$1,057,335,000* CITIZENS PROPERTY INSURANCE CORPORATION HIGH-RISK ACCOUNT SENIOR SECURED REFUNDING BONDS, SERIES 2007A

Transcription

1 SUPPLEMENT DATED FEBRUARY 12, 2007 TO PRELIMINARY OFFICIAL STATEMENT DATED FEBRUARY 6, 2007 CITIZENS PROPERTY INSURANCE CORPORATION $1,057,335,000* HIGH-RISK ACCOUNT SENIOR SECURED REFUNDING BONDS, SERIES 2007A This is a Supplement to the Preliminary Official Statement dated February 6, 2007 for the above referenced Bonds (the "Preliminary Official Statement"). On page 48 of the Preliminary Official Statement, under "HIGH-RISK ACCOUNT Assessments, Surcharges and Other Funds", it states that "Under the 2007 Legislation, the Regular Assessment base for future Plan Year Deficits is expected to increase to approximately $36 billion based on 2005 DWP." Such statement is repeated, in substance, on page 52 of the Preliminary Official Statement as a footnote to the chart entitled "High-Risk Account Regular Assessment Base". Such statements are hereby amended to read as follows: "Under the 2007 Legislation, the Regular Assessment base for future Plan Year Deficits is expected to increase to approximately $33.4 billion based on 2005 DWP." In addition, on page 53 of the Preliminary Official Statement, the footnote to the table entitled "High-Risk Account Emergency Assessment Base" states: "Under the 2007 Legislation, the Emergency Assessment base for future Plan Year Deficits is expected to increase to approximately $45 billion." Such statement is hereby amended to read as follows: "Under the 2007 Legislation, the Emergency Assessment base for future Plan Year Deficits is expected to increase to approximately $36 billion based on 2005 DWP." Finally, the section entitled LITIGATION which begins on Page 85 of the Preliminary Official Statement is supplemented to include the following lawsuit, which was filed on February 9, 2007: Jimenez v. Citizens, (Miami-Dade County Cir. Ct. 2007). Citizens is aware of a putative class action lawsuit that was filed on February 9, 2007, but not served on Citizens as of this date. This suit seeks damages based on Citizens alleged failure to pay claims by certain Citizens' policyholders for properties located in Miami-Dade and Broward counties for damage from Hurricane Wilma. Such claims sought replacement windows that would meet the high-impact standards of the Florida Building Code and High Velocity Hurricane Zone Standards. Because the action was filed on February 9, 2007, Citizens has not been able to determine the impact, if any, of such litigation. CITIZENS PROPERTY INSURANCE CORPORATION G. Bruce Douglas, Chairman Scott Wallace, President and Executive Director *Preliminary, subject to change. 1

2 This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration, qualification or filing under the securities laws of any such jurisdiction. NEW ISSUE BOOK-ENTRY ONLY PRELIMINARY OFFICIAL STATEMENT DATED FEBRUARY 6, 2007 See RATINGS herein In the opinion of Squire, Sanders & Dempsey L.L.P., Bond Counsel, under existing law (i) assuming continuing compliance with certain covenants and the accuracy of certain representations, interest on the Series 2007A Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and (ii) the Series 2007A Bonds and the income thereon are exempt from taxation under the laws of the State of Florida, except estate taxes imposed by Chapter 198, Florida Statutes, as amended, and net income and franchise taxes imposed by Chapter 220, Florida Statutes, as amended. Interest on the Series 2007A Bonds may be subject to certain federal taxes imposed only on certain corporations, including the corporate alternative minimum tax on a portion of that interest. For a more complete discussion of the tax aspects, see TAX MATTERS herein. Dated: February 26, 2007 $1,057,335,000* CITIZENS PROPERTY INSURANCE CORPORATION HIGH-RISK ACCOUNT SENIOR SECURED REFUNDING BONDS, SERIES 2007A Due: March 1, as shown on inside cover page The $1,057,335,000* High-Risk Account Senior Secured Refunding Bonds, Series 2007A (the Series 2007A Bonds ), are limited obligations of Citizens Property Insurance Corporation ( Citizens ) and are being issued for the purpose of financing the current refunding and redemption of the outstanding 7.125% Series 1999A Senior Secured Insured Notes due 2019 (the 1999A Notes ) previously issued by the Florida Windstorm Underwriting Association ( FWUA ), a predecessor of Citizens, as more fully described herein. Citizens is a statutorily-created entity established pursuant to Section (6), Florida Statutes, as amended (the Act ), to provide residential and commercial property and casualty insurance coverage for the owners of certain properties in the State of Florida that meet statutory requirements. Pursuant to the Act, all revenues, assets, liabilities and losses of Citizens are divided into three separate accounts (each an Account ) as more fully described herein: the High-Risk Account, the Personal Lines Account and the Commercial Lines Account. Creditors of one Account do not have a claim against or recourse to the other Accounts. See CITIZENS PROPERTY INSURANCE CORPORATION and RISK FACTORS Consolidation of Accounts herein for a discussion of possible circumstances under which the Accounts may be consolidated. The Series 2007A Bonds are being issued for the benefit of the High-Risk Account only and will not be an obligation of or have a claim against the Personal Lines Account or the Commercial Lines Account. The Series 2007A Bonds will be direct and general obligations of the High-Risk Account payable solely from and secured by the Pledged Revenues as provided in the Indenture referred to herein. The Series 2007A Bonds constitute Senior Secured Obligations under the Pledge and Security Agreement, described herein, and are secured by Collateral distributions on a parity with all other Senior Secured Obligations. See PLEDGE AND SECURITY AGREEMENT herein. The Series 2007A Bonds do not and will not represent or constitute a debt or pledge of the faith and credit or the taxing power of the State of Florida or of any political subdivision, municipality or other local agency thereof. Citizens does not have any taxing power. The Series 2007A Bonds are being issued on a parity with certain outstanding obligations of Citizens High-Risk Account, as more fully described herein. The Series 2007A Bonds are being issued and secured under and pursuant to a Trust Indenture, dated as of August 6, 1997 (the Original Indenture ), between Citizens and U.S. Bank National Association, as successor trustee (the Indenture Trustee ), as amended and supplemented, and particularly as supplemented by a Fifth Supplemental Indenture dated as of February 1, 2007, between Citizens and the Indenture Trustee (the Fifth Supplemental Indenture and, together with the Original Indenture, as amended and supplemented, the Indenture ). The proceeds derived from the sale of the Series 2007A Bonds, together with other available funds of Citizens, will be used to (i) finance the current refunding and redemption (including redemption premium) of the 1999A Notes described herein, (ii) fund the Reserve Subaccount for the Series 2007A Bonds in an amount equal to the Reserve Account Requirement, (iii) pay capitalized interest on the Series 2007A Bonds until September 1, 2007, and (iv) pay the costs of issuance of the Series 2007A Bonds. See APPLICATION OF PROCEEDS OF THE SERIES 2007A BONDS herein. The Series 2007A Bonds will be issued in fully registered form in the name of Cede & Co., as nominee of The Depository Trust Company ( DTC ) under the book-entry-only system maintained by DTC. Individual purchases of Series 2007A Bonds will be made in book-entry form only in the denominations of $5,000 and integral multiples thereof. Purchasers of the Series 2007A Bonds will not receive physical delivery of certificates. Transfers of ownership interests in the Series 2007A Bonds will be effected by the DTC book-entry system as described herein. Interest on the Series 2007A Bonds is payable on September 1, 2007 and semiannually on each March 1 and September 1 thereafter. So long as Cede & Co. is the registered owner of the Series 2007A Bonds, principal of and interest on the Series 2007A Bonds will be payable by the Indenture Trustee to DTC, which will in turn remit such payments to its participants for subsequent disbursement to Beneficial Owners of the Series 2007A Bonds, as more fully described herein. See DESCRIPTION OF THE SERIES 2007A BONDS Book-Entry-Only System herein. Payment of the principal of and interest on the Series 2007A Bonds when due will be insured by a Bond Insurance Policy issued by MBIA Insurance Corporation (the Bond Insurer ). See BOND INSURANCE herein. The Series 2007A Bonds are not subject to redemption at any time prior to maturity. THIS COVER PAGE, INCLUDING THE INSIDE COVER PAGE HERETO, CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT INTENDED TO BE A SUMMARY OF ALL FACTORS RELATING TO AN INVESTMENT IN THE SERIES 2007A BONDS. INVESTORS ARE ADVISED TO READ THIS OFFICIAL STATEMENT IN ITS ENTIRETY BEFORE MAKING AN INVESTMENT DECISION. SEE RISK FACTORS HEREIN. The Series 2007A Bonds are offered when, as and if issued by Citizens and accepted by the Underwriters, subject to prior sale or withdrawal or modification of the offer without notice, and subject to receipt of an approving legal opinion of Squire, Sanders & Dempsey L.L.P., Miami, Florida, Bond Counsel. Certain legal matters will be passed upon for Citizens by Perry Ian Cone, as Citizens General Counsel and by Bryant Miller Olive P.A., Tallahassee, Florida, as Disclosure Counsel, and for the Underwriters by their counsel, Broad and Cassel, Orlando, Florida. Raymond James & Associates, Inc. has served as Financial Advisor to Citizens. The Series 2007A Bonds are expected to be available for delivery through the facilities of DTC in New York, New York, on or about February 26, UBS Investment Bank Bear, Stearns & Co. Inc. Citigroup Goldman, Sachs & Co. Banc of America Securities LLC First Southwest Company JPMorgan Loop Capital Markets, LLC Merrill Lynch & Co. RBC Capital Markets Wachovia Bank, N.A. Dated: February, *Preliminary, subject to change.

3 MATURITIES, AMOUNTS*, INTEREST RATES, PRICES, YIELDS AND INITIAL CUSIP NUMBERS $1,057,335,000* CITIZENS PROPERTY INSURANCE CORPORATION HIGH-RISK ACCOUNT SENIOR SECURED REFUNDING BONDS, SERIES 2007A Maturity (March 1,) Amount* 2008 $ 50,000, ,875, ,535, ,435, ,585, ,995, ,690, ,675, ,965, ,580,000 Interest Rate Price Yield Initial CUSIP *Preliminary, subject to change. [Remainder of page intentionally left blank]

4 No dealer, broker, salesman or other person has been authorized by Citizens or by the Underwriters to give any information or to make any representations, other than those contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any offer, solicitation or sale of the Series 2007A Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. Certain information contained in this Official Statement (which includes the Appendices) has been obtained by Citizens from DTC, the Bond Insurer and other sources believed to be reliable. No representation is made by Citizens, however, as to the accuracy or completeness of such information, and nothing contained in this Official Statement is, or shall be relied upon as, a promise or representation as to such information by Citizens. The Underwriters have reviewed the information in this Official Statement in accordance with, and as a part of, their responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. This Official Statement is submitted in connection with the sale of the Series 2007A Bonds and may not be reproduced or used, in whole or in part, for any other purposes. The information herein is subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the information or in the affairs of Citizens since the date hereof. IN CONNECTION WITH THE OFFERING OF THE SERIES 2007A BONDS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2007A BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. UPON ISSUANCE, THE SERIES 2007A BONDS WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR WILL THE INDENTURE BE QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. THE REGISTRATION OR QUALIFICATION OF THE SERIES 2007A BONDS IN ACCORDANCE WITH APPLICABLE PROVISIONS OF THE SECURITIES LAWS OF THE STATES, IF ANY, IN WHICH THE SERIES 2007A BONDS HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN CERTAIN OTHER STATES CANNOT BE REGARDED AS A RECOMMENDATION THEREOF. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE.

5 CITIZENS PROPERTY INSURANCE CORPORATION BOARD OF GOVERNORS G. Bruce Douglas Chairman Gloria W. Fletcher Vice Chairman John Collins Richard DeChene Cheryl Herrin Earl Horton, Jr. Carlos Lacasa Jay Odom SENIOR MANAGEMENT Scott Wallace President and Executive Director Susanne Murphy Executive Vice President Perry Ian Cone Senior Vice President and General Counsel Sharon Binnun* Senior Vice President of Finance and Accounting/Chief Financial Officer Curt Overpeck Senior Vice President of Information Technology Paul Palumbo Vice President of Underwriting Tim Loftin Vice President of Claims Linda Philipps - Vice President of Tampa Operations Robert Gofourth - Vice President of Jacksonville Operations BOND COUNSEL Squire, Sanders & Dempsey L.L.P. Miami, Florida DISCLOSURE COUNSEL Bryant Miller Olive P.A. Tallahassee, Florida FINANCIAL ADVISOR Raymond James & Associates, Inc. St. Petersburg, Florida *Ms. Binnun will begin in this position on February 19, 2007.

6 TABLE OF CONTENTS Page No. INTRODUCTION... 1 Citizens Property Insurance Corporation... 1 Series 2007A Bonds... 2 Other Indebtedness... 2 Security and Pledged Revenues... 3 Bond Insurance... 4 Reserve Account... 4 Other Matters... 4 PLAN OF FINANCING... 5 The Series 2007A Bonds... 5 The 2005 Plan Year Deficit... 5 Claims Paying Resources of Citizens... 6 Liquidity Resources of Citizens... 7 APPLICATION OF PROCEEDS OF THE SERIES 2007A BONDS... 7 REDEMPTION OF 1999A NOTES... 8 ESTIMATED SOURCES AND USES... 8 DEBT SERVICE REQUIREMENTS FOR THE SERIES 2007A BONDS... 9 ESTIMATED DEBT SERVICE SCHEDULE FOR THE INDENTURE OBLIGATIONS DESCRIPTION OF THE SERIES 2007A BONDS General No Redemption Book-Entry-Only System PLEDGE AND SECURITY AGREEMENT General Distributions of the Collateral SECURITY FOR THE SERIES 2007A BONDS AND OTHER INDENTURE OBLIGATIONS Security Reserve Account Additional Indenture Obligations Proceeds Account Flow of Funds Certain Covenants SUMMARY OF CERTAIN AMENDMENTS TO ORIGINAL INDENTURE AND PLEDGE AND SECURITY AGREEMENT General Amendments to Original Indenture Amendments to Pledge and Security Agreement DEPARTMENT OF INSURANCE AGREEMENT BOND INSURANCE MBIA Insurance Corporation Regulation Financial Strength Ratings of the Bond Insurer Bond Insurer Financial Information Incorporation of Certain Documents by Reference i

7 FLORIDA PROPERTY AND CASUALTY INSURANCE MARKET...37 CITIZENS PROPERTY INSURANCE CORPORATION Background Operations Pension and Other Post Employment Benefits Properties HIGH-RISK ACCOUNT General Eligible Areas Policies Premiums and Rates Assessments, Surcharges and Other Funds Depopulation Recent Hurricane Seasons Liquidity Resources and Loss Exposures Reduction in Loss Exposure Loss Modeling FLORIDA HURRICANE CATASTROPHE FUND FINANCIAL INFORMATION General Summary of Significant Accounting Differences Between SAP and GAAP Financial Statements Reconciliation of SAP to GAAP for High-Risk Account Adjusted GAAP Surplus for the High-Risk Account Operating Budget INVESTMENTS CITIZENS BOARD OF GOVERNORS AND SENIOR MANAGEMENT Board of Governors Senior Management RISK FACTORS General Catastrophe Losses Consolidation of Accounts Collectability of the Assessments Possible Changes in the Market for Property Insurance Citizens' Exposure Limitations of Loss Modeling Analysis Insolvency of Insurers Enforceability of Remedies Investment Risk Variable Rate Risk Future Legislative and Regulatory Changes Post-Event Bonds State Treasury Parity Debt Additional Parity Indebtedness FHCF Delinquency Proceedings Amendments Without Consent of Bondholders TAX MATTERS ii

8 Original Issue Discount and Original Issue Premium RATINGS LITIGATION FINANCIAL STATEMENTS CERTAIN LEGAL MATTERS DISCLOSURE REQUIRED BY FLORIDA BLUE SKY REGULATIONS FINANCIAL ADVISOR INDENTURE TRUSTEE UNDERWRITING CONTINGENT FEES RELATED PARTIES CONTINUING DISCLOSURE FORWARD LOOKING STATEMENTS MISCELLANEOUS APPENDIX A COMPOSITE FORM OF THE TRUST INDENTURE AND FORM OF FIFTH SUPPLEMENTAL INDENTURE APPENDIX B COMPOSITE FORM OF THE PLEDGE AND SECURITY AGREEMENT APPENDIX C AUDITED FINANCIAL STATEMENTS STATUTORY BASIS AND SUPPLEMENTAL SCHEDULES FOR YEARS ENDED DECEMBER 31, 2005 AND 2004 APPENDIX D AUDITED FINANCIAL STATEMENTS GENERALLY ACCEPTED ACCOUNTING PRINCIPLES FOR YEARS ENDED DECEMBER 31, 2005 AND 2004 APPENDIX E DESCRIPTION OF PERSONAL LINES ACCOUNT AND COMMERCIAL LINES ACCOUNTS APPENDIX F CITIZENS PROPERTY INSURANCE CORPORATION PROPOSED PLAN OF OPERATION APPENDIX G PROPOSED FORM OF BOND COUNSEL OPINION APPENDIX H FORM OF CONTINUING DISCLOSURE CERTIFICATE APPENDIX I SPECIMEN BOND INSURANCE POLICY OF MBIA APPENDIX J GENERAL INFORMATION FOR THE STATE OF FLORIDA iii

9 [THIS PAGE INTENTIONALLY LEFT BLANK]

10 OFFICIAL STATEMENT relating to $1,057,335,000* CITIZENS PROPERTY INSURANCE CORPORATION HIGH-RISK ACCOUNT SENIOR SECURED REFUNDING BONDS, SERIES 2007A INTRODUCTION This Official Statement, dated as shown on the cover page hereof, of Citizens Property Insurance Corporation ("Citizens") is provided to furnish information concerning the $1,057,335,000* in aggregate principal amount of its High-Risk Account Senior Secured Refunding Bonds, Series 2007A (the "Series 2007A Bonds"). See "APPENDIX A COMPOSITE FORM OF THE TRUST INDENTURE AND FORM OF FIFTH SUPPLEMENTAL INDENTURE" and "APPENDIX B COMPOSITE FORM OF THE PLEDGE AND SECURITY AGREEMENT" attached hereto for the definition of certain capitalized terms used herein and for a more complete description of the Series 2007A Bonds. Citizens Property Insurance Corporation Citizens is a legislatively-created entity which provides certain residential and commercial property and casualty insurance coverage for the owners of certain properties in the State of Florida (the "State") as specified in Section (6), Florida Statutes, as amended (the "Act"). The Act was most recently amended by HB CS/BB 1A which was enacted by the Florida Legislature on January 22, 2007 and signed into law by the Governor of Florida on January 25, 2007 (the "2007 Legislation"). Citizens resulted from a legislatively-mandated combination of the Florida Residential Property and Casualty Joint Underwriting Association ("FRPCJUA") and the Florida Windstorm Underwriting Association ("FWUA"). Citizens operates pursuant to a Plan of Operation (the "Plan") which must be approved by the Financial Services Commission (the "Commission") of the State of Florida. The Commission is composed of the Governor, the Chief Financial Officer, the Attorney General and the Commissioner of Agriculture of the State. Citizens is supervised by an eight member Board of Governors. See "CITIZENS PROPERTY INSURANCE CORPORATION" herein. See "APPENDIX F CITIZENS PROPERTY INSURANCE CORPORATION PROPOSED PLAN OF OPERATION" attached hereto for a copy of the current Plan approved by the Board on January 25, 2007 and awaiting approval of the Commission, which is anticipated on February 13, Pursuant to the Act, all revenues, assets, liabilities and losses of Citizens are divided into three separate accounts (each an "Account" and collectively, the "Accounts"): the High-Risk Account, the Personal Lines Account and the Commercial Lines Account. See "CITIZENS PROPERTY INSURANCE CORPORATION Background" for a discussion of the three current Accounts. Creditors of one Account do not have a claim against or recourse to the other Accounts. See "SECURITY FOR THE SERIES 2007A BONDS AND OTHER INDENTURE OBLIGATIONS" herein and "RISK FACTORS Consolidation of Accounts" herein, the latter for a description of circumstances that may result in the consolidation of the three current Accounts into one account. *Preliminary, subject to change. 1

11 Through the High-Risk Account, Citizens currently provides wind-only insurance on properties located in Eligible Areas for which coverage is unavailable at statutorily defined rates in the voluntary market. Policies issued through the High-Risk Account insure against direct physical loss to such properties caused by hurricanes, tornadoes, windstorms and hail. In addition, pursuant to the 2007 Legislation, Citizens may, no earlier than March 31, 2007, offer policies providing multi-peril coverage in conjunction with wind-only insurance from the High-Risk Account in the areas eligible for coverage from the High-Risk Account. Citizens will also have the continued authority to write wind-only policies in these areas. This authority to write multi-peril policies is subject to approval by the Commission and by the Legislative Budget Commission of the State of Florida (the "Legislative Budget Commission"). See "HIGH-RISK ACCOUNT General." Series 2007A Bonds The Series 2007 Bonds are being issued for the purposes described in "PLAN OF FINANCING The Series 2007A Bonds herein." The Series 2007A Bonds are being issued by Citizens under and pursuant to a Trust Indenture, dated as of August 6, 1997 (the "Original Indenture"), between Citizens, as the successor to the FWUA, and U.S. Bank National Association (successor to Wachovia Bank, National Association and The Bank of New York), as trustee (together with any successor trustee, the "Indenture Trustee"), as amended and supplemented, and particularly as supplemented by a Fifth Supplemental Indenture dated as of February 1, 2007, between Citizens and the Indenture Trustee (the "Fifth Supplemental Indenture" and together with the Original Indenture, as amended and supplemented, the "Indenture"). Terms used in this Official Statement in capitalized form and not otherwise defined in this Official Statement, except in the section herein entitled "PLEDGE AND SECURITY AGREEMENT," have the meanings assigned to them in the Indenture. See "INDENTURE TRUSTEE" herein for a discussion of Citizens plans to provide for a successor Indenture Trustee. Other Indebtedness The Series 2007A Bonds will be secured and payable from the Pledged Revenues (as defined herein), in the manner and to the extent provided in the Indenture and described herein, on a parity with Citizens' High-Risk Account 6.85% Series 1997A Senior Secured Notes due 2007 issued and currently outstanding in the principal amount of $300,000,000 (**) (the "1997 Notes"), High-Risk Account Senior Secured Bonds, Series 2004 issued and currently outstanding in the aggregate principal amount of $750,000,000 (the "Series 2004 Bonds"), High-Risk Account Senior Secured Bonds, Series 2006A issued and currently outstanding in the aggregate principal amount of $3,050,000,000 (the "Series 2006A Bonds" and, together with the 1997 Notes and the Series 2004 Bonds, the "Existing Indenture Obligations") and any Additional Indenture Obligations that may be issued from time to time under the Indenture on a parity with the Existing Indenture Obligations. See "SECURITY FOR THE SERIES 2007A BONDS AND OTHER INDENTURE OBLIGATIONS", "ESTIMATED DEBT SERVICE SCHEDULE FOR THE INDENTURE OBLIGATIONS", herein and "APPENDIX A COMPOSITE FORM OF THE TRUST INDENTURE AND FORM OF FIFTH SUPPLEMENTAL INDENTURE" attached hereto. See also "PLAN OF FINANCING" herein. Citizens and the Division of Treasury, Florida Department of Financial Services (the "State Treasury") have entered into a standby purchase contract dated as of July 29, 2005 (the "Standby Purchase Contract"). In * Securities with a market value of $270,222,406 as of December 31, 2006 were on deposit in the Defeasance Account for the 1997 Notes, which are scheduled to mature August 25,

12 the event of a Plan Year Deficit in the High-Risk Account, Citizens may issue up to $750,000,000 in principal amount of debt which would be purchased by the State Treasury pursuant to the Standby Purchase Contract (the "State Treasury Parity Debt") and would be issued as Additional Indenture Obligations on a parity with the Series 2007A Bonds, the Existing Indenture Obligations and any Additional Indenture Obligations. The Standby Purchase Contract provides that the State Treasury will purchase the State Treasury Parity Debt as long as such State Treasury Parity Debt is rated "by at least two nationally recognized rating services in any one of the four highest classifications" (hereinafter referred to as "investment grade") and if by "only one nationally recognized rating service, then in any one of the two highest rating classifications." Similar to the Existing Indenture Obligations, the State Treasury Parity Debt is intended to provide interim financing and liquidity for the High-Risk Account while Citizens readies a long-term financing with respect to the High-Risk Account in the event of a Plan Year Deficit. The Standby Purchase Contract expires on July 29, Security and Pledged Revenues Indenture Obligations, including the Series 2007A Bonds, constitute Senior Secured Obligations under the Pledge and Security Agreement and are secured by Collateral distributions, and are further secured by and payable from Pledged Revenues under the Indenture. The Indenture generally defines Pledged Revenues, with certain exceptions, to include (A) the Indenture Trustee's proportionate interest in the following amounts deposited with the Collateral Trustee under the Pledge and Security Agreement described herein: (i) premiums and surcharges collected by Citizens in respect of the High-Risk Account (provided that upon the effective date of certain amendments to the Pledge and Security Agreement more fully described herein, such term will only include "net premiums and surcharges"); (ii) Emergency Assessments; (iii) Regular Assessments in anticipation of which Citizens has made Draws from the Proceeds Account; and (iv) Florida Hurricane Catastrophe Fund ("FHCF") Reimbursements as to which Citizens has made Draws from the Proceeds Account; and (B) moneys and investments held from time to time in the Accounts and Subaccounts established under the Indenture as described herein, including, without limitation, investment earnings thereon. See "PLEDGE AND SECURITY AGREEMENT," "SECURITY FOR THE SERIES 2007A BONDS AND OTHER INDENTURE OBLIGATIONS," and "HIGH-RISK ACCOUNT Assessment, Surcharges and Other Funds" herein. THE SERIES 2007A BONDS AND THE INTEREST THEREON WILL BE DIRECT AND GENERAL OBLIGATIONS OF CITIZENS' HIGH-RISK ACCOUNT, SECURED SOLELY BY THE PLEDGED REVENUES AS MORE FULLY DESCRIBED HEREIN. THE SERIES 2007A BONDS DO NOT AND WILL NOT REPRESENT OR CONSTITUTE A DEBT OR PLEDGE OF THE FAITH AND CREDIT OR THE TAXING POWER OF THE STATE OF FLORIDA OR OF ANY POLITICAL SUBDIVISION, MUNICIPALITY OR OTHER LOCAL AGENCY THEREOF. NEITHER THE STATE OF FLORIDA NOR ANY POLITICAL SUBDIVISION THEREOF WILL BE OBLIGATED TO PAY THE PRINCIPAL OF THE SERIES 2007A BONDS, THE INTEREST THEREON OR OTHER COSTS INCIDENT THERETO. CITIZENS DOES NOT HAVE ANY TAXING POWER. THE SERIES 2007A BONDS ARE BEING ISSUED FOR THE BENEFIT OF THE HIGH- RISK ACCOUNT ONLY AND WILL NOT BE OBLIGATIONS OF OR HAVE A CLAIM AGAINST THE PERSONAL LINES ACCOUNT OR THE COMMERCIAL LINES ACCOUNT OF CITIZENS. See, however, "RISK FACTORS Consolidation of Accounts" herein for a description of circumstances that may result in the consolidation of these Accounts into one account. 3

13 Bond Insurance Payment of the principal of and interest on the Series 2007A Bonds when due will be insured by a Bond Insurance Policy (the "Bond Insurance Policy") to be issued by MBIA Insurance Corporation (the "Bond Insurer") simultaneously with the delivery of the Series 2007A Bonds. See "BOND INSURANCE" herein. Reserve Account A Series 2007A Reserve Subaccount is being established under the Indenture into which Citizens will deposit available monies (other than the proceeds of the Series 2007A Bonds) in an amount equal to the Reserve Account Requirement for the Series 2007A Bonds. The Series 2007A Bonds Reserve Subaccount secures only the Series 2007A Bonds and no other Series of Indenture Obligations. The Series 2007A Bonds will not be secured by or payable from any funds or investments in the Reserve Account or any subaccount therein, other than the funds and investments in the Series 2007A Bonds Reserve Subaccount. Funds on deposit in the Series 2007A Bonds Reserve Subaccount will be applied solely to cure any deficiencies in amounts available to pay the principal of and interest on the Series 2007A Bonds. See "SECURITY FOR THE SERIES 2007A BONDS AND OTHER INDENTURE OBLIGATIONS Reserve Account" herein for a further description of the Series 2007A Bonds Reserve Subaccount. Other Matters Squire, Sanders & Dempsey L.L.P., as Bond Counsel, proposes to deliver an opinion in substantially the form attached hereto as APPENDIX G in connection with the issuance of the Series 2007A Bonds. The actual legal opinion to be delivered may vary from that text as necessary to reflect facts and law on the date of delivery. The opinion will speak only as of its date, and subsequent distribution thereof by recirculation of the Official Statement or otherwise will create no implication that Bond Counsel has reviewed or expresses any opinion concerning any of the matters referenced in the opinion subsequent to its date. See "CERTAIN LEGAL MATTERS" herein. The Series 2007A Bonds are being issued pursuant to the Act and a resolution of Citizens authorizing the issuance of the Series 2007A Bonds adopted on December 7, 2006 by the Board of Governors (the "Resolution"). The Series 2007A Bonds are being issued in book-entry only form in denominations equal to $5,000 and integral multiples thereof, and when issued, will be registered in the name of Cede & Co., as Bondholder and securities depository nominee of The Depository Trust Company, New York, New York ("DTC"), as described herein. Individual purchases of beneficial interests in the Series 2007A Bonds will be made in bookentry form only through Direct Participants, as described herein. Interest on the Series 2007A Bonds will be payable on September 1, 2007 and on each March 1 and September 1 thereafter at the rates per annum set forth on the inside front cover. The Series 2007A Bonds are not subject to redemption at any time prior to maturity. See "DESCRIPTION OF THE SERIES 2007A BONDS" herein and "APPENDIX A COMPOSITE FORM OF THE TRUST INDENTURE AND FORM OF FIFTH SUPPLEMENTAL INDENTURE" attached hereto. For statistical and demographic information about the State of Florida, see "APPENDIX J GENERAL INFORMATION FOR THE STATE OF FLORIDA" attached hereto. 4

14 The foregoing introduction contains only a brief summary of certain information contained in this Official Statement. It is not intended to be complete and is qualified by the more detailed information contained elsewhere in this Official Statement. Investors are advised to read this Official Statement in its entirety before making an investment decision. Copies of documents and reports not reproduced in this Official Statement may be obtained from the Accounting and Finance Department, Citizens Property Insurance Corporation, 101 N. Monroe Street, Suite 1000, Tallahassee, Florida 32301, The Series 2007A Bonds PLAN OF FINANCING The Series 2007A Bonds are being issued primarily to provide funds which, in combination with other available monies of Citizens, will be used to refund and redeem the outstanding 1999A Notes in full on February 26, The 1999A Notes are one of four taxable High-Risk Account "pre-event" financings issued by Citizens or its predecessors. These obligations were issued to provide liquidity for Citizens in advance of any storms. The proceeds have been held and invested pending their need to pay claims. The longstanding plan of finance for Citizens anticipated that, once the proceeds of these obligations were spent to pay claims, the obligations would be refinanced using "post-event" tax-exempt bonds structured to be paid from the proceeds of Emergency Assessments. See "HIGH-RISK ACCOUNT Assessments, Surcharges and Other Funds Emergency Assessment" herein. Until 2006, no pre-event proceeds had ever been spent to pay claims; however, the losses caused by the four hurricanes that impacted Florida in 2005 (particularly Hurricane Wilma) led Citizens to apply the proceeds of the 1999A Notes (other than those on deposit in the Reserve Subaccount related to the 1999A Notes) in 2006 to pay 2005 storm claims, and to incur a deficit (the "2005 Plan Year Deficit") that required Citizens to levy both a Regular Assessment and its first Emergency Assessment. The proceeds of the Series 2007A Bonds, together with other available funds of Citizens, will be used to (i) finance the current refunding and redemption (including redemption premium) of the 1999A Notes, (ii) make a deposit to the Reserve Subaccount for the Series 2007A Bonds in an amount equal to the Reserve Account Requirement, (iii) pay capitalized interest on the Series 2007A Bonds until September 1, 2007, and (iv) pay the costs of issuance of the Series 2007A Bonds. The Series 2007A Bonds are being issued on a parity basis with Existing Indenture Obligations and any Additional Indenture Obligations that may be issued from time to time under the Indenture. The Series 2007A Bonds are structured so that the receipts of the Emergency Assessments, that are statutorily required to be levied by Citizens for a period of ten years to finance the 2005 Plan Year Deficit, should be sufficient to pay the debt service on the Series 2007A Bonds. The 2005 Plan Year Deficit As presented in the audited financial statements (prepared in accordance with generally accepted accounting principles ("GAAP")) for fiscal year 2005, attached hereto as APPENDIX D, Citizens incurred a 2005 Plan Year Deficit in the High-Risk Account of $1.674 billion. Under the Act and the Plan, Citizens was required to levy a Regular Assessment of up to 10% of the aggregate $7.863 billion 2004 statewide direct written premium ("DWP"), or approximately $786.3 million. However, in order to reduce the Regular Assessment for Plan Year 2005, the Florida Legislature appropriated $715 million to Citizens to reduce the deficits in the Citizens' accounts, of which $623 million was applied to the 2005 Plan Year Deficit in the High- 5

15 Risk Account (the "Legislative Appropriation"). Pursuant to the Indenture, the remaining $163 million of the required Regular Assessment for the 2005 Plan Year Deficit was required to be levied prior to December 31, On September 26, 2006, Citizens levied a Regular Assessment of 2.07% on each Assessable Insurer of its 2004 DWP. See "HIGH-RISK ACCOUNT Assessments, Surcharges and Other Funds Regular Assessments" herein for a further discussion of DWP calculation. Citizens' HRA Deficit Remaining Following Legislative Appropriation and Levy of Regular Assessment Amount (in millions) 2005 HRA Plan Year Deficit ($1,674) Legislative Appropriation 623 Regular Assessment (2.07%) 163 Remaining Deficit requiring an Emergency Assessment ($887)* Pursuant to the Act and the Plan, after the Legislative Appropriation and the levy of the Regular Assessment as described above, the remaining $887 million of the 2005 Plan Year Deficit must be recovered through Emergency Assessments. In accordance with a change in Florida law enacted in 2006 and specific only to the 2005 Plan Year Deficit, such Emergency Assessments are required to be levied over a 10-year period. The Act permits Citizens to levy Emergency Assessments for the amount of the remaining deficit (in this case, $887 million) plus "interest, fees, commissions, required reserves, and other costs associated with financing the original deficit." On December 7, 2006, Citizens levied an Emergency Assessment of 1.4% per year for ten years on the Emergency Assessment base, which includes all DWPs in the Regular Assessment base plus Citizens DWPs. The Office of Insurance Regulation of the State of Florida (the "Office") approved the levy of such Emergency Assessment on January 11, Pursuant to the Fifth Supplemental Indenture, Citizens will be obligated to annually adjust the percentage such that the projected revenues generated from the assessment are not greater than the amount necessary to pay debt service on the Series 2007A Bonds and certain other purposes. See "SECURITY FOR THE SERIES 2007A BONDS AND OTHER INDENTURE OBLIGATIONS Flow of Funds Series 2007A Bonds Emergency Assessment Stabilization Account" herein. Although Emergency Assessments are not the sole source of security for the Series 2007A Bonds, Citizens believes that the amount levied will be sufficient to pay all interest and principal on the Series 2007A Bonds as they come due. See "SECURITY FOR THE SERIES 2007A BONDS AND OTHER INDENTURE OBLIGATIONS Additional Indenture Obligations" and "RISK FACTORS Additional Parity Indebtedness" herein. Claims Paying Resources of Citizens Citizens has at its disposal to pay policy claims most of the typical financial resources available to all property and casualty insurance companies that conduct business in the State, and in addition, has assessment powers granted to Citizens under the Act. * Does not add due to rounding. 6

16 The following table lists the resources available to Citizens to pay claims: Typical Financial Resources Additional Resources (1) Insurance Premiums Regular Assessments Investment Income Citizens Policyholder Surcharge (2) Operating Surplus from Prior Years, if any Emergency Assessments Florida Hurricane Catastrophe Fund (FHCF) Reimbursements Private Reinsurance (if obtained) (1) In addition to Regular Assessments, the Citizens Policyholder Surcharge and Emergency Assessments, the Act provides that Citizens may also levy Immediate Nonhomestead Assessments and Additional Citizens Policyholder Assessments to fund Plan Year Deficits occurring in calendar year 2008 and thereafter. Such assessments are treated as premium and surcharge revenue under the Indenture. (2) Replaced Market Equalization Surcharges which were available prior to the 2006 Plan Year. See "HIGH-RISK ACCOUNT Assessments, Surcharges and Other Funds" herein for a complete description of these claims-paying resources. Liquidity Resources of Citizens While the resources listed above provide ultimate claims-paying ability for Citizens, not all of them are available quickly enough to provide policyholders payment for their claims in a timely manner. The primary resources for the High-Risk Account that are not immediately available and that require Citizens to obtain additional liquidity for timely claims payment are the FHCF Reimbursements and all of the resources listed under "Additional Resources" in the table above. The primary purpose of the Existing Indenture Obligations and the State Treasury Parity Debt is to provide a portion of such claims-paying liquidity. Historically, Citizens has used a combination of accumulated operating surplus funds, bank lines of credit, the State Treasury Parity Debt and proceeds of Existing Indenture Obligations to provide needed liquidity. These programs have consistently enabled Citizens to meet its obligations to policyholders in a timely manner pending receipt of the ultimate claims-paying resource. Citizens believes that its projected amounts available to pay policyholder claims will allow it to continue to be able to pay such policyholder claims in a timely manner under most hurricane scenarios. Should storms occur which exhaust Citizens' liquidity resources prior to all policyholder claims being paid, Citizens expects to issue post-event bonds designed to be paid from the receipt of Emergency Assessments to provide funds to pay such claims. Citizens has, subject to certain restrictions, the ability to levy Emergency Assessments for an unlimited duration and unlimited amount in total to pay debt service on bonds issued to fund policyholder claims. See "HIGH-RISK ACCOUNT Assessments, Surcharge and Other Funds" herein for such restrictions. APPLICATION OF PROCEEDS OF THE SERIES 2007A BONDS Proceeds of the Series 2007A Bonds, together with other available funds of Citizens, will be used to (i) finance the current refunding and redemption (including redemption premium) of the 1999A Notes, (ii) fund the Reserve Subaccount for the Series 2007A Bonds in an amount equal to the Reserve Account Requirement, (iii) pay capitalized interest on the Series 2007A Bonds through September 1, 2007, and (iv) pay the costs of issuance of the Series 2007A Bonds. 7

17 REDEMPTION OF 1999A NOTES The 1999A Notes are to be redeemed on February 25, 2007 (the "Redemption Date"). Since the Redemption Date is a non-business Day, the principal of, redemption premium and interest on the 1999A Notes will be paid on February 26, Notice of such redemption has already been provided to the holders of the 1999A Notes in accordance with the requirements of the Indenture. The calculation of the redemption premium thereon will be verified by Causey, Demgen & Moore, Inc. prior to payment. ESTIMATED SOURCES AND USES* The proceeds to be received from the sale of the Series 2007A Bonds and other available funds are expected to be applied as shown below: Sources of Funds Series 2007A Bonds* Par Amount $1,057,335, Plus: Net Original Issue Premium 60,441, Plus: Other Available Funds (1) 146,373, Total Sources $1,264,149, Uses of Funds Deposit to 1999A Notes Redemption Account $1,173,195, Deposit to Series 2007A Bonds Reserve Subaccount 51,616, Deposit to Series 2007A Bonds Interest Subaccount (2) 27,167, Issuance Costs (3) 12,170, Total Uses $1,264, * Preliminary, as estimated by the Financial Advisor based on a total interest cost of 4.08%. Amounts are subject to change based on actual market rates on the date of sale of the Series 2007A Bonds. (1) Other Available Funds include amounts on deposit in the Reserve Subaccount for the 1999A Notes and available moneys of the High-Risk Account. (2) To pay capitalized interest through September 1, (3) Issuance costs include underwriting discount, rating agency, legal, accounting, municipal bond insurance premium, consulting, printing and other fees and expenses. [Remainder of page intentionally left blank] 8

18 ESTIMATED DEBT SERVICE REQUIREMENTS FOR THE SERIES 2007A BONDS* The following table sets forth the estimated debt service requirements for the Series 2007A Bonds*. Year Ended (December 31,)* Principal on Series 2007A Bonds* Interest on Series 2007A Bonds* Total Debt Service on Series 2007A Bonds* 2008 $ 50,000, $ 51,616, $101,616, ,875, ,094, ,969, ,535, ,434, ,969, ,435, ,535, ,970, ,585, ,384, ,969, ,995, ,970, ,965, ,690, ,278, ,968, ,675, ,294, ,969, ,965, ,003, ,968, ,580, ,389, ,969, Totals $1,057,335, $295,001, $1,352,336, * Preliminary, as estimated by the Financial Advisor based on a total interest cost of 4.08%. All amounts are subject to change based on actual markets rates on the date of sale of the Series 2007 Bonds. Excludes capitalized interest amount to be paid from proceeds of the Series 2007A Bonds. See "ESTIMATED SOURCES AND USES" herein. [Remainder of page intentionally left blank] 9

19 ESTIMATED DEBT SERVICE SCHEDULE FOR THE INDENTURE OBLIGATIONS The following table sets forth the estimated debt service requirements on the Existing Indenture Obligations and the Series 2007A Bonds (estimated). To the extent not drawn to pay claims, interest earnings on the proceeds of the Existing Indenture Obligations are expected to be used to offset the debt service on the Existing Indenture Obligations shown below. Year Ended (December 31,) 1997 Notes Debt Service (1) Series 2004 Bonds Debt Service (2)(3) Series 2006A Bonds Debt Service (4)(5) Series 2007A Bonds Debt Service (6) Total Debt Service (6) 2007 $ 63,407, $ 41,708, $ 170,576, $275,691, ,029, ,790, $101,616, ,436, ,708, ,469, ,969, ,147, ,136, ,827, ,969, ,933, ,708, ,613, ,970, ,292, ,708, ,469, ,969, ,147, ,708, ,576, ,965, ,250, ,029, ,827, ,968, ,825, ,029, ,576, ,969, ,574, ,314, ,827, ,968, ,110, ,704, ,696, ,969, ,370, ,861, ,354, ,215, ,914, ,019, ,934, ,709, ,997, ,706, ,881, ,570, ,452, ,920, ,998, ,919, ,749, ,518, ,268, ,933, ,469, ,403, ,116, ,116, ,802, ,802, Totals $63,407, $1,320,754, $5,675,100, $1,352,336, $8,411,599, (1) The actual amount of principal due on the Series 1997 Notes on August 25, 2007 is $300 million, however, securities with a market value of as of December 31, 2006 of $270 million are on deposit in the Defeasance Subaccount for the Series 1997 Notes and approximately $37.3 million are on deposit in the Reserve Account. Series 1997 Notes require monthly defeasance deposits in the amount of approximately $3.5 million; this schedule discounts that required deposit amount at a rate of 5.00%. Such proceeds are invested in Permitted Investment in compliance with Citizens' Investment Policy and the Indenture. See "INVESTMENTS" herein. The amount shown reflects the remaining required deposits for the Series 1997 Notes. (2) The Series 2004 Bonds have a variable rate of interest. For purposes of this schedule, the interest rate assumed is 5.50%. Actual interest rates will differ from the assumed rate, resulting in higher or lower debt service payments. (3) Securities with an approximate market value as of December 31, 2006 of (i) $735.1 million are on deposit in the Series 2004 Bond Proceeds Subaccount and (ii) $37.3 million are on deposit in the Reserve Account. Such proceeds are invested in Permitted Investment in compliance with Citizens' Investment Policy and the Indenture. See "INVESTMENTS" herein. (4) The Series 2006A Bonds have a variable rate of interest. For purposes of this schedule, the interest rate assumed is 5.50%. Actual rates will differ from the assumed rate, resulting in higher or lower debt service payments. (5) Securities with an approximate market value as of December 31, 2006 of (i) $2.9 billion are on deposit in the Series 2006A Bond Proceeds Subaccount and (ii) $154.6 are on deposit in the Reserve Account. Such proceeds are invested in Permitted Investments in compliance with Citizens' Investment Policy and the Indenture. See "INVESTMENTS" herein. (6) Preliminary, as estimated by the Financial Advisor based on a true interest cost of 4.08%. All amounts are subject to change based on actual market rates on the date of sale of the Series 2007A Bonds. Excludes capitalized interest amount to be paid from proceeds of the Series 2007A Bonds. See "ESTIMATED SOURCES AND USES" herein. 10