April 24, Spring 2009 Board of Directors Meeting The Battle House Hotel, Mobile, Alabama BOARD MEMBER COMPANIES PRESENT: ALSO PRESENT: STAFF:

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1 ALABAMA INSURANCE UNDERWRITING ASSOCIATION 315 E Laurel Av - Suite 216D Foley, Alabama (251) or (251) Fax (251) Robert W. Groves Secretary/Manager April 24, 2009 Spring 2009 Board of Directors Meeting The Battle House Hotel, Mobile, Alabama BOARD MEMBER COMPANIES PRESENT: Alfa Insurance Companies Allstate Insurance Company Auto-Owners Insurance Company Baldwin Mutual Insurance Company Farmers Insurance Group of Companies Liberty Mutual Insurance Company Mobile County Public Sector Nationwide Insurance State Farm Insurance Company Wyman Cabaniss Jeff Cooper Drew Klasing Kevin Russell Jerry Workman Jared Stuckey Jay Ison Patrick Foy Kim Robison ALSO PRESENT: Alabama Department of Insurance Alabama Department of Insurance Alabama Department of Insurance Charles Angell, Actuary Effie Brown Melody Burton, Webmaster STAFF: Bob Groves, Secretary/Manager Ursula Frieh, Assistant Manager-Operations Bill Hoffman, Assistant Manager-Accounting and Human Resources Ray Skinner, Assistant Manager-Claims Manager Chuck Woods, Assistant Manager-I.T. Sarah Champagne, Administrative Assistant Denny Hughes, Attorney LEGAL COUNSEL: OTHER GUESTS: Skip Brown Jack E. Brunson Jeff Omni Jeff Powell Carl Schneider Ken Selzer Russell, Thompson, Butler & Houston, LLP National Security Fire & Casualty Co. Press Register First Baldwin Insurance Agency Schneider Insurance Agency AON Re, Inc.

2 I. Chairman Drew Klasing called the meeting to order at 8:33am II. AIUA Legal Counsel read the AIUA Anti-trust Admonition: We are all aware that the purpose of this board meeting is to conduct the affairs of this voluntary underwriting association for the benefit of Alabamians living in the seacoast areas of the state. Board members, nevertheless, are reminded of the provisions of the various federal anti-trust acts. Subjects such as boycotts, voluntary rates, market sharing and the like are in violation of those laws and totally contrary to the purposes of this meeting and this association. III. Mr. Klasing requested Mr. Groves call the roll. Baldwin County Private Sector and Travelers not present. a. A quorum is present. IV. Recognition of Guests/Visitors: a. Charles Angell Alabama Department of Insurance, b. Effie Brown Alabama Department of Insurance (present during working session on April 23, 2009) c. Melody Burton Alabama Department of Insurance (present during working session on April 23, 2009) d. Denny Hughes - Attorney, e. Ken Selzer AON, f. Jack E. Brunson National Security Fire & Casualty Co g. Carl Schneider Agent h. Jeff Powell Agent i. Jeff Omni Press Register V. Adoption of Minutes from October 24, 2008 Board Meeting. Motion to waive the reading of the minutes of the October 24, 2008 meeting and adopt as submitted. Motion seconded. The motion passed VI. Operational Reports a. Treasurer s Report Kevin Russell, Baldwin Mutual Insurance Company i. Financial statements were presented. ii. Balances for Stern Agee, First National Bank of Baldwin County and Bank Trust accounts were presented. iii. An audit of the financial statements of AIUA as of and for the year ended October 31, 2008 was performed by Russell, Thompson, Butler & Houston, LLP. 1. Motion made to accept the audit of the financial statement ending in October 31, 2008 as submitted. Motion seconded. The motion passed b. Manager s Report i. Bob Groves, Secretary/Manager

3 1. Presented budget as approved at the October 2008 board meeting with actual figures year to date as of March 31, 2009 and budget variances. 2. Budget Performance Report 2008/2009 as of March 31, 2009 a. Policies in force 11,406 i. Manager Bob Groves noted that Growth and New Business in March 2009 has exceeded that of the peak season in Business is expected to continue to grow. b. Total insured value - $1,964,466, c. Written premium - $25,675,547 i. Residential business 1. Policies in force 11, Total insured value - $1,926,086, Written premium - $24,692,870 ii. Commercial business 1. Policies in force Total insured value - $38,379, Written premium - $982, Changes in Operation a. Direct Bill implemented on 11/1/2008 i. AIUA collects gross premium ii. Producer commissions paid monthly on net basis b. E-commerce i. Alpha testing 04/01/2009 ii. Release to select producers 06/01/2009 c. ImageRight i. Implemented on 12/15/2008 d. Producer agreements i. Implemented on 12/01/2008 e. Chairman Drew Klasing would like to commend the AIUA on improving the automation operations. 4. AIUA Business Continuity Plan a. Submitted a draft version of the Business Continuity Plan to the Board of Directors for review. b. An outside auditor will be hired to review and analyze the Business Continuity Plan.

4 i. The audit will be reported back to the Board at the October 2009 Board Meeting. 5. Information Technology a. Claims Management/Automation System i. Pilot 1. Optimized and Enhanced 2. Utilized in Cat Situations (Ike, Gustav) ii. Allied has been selected as a third party administrator in the event of a catastrophe b. Accounting/Policy/Claims Management integration i. Closer integration, improved reporting, record auditing/tracking/protection ii. RFP s have been collected for further review c. VOIP i. Waiting for fiber-optics to be installed in the office building d. Web-based Voluntary Writing report i. Will continue to pursue and stay within the approved budget ii. Ray Skinner, Assistant Manager Claims 1. Open Routine Claims 11 Routine, 13 Catastrophe 2. Revisions for Routine and Catastrophe Loss Claims Procedure Manual were submitted to the Claims Committee for review. 3. Effie Brown and Melody Burton from the Department of Insurance conducted a presentation of E-Storm on Thursday April 23 rd during the working session a. E-Storm is an electronic complaint filing system that will be used by the Department of Insurance in the event of a catastrophe. 4. Loss/ Claims Committee requests that they receive a copy of the monthly claims activity report produced by the Claims Department at AIUA. iii. Denny Hughes Legal Report VII. Proxy Report a. Votes as of April 23, 2009: i. 24,430 votes assigned by proxy to the Board Chairman to be cast for board membership 1. Chairman distributed the votes equally among the nominated companies.

5 ii. 277,228 votes assigned by proxy to the Board Chairman for business other than board membership. VIII. Standing Committee Reports: a. Accounting and Fiscal Affairs Committee Kevin Russell, Chairman (Baldwin Mutual) i. Reviewed Financial Statement audit of AIUA for the year ended October 31, 2008 which was performed by Russell, Thompson, Butler & Houston, LLP and the corresponding management representation letter. 1. After thorough review, the Committee commends AIUA. a. The controls are apparent and financials are transparent and reliable. ii. Amendment to AIUA Budget 1. Due to continued growth which was not predicted in October 2008, the AIUA is short on staff. The Committee would like to amend the salary budget by $85,000 to authorize two additional positions due to growth. 2. Earned but not taken PTO accounting treatment was not being reflected in the budget properly 3. Motion to amend the salary budget for $85,000 additional. Motion seconded. The motion passed 4. Investment Income a. After reviewing the current rates, motion to adjust investment income from $600,000 to $250,000. Motion seconded. The motion passed 5. Depreciation a. The budget did not reflect depreciation for all approved items Image Right b. Motion to adjust depreciation to reflect additional items purchased. Motion seconded. The motion passed b. Appeals Committee Jerry Workman, Chairperson (Farmers) i. Nothing to report at this time. c. Government - Jerry Workman, Chairperson (Farmers) i. Legislative update d. Loss or Claims Committee Wyman Cabaniss, Chairperson (Alfa) i. Claims Committee is working on updating/finalizing the Claims Procedure Manual.

6 1. Updates will be made and submitted to the Claims Committee within the next 30 days. 2. The Claims Committee will review. Once completed, copies of the manual will be submitted to the entire Board for the final approval. e. Meetings Committee Bob Schurke, Chairperson (Travelers) i. Fall 2009 Board Meeting scheduled for October 21-23, 2009 at the Grand Hotel, in Point Clear, AL ii meetings have not been determined will work with Meeting Chairperson to determine locations. 1. Motion to authorize the manager to contract for the 2010 meetings. Motion seconded. The motion passed iii. Thanks to Ursula and Sarah meeting space and accommodations were wonderful. f. Nomination Committee - Bob Schurke, Chairperson (Travelers) i. Nominating Committee makes the following nominations: 1. Alfa Insurance Companies 2. Allstate Insurance Companies 3. Auto-Owners Group 4. Baldwin Mutual Insurance Company, Inc 5. Farmers Insurance Group of Companies 6. Liberty Mutual Insurance Company 7. Nationwide Insurance Group 8. State Farm Fire and Casualty Company 9. Travelers Insurance Companies ii. Motion to accept the nominating committee s recommendations for the Board of Directors. Motion seconded. The motion passed iii. Department of Insurance Commissioner has re-appointed 1. Baldwin County Representative Robert Craft 2. Mobile County Representative Jay Ison iv. Board Member nominations: 1. Chairman Wyman Cabaniss 2. Vice Chairman Kim Robison 3. Treasurer Kevin Russell 4. Secretary/Manager Bob Groves 5. Motion to accept nominations as presented. Motion seconded. The motion passed g. Reinsurance Committee Drew Klasing, Chairperson (Auto Owners)

7 i. Ken Selzer (AON) commented on the reinsurance program which covers from June 1, 2009 to May 31, 2010 with limits sufficient to cover a 1 in 100 year PML event making optional layers available to Member Companies for purchase up to the 250 year return period. h. Underwriting Committee Kim Robison, Chairperson (State Farm) i. Underwriting Audit 1. Special thanks to Mark Ford for assisting with this audit. 2. Reviewed 150 files - Very pleased a. Commended the AIUA staff 3. The imaging of the files made the audit much more efficient i. Voluntary Writings Committee Jared Stuckey, Chairperson (Liberty Mutual) i. Motion to have an annual independent audit performed of the Voluntary Writings and Written Premium Reports process. Motion seconded. Motion passed IX. New Business: a. Motion to extend the operation of AIUA to 10/31/2012. Motion seconded. Motion passed b. Carl Schneider Schneider Insurance i. Would like to coordinate a meeting with several AIUA Committees to discuss topics 1. Modernization of AIUA 2. Rates/Territories 3. Coordinate Legislation a. The Board requested an agenda/outline of the topics be submitted to the Manager/Secretary before a meeting is scheduled. ii. Smart Coast - a non-profit organization in Fairhope, AL 1. Smart Home Alabama new organization in Alabama 2. Would like to make a presentation at the next board meeting iii. State of Mississippi Insurance Summit July 21, 2009 & July 22, 2009 c. Jeff Powell First Baldwin Insurance Agency i. Policy specific underwriting issues/comments X. Recognition of Drew Klasing s service to the AIUA Board of Directors. XI. Motion to adjourn meeting. Motion seconded. The motion passed unanimously and the meeting was adjourned.