February 3, 20113:00 – 4:00 P.M. EST

Incorporated in 1985, Demotech, Inc. is a financial analysis and actuarial services firm that provides Financial Stability Ratings® (FSRs) to the P&C and Title insurance industry.

Demotech was the first company to have its rating process formally reviewed and accepted by:◦ Fannie Mae (1989)◦ Freddie Mac (1990)◦ HUD (1994 & 2005)

1996 ◦ Worked with Florida Office of Insurance Regulation (then DOI) to develop FSRs for

Florida “take out” insurers to depopulate the residual market. 2005

◦ Accepted by HUD for rating Professional Liability insurers of long term care facilities. 2009

◦ Received carve-back on insolvency provision from several insurance agents’ errors and omissions insurance carriers.

2010◦ Participant in independent Florida State University and Wharton School studies

evaluating insurer financial ratings.

9/30/2010 TotalDirect Premium Written for Rated Companies

of more than $23,000,000,000

356 Rated Companiesas of 2/2/2011

Balance sheet fundamentals Management – planning/strategy Rate adequacy Operating results Guidance on Financial Stability Ratings® and Catastrophe

Reinsurance Program Reporting for Florida Property Insurers

Florida is a difficult market to earn an FSR upgrade due to uncertainty, variability and regulatory pressure

Risk Based Capital Greater than 300% TAC/ACL

Liquidity – Cash & Invested Assets to Total Liabilities

Greater than 1:1

Total Liabilities to Surplus Less than 3:1

Favorable Loss Reserve Development Annual and Quarterly

Underwriting Results Loss of no more than 10% of Prior Year Surplus

GPW to Surplus Less than 6:1

NPW to Surplus Less than 3:1

Net CAT Retention to Surplus * Less than 15% of Current Surplus

These criteria are not a safe harbor or bright-line indicator for acceptable financial performance

* APPLICABLE TO FLORIDA PROPERTY WRITERS

Modeling is reflected in the evaluation of the reinsurance program

Reinsurance program is evaluated on the quality and quantity of reinsurance including the catastrophe coverage within the program

Demotech does not recommend a particular model or model version, public or private

Evaluation of current modeling resultsModel creep - what we are willing to considerProvide comparison to prior season’s model results

Dr. Shahid HamidProfessor, Department of FinanceRB 208, College of BusinessFlorida International UniversityMiami, Florida 33199Tel: 305 348 2727fax: 305 348 4245hamids@fiu.edu

Overview Florida Hurricane Catastrophe Fund – Mandatory, TICL Aggregate cover Credit worthiness Affiliates, captives and alternative programs Net catastrophe retentions, event period and limits CAT Reinsurance Data Call update

Demotech does not publish prescribed acceptable parameters for reinsurance retentions or other aspects of a reinsurance program. We believe that the variables inherent in evaluating the appropriateness of each insurer’s reinsurance program preclude the establishment of rigid, universal benchmarks. However, we do provide feedback on aspects of company-specific reinsurance programs that are pertinent to our review.

1. Capital Adequacy - underwriting results, capital sources2. Rate Adequacy3. Reinsurance Program

Investments in government issued bonds Unauthorized Reinsurance Rule – Paragraph 3 (e) approval Citizens Property Insurance Corporation Regulatory and legislative matters impacting Financial Stability Ratings®

Independent studies discussing Demotech Financial Stability Ratings® will be finalized and published