying Resources $2,012 $9,081 $11,092 Total Claims-Paying Sources from Internal and External Resources = A + B $6,237 $12,418 $18, Year PML (including 10% LAE) - Single Event $2,982 $8,198 $11,181 Total Claims-Paying Sources as a % of Year PML 209% 151% 167% Series 2015A financing is for the Coastal Account only (13)

14 Section II: Policy Count, Exposure, Premiums and PML Overview (14)

15 Policy Count and Exposure As of December 31, 2014, Citizens policy count decreased by 55% and exposure decreased by 60% from December 31, 2011 Policies: For Coastal, 39% For PLA, 63% For CLA, 44% Exposure: For Coastal, 49% For PLA, 73% For CLA, 50% 1,600,000 1,400,000 1,200,000 1,000, , , , ,000 1,084,237 Citizens Policy Count ( ) 1,472,391 1,314,811 1,283,538 1,029,214 1,021, ,161 ($ in Billions) $600 $500 $400 $300 $200 $100 $423 Citizens Exposure ( ) $511 $465 $430 $411 $319 $ $ Coastal PLA CLA Total Coastal PLA CLA Total Citizens Property Insurance Corporation Policy Count and Exposure As of December 31, 2011 As of December 31, 2012 As of December 31, 2013 As of December 31, 2014 Percentage Change from December 31, December 31, 2014 Exposure Exposure Exposure Exposure Account Policies ($B) Policies ($B) Policies ($B) Policies ($B) Policies Exposure Coastal 460, , , , % -49% PLA 1,003, , , , % -73% CLA 8, , , , % -50% Total 1,472, ,314, ,021, , % -60% (15)

16 Citizens Total Assessment Reduction Coastal Account and PLA/CLA Citizens total year PML in the Coastal, PLA and CLA accounts decreased from $24.52 billion in 2011 to $11.18 billion in 2015, or by $13.34 billion Citizens depopulation efforts in the Coastal Account, PLA and CLA have completely eliminated the need for any potential assessments for a year event Pro-Forma Storm Risk Storm Risk Storm Risk Storm Risk Storm Risk $24.52B $24.00B $19.31B $16.15B $11.18B Depopulation PML ($0.33B) Surplus ($5.74B) FHCF ($6.59B) Private Risk Transfer ($0.58B) Depopulation PML ($2.17B) Surplus ($6.06B) FHCF ($6.91B) Private Risk Transfer ($1.50B) Depopulation PML ($3.28B) Surplus ($6.92B) FHCF ($5.00B) Depopulation PML (4.51B) Surplus ($7.56B) For all three accounts (Coastal, PLA, and CLA), Citizens need for potential assessments for a year event was $11.61 billion in 2011 and is completely eliminated for 2015 Private Risk Transfer ($1.85B) FHCF ($4.58B) Private Risk Transfer ($3.27B) Assessment Assessment Assessment Assessment $11.61B $9.53B $5.53B $1.69B Surplus ($7.56B) FHCF ($3.02B) Private Risk Transfer ($3.91B) 18% Annual 42% Annual 69% Annual 100% Annual Assessment Assessment Assessment Assessment Reduction Reduction Reduction Reduction Note: PMLs from use a weighted average of 1/3 rd Standard Sea Surface Temperature (SSST) and 2/3 rd Warm Sea Surface Temperature (WSST) PMLs reflect only SSST. (16)

17 Coastal Account Direct Written Premium As of December 31, 2014, Citizens direct written premium ( DWP ) for the Coastal Account was $994 million and 2015 budgeted DWP is $844 million For the Coastal Account from December 31, 2011 to December 31, 2014: Exposure decreased by 49% Policy count decreased by 39% DWP only decreased by 16% $1,400 $1,200 $1,000 Citizens Direct Written Premium ( and 2015 Projected) $1,170 $1,031 $1,115 $1,188 $1,231 $1,175 $994 ($ in Millions) $800 $600 $844 $400 $200 $ (P) Coastal (17)

18 Section III: Capital Structure (18)

19 Why Citizens Issues Pre-Event Bonds Citizens pre-event bonds provide multi-year liquidity to help ensure timeliness of payment for policyholders after a hurricane event Citizens has multiple claimspaying resources, but some of them are not immediately available post-event pre-event financing helps provide a bridge to those sources, particularly reimbursements from the FHCF Citizens Primary Claims-Paying Resources Private Risk Transfer Pre-event bonds provide a cash bridge to Citizens liquidity and claimspaying resources for above year scenario or for multiple event scenarios Draws on any liquidity financing instruments are intended to be repaid primarily from FHCF reimbursements or assessments (19)

20 Coastal Account Outstanding Pre-Event Debt Citizens currently has $2.6 billion in pre-event bonds outstanding for liquidity for the Coastal Account, of which $490 million matures on June 1, 2015 For the 2015 season Citizens will have, prior to the 2015 pre-event financing, approximately $2.1 billion in pre-event bonds outstanding for liquidity for the Coastal Account, of which $798 million will mature on June 1, 2016 and $869 million will mature on June 1, 2017 $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 ($ in MM) Citizens Coastal Account Pre-Event Bonds Maturity Schedule ($2.142B Total) $798 37% $869 41% $125 6% $175 8% $175 8% CPIC Coastal Account - Outstanding Pre-Event Bonds Maturity Schedule ($MM) Year Coastal Series 2009A Coastal Series 2010A Coastal Series 2011A Total Maturities Total Outstanding at End of Year , , Total , ,631.6 (20)

21 Coastal Account Invested Assets Overview as of April 30, 2015 Total Coastal Account Portfolio Composition ($MM) Money Market Funds (Taxable) $ % Variable Rate Demand Notes (VRDNs) $ % Municipal Bonds (Tax-Exempt) $2, % Money Market Funds (Tax- Exempt) $ % Government & Agency Securities $1, % Corporate Bonds, CP, and CDs $2, % Bond Proceeds Investments (Money Market Funds for Reserve Accounts and Debt Service Funds) $5.18 0% Municipal Bonds (Taxable) $ % Citizens has approximately $6.8 billion in cash & invested assets for the Coastal Account Average portfolio duration of 563 days, or 1.54 years 87% of the portfolio is managed by 12 external investment managers 18% of the portfolio is invested in AAA securities and 47% is invested in AA securities Total Coastal Account Portfolio Rating Distribution ($MM) A $2, % BBB Non-Rated $ $ % 2% P-1 $ % AAA $1, % AA $3, % (21)

22 Section IV: Coastal Account Security Structure (22)

23 The Coastal Account Has Multiple, Redundant Sources of Pledged Revenues FHCF Reimbursements (up to $2.0 billion for 2015) Net Premiums (up to $114 million for 2015) Citizens Policyholders Surcharge (up to $250 million for 2015) Trustee Bondholders Citizens Regular Assessments (up to $753 million for 2015) Emergency Assessments ($3.9 billion annually as of 2015) Multiple revenue sources are pledged to repay draws and/or pay bondholders directly All pledged revenues flow through a trustee waterfall to bondholders before Citizens has any access (23)

24 Draw Certificate Citizens is required to sign a draw certificate to certify to the Trustee the repayment source before any pre-event bond proceeds can be drawn to pay claims The Certificate must list the Purpose of Draw, Amount of Draw, and Type of Collateral against which the draw is being made Certificate says, among other things, that after giving effect to the draw requested, the moneys remaining in the Proceeds Account and other accounts pursuant to the Indenture..and all other amounts reasonably expected to be received on or on behalf of Citizens.will be sufficient to pay the Debt Service Charges on all Indenture Obligations Outstanding.as such obligations become due and payable. The following are eligible types of collateral against which draws may be made for the Coastal Account (amounts as of 2015): FHCF Reimbursements up to $2.0 billion Citizens Policyholders Surcharge up to $250 million Net Premiums up to $114 million Regular Assessments up to $753 million Emergency Assessments up to $3.9 billion annually (24)

25 Master Trust Indenture Revisions Citizens financing structure for the Coastal Account consists of a Pledge, Security and Trust Agreement ( PSTA ) under which the collateral is held by a Collateral Trustee (Wells Fargo Bank) for the benefit of the Senior Secured Obligations consisting of: Indenture Obligations issued under the 1997 Trust Indenture with Regions Bank as Successor Trustee, Bank Facilities entered into with one or more banking institutions, and Hedge Agreements For each of its Coastal Account issuances, Citizens has entered into Supplemental Indentures under the 1997 Trust Indenture The 1997 Trust Indenture is outdated and the PSTA / 1997 Trust Indenture structure is unnecessarily cumbersome and unwieldy In connection with the issuance of the Series 2015A Coastal Account Bonds, Citizens is amending and restating in its entirety, its original 1997 Indenture to be effective the day after the final maturity date or the day of defeasance of the existing outstanding Coastal Account bonds (issued in 2009, 2010, and 2011 with a final maturity date of June 1, 2020) Citizens is modernizing the original Indenture with the main revision being the elimination of the PSTA and the Collateral Trustee, which will allow Citizens to have one trustee in the form of an Indenture Trustee that will hold all the Pledged Revenues under the new Master Trust Indenture ( MTI ) The new MTI will serve as an umbrella or master security document for bonds issued thereunder, for bank facilities and for hedge agreements (collectively referred to as Senior Secured Obligations under the MTI) The security for the bonds and other Senior Secured Obligations remains the same and the credit has not changed based on the changes to the MTI that will only become effective the day after the defeasance or final maturity date of the existing outstanding Coastal Account bonds (final maturity date of June 1, 2020) The underlying credit strength remains intact but is intended to improve administrative efficiencies (25)

26 Assessment Base is Broad, Diverse, and Large Emergency Assessments are levied statewide on almost all of property and casualty insurance policies, including essential policies like home, auto, and commercial Total 2014 base is over $39.3 billion for EAs Assessment must be paid by policyholder to have policy deemed paid highly enforceable Like a broad-based sales tax on an essential product Insurable Lines Subject to Assessment Fire Financial Guaranty Aircraft (all perils) Allied Lines Earthquake Fidelity Multiple Peril Crop Other Liability Surety Farmowners Multiple Products Liability Burglary and Theft Peril Homeowners Multiple Private Passenger Boiler and Machinery Peril Auto No-Fault Commercial Multiple Other Private Passenger Credit Peril (non-liability) Auto Liability Commercial Multiple Commercial Warranty Peril (liability portion) Auto No-Fault Mortgage Guaranty Other Commercial Auto Liability Aggregate Write-Ins for other Lines of Business Ocean Marine Private Passenger Auto Physical Damage Inland Marine Commercial Auto Physical Damage Emergency Assessment Base (in $B) $45 $40 $35 $30 $25 $20 $15 $10 $5 $0 Composition of Assessment Base ($ in billions) All Others $ % Commercial $ % Homeowners $ % Auto $ % Growth of Assessment Base ($ in billions) All Other Direct Written Premiums Commercial Multiple Peril Homeowners Multiple Peril Auto (Private and Commercial) Year (26)

27 Section V: Series 2015A Financing Plan (27)

28 Series 2015A Proposed Financing Plan An additional $1 billion partially to replace Coastal Account 2016 and 2017 maturing bonds to bolster and extend its liquidity resources while locking in historically low rates in order to achieve the most efficient liquidity cost Approval of financing by the Board on April 7, 2015 Expected pricing*: May 20 th 2015A Timeline OIR order appeal period expires: May 10 th Print POS: May 11 th Internet Roadshow Available: May 11 th -20 th Investor Roadshow: May 12 th -14 th Expected closing*: June 2 nd * Preliminary, subject to change. $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 ($ in MM) Citizens Coastal Account Pre-Event Bonds Outstanding and Preliminary Series 2015A Maturity Schedule $798 $869 $250 $125 $250 $175 $175 $250 $ Series 2009A, 2010A, and 2011A Pre-Event Bonds Outstanding Series 2015A Preliminary Maturity Schedule* (28)

29 Series 2015A Transaction Summary Issuer Issue Total Estimated Size Security Use of Proceeds Ratings Bond Insurance Structure Maturities Optional Redemption Tax Status Co-Senior Managers Citizens Property Insurance Corporation Coastal Account Senior Secured Bonds, Series 2015A $1.0 billion (preliminary) Net premiums, investment earnings, Citizens Policyholders Surcharges, FHCF reimbursements, Regular Assessments and Emergency Assessments To pay claims from future events in anticipation of receipt of ultimate claimspaying resources (i.e. FHCF reimbursements, Policyholders Surcharges, Regular or Emergency Assessments) A1 stable outlook / A+ with stable outlook / AA- with stable outlook (Moody s / S & P / Fitch) To be determined available if needed Fixed rate bonds (Series 2015A-1) along with SIFMA-based Floating Rate Notes (Series 2015A-2) 3 10 years In whole or in part prior to each specific maturity at par on any date not more than six months prior to the specific maturity date Tax-exempt Bank of America/Merrill Lynch (Series 2015A-1) J.P. Morgan (Series 2015A-2) (29)

30 Citizens Estimated Claims Paying Resources: Notes & Assumptions ASSUMPTIONS Citizens 2015 Budgeted DWP $1.67 Billion Citizens Policyholder Surcharge Maximum % Per Account 15% 2015 Regular Assessment Base (projected) $37.63 Billion Regular Assessment Maximum % Per Account 2% for Coastal; 0% for PLA/CLA 2014 Emergency Assessment Base $39.30 Billion PMLs based on modeled losses as of December 31, 2014 per AIR U.S. Hurricane Model version as implemented in Touchstone, Version reflecting the Standard Sea Surface Temperature (SSST) Event Catalog including Demand Surge, excluding Storm Surge, and include 10% of loss to account for loss adjustment expense (LAE). Interim Return Periods are derived by Linear Interpolation 2015 Projected Surplus = audited 2014 surplus projected net income assuming no hurricanes. Citizens 2015 FHCF coverage is based on preliminary retention estimates and payment multiples. Actual Citizens FHCF attachment and limits of coverage could differ significantly from estimates. NOTES These charts are imperfect! They attempt to show projected claims-paying resources, but they are approximations only. Four significant complicating factors are described below: 1) Coastal PML vs. PLA/CLA PML: An actual 100-year PML event in Coastal Account may not be a 100-year PML event for PLA/CLA. The relative magnitude of actual losses for Coastal and PLA/CLA will depend on the storm size and path. 2) Combining PLA and CLA: The PLA and CLA are separate accounts for deficit calculation and assessment purposes, but are combined for FHCF and credit purposes. It is impossible to accurately show the PML resources situation of these accounts on either separate or combined charts since simplifications must be made in either case that could prove materially inaccurate. Although we show the combined accounts, there is no guarantee that they will have deficits at the same time or of similar magnitude. 3) Non-residential exposure: Commercial non-residential (CNR) exposures in the CLA and Coastal Account are not reinsured by FHCF. Actual deficits and assessments may be significantly different than an aggregated PML would otherwise indicate. The charts include a provisional estimate for CNR losses of 14% in the Coastal Account for all return times. CNR is a negligible portion of the PLA/CLA Accounts and so is not considered in that chart. 4) Liquidity: These charts do not show the liquidity needs of the accounts. An account with ample PML resources may still require liquidity as many of the PML resources are not available immediately following a major hurricane. The timing and magnitude of receivables such as FHCF recoveries and assessments are unknown. (30)