Post on 25-Dec-2015
Overview & Outlook for the U.S. Economy, Businessowners and the P/C Insurance IndustryTrends, Challenges and Opportunities
National Captives Owners’ ConferenceBanff, Alberta, CanadaSeptember 11, 2013
Robert P. Hartwig, Ph.D., CPCU, President & EconomistInsurance Information Institute 110 William Street New York, NY 10038
Tel: 212.346.5520 Cell: 917.453.1885 bobh@iii.org www.iii.org
2
Presentation Outline
U.S. Economic Overview and Outlook Key Sector Analysis: Construction, Manufacturing, Service
Interest Rates, Credit Markets and Fed Reserve Policy Labor Market Outlook P/C Insurance Industry Overview and Outlook Economic Factors Impacting Growth
Regional Analysis By Line Impacts
Catastrophe Loss Trends P/C Performance Analysis
Key Lines
The New Investment Reality The Challenge of Persistently Low Interest Rates
The Strength of the Economy Will Influence P/C Insurer
Growth Opportunities
3
Growth Will Expand Insurer Exposure Base Across Most Lines
3
4
US Real GDP Growth*
* Estimates/Forecasts from Blue Chip Economic Indicators.Source: US Department of Commerce, Blue Economic Indicators 9/13; Insurance Information Institute.
2.7
%0
.5%
3.6
%3
.0%
1.7
%-1
.8%
1.3
%-3
.7%
-5.3
%-0
.3%
1.4
%5
.0%
2.3
%2
.2%
2.6
%2
.4%
0.1
%2
.5%
1.3
%4
.1%
2.0
%1
.3% 3
.1%
1.1
% 2.5
%2
.1%
2.6
%2
.7%
2.8
%2
.9%
3.0
%
0.4
%
-8.9%
4.1
%1
.1%
1.8
%2
.5% 3.6
%3
.1%
-9%
-7%
-5%
-3%
-1%
1%
3%
5%
7%
2
00
0
2
00
1
2
00
2
2
00
3
2
00
4
2
00
5
2
00
6
07
:1Q
07
:2Q
07
:3Q
07
:4Q
08
:1Q
08
:2Q
08
:3Q
08
:4Q
09
:1Q
09
:2Q
09
:3Q
09
:4Q
10
:1Q
10
:2Q
10
:3Q
10
:4Q
11
:1Q
11
:2Q
11
:3Q
11
:4Q
12
:1Q
12
:2Q
12
:3Q
12
:4Q
13
:1Q
13
:2Q
13
:3Q
13
:4Q
14
:1Q
14
:2Q
14
:3Q
14
:4Q
Demand for Insurance Continues To Be Impacted by Sluggish Economic Conditions, but the Benefits of Even Slow Growth Will Compound and
Gradually Benefit the Economy Broadly
Real GDP Growth (%)
Recession began in Dec. 2007. Economic toll of credit crunch, housing slump, labor market contraction
was severe
The Q4:2008 decline was the steepest since the Q1:1982
drop of 6.8%
2013 is expected to see uneven growth,
then gradually accelerate throughout the year and into 2014
5
Real GDP Growth Forecasts: Major Economies: 2011 – 2014F
Sources: Blue Chip Economic Indicators (8/2013 issue); Insurance Information Institute.
1.8%
2.6%
3.9%
2.2%
2.9%
2.6%
2.4%
3.2% 3.
4%
0.9%
1.5%
4.6%
1.8%
3.0%
3.9%
-0.6
%
1.6% 1.7%
-0.6
%
3.0%
-1%
0%
1%
2%
3%
4%
5%
6%
US Canada Mexico Latin America Euro Area
2011 2012 2013F 2014F
Growth Prospects Vary Widely by Region: Growth Returning in the US, Recession in the Eurozone, Some strengthening in Latin America
The Eurozone is ending
Growth in Mexico and most of Latin America
outpace the USUS growth should accelerate in 2014,
bolstering construction activity
6
Real GDP by State Percent Change, 2012:Highest 25 States
13
.4
4.8
3.9
3.6
3.5
3.5
3.4
3.3
3.3
3.3
2.7
2.7
2.6
2.4
2.4
2.4
2.4
2.2
2.2
2.2
2.2
2.1
2.1
2.1
2.1
2.0
0
2
4
6
8
10
12
14
ND TX OR WA CA MN UT IN TN WV NC SC AZ FL IA MD MS MA MI OH US CO GA MT OK MO
Pe
rce
nt
Ch
an
ge
(%
)
Sources: US Bureau of Labor Statistics; Insurance Information Institute.
North Dakota was the economic growth juggernaut of the US
in 2012—by far
Only 10 states experienced growth in excess of 3%, which is what we would see nationally in
a more typical recovery
7
1.9
1.7
1.6
1.5
1.5
1.5
1.5
1.4
1.4
1.4
1.3
1.3
1.3
1.2
1.2
1.1
1.1
0.7
0.5
0.5
0.4
0.2
0.2
0.2
0.2
-0.1
-0.4-0.20.00.20.40.60.81.01.21.41.61.82.0
IL PA HI LA NE NV WI KS KY RI AR NJ NY AL VT AK VA DC ME NH ID DE NM SD WY CT
Pe
rce
nt
Ch
an
ge
(%
)
Real GDP by State Percent Change, 2012: Lowest 25 States
Sources: US Bureau of Labor Statistics; Insurance Information Institute.
Connecticut was the only state to shrink in 2012
Growth rates in 8 states (and DC) were still below
1% in 2012
State-by-State Leading Indicatorsthrough 2013:Q4
Sources: Federal Reserve Bank of Philadelphia at http://www.philadelphiafed.org/index.cfm ;Insurance Information Institute. 8
The economic outlook for Northeast
and Mid-Atlantic regions is mixed but suggests growth in
the creation of insurable exposures
Federal Spending as a Share of State GDP: Vulnerability to Sequestration Varies
Sources: Pew Center on the States (2012) Impact of the Fiscal Cliff on the States; Wells Fargo; Insurance Information Institute. 9
Some Mid-Atlantic and Southern state are more
vulnerable to the effects of sequestration
10
Defense and Non-Defense Federal Spending as a Share of State GDP: Top 10 States*
14
.6
10
.5
9.8
9.8
9.8
8.0
7.0
5.9
5.3
5.2
10
.0
10
.0
10
.0
9.2
4.9
3.8
3.1
2.8
2.7
2.6
0
2
4
6
8
10
12
14
16
HI AK DC MD VA KY AL MO CT AZ DC MD VA NM ID WV TN AK MT SC
Sh
are
of
Sta
te G
DP
(%
)
Federal defense spending accounts for approximately 10%+ of
GDP in 5 states
*As of 2010.Sources: Pew Center on the States (2012) Impact of the Fiscal Cliff on the States; Wells Fargo Securities; Insurance Information Institute.
Defense Spending Non-Defense Spending
Federal non-defense spending accounts for 10%+ of GDP in 3 states
Sequestration Could Adversely Impact Commercial Insurance Exposures Directly at Defense Contractors and Indirectly in Impacted Communities
74
.47
3.6
73
.67
2.2
73
.6 76
67
.86
8.9
68
.26
7.7 7
1.6 74
.57
4.2 77
.56
7.5 69
.8 74
.37
1.5
63
.75
5.7 5
9.5
60
.9 64
.16
9.9
75
.07
5.3
76
.27
6.4 79
.37
3.2
72
.3 74
.38
2.6
82
.77
4.5
73
.8 77
.67
8.6
84
.58
4.1
85
.18
2.1
76
.4
40
45
50
55
60
65
70
75
80
85
90
Jan
-10
Fe
b-1
0M
ar-
10
Ap
r-1
0M
ay-
10
Jun
-10
Jul-
10
Au
g-1
0S
ep
-10
Oct
-10
No
v-1
0D
ec-
10
Jan
-11
Fe
b-1
1M
ar-
11
Ap
r-1
1M
ay-
11
Jun
-11
Jul-
11
Au
g-1
1S
ep
-11
Oct
-11
No
v-1
1D
ec-
11
Jan
-12
Fe
b-1
2M
ar-
12
Ap
r-1
2M
ay-
12
Jun
-12
Jul-
12
Au
g-1
2O
ct-1
2N
ov-
12
De
c-1
2Ja
n-1
3F
eb
-13
Ma
r-1
3A
pr-
13
Ma
y-1
3Ju
n-1
3Ju
l-1
3A
ug
-13
Consumer Sentiment Survey (1966 = 100)
January 2010 through August 2013
Consumer confidence has been low for years amid high unemployment, falling home prices and other factors adversely impact
consumers, but improved substantially over the past two years
Source: University of Michigan; Insurance Information Institute
Optimism among consumers has remained fairly strong
despite tax hikes, federal budget concerns. July’s reading was
the highest since July 2007
11
12
16.9
16.5
16.1
13.2
10.4
11.6
12.7
14.4
15.5 15
.9
16.0
16.2
16.2
16.2
16.216
.9
16.617
.117.5
17.8
17.4
9
10
11
12
13
14
15
16
17
18
19
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13F 14F15F 16F17F18F 19F
(Millions of Units)
Auto/Light Truck Sales, 1999-2019F
Source: U.S. Department of Commerce; Blue Chip Economic Indicators (8/13 and 3/13); Insurance Information Institute.
Car/Light Truck Sales Will Continue to Recover from the 2009 Low Point, Bolstering the Auto Insurer Growth and the Manufacturing Sector Along
With Workers Comp Exposures
New auto/light truck sales fell to the lowest level since the late 1960s. Forecast for 2013-14 is
still below 1999-2007 average of 17 million units, but a robust recovery is well underway.
Job growth and improved credit market conditions will boost auto sales in
2013 and beyond
Truck purchases by contractors are especially strong
58
.35
7.1
60
.45
9.6
57
.85
5.3
55
.15
5.2
55
.3 56
.9 58
.25
8.5 6
0.8
61
.45
9.7
59
.75
4.2 55
.85
1.4 52
.55
2.5
51
.85
2.2 53
.1 54
.15
1.9 53
.35
4.1
52
.55
0.2
50
.55
0.7
51
.65
1.7
49
.95
0.2
53
.1 54
.2
50
.74
9.0 5
0.9
55
.45
5.7
51
.3
40
45
50
55
60
65
Jan
-10
Fe
b-1
0M
ar-
10
Ap
r-1
0M
ay-
10
Jun
-10
Jul-
10
Au
g-1
0S
ep
-10
Oct
-10
No
v-1
0D
ec-
10
Jan
-11
Fe
b-1
1M
ar-
11
Ap
r-1
1M
ay-
11
Jun
-11
Jul-
11
Au
g-1
1S
ep
-11
Oct
-11
No
v-1
1D
ec-
11
Jan
-12
Fe
b-1
2M
ar-
12
Ap
r-1
2M
ay-
12
Jun
-12
Jul-
12
Au
g-1
2S
ep
-12
Oct
-12
No
v-1
2D
ec-
12
Jan
-13
Fe
b-1
3M
ar-
13
Ap
r-1
3M
ay-
13
Jun
-13
Jul-
13
Au
g-1
3
ISM Manufacturing Index(Values > 50 Indicate Expansion)
January 2010 through August 2013
The manufacturing sector expanded for 42 of the 44 months from Jan. 2010 through June 2013. Recent weakness stems largely from woes in
Europe and a Slowdown in China.
Source: Institute for Supply Management at http://www.ism.ws/ismreport/mfgrob.cfm; Insurance Information Institute.
Manufacturing expanded in August, albeit modestly
13
14
$200,000
$300,000
$400,000
$500,000
Dollar Value* of Manufacturers’ Shipments Monthly, Jan. 1992—Apr. 2013
*seasonally adjustedSource: U.S. Census Bureau, Full Report on Manufacturers’ Shipments, Inventories, and Orders, http://www.census.gov/manufacturing/m3/
Monthly shipments in Feb. 2013 exceeded their pre-crisis (July 2008) peak. Trough in May 2009. Growth from trough to Apr. 2013 was 34%. Manufacturing is an energy intensive
activity and growth leads to gains in many commercial exposures: WC, Commercial Auto, Marine, Property and Various Liability Coverages
The value of Manufacturing Shipments in Apr. 2013 were up 34% to $478.7B from its May 2009 trough. March figure is now 2.2% below its previous record high in Feb. 2013.
Modest weakening in recent months.
$ Millions
14
15
Manufacturing Growth for Selected Sectors, 2013 vs. 2013*
3.7%
-0.6%
7.2%
0.7%3.1%
0.2%
-0.8%
2.8%
5.9%
1.6%2.6%
15.2%
-2.0%
1.0%
-4%-2%0%2%4%6%8%
10%12%14%16%18%
All
Ma
nu
fact
uri
ng
Du
rab
le M
fg.
Wo
od
Pro
du
cts
Pri
ma
ryM
eta
ls
Fa
bri
cate
dM
eta
ls
Ma
chin
ery
Ele
ctri
cal
Eq
uip
.
Tra
nsp
ort
atio
nE
qu
ip.
No
n-D
ura
ble
Mfg
.
Fo
od
Pro
du
cts
Pe
tro
leu
m &
Co
al
Ch
em
ica
l
Pla
stic
s &
Ru
bb
er
Te
xtile
Pro
du
cts
Manufacturing Is Expanding—Albeit More Slowly—Across a Number of Sectors that Will Contribute to Growth in Insurable Exposures Including: WC,
Commercial Property, Commercial Auto and Many Liability Coverages
Growth (%)
Manufacturing of durable goods was especially
strong in 2012 but weakened in 2013
*Seasonally adjusted; Date are YTD comparing data through July 2013 to the same period in 2012.Source: U.S. Census Bureau, Full Report on Manufacturers’ Shipments, Inventories, and Orders, http://www.census.gov/manufacturing/m3/
Durables: +2.6% Non-Durables: +0.7%
66%
68%
70%
72%
74%
76%
78%
80%
82%
Mar
01
Jun 0
1
Sep
Dec
Mar
02
Jun 0
2
Sep
Dec
Mar
03
Jun 0
3
Sep
Dec
Mar
04
Jun 0
4
Sep
Dec
Mar
05
Jun 0
5
Sep
Dec
Mar
06
Jun 0
6
Sep
Dec
Mar
07
Jun 0
7
Sep
Dec
Mar
08
Jun 0
8
Sep
Dec
Mar
09
Jun 0
9
Sep
Dec
Mar
10
Jun 1
0
Sep
Dec
Mar
11
Jun 1
1
Sep
Dec
Mar
12
Jun 1
2
Sep
Dec
Mar
13
Jun 1
3
Recovery in Capacity Utilization is a Positive Sign for Commercial Exposures
Source: Federal Reserve Board statistical releases at http://www.federalreserve.gov/releases/g17/Current/default.htm. 16
Percent of Industrial Capacity
Hurricane Katrina
March 2001-November 2001
recession
“Full Capacity”
The closer the economy is to operating at “full
capacity,” the greater the inflationary pressure
The US operated at 77.6% of industrial capacity in July 2013, well above the June
2009 low of 66.9% but is still below pre-recession levels.
December 2007-June 2009 Recession
March 2001 through July 2013
16
17
Manufacturing Employment,Jan. 2010—August 2013*
11,4
6011
,460
11,4
6611
,497
11,5
3111
,539
11,5
5811
,548
11,5
5411
,555
11,5
7711
,590
11,6
2411
,662
11,6
8211
,707
11,7
1511
,724
11,7
4711
,760
11,7
6211
,770
11,7
6911
,797
11,8
4111
,870
11,9
1011
,920
11,9
2611
,935
11,9
5711
,943
11,9
2511
,931
11,9
3811
,951
11,9
6511
,988
11,9
8411
,977
11,9
7211
,965
11,9
4911
,963
11,000
11,200
11,400
11,600
11,800
12,000
12,200
12,400
Jan-
10F
eb-1
0M
ar-1
0A
pr-1
0M
ay-1
0Ju
n-10
Jul-1
0A
ug-1
0S
ep-1
0O
ct-1
0N
ov-1
0D
ec-1
0Ja
n-11
Feb
-11
Mar
-11
Apr
-11
May
-11
Jun-
11Ju
l-11
Aug
-11
Sep
-11
Oct
-11
Nov
-11
Dec
-11
Jan-
122/
30/2
Mar
-12
Apr
-12
May
-12
Jun-
12Ju
l-12
Aug
-12
Sep
-12
Oct
-12
Nov
-12
Dec
-12
Jan-
13F
eb-1
3M
ar-1
3A
pr-1
3M
ay-1
3Ju
n-13
Jul-1
3A
ug-1
3
Manufacturing employment is up by more than 500,000 or 4.4% since Jan.
2010—a surprising source of strength in the economy. The sector has weakened
recently as US corporations remains cautious and Europe, China slow.
*Seasonally adjustedSources: US Bureau of Labor Statistics at http://data.bls.gov; Insurance Information Institute.
(Thousands)
50
.7 52
.7 54
.15
4.6
54
.85
3.5
53
.75
2.8 53
.95
4.6 56 5
7.1 5
9.4
59
.75
6.3
54
.45
3.3
53
.45
3.8
52
.65
2.6
52
.65
2.6
53
.05
6.8
56
.15
5.0
53
.75
4.1
52
.75
2.9 54
.3 55
.25
4.8
54
.85
5.7
55
.25
6.0
53
.15
3.7
52
.25
6.0
54
.4
40
45
50
55
60
65
Jan
-10
Fe
b-1
0M
ar-
10
Ap
r-1
0M
ay-
10
Jun
-10
Jul-
10
Au
g-1
0S
ep
-10
Oct
-10
No
v-1
0D
ec-
10
Jan
-11
Fe
b-1
1M
ar-
11
Ap
r-1
1M
ay-
11
Jun
-11
Jul-
11
Au
g-1
1S
ep
-11
Oct
-11
No
v-1
1D
ec-
11
Jan
-12
Fe
b-1
2M
ar-
12
Ap
r-1
2M
ay-
12
Jun
-12
Jul-
12
Au
g-1
2S
ep
-12
Oct
-12
No
v-1
2D
ec-
12
Jan
-13
Fe
b-1
3M
ar-
13
Ap
r-1
3M
ay-
13
Jun
-13
Jul-
13
ISM Non-Manufacturing Index(Values > 50 Indicate Expansion)
January 2010 through July 2013
Non-manufacturing industries have been expanding and adding jobs. The question is whether this will continue.
Source: Institute for Supply Management at http://www.ism.ws/ismreport/nonmfgrob.cfm; Insurance Information Institute.
Optimism among non-manufacturers is stable
and remains expansionary in 2013
18
19
43,6
9448
,125
69,3
0062
,436
64,0
04 71,2
77 81,2
3582
,446
63,8
5363
,235
64,8
53 71,5
4970
,643
62,3
0452
,374
51,9
5953
,549
54,0
2744
,367
37,8
8435
,472
40,0
9938
,540
35,0
3734
,317
39,2
0119
,695 28
,322
43,5
4660
,837
56,2
8247
,806
40,0
75
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
Business Bankruptcy Filings,1980-2012
Sources: American Bankruptcy Institute at http://www.abiworld.org/AM/AMTemplate.cfm?Section=Home&TEMPLATE=/CM/ContentDisplay.cfm&CONTENTID=61633; Insurance Information Institute
Significant Exposure Implications for All Commercial Lines as Business Bankruptcies Begin to Decline
2012 bankruptcies totaled 40,075, down 16.2% from 2011—the third
consecutive year of decline. Business bankruptcies more than tripled during the financial crisis.
% Change Surrounding Recessions
1980-82 58.6%1980-87 88.7%1990-91 10.3%2000-01 13.0%2006-09 208.9%*
19
20
Private Sector Business Starts, 1993:Q2 – 2012:Q4*
17
51
86
17
41
80
18
61
92
18
81
87 18
91
86 1
90 1
94
19
11
99 2
04
20
21
95
19
61
96
20
62
06
20
11
92
19
82
06
20
62
03
21
12
05
21
22
00 2
05
20
42
04
19
72
03
20
92
01
19
21
92
19
32
01 20
42
02
21
0 21
22
09
21
6 22
0 22
32
20
22
02
10
22
12
12
20
42
18
20
92
07
20
71
99
19
1 19
31
72 1
76
16
91
84
17
5 17
91
88
20
01
83 1
87 1
91
19
71
93
19
1 19
31
92
20
3
150
160
170
180
190
200
210
220
230
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
Business Starts Were Down Nearly 20% in the Recession, Holding Back Most Types of Commercial Insurance Exposure, But
Are Recovering Slowly* Data through Dec. 30, 2012 are the latest available as of Aug. 16, 2013; Seasonally adjusted. Source: Bureau of Labor Statistics, http://www.bls.gov/news.release/cewbd.t08.htm.
(Thousands)
Business starts were up 2.8% in 2012 to 769,000 following a 2.2% gain to
748,000 in 2011. Start-ups could accelerate in 2013.
Business Starts2006: 872,0002007: 843,0002008: 790,0002009: 697,000 2010: 742,000 2011: 748,000 2012: 769,000
20
NFIB Small Business Optimism Index
January 1985 through July 2013
Source: National Federation of Independent Business at http://www.advisorperspectives.com/dshort/charts/indicators/Sentiment.html?NFIB-optimism-index.gif ; Insurance Information Institute. 21
Small business optimism is off crisis lows but still suffering
from economic and regulatory uncertainty. Confidence today is basically where it was when the crisis began in Dec. 2007.
22
12 Industries for the Next 10 Years: Insurance Solutions Needed
Export-Oriented Industries
Health Sciences
Health Care
Energy (Traditional)
Alternative Energy
Petrochemical
Agriculture
Natural Resources
Technology (incl. Biotechnology)
Light Manufacturing
Insourced Manufacturing
Many industries are
poised for growth, though
insurers’ ability to
capitalize on these
industries varies widely
Shipping (Rail, Marine, Trucking, Pipelines)
CONSTRUCTION INDUSTRY OVERVIEW & OUTLOOK
23
The Construction Sector Is Critical to the Economy and the P/C Insurance Industry
23
24
Value of New Private Construction: Residential & Nonresidential, 2003-2013*
Billions of Dollars
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
03 04 05 06 07 08 09 10 11 12 13*
Non ResidentialResidential
Private Construction Activity Is Moving in a Positive Direction though Remains Well Below Pre-Crisis Peak; Residential Dominates
$298.1
$15.0
$613.7
New Construction peaks at $911.8. in 2006
Trough in 2010 at $500.6B,
after plunging 55.1% ($411.2B)
2013: Value of new pvt. construction hits $622.8B, up
24% from the 2010 trough but still
32% below 2006 peak
24
$261.8
$238.8
$332.1
$290.8
*2013 figure is a seasonally adjusted annual rate as of June.Sources: US Department of Commerce; Insurance Information Institute.
25
$314.9$304.0
$286.4 $279.0$261.1
$216.1 $220.2$234.2
$255.4
$289.1$308.7
$0
$50
$100
$150
$200
$250
$300
$350
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013*
($ Billions)
Government Construction Spending Peaked in 2009, Helped by Stimulus Spending, but Continues to Contract As State/Local Governments
Grapple with Deficits and Federal Sequestration Takes Hold
Value of New Federal, State and Local Government Construction: 2003-2013*
*2013 figure is a seasonally adjusted annual rate as of June.Sources: US Department of Commerce; Insurance Information Institute.
Construction across all levels of government
peaked at $314.9B in 2009
Austerity Reigns
Govt. construction is still shrinking, down $53.8B or
17.1% since 2009 peak
26
New Home Inventories and Rental Vacancy Rates, 2003-2013*
370
422
511536
497
353
234
190
151 150 161
8.2%
8.7%9.5%
10.2%10.6%
10.0%
9.7%9.7%9.8%
10.2%
9.8%
0
100
200
300
400
500
600
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013*
Inv
en
tory
of
Ho
me
s f
or
Sa
le
0%
2%
4%
6%
8%
10%
12%
Va
ca
nc
y R
ate
for R
en
tal H
ou
sin
g
(Thousands)
Low new home inventories and falling vacancy rates bode well
for residential construction
*2013 figure is a seasonally adjusted annual rate as of June.Sources: US Department of Commerce; Insurance Information Institute.
27
Change from Peak in New Construction Expenditures to 2013*
-28.8%
-61.6%
-48.6%-50.2%
-19.9%-11.8%
-17.1%-24.3%
-31.7%
-45.9%
-59.3%-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
All
Co
nst
ruct
ion
(20
06
)P
vt.
Co
nst
ruct
ion
(20
06
)
To
tal
Re
sid
en
tial
(20
06
)
Ne
w H
ou
sin
g(2
00
5)
To
tal
No
nre
sid
en
tial
(20
08
)
Lo
dg
ing
(20
08
)
Offi
ce (
20
08
)
Co
mm
erc
ial
(20
07
)
Ma
nu
fact
uri
ng
(20
09
)
Oth
er
(20
08
)
Go
vern
me
nt
(20
09
)
Despite Recent Improvements, Construction Activity (and Employment) Remains Far Below Pre-Crisis Peaks
Change (%)
Note: Year in parentheses is the year of peak expenditure.*2013 figure is a seasonally adjusted annual rate as of June.Sources: US Department of Commerce; Insurance Information Institute.
Residential Nonresidential Govt.
28
Value of Construction Put in Place, July 2013 vs. July 2012*
-3.7%-2.4%
-3.7%
5.2%
9.5%
17.2%
2.0%
-5%
0%
5%
10%
15%
20%
TotalConstruction
Total PrivateConstruction
Residential--Private
Non-Residential--
Private
Total PublicConstruction
Residential-Public
Non-Residential--
Public
Overall Construction Activity is Up, But Growth Is Entirely in the Private Sector as State/Local Government Budget Woes Continue
Growth (%)
Private sector construction activity is now up in the
residential and nonresidential segments
*seasonally adjustedSource: U.S. Census Bureau, http://www.census.gov/construction/c30/c30index.html ; Insurance Information Institute.
Private: +9.5% Public: -3.7%
Public sector construction activity remains depressed
29
Value of Private Construction Put in Place, by Segment, July 2013 vs. July 2012*
2.6%
-3.0% -2.1%
-18.5%
3.3%
-12.1%
5.0%0.8%
-5.1%
9.5%17.2%
2.0%
32.8%
4.7%
-30%
-20%
-10%
0%
10%
20%
30%
40%
To
tal
Pri
vate
Co
nstr
ucti
on
Resid
en
tial
To
tal
No
nre
sid
en
tial
Lo
dg
ing
Off
ice
Co
mm
erc
ial
Healt
h C
are
Ed
ucati
on
al
Reli
gio
us
Am
usem
en
t &
Rec.
Tra
nsp
ort
ati
on
Co
mm
un
icati
on
Po
wer
Man
ufa
ctu
rin
g
Private Construction Activity is Up in Some Segments, Including the Key Residential Construction Sector, But Weakened in the First Half of 2013
Growth (%) Led by the Residential Construction, Lodging, Power and Office segments, Private
sector construction activity remains mixed after plunging during the “Great Recession.”
Most segments expanded in 2012 but weakened in the first half of 2013.
*seasonally adjustedSource: U.S. Census Bureau, http://www.census.gov/construction/c30/c30index.html ; Insurance Information Institute.
30
Private Construction by Segment/Project Type, July 2013 vs. July 2012*
-13.7%
0.4%
-14.2%
-1.0%
2.9%
-12.1%
9.5%
-0.5%
-0.6%-3.6%
-14.4%
12.4%
51.1%
9.5%17.2%
29.3%
6.6%0.4%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
To
tal
Pri
vate
Co
nst
ruct
ion
Res
iden
tial
:S
ing
le F
amil
y
Res
iden
tial
:M
ult
i-F
amil
y
Off
ice:
Gen
eral
Off
ice:
Fin
anci
al
Au
tom
oti
ve
Fo
od
/Bev
erag
e
Ret
ail:
Gen
eral
Mer
chan
dis
e
Ret
ail:
Sh
op
pin
gC
ente
r
Sh
op
pin
g M
all
Dru
g S
tore
Bu
ild
ing
Su
pp
ly
Oth
er
War
eho
use
:C
om
mer
cial
War
eho
use
:M
ini-
Sto
rag
e
Ho
spit
als
Med
ical
Bu
ild
ing
Sp
ecia
l C
are
Private Construction Activity is Up in Some Segments, Including the Key Residential Construction Sector, But Down in Others
Growth (%)Shopping malls and
warehouse construction are among the strongest nonresidential segments
*seasonally adjustedSource: U.S. Census Bureau, http://www.census.gov/construction/c30/c30index.html ; Insurance Information Institute.
31
Value of Public Construction Put in Place, by Segment, July 2013 vs. July 2012*
4.4%
-11.7%-13.9%
-17.6%
14.7%
-3.8%
5.1%8.7%
-12.0%
13.9%
-3.7%-2.4%
-3.7%
-20.9%
-13.8%
-25%-20%
-15%-10%
-5%0%
5%10%
15%20%
To
tal
Pu
bli
cC
on
str
ucti
on
Resid
en
tial
To
tal
No
nre
sid
en
tial
Off
ice
Co
mm
erc
ial
Healt
h C
are
Ed
ucati
on
al
Pu
bli
c S
afe
ty
Am
usem
en
t &
Rec.
Tra
nsp
ort
ati
on
Po
wer
Hig
hw
ay &
Str
eet
Sew
ag
e &
Waste
Dis
po
sal
Wate
r S
up
ply
Co
nserv
ati
on
&D
evelo
p.
Public Construction Activity is Down in Many Segments as State and Local Budgets Remain Under Stress; Improvement Possible in 2014.
Growth (%)
*seasonally adjustedSource: U.S. Census Bureau, http://www.census.gov/construction/c30/c30index.html ; Insurance Information Institute.
Public sector construction activity is down substantially in most segments, a situation that will likely persist, dragging
on public entity risk exposures
Transportation and Power projects lead
public sector construction
32
Public Construction by Segment/Project Type, July 2013 vs. July 2012*
-41.7%
-19.0%-28.8%
27.4%
-28.8%-30.3%
13.7%6.6%
-19.3%-10.2%
-3.0%-3.7%
-16.5%
-3.6%
-50%-40%-30%-20%-10%
0%10%20%30%40%
To
tal
Pu
bli
cC
on
stru
ctio
n
Sta
te &
Lo
cal
Fed
eral
Ed
uca
tio
n:
Pri
mar
y/S
eco
nd
ary
Hig
her
Ed
uca
tio
n
Lib
rary
/Arc
hiv
e
Co
rrec
tio
nal
Pu
bli
c S
afet
y
Sp
ort
s
Pef
orm
ance
Cen
ter
Co
nve
nti
on
Cen
ter
Par
k/C
amp
Tra
nsp
ort
: A
ir
Hig
hw
ay &
Str
eet
Public Construction Activity is Down in Most Segements as Governments Grapple with Budget Deficits and Pension Shortfalls
Growth (%) It could be years before public sector construction
activity recovers
*seasonally adjustedSource: U.S. Census Bureau, http://www.census.gov/construction/c30/c30index.html ; Insurance Information Institute.
33
(Millions of Units)
New Private Housing Starts, 1990-2019F
1.4
8
1.4
7 1.6
21
.64
1.5
71
.60 1.7
1 1.8
5 1.9
6 2.0
71
.80
1.3
6
0.9
10
.55
0.5
9
0.6
1 0.7
8 0.9
7
1.1
8 1.3
5
1.4
41
.50
1.5
11
.50
1.3
51.4
61
.29
1.2
0
1.0
11.1
9
0.3
0.5
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2.1
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13F14F15F16F17F18F19F
Source: U.S. Department of Commerce; Blue Chip Economic Indicators (8/13 and 3/13); Insurance Information Institute.
Insurers Are Starting to See Meaningful Exposure Growth for the First Time Since 2005 Associated with Home Construction: Construction Risk Exposure,
Surety, Commercial Auto; Potent Driver of Workers Comp Exposure
New home starts plunged 72% from 2005-2009; A net
annual decline of 1.49 million units, lowest since records began
in 1959
Job growth, low inventories of existing homes, low mortgage
rates and demographics are stimulating new home construction
for the first time in years
34
Construction Employment,Jan. 2010—August 2013*
*Seasonally adjustedSources: US Bureau of Labor Statistics at http://data.bls.gov; Insurance Information Institute.
5,58
15,
522
5,54
25,
554
5,52
75,
512
5,49
75,
519
5,49
95,
501
5,49
75,
468
5,43
5 5,47
85,
485
5,49
75,
524
5,53
05,
547
5,54
6 5,58
35,
576
5,57
7 5,61
25,
629
5,64
45,
640
5,63
65,
615
5,62
25,
627
5,63
05,
633
5,64
95,
673 5,
711
5,73
5 5,78
35,
797
5,79
25,
791
5,80
15,
798
5,79
8
5,400
5,450
5,500
5,550
5,600
5,650
5,700
5,750
5,800
5,850
5,900
Jan-
10F
eb-1
0M
ar-1
0A
pr-1
0M
ay-1
0Ju
n-10
Jul-1
0A
ug-1
0S
ep-1
0O
ct-1
0N
ov-1
0D
ec-1
0Ja
n-11
Feb
-11
Mar
-11
Apr
-11
May
-11
Jun-
11Ju
l-11
Aug
-11
Sep
-11
Oct
-11
Nov
-11
Dec
-11
Jan-
122/
30/2
Mar
-12
Apr
-12
May
-12
Jun-
12Ju
l-12
Aug
-12
Sep
-12
Oct
-12
Nov
-12
Dec
-12
Jan-
132/
30/2
Mar
-13
Apr
-13
May
-13
Jun-
13Ju
l-13
Aug
-13
Construction employment growth accelerated in the second half of
2012 but flattened out by mid-2013. Construction is a key driver of
workers comp exposure growth.
(Thousands)
35
Construction Employment, Jan. 2003–August 2013
Note: Recession indicated by gray shaded column.Sources: U.S. Bureau of Labor Statistics; Insurance Information Institute.
5,000
5,500
6,000
6,500
7,000
7,500
8,000
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
The “Great Recession” and housing bust destroyed 2.3 million constructions jobs
The Construction Sector Could Be a Growth Leader in 2013 and 2014 as the Housing Market and Private Investment Recover. WC Insurers Will Benefit.
Construction employment
troughed at 5.435 million in Jan.
2011, after a loss of 2.291 million jobs, a 29.7%
plunge from the April 2006 peak
35
Construction employment
peaked at 7.726 million in April 2006
(Thousands) Construction employment as of July 2013 totaled 5.798 million, an
increase of 358,000 jobs or 6.6% from the
Jan. 2011 trough
36
Nonfarm Payroll (Wages and Salaries):Quarterly, 2005–2013:Q2
Note: Recession indicated by gray shaded column. Data are seasonally adjusted annual rates.Sources: http://research.stlouisfed.org/fred2/series/WASCUR; National Bureau of Economic Research (recession dates); Insurance Information Institute.
Billions
$5,500
$5,750
$6,000
$6,250
$6,500
$6,750
$7,000
$7,25005
:Q1
05:Q
205
:Q3
05:Q
406
:Q1
06:Q
206
:Q3
06:Q
407
:Q1
07:Q
207
:Q3
07:Q
408
:Q1
08:Q
208
:Q3
08:Q
409
:Q1
09:Q
209
:Q3
09:Q
410
:Q1
10:Q
210
:Q3
10:Q
411
:Q1
11:Q
211
:Q3
11:Q
412
:Q1
12:Q
212
:Q3
12:Q
413
:Q1
13:Q
2
Prior Peak was 2008:Q1 at $6.60 trillion
Latest (2013:Q2) was $7.09 trillion, a new peak--$762B
above 2009 trough
Recent trough (2009:Q3) was $6.25 trillion, down
5.3% from prior peak
Payrolls are 13.4% above
their 2009 trough and up 2.7% over
the past year
36
37
Credit Markets and Lending
Credit Market Conditions Have Vastly Improved
Mortgage Interest Rates Are RisingWhat Will the Fed Do Next?
37
38
Number of Failed and Troubled Banks*
252
702
884813
651553
165192157140
250
100
200300
400500
600700
800900
1,000
2008 2009 2010 2011 2012 2013*
*As of June 30. FDIC insured institutions only.Sources: FDIC at http://www2.fdic.gov/qbp/2013jun/qbp.pdf; Insurance Information Institute.
Number of Institutions
US Banks Are Getting Healthier—Fewer Are Failing or Considered to Be “Troubled” by the FDIC. This is Critical for
the Construction Sector.
Failures are down and the number of “Troubled” banks is at its lowest level in
the post-crisis era
38
39
Commercial & Industrial Loans Outstandingat FDIC-Insured Banks, Quarterly, 2006-2013*
$1.1
6
$1.1
8$1
.22
$1.4
4$1
.48
$1.4
9
$1.5
0$1
.49
$1.4
3$1
.37
$1.2
7
$1.2
1$1
.18
$1.1
7$1
.17
$1.1
8
$1.2
0$1
.24 $1
.28 $1
.35
$1.3
7 $1.4
2$1
.46 $1
.51
$1.5
3$1
.56
$1.1
3
$1.2
5 $1.3
0$1
.39
$1.0
$1.1
$1.2
$1.3
$1.4
$1.5
$1.6
06:Q
1
06:Q
2
06:Q
306
:Q4
07:Q
107
:Q2
07:Q
3
07:Q
408
:Q1
08;Q
208
:Q3
08:Q
4
09:Q
109
:Q2
09:Q
309
:Q4
10:Q
1
10:Q
210
:Q3
10:Q
411
:Q1
11:Q
2
11:Q
311
:Q4
12:Q
112
:Q2
12:Q
3
12:Q
413
:Q1
13:Q
2
Outstanding loan volume has been growing for over two yearsand (as of year-end 2012) surpassed previous peak levels.
*Latest data as of 9/8/2013.Source: FDIC at http://www2.fdic.gov/qbp/; Insurance Information Institute.
$Trillions In nominal dollar terms, this is an
all-time high.
Recession
40
Percent of Non-Current Commercial & Industrial Loans Outstanding at FDIC-Insured Banks,Quarterly, 2006-2013:Q2*
0.70
%
0.74
%
0.64
%
0.67
%
0.81
%
1.07
%
1.18
% 1.69
% 2.25
% 2.80
%
3.57
%
3.43
%
3.05
%
2.83
%
2.73
%
2.44
%
1.89
%
1.65
%1.
49%
1.29
%
1.17
%
1.09
%
0.97
%
0.88
%
0.80
%0.
74%
0.71
%
0.63
%
0.62
%
0.63
%
0%
1%
2%
3%
4%
06:Q
1
06:Q
2
06:Q
3
06:Q
4
07:Q
1
07:Q
2
07:Q
3
07:Q
4
08:Q
1
08;Q
2
08:Q
3
08:Q
4
09:Q
1
09:Q
2
09:Q
309
:Q4
10:Q
1
10:Q
2
10:Q
3
10:Q
4
11:Q
1
11:Q
2
11:Q
3
11:Q
4
12:Q
1
12:Q
2
12:Q
3
12:Q
4
13:Q
1
13:Q
2
Non-current loans (those past due 90 days or more or in nonaccrual status) are nearly back to early-recession levels, fueling bank willingness to lend.
*Latest data as of 9/8/2013.Source: FDIC at http://www2.fdic.gov/qbp/ (Loan Performance spreadsheet); Insurance Information Institute.
Almost back to “normal” levels of noncurrent
industrial & commercial loans
Recession
41
Mortgage Interest Rates Will Rise as Expectations Over the Fed’s Tapering of QE3 Persist; Still Low by Historical Standards
3.34
%3.
40%
3.38
%3.
42%
3.53
%3.
53%
3.53
%3.
56%
3.51
%3.
52%
3.63
%3.
54%
3.57
%3.
54%
3.43
%3.
41%
3.40
%3.
35%
3.42
%3.
51%
3.59
%3.
81%
3.91
%3.
98%
3.93
%4.
46%
4.29
%4.
51%
4.37
%4.
31%
4.39
%4.
40%
4.40
% 4.58
%4.
51%
4.57
%
3.0%
3.2%
3.4%
3.6%
3.8%
4.0%
4.2%
4.4%
4.6%
4.8%
03-J
an
10-J
an
17-J
an
24-J
an
31-J
an
07-F
eb
14-F
eb
21-F
eb
28-F
eb
07-M
ar
14-M
ar
21-M
ar
28-M
ar
04-A
pr
11-A
pr
18-A
pr
25-A
pr
02-M
ay
09-M
ay
16-M
ay
23-M
ay
30-M
ay
06-J
un
13-J
un
20-J
un
27-J
un
04-J
ul
11-J
ul
18-J
ul
25-J
ul
01-A
ug
08-A
ug
15-A
ug
22-A
ug
29-A
ug
05-S
ep
30-year mortgage rates are up 122 basis points since early May
30-Year Mortgages in 2013 Are Rising: What Will Be the Impact on Construction?
*Weekly through September 5, 2013.Sources: Federal Reserve Bank at http://www.federalreserve.gov/releases/h15/data.htm.; Insurance Information Institutes.
42
Interest Rate on Convention 30-Year Mortgages: Headed Back Up, 1990–2013*
*Monthly, through August 2013. Note: Recessions indicated by gray shaded columns.Sources: Federal Reserve Bank at http://www.federalreserve.gov/releases/h15/data.htm. National Bureau of Economic Research (recession dates); Insurance Information Institutes.
0%
2%
4%
6%
8%
10%
12%
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
Yields on 30-Year mortgages have been below 6% for a five
years
Since roughly 80% of P/C bond/cash investments are in 10-year or shorter durations, most P/C insurer portfolios will have low-yielding bonds for years to come.
Yields on 30-Year Mortgages in the U.S. plunged to all time record
lows in late 2012 and early 2013 but are now rising as the Fed
considers tapering its QE program
42
30-yr. mortgage rates are up 111 basis points since the
beginning of the year
43
Where Are Interest Rates Headed?
Longer Term Interest Rates Headed Up as Fed Begins to “Taper” its $85B/month Quantitative Easing (QE) Prog. 10-Year Treasury already up to 2.92% from less than 2% in early
2013; Could see 3.4% by year-end 2014
Shorter-Term Rates Will Remain Low Fed will keep rates low until the unemployment rates falls to 6.5%
and/or inflation spikes beyond 2.5% Neither is immediately likely (Late 2014? Early 2015?) Holders of cash and short-term securities still starved for yield
Lending Standards Will Remain Tighter But credit markets are thawing Banks will want to lend as spread increases
Equity Markets Can Withstand Unwinding of QE
44
Annual Inflation Rates, (CPI-U, %),1990–2014F
2.8 2.6
1.51.9
3.3 3.4
1.3
2.5 2.3
3.0
3.8
2.8
3.8
-0.4
1.6
3.2
2.11.6
1.9
2.92.4
3.23.0
5.14.9
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13F 14F
Sources: US Bureau of Labor Statistics; Blue Chip Economic Indicators, 9/13 (forecasts).
The slack in the U.S. economy suggests that inflationary pressures should remain subdued for an extended period of times. Energy, health care and
commodity prices, plus U.S. debt burden, remain longer-run concerns
Annual Inflation Rates (%)
Inflation peaked at 5.6% in August 2008 on high energy and commodity crisis. The recession and the collapse of the
commodity bubble reduced inflationary pressures in 2009/10
Inflationary expectations remain quite
low, far below the Fed’s 2.5%
threshold
45
U.S. 10-Year Treasury Note Yields:A Long Downward Trend, 1990–2013*
*Monthly, except Sept. figure of 2.92% is as of Sept. 6, 2013. Note: Recessions indicated by gray shaded columns.Sources: Federal Reserve Bank at http://www.federalreserve.gov/releases/h15/data.htm. National Bureau of Economic Research (recession dates); Insurance Information Institutes.
1%
2%
3%
4%
5%
6%
7%
8%
9%
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
Yields on 10-Year U.S. Treasury Notes have been essentially below 5% for a full decade.
Since roughly 80% of P/C bond/cash investments are in 10-year or shorter durations, most P/C insurer portfolios will have low-yielding bonds for years to come.
Yields on 10-Year U.S. Treasury Notes recently plunged to record modern-era lows and remain low
by historical standards.
2.92% as of Sept 6.
45
46
Trajectory of Interest Rates as Fed’s Monetary Stimulus Programs Unwind
0.25% 0.25% 0.25%
0.69%
1.52%
0.76%
1.32%
2.03%
2.63%2.78%
2.92%
4.08%
4.55%4.46%
3.66%
4.31%
4.93%
5.40%
0.25%
3.65%3.18%
2.62%
1.80%
3.91%3.63%
0%
1%
2%
3%
4%
5%
6%
2011 2012 2013F 2014F 2015F
Federal Fund Rate5-Year Treasury10-Year Treasury30-Year TreasuryConventional Mortgage
The End of the Fed’s Quantitative Easing Program and Economic Growth Will Send Intermediate and Longer Term Rates Higher While
Short Term Rates Are Held Low Until Unemployment Drops Below 6.5% or Until Inflation Expectations Exceed 2.5%
Source: Wells Fargo Securities, Sept. 2013;; Insurance Information Institute.
47
Labor Market Trends
Massive Job Losses Sapped the Economy and Commercial/Personal
Lines Exposure, But Trend is Improving
47
48
Unemployment and Underemployment Rates: Stubbornly High, But Falling
2
4
6
8
10
12
14
16
18
Jan00
Jan01
Jan02
Jan03
Jan04
Jan05
Jan06
Jan07
Jan08
Jan09
Jan10
Jan11
Jan12
Jan13
Traditional Unemployment Rate U-3
Unemployment + Underemployment Rate U-6
Unemployment stood at 7.3% in Aug. 2013—its
lowest level since Dec. 2008.
Unemployment peaked at 10.1% in
October 2009, highest monthly rate since 1983.
Peak rate in the last 30 years: 10.8% in
November - December 1982
Source: US Bureau of Labor Statistics; Insurance Information Institute.
U-6 went from 8.0% in March
2007 to 17.5% in October 2009; Stood at 13.7% in August 2013
January 2000 through August 2013, Seasonally Adjusted (%)
Recession ended in
November 2001
Unemployment kept rising for
19 more months
Recession began in
December 2007
Stubbornly high unemployment and underemployment constrain overall economic growth, but the job market is now clearly improving
48
22
75
41
68
50
12
36
61
-79
24 6
8 74
51
2-1
14
-10
5-2
22
-21
9-2
03
-26
7-2
69
-42
9-4
84
-78
6 -70
1-8
21
-69
2-8
12
-82
1-2
88
-44
2-2
82 -2
22 -1
62
-23
3-3
4-1
67
-17
-26
17
01
02
94 10
31
29
11
3 18
81
54
11
48
02
43
22
3 30
31
83
17
72
06
12
92
56
17
41
97 24
9 32
32
65
20
81
20 15
27
81
77
13
11
18
21
7 25
62
24
16
43
19
15
4 18
81
87
19
41
27
15
2
11
1
(1,000)
(800)
(600)
(400)
(200)
0
200
400
Jan
-07
Fe
b-0
7M
ar-
07
Ap
r-0
7M
ay-
07
Jun
-07
Jul-
07
Au
g-0
7S
ep
-07
Oct
-07
No
v-0
7D
ec-
07
Jan
-08
Fe
b-0
8M
ar-
08
Ap
r-0
8M
ay-
08
Jun
-08
Jul-
08
Au
g-0
8S
ep
-08
Oct
-08
No
v-0
8D
ec-
08
Jan
-09
Fe
b-0
9M
ar-
09
Ap
r-0
9M
ay-
09
Jun
-09
Jul-
09
Au
g-0
9S
ep
-09
Oct
-09
No
v-0
9D
ec-
09
Jan
-10
Fe
b-1
0M
ar-
10
Ap
r-1
0M
ay-
10
Jun
-10
Jul-
10
Au
g-1
0S
ep
-10
Oct
-10
No
v-1
0D
ec-
10
Jan
-11
Fe
b-1
1M
ar-
11
Ap
r-1
1M
ay-
11
Jun
-11
Jul-
11
Au
g-1
1S
ep
-11
Oct
-11
No
v-1
1D
ec-
11
Jan
-12
Fe
b-1
2M
ar-
12
Ap
r-1
2M
ay-
12
Jun
-12
Jul-
12
Au
g-1
2S
ep
-12
Oct
-12
No
v-1
2D
ec-
12
Jan
-13
Fe
b-1
3M
ar-
13
Ap
r-1
3M
ay-
13
Jun
-13
Jul-
13
Jul-
13
Monthly Change in Private Employment
January 2007 through August 2013 (Thousands, Seasonally Adjusted)
Private Employers Added 7.41 million Jobs Since Jan. 2010 After Having Shed 4.98 Million Jobs in 2009 and 3.80 Million in 2008 (State and Local Governments Have Shed Hundreds of Thousands of Jobs)
Source: US Bureau of Labor Statistics: http://www.bls.gov/ces/home.htm; Insurance Information Institute
Monthly Losses in Dec. 08–Mar. 09 Were
the Largest in the Post-WW II Period
152,000 private sector jobs were created in July
49
Jobs Created2013 YTD: 1.485 Mill
2012: 2.247 Mill2011: 2.420 Mill2010: 1.235 Mill
0.05
10.
053
-0.0
61-0
.166
-0.3
88-0
.607
-0.8
10-1
.077
-1.3
46-1
.775
-2.2
59-3
.045
-3.7
46-4
.567
-5.2
59-6
.071
-6.8
92-7
.180
-7.6
22-7
.904
-8.1
26-8
.288
-8.5
21-8
.555
-8.7
22-8
.739
-8.7
65-8
.654
-8.4
84-8
.382
-8.2
88-8
.185
-8.0
56-7
.943
-7.7
55-7
.601
-7.4
87-7
.407
-6.9
41-6
.638
-6.4
55-6
.278
-6.0
72-5
.943
-5.6
87-5
.513
-5.3
16-5
.067
-4.7
44-4
.479
-4.2
71-4
.151
-3.9
99-3
.921
-3.7
44-3
.613
-3.4
95-3
.278
-3.0
22-2
.798
-2.6
34-2
.315
-2.1
61-1
.973
-1.7
86-1
.592
-1.4
65-1
.313
-7.1
64
-10
-8
-6
-4
-2
0
2
De
c-0
7Ja
n-0
8F
eb
-08
Ma
r-0
8A
pr-
08
Ma
y-0
8Ju
n-0
8Ju
l-0
8A
ug
-08
Se
p-0
8O
ct-0
8N
ov-
08
De
c-0
8Ja
n-0
9F
eb
-09
Ma
r-0
9A
pr-
09
Ma
y-0
9Ju
n-0
9Ju
l-0
9A
ug
-09
Se
p-0
9O
ct-0
9N
ov-
09
De
c-0
9Ja
n-1
0F
eb
-10
Ma
r-1
0A
pr-
10
Ma
y-1
0Ju
n-1
0Ju
l-1
0A
ug
-10
Se
p-1
0O
ct-1
0N
ov-
10
De
c-1
0Ja
n-1
1F
eb
-11
Ma
r-1
1A
pr-
11
Ma
y-1
1Ju
n-1
1Ju
l-1
1A
ug
-11
Se
p-1
1O
ct-1
1N
ov-
11
De
c-1
1Ja
n-1
2F
eb
-12
Ma
r-1
2A
pr-
12
Ma
y-1
2Ju
n-1
2Ju
l-1
2A
ug
-12
Se
p-1
2O
ct-1
2N
ov-
12
De
c-1
2Ja
n-1
3F
eb
-13
Ma
r-1
3A
pr-
13
Ma
y-1
3Ju
n-1
3Ju
l-1
3A
ug
-13
Mill
ion
sCumulative Change in Private Employment: Dec. 2007—Aug. 2013
December 2007 through August 2013 (Millions)
Source: US Bureau of Labor Statistics: http://www.bls.gov/ces/home.htm; Insurance Information Institute
Cumulative job losses peaked at 8.765 million
in February 2010
Cumulative job losses as of Aug. 2013 totaled
1.313 million
50
Private Employers Added 7.29 million Jobs Since Jan. 2010 After Having Shed 4.98 Million Jobs in 2009 and 3.80 Million in 2008 (State and Local Governments Have Shed Hundreds of Thousands of Jobs)
-0.0
17-0
.043
0.06
80.
238
0.34
00.
434
0.53
70.
666
0.77
90.
967
1.12
11.
235
1.31
51.
558
1.78
12.
084
2.26
72.
444
2.65
02.
779
3.03
53.
209
3.40
63.
655
3.97
84.
243
4.45
14.
571
4.72
34.
801
4.97
85.
109
5.22
75.
444
5.70
05.
924
6.08
86.
407
6.74
96.
936
7.13
07.
257
7.40
9
6.56
1
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
Jan-
10
Feb
-10
Mar
-10
Apr
-10
May
-10
Jun-
10Ju
l-10
Aug
-10
Sep
-10
Oct
-10
Nov
-10
Dec
-10
Jan-
11F
eb-1
1
Mar
-11
Apr
-11
May
-11
Jun-
11Ju
l-11
Aug
-11
Sep
-11
Oct
-11
Nov
-11
Dec
-11
Jan-
12
Feb
-12
Mar
-12
Apr
-12
May
-12
Jun-
12
Jul-1
2A
ug-1
2
Sep
-12
Oct
-12
Nov
-12
Dec
-12
Jan-
13F
eb-1
3
Mar
-13
Apr
-13
May
-13
Jun-
13Ju
l-13
Aug
-13
Mill
ion
sCumulative Change in Private Sector Employment: Jan. 2010—August 2013
January 2010 through August 2013* (Millions)
Source: US Bureau of Labor Statistics: http://www.bls.gov/ces/home.htm; Insurance Information Institute
Cumulative job gains through Aug. 2013 totaled 7.41 million
51
Job gains and pay increases have added more than $750 billion to payrolls
since Jan. 2010
Private Employers Added 7.41 million Jobs Since Jan. 2010 After Having Shed 4.98 Million Jobs in 2009 and 3.80 Million in 2008 (State and Local Governments Have Shed Hundreds of Thousands of Jobs)
4-1
033
9251
128
798
-68
-224 -1
84-1
94-2
13-2
24-2
71-2
89-2
88-3
56 -324
-452
-449
-480
-488
-511
-530
-542
-536
-539
-547
-574
-565
-589 -555
-535
-592
-601
-606
-622
-609
-610
-621
-643
-666
-649-6
21
-800
-600
-400
-200
0
200
400
600
Jan-
10
Feb
-10
Mar
-10
Apr
-10
May
-10
Jun-
10
Jul-1
0
Aug
-10
Sep
-10
Oct
-10
Nov
-10
Dec
-10
Jan-
11
Feb
-11
Mar
-11
Apr
-11
May
-11
Jun-
11
Jul-1
1
Aug
-11
Sep
-11
Oct
-11
Nov
-11
Dec
-11
Jan-
12
Feb
-12
Mar
-12
Apr
-12
May
-12
Jun-
12
Jul-1
2
Aug
-12
Sep
-12
Oct
-12
Nov
-12
Dec
-12
Jan-
13
Feb
-13
Mar
-13
Apr
-13
May
-13
Jun-
13
Jul-1
3
Jul-1
3
Cumulative Change in Government Employment: Jan. 2010—August 2013
January 2010 through August 2013* (Millions)
Source: US Bureau of Labor Statistics http://www.bls.gov/data/#employment; Insurance Information Institute
Cumulative job losses through June 2013 totaled 649,000
52
Governments at All Levels are Under Severe Fiscal Strain As Tax Receipts Plunged and Pension Obligations Soared During the
Financial Crisis: Sequestration Will Add to this Toll
Government at all levels has shed nearly 650,000 jobs since
Jan. 2010 even as private employers created 7.41 million jobs, though losses may now
be stabilizing.
Temporary Census hiring distorted 2010
figures
53
Net Change in Government Employment: Jan. 2010—August 2013*
-649
-418
-143-88
-700
-600
-500
-400
-300
-200
-100
0
Total Local State Federal
(Thousands)
Local government employment shrank by 418,000 from Jan.
2010 through Aug. 2013, accounting for 64% of all government job losses,
negatively impacting WC exposures for those cities and counties that insure privately
*Cumulative change from prior month; Base employment date is Dec. 2009.Source: US Bureau of Labor Statistics http://www.bls.gov/data/#employment; Insurance Information Institute
State government employment fell by 2.4% since the end of 2009 while
Federal employment is down by 2.9%
54
Unemployment Rates by State, July 2013:Highest 25 States*
9.5
9.2
8.9
8.9
8.8
8.8
8.7
8.6
8.6
8.5
8.5
8.5
8.4
8.1
8.1
8.0
8.0
7.5
7.5
7.4
7.4
7.4
7.2
7.2
7.1
7.1
0
2
4
6
8
10
12
NV IL NC RI GA MI CA DC NJ KY MS TN IN CT SC AZ OR NY PA US AR DE MA OH CO FL
Un
em
plo
ym
en
t R
ate
(%
)
*Provisional figures for July 2013, seasonally adjusted.Sources: US Bureau of Labor Statistics; Insurance Information Institute.
In July, 28 states and the District of Columbia had over-the-month
unemployment rate increases, 8 states had decreases, and 14 states had no
change.
55
7.1
7.1
7.0
6.9
6.9
6.9
6.8
6.6
6.5
6.3
6.3
6.2
5.9
5.7
5.3
5.3
5.2
5.1
4.8
4.6
4.6
4.6
4.5
4.2
3.9
3.0
0
2
4
6
8
MD MO LA ME NM WA WI ID TX AL AK WV KS VA MT OK MN NH IA UT VT WY HI NE SD ND
Une
mpl
oym
ent R
ate
(%)
Unemployment Rates by State, July 2013: Lowest 25 States*
*Provisional figures for July 2013, seasonally adjusted.Sources: US Bureau of Labor Statistics; Insurance Information Institute.
In July, 28 states and the District of Columbia had over-the-month
unemployment rate increases, 8 states had decreases, and 14 states had no
change.
56
Oil & Gas Extraction Employment,Jan. 2010—August 2013*
*Seasonally adjustedSources: US Bureau of Labor Statistics at http://data.bls.gov; Insurance Information Institute.
156.
415
6.4
156.
715
7.6
158.
715
7.8
158.
015
9.5
160.
016
1.5
161.
216
1.2
163.
116
4.4
166.
6 169.
317
0.1
171.
017
2.5
173.
6 176.
317
8.2
178.
518
0.9
181.
918
3.1
184.
818
5.2
185.
718
6.8
187.
618
8.0
188.
018
8.2
190.
019
1.7
191.
919
3.4
192.
419
2.6
193.
119
3.3
194.
919
6.3
150
155
160
165
170
175
180
185
190
195
200
Jan-
10F
eb-1
0M
ar-1
0A
pr-1
0M
ay-1
0Ju
n-10
Jul-1
0A
ug-1
0S
ep-1
0O
ct-1
0N
ov-1
0D
ec-1
0Ja
n-11
Feb
-11
Mar
-11
Apr
-11
May
-11
Jun-
11Ju
l-11
Aug
-11
Sep
-11
Oct
-11
Nov
-11
Dec
-11
Jan-
122/
30/2
Mar
-12
Apr
-12
May
-12
Jun-
12Ju
l-12
Aug
-12
Sep
-12
Oct
-12
Nov
-12
Dec
-12
Jan-
13F
eb-1
3M
ar-1
3A
pr-1
3M
ay-1
3Ju
n-13
Jul-1
3Ju
l-13
Oil and gas extraction employment is up 25.5%
since Jan. 2010 as the energy sector booms.
Domestic energy production is essential to any robust economic
recovery in the US.
(Thousands)
57
US Unemployment Rate Forecast
4.5
%4
.5%
4.6
%4
.8%
4.9
% 5.4
% 6.1
%6
.9%
8.1
%9
.3%
9.6
% 10
.0%
9.7
%9
.6%
9.6
%
8.9
%9
.1%
9.1
%8
.7%
8.3
%8
.2%
8.0
%7
.8%
7.7
%7
.6%
7.4
%7
.3%
7.2
%7
.1%
7.0
%6
.8%
9.6
%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
07
:Q1
07
:Q2
07
:Q3
07
:Q4
08
:Q1
08
:Q2
08
:Q3
08
:Q4
09
:Q1
09
:Q2
09
:Q3
09
:Q4
10
:Q1
10
:Q2
10
:Q3
10
:Q4
11
:Q1
11
:Q2
11
:Q3
11
:Q4
12
:Q1
12
:Q2
12
:Q3
12
:Q4
13
:Q1
13
:Q2
13
:Q3
13
:Q4
14
:Q1
14
:Q2
14
:Q3
14
:Q4
Rising unemployment
eroded payrolls
and workers comp’s
exposure base.
Unemployment peaked at 10%
in late 2009.
* = actual; = forecastsSources: US Bureau of Labor Statistics; Blue Chip Economic Indicators (9/13 edition); Insurance Information Institute.
2007:Q1 to 2014:Q4F*
Unemployment forecasts have been revised slightly
downwards. Optimistic scenarios put the
unemployment as low as 6.5% by Q4 of next year.
Jobless figures have been revised
slightly downwards for 2013/14
59
Nonfarm Payroll (Wages and Salaries):Quarterly, 2005–2013:Q2
Note: Recession indicated by gray shaded column. Data are seasonally adjusted annual rates.Sources: http://research.stlouisfed.org/fred2/series/WASCUR; National Bureau of Economic Research (recession dates); Insurance Information Institute.
Billions
$5,500
$5,750
$6,000
$6,250
$6,500
$6,750
$7,000
$7,25005
:Q1
05:Q
205
:Q3
05:Q
406
:Q1
06:Q
206
:Q3
06:Q
407
:Q1
07:Q
207
:Q3
07:Q
408
:Q1
08:Q
208
:Q3
08:Q
409
:Q1
09:Q
209
:Q3
09:Q
410
:Q1
10:Q
210
:Q3
10:Q
411
:Q1
11:Q
211
:Q3
11:Q
412
:Q1
12:Q
212
:Q3
12:Q
413
:Q1
13:Q
2
Prior Peak was 2008:Q1 at $6.60 trillion
Latest (2013:Q2) was $7.09 trillion, a new peak--$762B
above 2009 trough
Recent trough (2009:Q3) was $6.25 trillion, down
5.3% from prior peak
Payrolls are 13.4% above
their 2009 trough and up 2.7% over
the past year
59
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12*
$25
$30
$35
$40
$45
$50Wage & Salary DisbursementsWC NPW
60
Payroll Base* WC NWP
Payroll vs. Workers Comp Net Written Premiums, 1990-2012E
*Private employment; Shaded areas indicate recessions. WC premiums for 2012 are I.I.I. estimate based YTD 2012 actuals.Sources: NBER (recessions); Federal Reserve Bank of St. Louis at http://research.stlouisfed.org/fred2/series/WASCUR ; NCCI; I.I.I.
Continued Payroll Growth and Rate Increases Suggest WC NWP Will Grow Again in 2012; +7.9% Growth in 2011 Was the First Gain Since 2005
7/90-3/91 3/01-11/0112/07-6/09
$Billions $Billions
WC premium volume dropped two years before
the recession began
WC net premiums written were down $14B or 29.3% to
$33.8B in 2010 after peaking at $47.8B
in 2005
+9% in 2012E
61
P/C Insurance Industry Financial Overview
So Far, So Good:Profit Recovery in 2013 After High CAT Losses in 2011-12
61
P/C Net Income After Taxes1991–2013:H1 ($ Millions)
2005 ROE*= 9.6% 2006 ROE = 12.7% 2007 ROE = 10.9% 2008 ROE = 0.1% 2009 ROE = 5.0% 2010 ROE = 6.6% 2011 ROAS1 = 3.5% 2012 ROAS1 = 5.9% 2013:H1 ROAS1 = 9.1%E
• ROE figures are GAAP; 1Return on avg. surplus. Excluding Mortgage & Financial Guaranty insurers yields a 9.7% ROAS in 2013:Q1, 6.2% ROAS in 2012, 4.7% ROAS for 2011, 7.6% for 2010 and 7.4% for 2009.
Sources: A.M. Best, ISO, Insurance Information Institute
$1
4,1
78
$5
,84
0
$1
9,3
16
$1
0,8
70
$2
0,5
98
$2
4,4
04 $3
6,8
19
$3
0,7
73
$2
1,8
65
$3
,04
6
$3
0,0
29
$6
2,4
96
$3
,04
3
$3
5,2
04
$1
9,4
56 $
33
,52
2
$2
7,0
00
$2
8,6
72
-$6,970
$6
5,7
77
$4
4,1
55
$2
0,5
59
$3
8,5
01
-$10,000
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 1213:Q1E
Net income is up substantially (+64%) from
2012:H1 $16.4B
-5%
0%
5%
10%
15%
20%
25%
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
:H1
Profitability Peaks & Troughs in the P/C Insurance Industry, 1975 – 2013:H1*
*Profitability = P/C insurer ROEs. 2011-13 figures are estimates based on ROAS data. Note: Data for 2008-2013 exclude mortgage and financial guaranty insurers.Source: Insurance Information Institute; NAIC, ISO, A.M. Best.
1977:19.0% 1987:17.3%
1997:11.6%2006:12.7%
1984: 1.8% 1992: 4.5%2001: -1.2%
10 Years
10 Years9 Years
2012: 5.9%
History suggests next ROE peak will be in 2016-2017
ROE
1975: 2.4%
2013:H1 9.1%(est)
A 100 Combined Ratio Isn’t What ItOnce Was: Investment Impact on ROEs
Combined Ratio / ROE
* 2008 -2012 figures are return on average surplus and exclude mortgage and financial guaranty insurers. 2012 combined ratio including M&FG insurers is 103.2, 2011 combined ratio including M&FG insurers is 108.1, ROAS = 3.5%. Source: Insurance Information Institute from A.M. Best and ISO data.
97.5
100.6 100.1 100.8
92.7
101.299.5
101.0
94.8
102.4
106.5
95.79.7%
6.2%4.7%
7.9%7.4%
4.3%
9.6%
15.9%
14.3%
12.7% 10.9%
8.8%
80
85
90
95
100
105
110
1978 1979 2003 2005 2006 2007 2008 2009 2010 2011 2012 2013:Q10%
3%
6%
9%
12%
15%
18%
Combined Ratio ROE*
Combined Ratios Must Be Lower in Today’s DepressedInvestment Environment to Generate Risk Appropriate ROEs
A combined ratio of about 100 generates an ROE of ~7.0% in 2012, ~7.5% ROE in 2009/10,
10% in 2005 and 16% in 1979
Catastrophes and lower investment
income pulled down ROE in 2012
65
RNW All Lines by State, 2002-2011 Average:Highest 25 States
21
.3
16
.9
14
.8
13
.4
12
.8
12
.8
12
.5
12
.1
12
.0
11
.7
11
.2
11
.1
11
.1
11
.1
11
.1
11
.1
11
.0
10
.9
10
.8
10
.7
10
.5
10
.3
10
.1
9.8
9.8
9.4
02468
1012141618202224
HI AK ME UT IA WY VT ID NE WA ND NH NM RI SC VA NC SD DC MA CT OR OH CA KS CO
Source: NAIC.
There is enormous regional variation in the
profitability of the insurance industry
66
9.0
8.9
8.9
8.5
8.2
8.0
7.8
7.7
7.5
7.1
7.1
7.1
6.9
6.9
6.9
6.0
6.0
5.9
5.4
5.2
4.8
3.9
3.4
1.5
-8.3
-10
.8
-14-12-10-8-6-4-202468
10
WI IN WV MD MN MT FL US NJ AR IL MO AZ PA TX KY NV NY GA MI TN OK DE AL MS LA
Un
em
plo
ym
en
t R
ate
(%
)
RNW All Lines by State, 2002-2011 Average: Lowest 25 States
Source: NAIC.
67
U.S. Insured Catastrophe Loss Update
Catastrophe Losses in Recent Years Have Been Very High
Billions in Claims for Repair/Rebuilding and Rebuilding Have Been Paid
67
68
$1
2.6
$1
1.0
$3
.8
$1
4.3
$1
1.6
$6
.1
$3
4.7
$7
.6
$1
6.3
$3
3.7
$7
3.4
$1
0.5
$7
.5
$2
9.2
$1
1.5
$1
4.4
$3
3.6
$3
5.0
$7
.9$1
4.0
$4
.8
$8
.0
$3
7.8
$8
.8
$2
6.4
$0
$10
$20
$30
$40
$50
$60
$70
$80
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13*
U.S. Insured Catastrophe Losses
*Through 6/2/13. Includes $2.6B for 2013:Q1 (PCS) and $5.32B for the period 4/1 – 6/2/13 (Aon Benfield Monthly Global Catastrophe Recap).Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01 ($25.9B 2011 dollars). Includes only business and personal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B ($15.6B in 2011 dollars.) Sources: Property Claims Service/ISO; Insurance Information Institute.
2012 Was the 3rd Highest Year on Record for Insured Losses in U.S. History on an Inflation-Adj. Basis. 2011 Losses Were the 6th Highest. YTD 2013 Running Below
Average But Q3 Is Typically the Costliest Quarter.
2012 was likely the third most expensive year ever for insured
CAT losses
Record tornado losses caused
2011 CAT losses to surge
($ Billions, $ 2012)
68
69
Top 16 Most Costly Disastersin U.S. History
(Insured Losses, 2012 Dollars, $ Billions)
$7.8 $8.7 $9.2 $11.1$13.4$18.8
$23.9 $24.6$25.6
$48.7
$7.5$7.1$6.7$5.6$5.6$4.4
$0
$10
$20
$30
$40
$50
$60
Irene (2011) Jeanne(2004)
Frances(2004)
Rita (2005)
Tornadoes/T-Storms
(2011)
Tornadoes/T-Storms
(2011)
Hugo (1989)
Ivan (2004)
Charley(2004)
Wilma(2005)
Ike (2008)
Sandy*(2012)
Northridge(1994)
9/11 Attack(2001)
Andrew(1992)
Katrina(2005)
Hurricane Sandy could become the 4th or 5th costliest event in US
insurance history
Hurricane Irene became the 12th most expense hurricane
in US history in 2011
Includes Tuscaloosa, AL,
tornado
Includes Joplin, MO, tornado
12 of the 16 Most Expensive Events in US History Have
Occurred Over the Past Decade
*PCS estimate as of 4/12/13.Sources: PCS; Insurance Information Institute inflation adjustments to 2012 dollars using the CPI.
70
Top 12 Most Costly Hurricanesin U.S. History
(Insured Losses, 2012 Dollars, $ Billions)
*PCS estimate as of 4/12/13.Sources: PCS; Insurance Information Institute inflation adjustments to 2012 dollars using the CPI.
$9.2 $11.1$13.4
$18.8
$25.6
$48.7
$8.7$7.8$6.7$5.6$5.6$4.4
$0
$10
$20
$30
$40
$50
$60
Irene(2011)
Jeanne(2004)
Frances(2004)
Rita (2005)
Hugo (1989)
Ivan (2004)
Charley(2004)
Wilma(2005)
Ike (2008)
Sandy*(2012)
Andrew(1992)
Katrina(2005)
Hurricane Sandy became the 3rd costliest hurricane in US
insurance historyHurricane Irene
became the 12th most expensive hurricane in US history in 2011
10 of the 12 most costly hurricanes in insurance history occurred over the past 9 years (2004—2012)
Nu
mb
er
Geophysical (earthquake, tsunami, volcanic activity)
Climatological (temperature extremes, drought, wildfire)
Meteorological (storm)
Hydrological (flood, mass movement)
Natural Disasters in the United States, 1980 – June 2013*Number of Events (Annual Totals 1980 – June 2013*)
*Through June 30, 2013.Source: MR NatCatSERVICE 72
41
19
121
3
50
100
150
200
250
300
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
There were 68 natural disaster events in the
first half of 2013
Losses Due to Natural Disasters in the US, 1980–2012 (Overall & Insured Losses)
75
Overall losses (in 2012 values) Insured losses (in 2012 values)
Source: MR NatCatSERVICE
(2012 Dollars, $ Billions)(Overall and Insured Losses)
20
40
60
80
100
120
140
160
180
200
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
2012 was the 2nd or 3rd most expensive year on record for insured catastrophe losses in
the US.
Approximately 57% of the overall cost of
catastrophes in the US was covered by insurance in 2012
2012 Losses
Overall : $101.1B
Insured: $57.9B
U.S. Thunderstorm Loss Trends, 1980 – June 30, 2013
81Source: Property Claims Service, MR NatCatSERVICE
Average thunderstorm
losses are up 7 fold since the early
1980s. The 5- year running average
loss is up sharply.
Hurricanes get all the headlines, but thunderstorms are consistent
producers of large scale loss. 2008-2012 are the most expensive
years on record.
1st Half 2013 thunderstorm losses total $6.325B; The
system that included the EF-5 tornado in Moore, OK, accounted for $1.575B
EarthquakeMexico, 20 March
EarthquakeItaly, 29 May/3 June
EarthquakeIran, 11 August
Severe Storms, tornadoesUSA, 2–4 March
Severe WeatherUSA, 28–29 April Severe storms
USA, 28 June –2 July
Hurricane IsaacUSA, Caribbean24–31 August
Hurricane SandyUSA, Caribbean24–31 October
Floods, flash floodsAustralia, Jan – Feb
Flash FloodsRussia, 6–8 July
FloodsChina, 21–24 July
DroughtUSA, Summer
Cold WaveEastern Europe, Jan – Feb
Cold WaveAfghanistan, Jan – Mar
FloodsUnited Kingdom, 21–27 November
Typhoon Bopha Philippines, 4–5 December
Floods. flash floodsAustralia, Feb – Mar
Typhoon Haikui China, 8–9 August
FloodsNigeria, Jul – Oct
Floods, hailstormsSouth Africa, 20 –21 October
FloodsPakistan, 3 –27 September
FloodsColumbia, Mar – Jun
Hailstorms, severe weatherCanada, 12–14 August
Number of events: 905
Geophysical events(earthquake, tsunami, volcanic activity)
Meteorological events (storm)
Selection of significant Natural catastrophes
Natural catastrophes Hydrological events(flood, mass movement)
Climatological events(extreme temperature, drought, wildfire)
Winter Storm AndreaEurope, 5–6 January
85
Natural Loss Events:Full Year 2012
World Map
Source: Geo Risks Research, NatCatSERVICE – As of January 2013
Hurricane Sandy Summary
86
Sandy Became One of the Most Expensive Events in
Insurance History
86
Hurricane Sandy: Claim Payments to Policyholders, by State
$9,600
$6,300
$700 $500 $410 $295 $292 $210 $103 $84 $57 $55 $37 $36 $13$58$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
NY NJ PA CT MD VA OH MA RI DE WV NC NH DC ME VT
Insurers Will Pay at Least $18.75 Billion to 1.52 Million Policyholders Across 15 States and DC in the Wake of Hurricane Sandy
87
At $9.6B and $6.6B, respectively, NY and NJ suffered, by far, the largest losses
from Hurricane Sandy
TOTAL = $18.75 BILLION($ Thousands)
Sources: Catastrophe loss data is for Catastrophe Serial No. 90 (Oct. 28 – 31, 2012) from PCS as of Jan. 18, 2013; Insurance Information Institute .
Auto, 250,500 ,
16%
Commercial, 202,500 ,
13%
Homeowner, 1,067,000 ,
71%
Hurricane Sandy resulted in an
estimated 1.52 million privately insured
claims resulting in an estimated $18.75 to
$25 billion in insured losses. Hurricane
Katrina produced 1.74 million claims and
$48.7B in losses (in 2012 $)
Hurricane Sandy: Number of Claims by Type*
*PCS claim count estimate s as of 1/18/13. Loss estimate represents PCS total ($18.75B) and upper end of range estimates by risk modelers RMS, Eqecat and AIR. All figures exclude losses paid by the NFIP.Source: PCS; AIR, Eqecat, AIR Worldwide; Insurance Information Institute. 88
Sandy is a high HO frequency, (relatively
low) severity event (avg. severity <50% Katrina)
Total Claims = 1.52 Million*
Auto, $2,729 , 15%
Commercial, $9,024 ,
48%
Homeowner, $6,997 ,
37%
Although Commercial Lines accounted for
only 13% of total claims, they account for 48% of all claim
dollars paid. In most hurricanes,
Commercial Lines accounts for about
1/3 of insured losses.
Hurricane Sandy: Insured Loss byClaim Type* ($ Millions)
*PCS insured loss estimates as of 1/18/13. Catastrophe modeler estimates range up to $25 billion. All figures exclude losses paid by the NFIP.Source: PCS; Insurance Information Institute. 89
Total Claim Value = $18.75 Billion*
90
Total Value of Insured Coastal Exposure in 2012
(2012, $ Billions)
Source: AIR Worldwide
$293.5$239.3
$182.3$164.6$163.5
$118.2$106.7$81.9$64.0$60.6$58.3
$17.3
$567.8$713.9
$849.6$1,175.3
$2,862.3$2,923.1
$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500
New YorkFloridaTexas
MassachusettsNew JerseyConnecticut
LouisianaS. Carolina
VirginiaMaine
North CarolinaAlabamaGeorgia
DelawareNew Hampshire
MississippiRhode Island
Maryland
In 2012, New York Ranked as the #1 Most Exposed State to Hurricane Loss, Overtaking Florida with $2.862 Trillion. Texas is very exposed too, and
ranked #3 with $1.175 Trillionin insured coastal exposure
The Insured Value of All Coastal Property Was $10.6 Trillion in 2012 , Up 20% from $8.9 Trillion in 2007 and
Up 48% from $7.2 Trillion in 2004
94
Inflation Adjusted U.S. Catastrophe Losses by Cause of Loss, 1992–20111
0.4%
1.6%
3.8%4.7%
6.3%
7.3%
33.9%
42.0%
1. Catastrophes are defined as events causing direct insured losses to property of $25 million or more in 2009 dollars.2. Excludes snow.3. Does not include NFIP flood losses4. Includes wildland fires5. Includes civil disorders, water damage, utility disruptions and non-property losses such as those covered by workers compensation.Source: ISO’s Property Claim Services Unit.
Hurricanes & Tropical Storms, $161.3
Fires (4), $6.0
Tornadoes (2), $130.2
Winter Storms, $28.2
Terrorism, $24.4
Geological Events, $18.2
Wind/Hail/Flood (3), $14.8
Other (5), $1.4
Wind losses are by far cause the most catastrophe losses,
even if hurricanes/TS are excluded.
Tornado share of CAT losses is
rising
Insured cat losses from 1992-2011
totaled $384.3B, an average of $19.2B per year or $1.6B
per month
96
Combined Ratio Points Associated with Catastrophe Losses: 1960 – 2012*
Notes: Private carrier losses only. Excludes loss adjustment expenses and reinsurance reinstatement premiums. Figures are adjusted for losses ultimately paid by foreign insurers and reinsurers.Source: ISO (1960-2011); A.M. Best (2012E) Insurance Information Institute.
0.4
1.2
0.4 0.
8 1.3
0.3 0.4 0.
71.
51.
00.
40.
4 0.7
1.8
1.1
0.6
1.4 2.
01.
3 2.0
0.5
0.5 0.7
3.0
1.2
2.1
8.8
2.3
5.9
3.3
2.8
1.0
3.6
2.9
1.6
5.4
1.6
3.3
3.3
8.1
2.7
1.6
5.0
2.6
3.4
8.7 9.
4
3.6
0.9
0.1
1.1
1.1
0.8
0
1
2
3
4
5
6
7
8
9
10
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
E
The Catastrophe Loss Component of Private Insurer Losses Has Increased Sharply in Recent Decades
Avg. CAT Loss Component of the Combined Ratio
by Decade
1960s: 1.04 1970s: 0.85 1980s: 1.31 1990s: 3.39 2000s: 3.52 2010s: 7.20*
Combined Ratio Points Catastrophe losses as a share of all losses reached
a record high in 2012
98
Federal Disaster Declarations Patterns:
1953-2013
98
Disaster Declarations Set New Records in Recent Years
Number of Federal Disaster Declarations, 1953-2013*
13 1
7 18
16
16
7 71
21
22
22
0 25
25
11
11
19
29
17
17
48
46
46
38
30
22 2
54
22
31
52
42
13
42
7 28
23
11
31
38
45
32 3
63
27
54
46
55
04
54
5 49
56
69
48 5
26
37
55
98
19
94
74
143
0
20
40
60
80
100
120
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
*Through September 8, 2013.Source: Federal Emergency Management Administration; http://www.fema.gov/disasters; Insurance Information Institute.
The Number of Federal Disaster Declarations Is Rising and Set New Records in 2010 and 2011. Hurricane Sandy Produced 13 Declarations in 2012/13.
The number of federal disaster declarations set a
new record in 2011, with 99, shattering 2010’s record 81
declarations.
There have been 2,130 federal disaster
declarations since 1953. The average
number of declarations per year is 35 from 1953-2012, though
there few haven’t been recorded since 1995.
41 federal disasters were declared so far in 2013*
99
100
Federal Disasters Declarations by State, 1953 – 2013: Highest 25 States*
87
78
74
67
66
60
57
56
55
54
52
52
52
51
51
50
49
48
47
47
47
46
43
40
39
0
10
20
30
40
50
60
70
80
90
100
TX CA OK NY FL LA AL KY MO AR MS IL IA TN WV MN KS PA NE VA OH WA ND NC IN
Dis
as
ter
De
cla
rati
on
s
Over the past 60 years, Texas has had the highest
number of Federal Disaster
Declarations
*Through Sept. 8, 2013. Includes Puerto Rico and the District of Columbia.Source: FEMA: http://www.fema.gov/news/disaster_totals_annual.fema; Insurance Information Institute.
101
Federal Disasters Declarations by State, 1953 – 2013: Lowest 25 States*
42
40
38
37
36
36
35
33
29
28
26
26
26
24
24
24
23
23
21
19
17
15
15
13
11
11
9
0
10
20
30
40
50
SD ME AK WI GA VT NJ NH MA OR PR HI MI AZ MD NM ID MT CO CT NV DE SC DC UT RI WY
Dis
as
ter
De
cla
rati
on
s
Over the past 60 years, Wyoming and Rhode Island had the fewest
number of Federal Disaster Declarations
*Through Sept. 8, 2013. Includes Puerto Rico and the District of Columbia.Source: FEMA: http://www.fema.gov/news/disaster_totals_annual.fema; Insurance Information Institute.
102
SEVERE WEATHER REPORT UPDATE: 2013
Damage from Tornadoes, Large Hail and High Winds Keep Insurers Busy
102
Location of Tornado Reports:Through August 30, 2013
103Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2013_annual_summary.html#; PCS.
There were 720 tornadoes
through Aug. 30, causing extensive property
damage in several states
The storm system that spawned the deadly EF-5
tornado on May 19 in Moore, OK,
produced insured losses of $1.575 billion
Location of Large Hail Reports:Through August 30, 2013
105Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2013_annual_summary.html#
There were 5,003 “Large Hail” reports through Aug. 30, causing extensive
property and vehicle damage
Location of High Wind Reports:Through August 30, 2013
106Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2013_annual_summary.html#
There were 10,572 “Wind
Damage” reports through Aug. 4, causing
extensive property damage
Severe Weather Reports:Through August 30, 2013
107Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2013_annual_summary.html#
Severe weather reports are
concentrated east of the Rockies
There were 16,296 severe
weather reports through Aug. 30; including
720 tornadoes; 5,003 “Large Hail” reports
and 10,572 high wind events
Terrorism Update
109
Boston Marathon Bombings Underscore the Need for Extension of the Terrorism
Risk Insurance ProgramDownload III’s Terrorism Insurance Report at: http://www.iii.org/white_papers/terrorism-risk-a-constant-threat-2013.html
109
110
Terrorism Risk Insurance Program
Reauthorization Was a Major Industry Initiative for 2013 Even Before Boston
I.I.I. Testified at First Congressional Hearing on 9/11/12 Provided testimony at NYC hearing on 6/17/13
I.I.I. Accelerated Planned Study on Terrorism Risk and Insurance in the Wake of Boston and Was Well Received Terrorism: A Constant Threat issued in June 2013
Life$1.2 (3%)
Aviation Liability
$4.3 (11%)
Other Liability
$4.9 (12%)
Biz Interruption $13.5 (33%)
Property -WTC 1 & 2*$4.4 (11%) Property -
Other$7.4 (19%)
Aviation Hull$0.6 (2%)
Event Cancellation
$1.2 (3%)Workers Comp
$2.2 (6%)
Total Insured Losses Estimate: $40.0B***Loss total does not include March 2010 New York City settlement of up to $657.5 million to compensate approximately 10,000 Ground Zero workers or any subsequent settlements.
**$32.5 billion in 2001 dollars.
Source: Insurance Information Institute.
Loss Distribution by Type of Insurancefrom Sept. 11 Terrorist Attack ($ 2011)
($ Billions)
117
Growth Analysis by State and Business Segment
Premium Growth Rates Vary Tremendously by State
117
118
Direct Premiums Written: Total P/CPercent Change by State, 2007-2012*
58
.4
25
.4
24
.5
21
.0
19
.2
17
.6
16
.3
13
.2
13
.2
12
.4
9.9
9.2
9.2
8.5
8.0
6.2
5.8
5.2
4.5
4.4
4.3
4.3
4.2
4.0
3.8
3.6
0
10
20
30
40
50
60
70
ND
SD
OK
NE IA KS
VT
AK
TX
WY
MN
AR
TN IN W
I
KY
MT
OH LA
VA
NJ
MI
SC
CO
MO
NM
Pe
ce
nt
ch
an
ge
(%
)
Sources: SNL Financial LC.; Insurance Information Institute.
Top 25 States
North Dakota was the country’s growth leader over the past 5 years with premiums written
expanding by 58.4%
119
Direct Premiums Written: Total P/CPercent Change by State, 2007-2012*
3.6
3.1
3.0
2.9
2.7
2.2
2.1
2.1
2.0
1.8
1.1
0.0
-0.1
-0.3
-0.7
-0.9
-2.8
-5.6
-6.0
-7.2
-7.2
-9.3
-10
.1
-11
.2
-12
.5
-17
.3
-20
-15
-10
-5
0
5
CT
MS
NC AL
MD PA
U.S
.
MA IL
WA
GA
UT
NH RI
ID ME
NY FL
CA
DC
WV HI
AZ
OR
DE
NV
Pe
ce
nt
ch
an
ge
(%
)
Bottom 25 States
Sources: SNL Financial LC.; Insurance Information Institute.
Growth was negative in 13 states and DC between
2007 and 2012
124
Direct Premiums Written: Comm. LinesPercent Change by State, 2007-2012*
72
.2
35
.2
28
.8
25
.7
21
.0
20
.2
16
.0
15
.1
14
.6
8.8
6.3
4.6
3.3
2.9
1.5
1.2
0.0
-1.5
-2.3
-2.4
-2.6
-2.6
-3.2
-3.3
-3.5
-3.7
-20
0
20
40
60
80
ND
OK
SD VT
NE IA KS
AK ID WY
TX
MN IN WI
AR
TN
MT
OH LA
MA
PA
CT
MS
NM IL
WA
Pe
ce
nt
ch
an
ge
(%
)
Sources: SNL Financial LC.; Insurance Information Institute.
Top 25 States
Only 16 states showed any commercial lines growth
2007 and 2012
125
Direct Premiums Written: Comm. LinesPercent Change by State, 2007-2012*
-4.1
-4.2
-4.5
-4.6
-4.9
-4.9
-5.1
-5.4
-5.9
-6.2
-6.5
-6.8
-6.8
-6.9
-7.3
-9.1
-10
.2
-11
.1
-13
.2
-14
.5
-15
.3
-16
.2
-16
.8
-20
.2
-22
.2
-30
.3
-40
-35
-30
-25
-20
-15
-10
-5
0
US
NY
MD
NH NJ
MO
ME
NC
KY VA RI
CO MI
SC AL
GA
CA
UT
DC
OR HI
DE FL AZ
WV
NV
Pe
ce
nt
ch
an
ge
(%
)
Bottom 25 States
Sources: SNL Financial LC.; Insurance Information Institute.
States with the poorest performing economies also produced the most negative net change in premiums of
the past 5 years
126
Direct Premiums Written: Workers’ CompPercent Change by State, 2007-2012*
27
.9
21
.7
18
.8
12
.4
4.0
0.8
0.2
-0.3
-1.1
-1.8
-2.5
-2.7
-3.6
-3.9
-4.7
-5.4
-6.8
-9.1
-9.2
-9.7
-10
.2
-10
.8
-11
.6
-30-25-20-15-10-505
1015202530
OK IA SD
NY
KS
CT
CA
NE IN WI
NJ
MI
MN IL VA
PA
NH VT
US
AK
NM TX
MD
Pe
ce
nt
ch
an
ge
(%
)
*Excludes monopolistic fund states: ND, OH, WA, WY as well as WV, which transitioned to a competitive structure during this period.Sources: SNL Financial LC.; Insurance Information Institute.
Top 25 States
127
Direct Premiums Written: Worker’s CompPercent Change by State, 2007-2012*
-12
.1
-12
.9
-14
.3
-15
.4
-15
.5
-15
.9
-16
.0
-16
.6
-16
.9
-17
.8
-18
.3
-19
.9
-20
.8
-21
.9
-24
.6
-25
.5
-26
.0
-27
.4
-31
.8
-33
.9
-35
.1
-38
.3
-43
.4
-49
.1
-60
-55
-50
-45
-40
-35
-30
-25
-20
-15
-10
TN
DC
MA RI
MS
GA
AR ID LA
ME
NC
SC AL
MO
MT
CO
KY AZ
UT
OR FL HI
DE
NV
Pe
ce
nt
ch
an
ge
(%
)
Bottom 25 States
*Excludes monopolistic fund states: ND, OH, WA, WY as well as WV, which transitioned to a competitive structure during this period.Sources: SNL Financial LC.; Insurance Information Institute.
States with the poorest performing economies also produced the most negative net change in premiums of
the past 5 years
Workers Compensation Operating Environment
128
The Weak Economy and Soft Market Have Made the Workers Comp Operating
Increasingly Challenging
128
Workers Compensation Combined Ratio: 1994–2012P
102.
0
97.0 10
0.0
101.
0
112.
6
108.
6
105.
1
102.
7
98.5
103.
5
104.
5 110.
6 115.
0
115.
0
109.
0
121.
7
107.
0
115.
3
118.
2
80
85
90
95
100
105
110
115
120
125
130
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
Workers Comp Results Began to Improve in 2012. Underwriting Results Deteriorated Markedly from 2007-
2010/11 and Were the Worst They Had Been in a Decade. Sources: A.M. Best (1994-2009); NCCI (2010-2012P) and are for private carriers only; Insurance Information Institute. 129
WC showed a better-than-expected
improvement for private carriers in 2012
Workers Compensation Medical SeverityModerate Increase in 2012
130
Accident Year
Annual Change 1991–1993: +1.9%Annual Change 1994–2001: +8.9%Annual Change 2002–2010: +6.0%
Average Medical Cost per Lost-Time ClaimMedicalClaim Cost ($000s)
$8
.1
$8
.2
$8
.1
$8
.8
$9
.2
$9
.9
$1
0.9
$11
.8
$1
3.1
$1
4.0
$1
5.9
$1
7.3
$1
8.7
$1
9.7
$2
1.2
$2
2.3
$2
3.7
$2
5.3
$2
6.4
$2
6.7
$2
7.7
$2
8.5
+6.8%+1.3%-2.1%+9.0%+5.1%
+7.4%+10.1%
+8.3%+10.6%
+7.3%
+13.5%+8.8%
+7.7%+5.4%
+7.8%+5.4%
+6.3%
+6.6%+4.1%+1.4%
+3.6%+3%
5
10
15
20
25
30
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20112012p
2012p: Preliminary based on data valued as of 12/31/2012.1991-2011: Based on data through 12/31/2011, developed to ultimateBased on the states where NCCI provides ratemaking services including state funds, excluding WV; Excludes high deductible policies.
Cumulative Change = 252%(1991-2012p)
Annual Change 1991–1993: +1.9%Annual Change 1994–2001: +8.9%Annual Change 2002–2011: +5.7%
Accident Year
4.5%
3.5%2.8%
3.2%3.5%4.1%
4.6%4.7%4.0%
4.4%4.2%4.0%4.4%
3.7%3.2%3.4%
3.0%
5.1%
7.4%
10.1%10.6%
13.5%
5.4%
7.8%
6.3%6.6%
4.1%3.6% 4%
3%
1.4%
5.4%
8.8%
7.7%
7.3%
8.3%
0%
2%
4%
6%
8%
10%
12%
14%
16%
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12P
Change in Medical CPI
Change Med Cost per Lost Time Claim
WC Medical Severity Generally Outpaces the Medical CPI Rate
Sources: Med CPI from US Bureau of Labor Statistics, WC med severity from NCCI based on NCCI states.
Average annual increase in WC medical severity form 1995 through 2011 was well above the medical CPI (6.8% vs. 3.8%), but
the gap is narrowing.
$9
.8
$9
.5
$9
.2
$9
.7
$9
.8
$1
0.4
$1
1.2
$1
2.2
$1
3.5
$1
4.8
$1
6.2
$1
6.7
$1
7.5
$2
2.2
$2
2.4
$2
2.2
$2
2.4$
18
.2
$1
7.7
$1
9.2
$2
0.8
$2
1.7
+1%-3.0%
+0.7%+8.8% +2.2%
+5.6%+3.1%
+1.0%+4.6%+3.1%+9.2%
+10.1%
+10.1%
+9.0%+7.7%
+5.9%+1.7%+4.9%
-2.8%-3.1%+1.0%
+6.2%
5
7
9
11
13
15
17
19
21
23
25
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20112012p
IndemnityClaim Cost ($ 000s)
Annual Change 1991–1993: -1.7%Annual Change 1994–2001:+7.3%Annual Change 2002–2011:+3.2%
Accident Year
Workers Comp Indemnity Claim Costs: Small Increase in 2012
Average indemnity costs per claim were up 1% in
2012 to $22,400
Average Indemnity Cost per Lost-Time Claim
2012p: Preliminary based on data valued as of 12/31/2012.1991-2011: Based on data through 12/31/2011, developed to ultimateBased on the states where NCCI provides ratemaking services including state funds, excluding WV; Excludes high deductible policies.
Workers Compensation Lost-Time Claim Frequency Declined in 2012Lost-Time Claims
134
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012p
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
-4.2 -4.4
-9.2
0.3
-6.5
-4.5
0.5
-3.9
-2.3
-4.5
-6.9
-4.5 -4.1 -3.7
-6.6
-4.5
-2.2
-4.3
-5.7
11
-4-5.0
3.8
-0.9
AdjustedIndicated
Frequency Change: 2007—2012
Contracting: 7.97.1 -9.3%
Manufacturing: 13.612.0 -11.8%
Percent
Accident Year*Adjustments primarily due to significant audit activity.2012p: Preliminary based on data valued as of 12/31/20121991–2011: Based on data through 12/31/2011, developed to ultimateBased on the states where NCCI provides ratemaking services, including state funds; excludes high deductible policiesFrequency is the number of lost-time claims per $1M pure premium at current wage and voluntary loss cost levelSource: NCCI.
Cumulative Change of –55.4%(1991–2011 adj.)
4.2%
5.2%5.6%
4.7%
6.3%
2.3%
1.1%
2.7%
4.3%4.7%4.6%
2.7%
5.9%
7.7%
9.0%
10.1%
4.6%
3.6%
5.6%6.2%
8.8%
2%
2.9%2.3%
1.1%3.5%
3.6%
1%
2.2%
0.7%
-3.0%
1.0%1.7%
10.1%
9.2%
3.1%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12P
Change in CPS Wage Change in Indemnity Cost per Lost-Time Claim
WC Indemnity Severity vs. Wage Inflation, 1995 -2012p
2011p: Preliminary based on data valued as of 12/31/2011; 1991-2010: Based on data through 12/31/2010, developed to ultimate. Based on the states where NCCI provides ratemaking services. Excludes the effects of deductible policies. CPS = Current Population Survey.Source: NCCI
WC indemnity severity turned
positive again in 2011
Annual Change 1991–1993: -1.7%Annual Change 1994–2001:+7.3%Annual Change 2002–2011:+3.2%
Indemnity severities usually
outpace wage gains
Workers Compensation Premium: Second Consecutive Year of IncreaseNet Written Premium
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012p
0
10
20
30
40
50
31.0 31.3 29.8 30.5 29.126.3 25.2 24.2 23.3 22.3
25.0 26.129.2 31.1
34.737.8 38.6 37.6
33.830.3 29.9
32.335.2
31.0 31.329.8 30.5
29.126.3
28.226.9 25.9 25.0
28.6
32.1
37.7
42.3
46.547.8
46.544.3
39.3
34.6 33.836.4
39.6
State Funds ($ B)
Private Carriers ($ B)
Pvt. Carrier NWP growth was +9.0% in 2012, the
best since 2005
$ Billions
Calendar Yearp Preliminary
Source: 1990–20102p Private Carriers, Annual Statement Data, NCCI.1996–2012p State Funds: AZ, CA, CO, HI, ID, KY, LA, MD, MO, MT, NM, OK, OR, RI, TX, UT Annual Statements
State Funds available for 1996 and subsequent
Average Approved BureauRates/Loss Costs
12.1
7.4
10.0
2.9
-6.4
-3.2
-6.0
-8.0
-5.4
-2.6
3.5
1.2
4.9
6.6
-6.0-5.1
-5.7-6.6
-3.1-2.0
-0.7
0.4
7.8
-10
-5
0
5
10
15
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12*
Percent
Calendar Year
Cumulative1990–1993
+36.3%
Cumulative 2000–2003
+17.1%
Cumulative 2004–2011
-25.6%
Cumulative 1994–1999
-27.8%
*States approved through 7/31/12.Note: Countrywide approved changes in advisory rates, loss costs and assigned risk rates as filed by applicable rating organization.Source: NCCI.
History of Average WC Bureau Rate/Loss Cost Level Changes
Approve rates/loss costs are seeing their
first significant increase since 2003
Workers Comp Rate Changes,2008:Q4 – 2013:Q2
Source: Council of Insurance Agents and Brokers; Information Institute.
-5.5%-4.6%
-4.0%-4.6%
-3.7%-3.9%
-5.4%
-3.7%-3.4%
-1.6%
2.6%
4.1%
7.5%7.4%8.3%8.1%
9.0%9.8%
8.3%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
08:Q4 09:Q1 09:Q2 09:Q3 09:Q4 10:Q1 10:Q2 10:Q3 10:Q4 11:Q1 11:Q2 11:Q3 11:Q4 12:Q1 12:Q2 12:Q3 12:Q4 13:Q1 13:Q2
WC rate changes have been positive for 9
consecutive quarters, longer than any other
commercial line
(Percent Change)
Note: CIAB data cited here are based on a survey. Rate changes earned by individual insurers can and do vary, potentially substantially.
The BIG Question:Where Is the Market Heading?
144
Catastrophes and Other Factors Are Pressuring Insurance Markets
144
New Factor: Record Low Interest Rates Are Contributing to
Underwriting and Pricing Pressures
INVESTMENTS: THE NEW REALITY
145
Investment Performance is a Key Driver of Profitability
Depressed Yields Will Necessarily Influence Underwriting & Pricing
145
Property/Casualty Insurance Industry Investment Income: 2000–2013*1
$38.9$37.1 $36.7
$38.7
$54.6
$51.2
$47.1 $47.6$49.2
$47.7$45.5
$39.6
$49.5
$52.3
$30
$40
$50
$60
00 01 02 03 04 05 06 07 08 09 10 11 12 13*
Investment Income Fell in 2012 and is Falling in 2013 Due to Persistently Low Interest Rates, Putting Additional Pressure on (Re) Insurance Pricing
1 Investment gains consist primarily of interest and stock dividends..*Estimate based on annualized actual Q1:2013 investment income of $11.385B.Sources: ISO; Insurance Information Institute.
($ Billions)
Investment earnings are running below their 2007
pre-crisis peak
147
P/C Insurer Net Realized Capital Gains/Losses, 1990-2013:Q1
Sources: A.M. Best, ISO, Insurance Information Institute.
$2.8
8
$4.8
1 $9.8
9
$9.8
2
$10.
81 $18.
02
$13.
02
$16.
21
$6.6
3
-$1.
21
$6.6
1
$9.1
3
$9.7
0
$3.5
2 $8.9
2
-$7.
90
$5.8
5
$7.0
4
$6.2
1
$1.3
8
-$19
.81
$9.2
4
$6.0
0
$1.6
6
-$25
-$20
-$15
-$10
-$5
$0
$5
$10
$15
$20
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 1213:Q1
Insurers Posted Net Realized Capital Gains in 2010, 2011 and 2012 Following Two Years of Realized Losses During the Financial Crisis. Realized Capital
Losses Were the Primary Cause of 2008/2009’s Large Drop in Profits and ROE
($ Billions) Realized capital gains in 2012 were down 12% from 2011
Property/Casualty Insurance Industry Investment Gain: 1994–2013:Q11
$35.4
$42.8$47.2
$52.3
$44.4
$36.0
$45.3$48.9
$59.4$55.7
$64.0
$31.7
$39.2
$53.4$56.2
$53.9
$12.8
$58.0
$51.9$56.9
$0
$10
$20
$30
$40
$50
$60
$70
94 95 96 97 98 99 00 01 02 03 04 05* 06 07 08 09 10 11 12 13:Q1
Investment Gains Are Slipping in 2012 as Low Interest Rates Reduce Investment Income and Lower Realized Investment Gains; The Financial
Crisis Caused Investment Gains to Fall by 50% in 2008
1 Investment gains consist primarily of interest, stock dividends and realized capital gains and losses.* 2005 figure includes special one-time dividend of $3.2B; Sources: ISO; Insurance Information Institute.
($ Billions)
Investment gains in 2012 were approximately 16%
below their pre-crisis peak
151
U.S. Treasury Security Yields:A Long Downward Trend, 1990–2013*
*Monthly, constant maturity, nominal rates, through August 2013.Sources: Federal Reserve Bank at http://www.federalreserve.gov/releases/h15/data.htm. National Bureau of Economic Research (recession dates); Insurance Information Institute.
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
Recession2-Yr Yield10-Yr Yield
Yields on 10-Year U.S. Treasury Notes have been essentially below 5% for a full decade.
Since roughly 80% of P/C bond/cash investments are in 10-year or shorter durations, most P/C insurer portfolios will have low-yielding bonds for years to come.
U.S. Treasury security yields
recently plunged to record lows
151
1. UNDERWRITING
155
Underwriting Losses in 2011 and 2012 Are Elevated by High
Catastrophe Losses
155
156
P/C Insurance Industry Combined Ratio, 2001–2013:Q1*
* Excludes Mortgage & Financial Guaranty insurers 2008--2012. Including M&FG, 2008=105.1, 2009=100.7, 2010=102.4, 2011=108.1; 2012:=103.2. Sources: A.M. Best, ISO.
95.7
99.3100.8
106.3
102.4
94.8
101.0
92.6
100.898.4
100.1
107.5
115.8
90
100
110
120Best
Combined Ratio Since 1949 (87.6)
As Recently as 2001, Insurers Paid Out
Nearly $1.16 for Every $1 in Earned
Premiums
Relatively Low CAT Losses, Reserve Releases
Heavy Use of Reinsurance Lowered Net
Losses
Relatively Low CAT Losses, Reserve Releases
Avg. CAT Losses,
More Reserve Releases
Higher CAT
Losses, Shrinking Reserve
Releases, Toll of Soft
Market
Cyclical Deterioration
Lower CAT
Losses Before Sandy
Underwriting Gain (Loss)1975–2013:Q1*
* Includes mortgage and financial guaranty insurers in all years.Sources: A.M. Best, ISO; Insurance Information Institute.
Large Underwriting Losses Are NOT Sustainable in Current Investment Environment
-$55
-$45
-$35
-$25
-$15
-$5
$5
$15
$25
$35
75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 1213:Q1
Cumulative underwriting deficit from 1975 through
2012 is $510B
($ Billions)Underwriting
profit in 2013:Q1
totaled $4.6B
High cat losses in 2011 led to the highest
underwriting loss since 2002
159
2
(2)
(8)
(3)
(7)(10)(10)
(4)
(0)
11
24
1411 9
(5)
(9)
(13)(12)
(10)
(14)(12)
(10)(7) (7)
-$20
-$15
-$10
-$5
$0
$5
$10
$15
$20
$25
$309
2
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
E
14
E
15
E
Pri
or
Yr.
Re
se
rve
Re
lea
se
($
B)
-6
-4
-2
0
2
4
6
8 Imp
ac
t on
Co
mb
ine
d R
atio
(Po
ints
)
Prior Yr. ReserveDevelopment ($B)
Impact onCombined Ratio(Points)
P/C Reserve Development, 1992–2015E
Note: 2005 reserve development excludes a $6 billion loss portfolio transfer between American Re and Munich Re. Including this transaction, total prior year adverse development in 2005 was $7 billion. The data from 2000 and subsequent years excludes development from financial guaranty and mortgage insurance. Sources: A.M. Best, ISO, Barclays Research (estimates).
166
Performance by Segment
166
10
9.4
11
0.2
11
8.8
10
9.5 1
12
.5
11
0.2
10
7.6
10
4.1
10
9.7
11
0.2
10
2.5 1
05
.4
91
.1
93
.6
10
4.2
98
.9
10
2.1
10
6.7
10
4.9
10
2.1
10
1.4
10
1.3
10
2.0
11
1.1
11
2.3
12
2.3
90
95
100
105
110
115
120
125
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
F
14
F
15
F
Co
mm
erc
ial L
ine
s C
om
bin
ed
Ra
tio
*2007-2012 figures exclude mortgage and financial guaranty segments.Source: A.M. Best (1990-2011); Conning (2012-2015F) Insurance Information Institute
Commercial Lines Combined Ratio, 1990-2015F*
Commercial lines underwriting
performance is expected to improve as
improvement in pricing environment persists
171
Commercial Auto Combined Ratio: 1993–2015F
11
2.1
11
2.0
11
3.0
11
5.9
10
2.7
95
.2
92
.9
92
.1
92
.4 94
.3 96
.8 99
.4
98
.0
10
4.6
10
7.1
10
1.7
10
0.3
99
.8
11
8.1
11
5.7
11
6.2
80
85
90
95
100
105
110
115
120
125
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12E 13F 14F 15F
Commercial Auto is Expected to Improve as Rate Gains Outpace Any Adverse Frequency and Severity Trends
172Sources: A.M. Best (1990-2012E);Conning (2012-2015F); Insurance Information Institute.
General Liability Combined Ratio: 2005–2015F
112.
9
95.1 99
.0
94.2
101.
4
104.
4
105.
8
108.
3
107.
1 110.
8
99.8
80
85
90
95
100
105
110
115
05 06 07 08 09 10 11 12 13F 14F 15F
Commercial General Liability Underwriting Performance Has Been Volatile in Recent Years
Source: Conning Research and Consulting. 174
2. SURPLUS/CAPITAL/CAPACITY
178
How Will Large Catastrophe Losses Impact Capacity?
178
180
Policyholder Surplus, 2006:Q4–2013:Q1
Sources: ISO, A.M .Best.
($ Billions)
$487.1$496.6
$512.8$521.8
$478.5
$455.6
$437.1
$463.0
$490.8
$511.5
$540.7$530.5
$544.8
$559.2 $559.1
$538.6
$550.3
$567.8
$583.5$586.9
$607.7
$570.7$566.5
$505.0$515.6$517.9
$420
$440
$460
$480
$500
$520
$540
$560
$580
$600
$620
06:Q407:Q107:Q207:Q307:Q408:Q108:Q208:Q308:Q409:Q109:Q209:Q309:Q410:Q110:Q210:Q310:Q411:Q111:Q211:Q311:Q412:Q112:Q212:Q312:Q413:Q1
2007:Q3Pre-Crisis Peak
Surplus as of 3/31/13 stood at a record high $607.7B
*Includes $22.5B of paid-in capital from a holding company parent for one insurer’s investment in a non-insurance business in early 2010.
The Industry now has $1 of surplus for every $0.80
of NPW, close to the strongest claims-paying
status in its history.
Drop due to near-record 2011 CAT losses
The P/C Insurance Industry Both Entered and Emerged from the 2012 Hurricane
Season Very Strong Financially.
182
3. REINSURANCE MARKET CONDITIONS
Ample Capacity Despite Heavy Global
Catastrophe Activity in Recent Years
182
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1Q1360
80
100
120
140
160
180
200
US
D b
n
Soft market
Hard market
Hard market softening
Crisis
Excess capital
Long-Term Evolution of Shareholders’ Funds for the Guy Carpenter Global Reinsurance Composite
Source: Guy Carpenter
187
CATASTROPHE BONDS, ANNUAL RISK CAPITAL ISSUED, 2002-2012
$2.73
$3.39
$4.60
$3.86
$5.85
$1.22$1.73
$1.14
$1.99
$4.69
$7.00
$0
$1
$2
$3
$4
$5
$6
$7
$8
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: GC Securities and Guy Carpenter & Company, LLC.
($ Billions)
Note
4. RENEWED PRICING DISCIPLINE
189
Evidence of a Broad and Sustained Shift in Pricing
189
191
-5%
0%
5%
10%
15%
20%
25%
71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 1213
:Q1
Net Premium Growth: Annual Change, 1971—2013:Q1
(Percent)1975-78 1984-87 2000-03
Shaded areas denote “hard market” periodsSources: A.M. Best (historical and forecast), ISO, Insurance Information Institute.
Net Written Premiums Fell 0.7% in 2007 (First Decline
Since 1943) by 2.0% in 2008, and 4.2% in 2009, the First 3-Year Decline Since 1930-33.
2013:Q1 = 4.1%
2012 growth was +4.3%
192
P/C Net Premiums Written: % Change, Quarter vs. Year-Prior Quarter
Sources: ISO, Insurance Information Institute.
Sustained Growth in Written Premiums(vs. the same quarter, prior year) Will Continue through 2013
10.2
%15
.1%
16.8
%16
.7%
12.5
%10
.1%
9.7%
7.8%
7.2%
5.6%
2.9%
5.5%
-4.6
%-4
.1%
-5.8
%-1
.6%
10.3
%10
.2% 13
.4%
6.6%
-1.6
%2.
1%0.
0%-1
.9%
0.5%
-1.8
%-0
.7%
-4.4
%-3
.7%
-5.3
%-5
.2%
-1.4
%-1
.3%
1.3% 2.
3%1.
7% 3.5%
1.6%
4.1%
3.8%
3.0% 4.
2% 5.1%
4.8%
4.1%
-10%
-5%
0%
5%
10%
15%
20%
2002
:Q1
2002
:Q2
2002
:Q3
2002
:Q4
2003
:Q1
2003
:Q2
2003
:Q3
2003
:Q4
2004
:Q1
2004
:Q2
2004
:Q3
2004
:Q4
2005
:Q1
2005
:Q2
2005
:Q3
2005
:Q4
2006
:Q1
2006
:Q2
2006
:Q3
2006
:Q4
2007
:Q1
2007
:Q2
2007
:Q3
2007
:Q4
2008
:Q1
2008
:Q2
2008
:Q3
2008
:Q4
2009
:Q1
2009
:Q2
2009
:Q3
2009
:Q4
2010
:Q1
2010
:Q2
2010
:Q3
2010
:Q4
2011
:Q1
2011
:Q2
2011
:Q3
2011
:Q4
2012
:Q1
2012
:Q2
2012
:Q3
2012
:Q4
2013
:Q1
Premium growth in Q1 2013 was up 4.1% over Q1 2012, marking the
12th consecutive quarter of growth
194
Average Commercial Rate Change,All Lines, (1Q:2004–2Q:2013)
-3.2
%-5
.9%
-7.0
%-9
.4%
-9.7
%-8
.2%
-4.6
% -2.7
%-3
.0%
-5.3
%-9
.6%
-11
.3%
-11
.8%
-13
.3%
-12
.0%
-13
.5%
-12
.9%
-11
.0%
-6.4
%-5
.1%
-4.9
%-5
.8%
-5.6
%-5
.3%
-6.4
%-5
.2%
-5.4
% -2.9
%
2.7
% 4.4
%4
.3%
3.9
%5
.0%
5.2
%4
.3%
-0.1
% 0.9
%
-0.1
%
-16%
-11%
-6%
-1%
4%
9%
1Q
04
2Q
04
3Q
04
4Q
04
1Q
05
2Q
05
3Q
05
4Q
05
1Q
06
2Q
06
3Q
06
4Q
06
1Q
07
2Q
07
3Q
07
4Q
07
1Q
08
2Q
08
3Q
08
4Q
08
1Q
09
2Q
09
3Q
09
4Q
09
1Q
10
2Q
10
3Q
10
4Q
10
1Q
11
2Q
11
3Q
11
4Q
11
1Q
12
2Q
12
3Q
12
4Q
12
1Q
13
2Q
13
Note: CIAB data cited here are based on a survey. Rate changes earned by individual insurers can and do vary, potentially substantially.
Source: Council of Insurance Agents & Brokers; Insurance Information Institute
KRW Effect
Pricing as of Q2:2013 was positive for the89th consecutive
quarter. Gains are likely to continue through 2013.
(Percent)
Q2 2011 marked the last of 30th
consecutive quarter of price declines
195
Change in Commercial Rate Renewals, by Account Size: 1999:Q4 to 2013:Q2
Source: Council of Insurance Agents and Brokers; Barclay’s Capital; Insurance Information Institute.
Note: CIAB data cited here are based on a survey. Rate changes earned by individual insurers can and do vary, potentially substantially.
Percentage Change (%)
Pricing turned positive in Q3:2011, the first increase in
nearly 8 years; Q2:2013 renewals were up 4.3%. Some insurers posted
stronger numbers.
Pricing Turned Negative in Early
2004 and Remained that
way for 7 ½ years
Peak = 2001:Q4 +28.5%
Trough = 2007:Q3 -13.6%
KRW : No Lasting Impact
196
Cumulative Qtrly. Commercial Rate Changes, by Account Size: 1999:Q4 to 2013:Q2
Source: Council of Insurance Agents and Brokers; Barclay’s Capital; Insurance Information Institute.
Note: CIAB data cited here are based on a survey. Rate changes earned by individual insurers can and do vary, potentially substantially.
1999:Q4 = 100Despite 8 consecutive quarters
of gains (Q2:2013 = 4.3%), pricing today is where is was in
late 2001 (around 9/11), suggesting additional rate need going forward, esp. in light of
record low interest rates
199
Change in Commercial Rate Renewals, by Line: 2013:Q2
Source: Council of Insurance Agents and Brokers; Insurance Information Institute.
Major Commercial Lines Renewed Uniformly Upward in Q2:2013 for the 8th Consecutive Quarter; Property Lines & Workers Comp Leading the Way; Cat
Losses and Low Interest Rates Provide Momentum Going Forward
Percentage Change (%)
5.4%5.9% 5.9%
8.3%
1.1%
3.5% 3.6% 3.7%4.6% 4.5%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
Su
rety
Ge
ne
ral
Lia
bili
ty
Bu
sin
ess
Inte
rru
ptio
n
Um
bre
lla
Co
mm
erc
ial
Au
to
Co
nst
ruct
ion
EP
L
D&
O
Co
mm
erc
ial
Pro
pe
rty
Wo
rke
rsC
om
p
Workers Comp rate increases are large than any other line, followed
by Property lines
Note: CIAB data cited here are based on a survey. Rate changes earned by individual insurers can and do vary, potentially substantially.
Shifting Legal Liability & Tort Environment
202
Is the Tort PendulumSwinging Against Insurers?
202
203
Over the Last Three Decades, Total Tort Costs as a % of GDP Appear Somewhat Cyclical, 1980-2013E
$0
$50
$100
$150
$200
$250
$300
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12E
To
rt S
ys
tem
Co
sts
1.50%
1.75%
2.00%
2.25%
2.50%
To
rt Co
sts
as
% o
f GD
P
Tort Sytem Costs Tort Costs as % of GDP
($ Billions)
Sources: Towers Watson, 2011 Update on US Tort Cost Trends, Appendix 1A
Tort costs in dollar terms have remained high but relatively stable
since the mid-2000s., but are down substantially as a share of GDP
Deepwater Horizon Spike
in 2010
1.68% of GDP in 2013
2.21% of GDP in 2003
= pre-tort reform peak
Business Leaders Ranking of Liability Systems in 2012
Best States
1. Delaware
2. Nebraska
3. Wyoming
4. Minnesota
5. Kansas
6. Idaho
7. Virginia
8. North Dakota
9. Utah
10. Iowa
Worst States
41. Florida
42. Oklahoma
43. Alabama
44. New Mexico
45. Montana
46. Illinois
47. California
48. Mississippi
49. Louisiana
50. West Virginia
Source: US Chamber of Commerce 2012 State Liability Systems Ranking Study; Insurance Info. Institute.
New in 2012
Wyoming Minnesota Kansas Idaho
Drop-offs
Indiana Colorado Massachusetts South Dakota
Newly Notorious
Oklahoma
Rising Above
Arkansas
206
207
The Nation’s Judicial Hellholes: 2012/2013
Source: American Tort Reform Association; Insurance Information Institute
West VirginiaIllinoisMadison County
New YorkAlbany and
NYC
Watch List
Philadelphia, Pennsylvania
South Florida Cook County, Illinois New Jersey Nevada Louisiana
Dishonorable Mention
MO Supreme Court WA Supreme Court
California
MarylandBaltimore
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208