The Housing Market. Overview and Outlook for the P/C Insurance Industry. The Weak Economy: How Might It Affect the P/C Insurance Industry?

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1 Overview and Outlook for the P/C Insurance Industry State Insurance Trade Associations Annual Conference Palm Coast, FL October 14, 28 The Weak Economy: How Might It Affect the P/C Insurance Industry? Steven N. Weisbart, Ph.D., CLU, Vice President and Chief Economist Insurance Information Institute 110 William Street New York, NY 138 Tel: (212) Cell: (7) % 1% -1% Real Quarterly GDP Growth (annualized), 25-29F 3 Major hurricanes 3.8% 1.3% 4.8% 2.7% 0.8% % 4.8% 4.8% % 2.8% % % :1Q :2Q :3Q :4Q :1Q :2Q :3Q :4Q :1Q :2Q :3Q :4Q 08:1Q 08:2Q* 08:3Q 08:4Q 09:1Q 09:2Q 09:3Q 09:4Q Sources: US Department of Commerce, Bureau of Economic Analysis (actual) at Blue Chip Economic Indicators 9/08 issue (forecasts). Almost entirely due to the weak dollar (growing exports and slowing imports) Red bars are actual; Yellow bars are forecasts *preliminary How Accurate Have Forecasts Been for Real GDP Growth in 2Q:28? % 2.9% % 2.8% % % As recently as April 28, the midpoint of forecasts for real GDP growth in 2Q:28 was 0.1% 1.1% % Mar 27 Apr 27 May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Actual* Source: Blue Chip Economic Indicators, Vols 32 and 33, indicated months *preliminary % Real NWP Growth Inflation-Adjusted P/C Net Premium Growth is Affected by the U.S. Economy -0.9% % 4.3% but the relationship is a loose one % 5.8% 0.3% % -1. Hard Market 3.1% 1.1% 0.8% Real NWP Growth Hard Market % % Real GDP 7.7% % % -2.7% F Sources: A.M. Best, US Bureau of Economic Analysis, Blue Chip Economic Indicators, 8/08; I.I.I. 8% - Real GDP Growth The Housing Market

2 Jan- Case-Schiller Home Price Index Monthly: 20 City Composite (Jan 20=1) Peak in July 26 at Home prices more than doubled between January 20 and July 26 Jan- Home prices in July 28 were about where they were in June 24 Jan- Jan- Jan- Jan- July 28 index value was : home prices were 19. below their July 26 peak Source: Jan- Jan- Jan Private Housing Starts, 19-24F (Millions of Units) 1.29 Housing bubble I.I.I. estimate: 1,0 housing starts = $87.5 million in gross premium vs. 25 HO gross premium loss is nearly $1B (I.I.I. est) F 09F 10F 11F 12F 13F 14F Sources: US Department of Commerce; Blue Chip Economic Indicators (3/08) forecast for 20-24, and 28/09 figures from 9/08 edition of BCEI; Insurance Info. Institute Thousands of Units 2,1 1,8 Single vs. Multi-Family Housing Starts The slump is mainly in single-family housing. Starts of multifamily buildings generally held at 310,0+ until recently. units in multi-family buildings single family units August 28 single family starts down 33% vs. August July 19- March 19 Homeowner Vacancy Rates, Quarterly, 19-28:Q2 March 21- November 21 Vacancy rates began rising in 25:Q3; Katrina? 1,5 1, * *annualized based on actual data for 1 st half of 28 Source: US Census Bureau at :Q1 19:Q4 19:Q3 19:Q2 19:Q1 19:Q4 19:Q3 19:Q2 19:Q1 19:Q4 19:Q3 19:Q2 20:Q1 20:Q4 21:Q3 22:Q2 23:Q1 23:Q4 24:Q3 25:Q2 26:Q1 26:Q4 27:Q3 28:Q2 Source: U.S. Census Bureau, Rental Vacancy Rates, Quarterly, 19-28:Q July 19- March 19 March 21- November 21 Inflation Vacancy rates began falling in 24:Q :Q1 19:Q4 19:Q3 19:Q2 19:Q1 19:Q4 19:Q3 19:Q2 19:Q1 19:Q4 19:Q3 19:Q2 20:Q1 20:Q4 21:Q3 22:Q2 23:Q1 23:Q4 24:Q3 25:Q2 26:Q1 26:Q4 27:Q3 28:Q2 Source: U.S. Census Bureau,

3 4.9% 5.1% 3% 1% Annual Inflation Rates (CPI-U, %), 19-29F % 2.8% In August 28, on a year-overyear basis inflation was % % % % % 2.8% % 08* 08F09F *12-month change August 28 vs. August 27 Sources: US Bureau of Labor Statistics; Blue Chip Economic Indicators, September 10, 28. (forecasts) 7% 3% 2.3% 1% -1% - -3% :Q1 3.8% Quarterly Inflation Rate (CPI-U), % Change from Prior Quarter, Annualized :Q2 5. :Q3 3.3% :Q4 1.8% :Q1 5.1% :Q2 3. :Q3-2. :Q4 3.8% :Q1 4. :Q2 2.7% :Q3 5.1% :Q4 08:Q1 08:Q2 6.3% 08:Q % 2.2.3% Sources: U.S. Bureau of Labor Statistics; Blue Chip Economic Indicators, September 10, 28; I.I.I. 08:Q4 09:Q1 Highest sustained inflation since :Q2 09:Q3 09:Q4 Index Value (12-84= Medical Inflation is One of the Most Serious Long-term Challenges Facing Casualty, Disability and Health Insurers Since 12-84, the cost of medical care has more than tripled, while the overall cost of living merely doubled All Items Medical Care * Source: Department of Labor (Bureau of Labor Statistics); not seasonally adjusted *through July % 5.1% WC Medical Severity Rising Far Faster than Medical CPI % 8.3% % % % % Change in Medical CPI Change Med Cost per Lost Time Claim Sources: Med CPI from I.I.I. Inflation Watch; WC med severity from NCCI based on NCCI states. Inflation That Affects Insurance Claims Is Often Above the Overall CPI-U Rate % - Legal Services Residential Maint/Repair CPI-U Post-hurricane price surge? 08* Unemployment *July 28 vs. July 27 Source: U.S. Department of Labor, Bureau of Labor Statistics, at

4 Jan- Unemployment Rate: On the Rise Previous recent peak: 6.3% in June 23 Jan- Jan- Source: US Bureau of Labor Statistics January 20 through August 28 Unemployment will likely continue rising above 6.1% during this cycle, affecting payroll sensitive p/c and non-life exposures Jan- Jan- Sept. 28 rate was 6.1%, the highest level since Sept. 23 Jan- Jan- Jan- Trough: 4. in March 27 Jan-08 Sep Quarterly US Unemployment Rate, (26:Q1 to 29:Q4F) Higher unemployment rate reduces workers comp exposure but could signal a temporary claim frequency surge Blue bars are actual; Yellow bars are forecasts 4.8% 4.9% 4.7% 4.7% % % % 3. :Q1 :Q2 :Q3 :Q4 :Q1 :Q2 :Q3 :Q4 08:Q1 08:Q2 08:Q3 08:Q4 09:Q1 09:Q2 09:Q3 09:Q4 Sources: U.S. Bureau of Labor Statistics (actual); Blue Chip Economic Indicators (9/08) (forecast) Total Industrial Production Affects Insured Exposures both Directly and Indirectly Industrial and Commercial Activity Annualized % Change from Prior Quarter Blue bars are actual; Yellow bars are forecast 0.3% % % 1.7% :Q1 :Q2 :Q3 :Q4 :Q1 :Q2 :Q3 :Q4 08:Q1 08:Q2 08:Q3 08:Q4 09:Q1 09:Q2 09:Q3 09:Q4 Sources: US Bureau of Labor Statistics; Blue Chip Economic Indicators (8/08); Insurance Info. Inst. % Change from Prior Year Total Industrial Production Affects Insured Exposures both Directly and Indirectly 4.3% 4. March 21- November % Blue bars are actual; Yellow bars are forecast % % Sources: US Bureau of Labor Statistics; Blue Chip Economic Indicators (8/08); Insurance Info. Inst. $5,0 $4,0 $3,0 $2,0 Weaker Wage/Salary Growth Doesn t Always Slow WC Premium Growth Wage & Salary Disbursement (Private Employment) vs. WC NWP $ Billions $ Billions 7/-3/ 3/-11/ $7,0 $45 Wage & Salary Disbursements* $6,0 WC NPW $40 Shaded areas indicate s 89 08** *As of 12/31 each year **Wage & Salary data as of 3/31/28 last updated 7/31/28 Sources: US Bureau of Economic Analysis; Federal Reserve Bank of St. Louis at I.I.I. Fact Books $35 $30 $25 $20

5 Car Sales, Driving, and Collision Claims Frequency Auto/Light Truck Sales, 19-24F (Millions of Units) Weakening economy, credit crunch, high gas prices hurt auto sales Fewer new cars & more older cars means lower comp/collision premiums 14.0 Annualized, seasonally adjusted, based on Sept. 28* F 08* 09F 10F 11F 12F 13F 14F Sources: US Department of Commerce; Blue Chip Economic Indicators (3/08), except 28/09 figures from 9/08 edition of BCEI; *reported by Wall Street Journal on 10/2/08, p. B1 Do Increases in Gas Prices Lower Auto Collision Claim Frequency? Do Changes in Miles Driven Affect Auto Collision Claim Frequency? Paid Claim Frequency = (No. of paid claims)/(earned Car Years) x Paid Claim Freq Collision Claim Frequency Gas Prices $4. $3.75 $3.50 $3.25 $3. $2.75 $2.50 $2.25 $2. $1.75 Avg Gas Price/Ga Paid Claim Frequency = (No. of paid claims)/(earned Car Years) x Paid Claim Freq Collision Claim Frequency Miles Driven :Q1 25:Q2 25:Q3 25:Q4 26:Q1 26:Q2 26:Q3 26:Q4 27:Q1 27:Q2 27:Q3 27:Q4 28:Q1 28:Q2 25:Q1 25:Q2 Billions of Miles Driven 25:Q3 25:Q4 26:Q1 26:Q2 26:Q3 26:Q4 27:Q1 27:Q2 27:Q3 27:Q4 28:Q1 28:Q2 Sources: Energy Information Administration ( ISO Fast Track Monitoring System, Private Passenger Automobile Fast Track Data: Second Quarter 28, published September 30, 28. Sources: Energy Information Administration ( ISO Fast Track Monitoring System, Private Passenger Automobile Fast Track Data: Second Quarter 28, published September 30, 28. Do Increases in Gas Prices Affect Auto Collision Claim Frequency? Do Changes in Miles Driven Affect Auto Collision Claim Frequency? Paid Claim Frequency = (No. of paid claims)/(earned Car Years) x Collision Claim Frequency Gas Prices $3. Paid Claim Frequency = (No. of paid claims)/(earned Car Years) x Collision Claim Frequency Billions of Vehicle Miles 31 Paid Claim Freq $2.50 $2. $1.50 $1. Avg Gas Price/Ga Paid Claim Freq Billions of Miles Driven $ Sources: Energy Information Administration ( ISO Fast Track Monitoring System, Private Passenger Automobile Fast Track Data: Fourth Quarter 27, published March 31, 28 and earlier reports. Sources: Federal Highway Administration ( ISO Fast Track Monitoring System, Private Passenger Automobile Fast Track Data: Fourth Quarter 27, published March 31, 28 and earlier reports.

6 Example IRC Study: Switch to Small Cars Might Worsen Auto Injury PIP Claim Costs Average Payment for PIP claims % of claimants who lost time from work Likelihood of hospitalization following injury Lightest 2 of cars (2,771 lbs or less) $5,554 Heaviest 2 of cars (3,726 lbs or more) $4, more likely than claimants in heavier cars 29 Honda Civic DX (2,630-2,710 lbs) Sources: Insurance Research Council Press Release dated August 26, 28, at ; I.I.I. 29 Toyota Highlander Hybrid (4,640 lbs) Miles Driven 280,0 270,0 260,0 250,0 240,0 230,0 220,0 210,0 2,0 Miles Driven vs. Gas Prices in Recent Months Miles Driven Gas Prices Jan Feb Mar April May June July Aug Sept Oct Nov Dec Jan Feb March April May June Sources: Energy Information Administration ( Federal Highway Administration ( Gas Price/ Gallon $4.50 $4. $3.50 $3. $2.50 $2. Underwriting and Premium Trends Can Underwriters Seeking Growth Avoid Easing Up on Risk Standards? U.S. P/C Insurance Industry Combined Ratio, 10-28* Combined Ratios 10s: s: s: s: 1.6** * *28 first half **20-27 Sources: A.M. Best; ISO, III P/C Insurance Industry Combined Ratio, 21-28:1H As recently as 21, insurers paid out nearly $1.16 for every $1 in earned premiums 25 ratio benefited from heavy use of reinsurance which lowered net losses Relatively low CAT losses, reserve releases Best combined ratio since 19 (87.6) :1H 08:1H* *Excluding Mortgage & Financial Guarantee insurers. Sources: A.M. Best, ISO; III Including Mortgage & Fin. Guarantee insurers Excluding Mortgage & Fin. Guarantee insurers.2 Reserve Development ($B) $40 $35 $30 $25 $20 $15 $10 $5 $0 ($5) ($10) Effect of Reserve Changes on the P/C Industry s Combined Ratio PY Reserve Development Combined Ratio Points 10 9 Reserve adequacy has improved substantially $ (1) ($5.3) ($6.0) ($5.0) (2) ($7.0) (3) F 08F 09F $10.8 $22.8 $33.4 $36.9 $18.9 Source: A.M. Best, Lehman Brothers estimates for years Combined Ratio Points

7 Three Hard Markets in the Last 40 Years Changes in Net Written Premium, 20-28* This period resembles % 10. The P/C industry is experiencing its slowest premium growth since 13. Excluding mortgage & financial guarantee insurers % : -0. premium growth is the first decline since * Note: Shaded areas denote hard market periods. *actual 1 st half of 28 Source: A.M. Best, ISO, Insurance Information Institute Sources: A.M. Best; ISO. *1 st half of % * 28* % Quarterly Commercial Rate Change, Average for All Lines, (1Q:24 2Q:28) -0.1% % % % % % -11.8% -13.3% % Cumulative Effect of Downtrend in Commercial Rates Commercial account pricing now compares to late Size of rate decreases shrank greatly after Katrina but have grown again Commercial account pricing has been trending down for 4+ years and is now on par with prices in late 21, early 22 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q08 2Q08 Source: Council of Insurance Agents & Brokers Source: Council of Insurance Agents & Brokers at Investments: Will Interest Rates and Stock Returns Rebound? 1 8% Bond Yields Tend to Follow Inflation, but the Relationship is a Loose One CPI-U % Change July 19- March 19 U.S. Treasury 10-Year Note Yield March 21- November 21 Forecast 08F 09F 10F 11F 12F 13F 14F Sources: US Bureau of Labor Statistics (history); Blue Chip Economic Indicators, March 10 and Sept. 10, 28 (forecasts)

8 9% 8% 7% 3% P/C Investment Income as a % of Invested Assets Follows 10-Year U.S. T-Note P-C Inv Income/Inv Assets 10-Year Treasury Note Investment yield historically tracks 10- year Treasury note quite closely 08* *As of August 18, 28. Sources: Board of Governors, Federal Reserve System; A.M.Best; Insurance Information Institute. Billions $55 $50 $45 $40 $35 $30 $25 $20 $15 $10 $5 $0 P/C Industry Investment Income*, H Investment income (excluding one-time dividend) jumped by 17% in 25 as insurers which had accumulated cash captured rising bond interest rates. $33.7 $36.8 $38.0 $41.5 $39.9 $38.6 $40.8 $37.1 $36.7 $38.7 $39.6 Investment income CAGR was just 3.8%. $49.5 $52.3 $ :1H *Primarily interest and stock dividends. 25 figure includes special one-time dividend of $3.2B. Sources: ISO; Insurance Information Institute. $25.8 $20 $18 $16 $14 $12 $10 $8 $6 $4.81 $4 $2.88 $2 $0 -$2 $ Billions P/C Industry Net Realized Capital Gains, 19-28:1H $9.89 $9.82 $1.66 $6. $10.81 $9.24 $18. $13. $16.21 $6.63 -$1.21 $6.61 $9.70 $9.13 $3.52 $8. -$ :1H Sources: A.M. Best, ISO, Insurance Information Institute. Realized capital gains exceeded $9 billion in 24/5 but fell sharply in 26 despite a strong stock market. Nearly $9 billion again in 27, but $-1.1 billion in 28:1H. Expenses: Will Expense Ratios Rise as Premium Growth Slows? Expense Ratios* are Highly Likely to Rise if Premium Volume Shrinks Direct P/C Insurance Carrier Employment vs. U.S. Private Employment: % Change From Same Month in Prior Year % hard markets helped drive expense ratios down 2. P/C Direct Carrier Employment Total US Private Employment 3 28% % % 29.1% % 27.1% % 24.8% % % Personal Commercial E 08F P/C employment dropping Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- U.S. private employment dropping Sep- Oct- Nov- Dec- Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 *Ratio of expenses incurred to net premiums written. Source: A.M. Best; Insurance Information Institute Source: U.S. Dept of Labor, Bureau of Labor Statistics July and August 28 data are preliminary

9 Atlantic Sea Surface Temperatures, Catastrophic Loss: What Will the Rest of 28 Bring? Source: AIR web site, Number of Major (Category 3, 4, 5) Hurricanes Striking the US by Decade CSU Forecast for 28 Hurricane Season: More To Come Mid 10s mid-10s: AMO Warm Phase Mid-19s 20s? AMO Warm Phase Already more major storms in as in all of the 19s Average (10-20) 25 Net Tropical Cyclone Activity Named Storms Hurricanes Intense Hurricanes (Category 3-4-5) 28F total season 159% through September October Monthly Forecast s 10s 10s 10s 10s 10s 10s 10s 10s 19s 20s 20s 20s *Figure for 20s is extrapolated based on data for (9 major storms: Charley, Ivan, Jeanne (24), Katrina, Rita, Wilma (25), Bertha, Gustav, Ike (28)). Source: Tillinghast from National Hurricane Center: I.I.I. Sources: Philip Klotzbach and Dr. William Gray, Forecast of Atlantic Hurricane Activity for October 28 and Seasonal Update Through September, Colorado State University, October 1, 28. Available at ; I.I.I. Major Hurricanes Might Form But Not Make Landfall From Hurricane Irene in 19 to Hurricane Lili in 22, 21 consecutive hurricanes developed in the Atlantic basin without a single U.S. landfall. This is how nature sometimes works. From 16 to 23, of 79 major (3-4-5) hurricanes, 19 (2) made landfall. During 24-5, 7 of 13 (5) major hurricanes made landfall During 26-7, 0 of 4 () major hurricanes made landfall Source: Philip Klotzbach and William Gray, Extended Range Forecast of Atlantic Seasonal Hurricane Activity and U.S. Landfall Strike Probability for 28, Department of Atmospheric Science, Colorado State University, June 3, 28, p. 34. Inflation-Adjusted U.S. Insured Catastrophe Losses By Cause of Loss, 17-26¹ Fire, $6.6, 2. Wind/Hail/Flood, $9.3, 3.1% Earthquakes, $19.1, 6. Winter Storms, $23.1, 7.8% Terrorism, $22.3, 7. Civil Disorders, $1.1, 0. All Tropical Cyclones, $137.7, 46.3% Water Damage, $0.4, 0.1% Utility Disruption, $0.2, 0.1% Tornadoes, $77.3, 26. Insured disaster losses totaled $2.3 billion from (in 26 dollars). Hurricanes and tornadoes accounted for approximately 7 of these. 1 Catastrophes are all events causing direct insured losses to property of $25 million or more in 26 dollars. Catastrophe threshold changed from $5 million to $25 million beginning in 19. Adjusted for inflation by the III. 2 Excludes snow. 3 Includes hurricanes and tropical storms. 4 Includes other geologic events such as volcanic eruptions and other earth movement. 5 Does not include flood damage covered by the federally administered National Flood Insurance Program. 6 Includes wildland fires. Source: Insurance Services Office (ISO)..

10 1, Number of Tornadoes in First Three Calendar Quarters, The first two quarters of 28 were unusually active for tornadoes, driving up catastrophe losses substantially st Qtr 2nd Qtr 3rd Qtr Sources: US Dept. of Commerce, Storm Prediction Center, National Weather Service, at Already more tornadoes in 28 than in the full years 25, 26, or 27! I.I.I. estimate based on preliminary data $ Billions $120 $1 $80 $60 $40 $20 $0 U.S. Insured Catastrophe Losses* $7.5 $2.7 $ and 25 remind us that it s possible to suffer damage from more than one hurricane and/or other catastrophe in a year. 27 (in Mexico) reminds us that it s possible to have two CAT-5 storms in one year. $22.9 $5.5 $16.9 $8.3 $7.4 $2.6 $10.1 $8.3 $4.6 $26.5 $5.9 $12.9 $27.5 Is a $1 Billion CAT year coming soon? $61.9 $9.2 $6.7 $ :Q2** 20?? *Excludes $4B-$6b offshore energy losses from Hurricanes Katrina & Rita. **Based on preliminary PCS data through June 30; excludes recoveries from reinsurance. Note: 21 figure includes $20.3B for 9/11 losses reported through 12/31/. Includes only business and personal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B. Source: Property Claims Service/ISO; Insurance Information Institute $1.0 Financial Strength/ Capacity: Does the Industry Have Enough? Does It Have Too Much? $ Billions $550.0 $5.0 $450.0 $4.0 $350.0 $3.0 $250.0 $2.0 $150.0 $1.0 $50.0 $0.0 U.S. P/C Industry Policyholder Surplus: 17-28:1H Surplus as of 3/31/08 was $5.0 billion, down 2. from year-end CAGR: CAGR: CAGR: Sources: A.M. Best, ISO, Insurance Information Institute. Surplus exceeded a half trillion dollars for the first time during the 2 nd quarter of U.S. P/C Industry Premiums-to- Surplus Ratio: 15-28:1H :1 the lowest P:S ratio in recent history. Premiums measure risk accepted; surplus is funds beyond reserves to pay unexpected losses. The larger surplus is in relation to premiums the lower the ratio of premiums to surplus the greater the industry s capacity to handle the risk it has accepted. 0.88:1 as of 6/30/ :1H Combined Ratio P/C Insurer Impairment Rates are Highly Correlated with Underwriting Performance The 27 impairment rate was 0.1, a record low. Combined Ratio after Div P/C Impairment Frequency Impairment Rate Sources: A.M. Best, ISO, Insurance Information Institute. Source: A.M. Best; Insurance Information Institute

11 Profitability: Did Profits in 26/ Reach a Cyclical Peak? Profitability Peaks & Troughs in the P/C Insurance Industry,15 28:1H 15: 2. 17:19. 17:17.3% 10 Years 19: Years 9 Years 26:12. 28:1H: 5. 14: 1.8% 19: 4. 21: *GAAP ROE for all years except 27 which is ROAS of 12.3%. All figures include mortgage and financial guarantee insurers. Excluding M&FG insurers 28:Q1 ROAS is 7.. Source: Insurance Information Institute, ISO; Fortune ROE: U.S. P/C Insurance Industry vs. Fortune Hugo Andrew Northridge Sept. 11 Mortgage & Financial Guarantee Impact Katrina, Rita, Wilma 4 Hurricanes :1H US P/C Insurers All US Industries 28 P/C insurer figure is annualized 1H return on average surplus. Excluding mortgage and financial guarantee insurers = 7.. Source: ISO, Fortune; Insurance Information Institute. Public Perceptions of the Insurance Industry An I.I.I.-Sponsored National Public Opinion Poll Recently Asked POLL: Has the Insurance Industry Been Affected by the Downturn in the Economy? Has the Insurance Industry Been Affected by the Downturn in the Economy? How Will U.S. Economic/Financial Problems Affect Insurers? Nearly 3 in 4 Americans believe that the economic downturn has adversely affected the insurance industry Yes 7 No 17% Don't Know 9% Source: Insurance Information Institute, 28 Pulse Survey, May 28.

12 POLL: How Will US Economic/Financial Problems Affect Insurers? POLL: How Important is the Financial Strength of Your Insurance Company? 7 of those polled believe that the recent national economic and financial conditions harm insurers ability to pay claims and sell insurance Affects Ability to Pay Claims AND Sell Insurance 7 Source: Insurance Information Institute, 28 Pulse Survey, May 28. Don't Know 3% Affects Ability to Pay Claims 1 Affects Ability to Sell Insurance 8% Doesn't Affect Ability to Pay Claims or Sell Insurance 7% 78% of those polled believe that an insurer s financial strength is Extremely or Very important Extremely Important 37% Don't Know Not At All Important 3% Not Very Important Source: Insurance Information Institute, 28 Pulse Survey, May 28. Somewhat Important 1 Very Important 41% POLL: What is the MOST Important Quality to You When You Choose and Insurer? Summary Americans are nearly equally divided between price, service and financial strength when it comes to the most important quality of their insurer Service 31% Price 31% Financial Strength & Stability 3 Don't Know 3% The P/C business has been highly cyclical Profits were strong in 26/, but Underwriting results were aided by lack of CATs & favorable underlying loss trends 28 Hurricane forecast is for worse-than-average season Premium growth rates are at their lowest levels since WW II Commercial lines lead decreases Housing slump cuts HO exposure growth Investment returns insufficient to support deep soft market in terms of price, terms & conditions as in 19s Source: Insurance Information Institute, 28 Pulse Survey, May 28. Insurance Information Institute On-Line If you would like a copy of this presentation, please give me your business card with address