2013.03_nyssa_pres by insurance info inst.pdf
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P/C Insurance Industry
Overview & OutlookA Story o f Grow th and Streng th in anUncertain World
New York Society of Securities Analysts
New York, NYMarch 18, 2013
Download at www.i i i.org /presentat ion sRobert P. Hartwig, Ph.D., CPCU, President & Economist
Insurance Information Institute 110 William Street New York, NY 10038Tel: 212.346.5520 Cell: 917.453.1885 [email protected] www.iii.org
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2
P/C Insurance Industry
Financial Overview
Profit Recovery in 2012 AfterHigh CAT Losses; Ultimate
Impact of Sandy Still Unclear
2
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P/C Net Income After Taxes19912012:Q3 ($ Millions)
$14
,178
$5
,840
$19
,316
$10
,870
$20
,598
$24
,404 $
36,8
19
$30
,773
$21
,865
$3,0
46
$30
,029
$62
,496
$3,0
43
$35,2
04
$19
,150
$26
,981
$28
,672
-$6,970
$65
,777
$44
,155
$20
,559
$38
,501
-$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 12:Q3
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:Q3 ROAS1 = 6.3%
P-C Industry 2012:Q3
profits were up 222% from2011:Q3, due primarily tolower catastrophe losses
* ROE figures are GAAP; 1Return on avg. surplus. Excluding Mortgage & Financial Guaranty insurers yields a 6.6% ROAS through2012:Q3, 4.6% ROAS for 2011, 7.6% for 2010 and 7.4% for 2009.Sources: A.M. Best, ISO, Insurance Information Institute
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A 100 Combined Ratio Isnt 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:Q3 combined ratioincluding M&FG insurers is 100.9, 2011 combined ratio including M&FG insurers is 108.2, 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
106.2106.5
95.7
3.6%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 2012E 0%
3%
6%
9%
12%
15%
18%
Combined Ratio ROE*
Combined Ratios Must Be Lower in Todays DepressedInvestment Environment to Generate Risk Appropriate ROEs
A combined ratio of about 100 generates an
ROE of ~6.6% in 2012, ~7.5% ROE in 2009/10,10% in 2005 and 16% in 1979
Catastrophes andlower investment
income pulleddown ROE in 2012
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-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
13F
Profitability Peaks & Troughs in the P/CInsurance Industry, 1975 2013F*
*Profitability = P/C insurer ROEs. 2011 figure is an estimate based on ROAS data. Note: Data for 2008-2012 excludemortgage and financial guaranty insurers. 2012:Q3 ROAS = 6.2% including M&FG.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%
9 Years
2012E:3.6%
History suggests next ROE
peak will be in 2016-2017
ROE
1975: 2.4%
2013F5.8%
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The Strength of the EconomyWill Influence P/C Insurer
Growth Opportunities
6
Growth Will Expand Insurer ExposureBase Across Most Lines
6
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US Real GDP Growth*
* Estimates/Forecasts from Blue Chip Economic Indicators.Source: US Department of Commerce, Blue Economic Indicators 3/13; 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
%
2.1
%
2.0
%2.5
%
2.7
%
2.6
%
2.8
%
2.9
%
3.0
%
0.1
%
-8.9%
4.1
%
1.1
%1.8
%2.5
%3.6
%
3.1
%
-9%
-7%
-5%
-3%
-1%
1%
3%
5%
7%
2000
2001
2002
2003
2004
2005
2006
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 EconomicConditions, but the Benefits of Even Slow Growth Will Compound and
Gradually Benefit the Economy Broadly
Real GDP Growth (%)
Recession began inDec. 2007. Economictoll of credit crunch,housing slump, labormarket contraction
was severe
The Q4:2008 declinewas the steepest
since the Q1:1982drop of 6.8%
2013 is expected to seeinitially slow growth,
then graduallyaccelerate throughoutthe year and into 2014
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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. 8
NY has relatively
little exposure tosequester cuts
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Defense and Non-Defense Federal Spendingas 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
Shareo
fStateGDP(%)
Federal defensespending accounts forapproximately 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 spendingaccounts for 10%+of GDP in 3 states
Sequestration Could Adversely Impact Commercial Insurance ExposuresDirectly at Defense Contractors and Indirectly in Impacted Communities
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State-by-State Leading Indicatorsthrough 2013:Q1
Sources: Federal Reserve Bank of Philadelphia at http://www.philadelphiafed.org/index.cfm ;Insurance Information Institute.10
5 Fastest Growing StatesSouth Carolina 6.97%Michigan 4.32%West Virginia 3.59%
Idaho 3.14%Georgia 3.04%
5 Slowest Growing StatesWyoming -1.09%Delaware -0.24%North Dakota -0.19%
Vermont 0.09%Minnesota 0.18%
Near-term growth
forecasts varywidely by state
http://www.philadelphiafed.org/index.cfmhttp://www.philadelphiafed.org/index.cfm -
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74
.4
73
.6
73
.6
72
.273
.676
67
.868
.9
68
.2
67
.7 71
.674
.5
74
.2 77
.5
67
.569
.8 74
.3
71
.5
6
3.7
55
.7 59.560
.9 64
.16
9.9
75
.0
75
.376
.2
76
.479
.3
73
.2
72
.374
.3
82
.682
.7
74
.5
73
.8 77
.6
71
.8
40
45
50
55
6065
70
75
80
8590
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Consumer Sentiment Survey (1966 = 100)
January 2010 through March 2013
Consumer confidence has been low for years amid highunemployment, falling home prices and other factors adversely impact
consumers, but improved substantially in late 2011 and in 2012
Source: University of Michigan; Insurance Information Institute
Optimism amongconsumers has
remained fairly strongdespite tax hike, federal
budget concerns
11
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16.9
16.5
16.1
13.2
10.4
11.6
12.7
1
4.4 1
5.3 1
5.8
16.0
16.2
16.2
16.2
16.21
6.9
16.61
7.1
17.5
17.8
17.4
910
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 (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.
New auto/light truck sales fell tothe lowest level since the late1960s. Forecast for 2013-14 is
still far below 1999-2007 averageof 17 million units, but a robust
recovery is well underway.
Job growth and improved
credit market conditionswill boost auto sales in2013 and beyond
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16%
18%
20%
22%
24%
26%
28%
30%
01 02 03 04 05 06 07 08 09 10 11 12E 13F 14F
$125
$135
$145
$155
$165
$175
$185
$195
% of registered cars under 3 years old Auto Ins Direct Pms$ Billions
Personal Auto Insurance Direct WrittenPremiums vs. Recently-Registered Cars
Sources: AIPSO Facts (various issues); SNL Financial; Conning Research & Consulting, Property-Casualty Forecast andAnalysis, First Quarter 2012; Insurance Information Institute.
PP DWP, flat from 2004-2009, is rising again.Conning forecasts growth at 3.5% in 2013 and 4.0% in 2014.
Average age ofregistered carsrose as fewernew cars werebought (and
insured)
In 2004-07no growth in
PP DWPdespite
strong newcar/truck
sales New car/trucksales grow to14-15M/year
4%/yr growthforecast for PP
DWP fromrecovering
new car/trucksales
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Monthly Change* in Auto InsurancePrices, 19912013*
*Percentage change from same month in prior year; through Feb. 2013; seasonally adjusted
Note: Recessions indicated by gray shaded columns.Sources: US Bureau of Labor Statistics; National Bureau of Economic Research (recession dates); Insurance Information Institutes.
-2%
0%
2%
4%
6%
8%
10%
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '1
Cyclical peaks in PP
Auto tend to occurapproximately every 10years (early 1990s, early
2000s and likely theearly 2010s)
Hard marketstend to occur
duringrecessionary
periods
Pricing peakoccurred in late
2010 at 5.3%, fallingto 2.8% by Mar. 2012
The Feb. 2013
reading of 5.2% isup from 3.6% a yearearlier; Highestsince Dec. 2010
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Monthly Change* in Auto Insurance Prices,January 2005 - February 2013
(Percent Changefrom same month,
prior year)
*Percentage change from same month in prior year, seasonally adjusted.Sources: US Bureau of Labor Statistics; Insurance Information Institute
Auto Insurance Price IncreasesAveraged 5.1% in 2010 over 2009, After
Averaging 4.5% in 2009 over 2008.
Underwritingperformance remained
strong even whenprices were flat or
falling due toimprovements in
underlying frequency
and severity trends
PPA Auto, like most p/c lines, exhibitsstrong cyclicality in pricing. Prices rosefrom 2000 to late 2005, were flat/fallingin 2006 and 2007 before beginning to
rise gain in 2008.
Pricing weakenedmaterially in 2011 and
early 2012 but hasstrengthened since then
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(Millions of Units)
New Private Housing Starts, 1990-2019F
1.4
8
1.4
7 1.6
2
1.6
4
1.5
71
.60 1
.71 1
.85 1.9
6
2
.07
1.8
0
1.3
6
0.9
1
0.5
50
.59
0.6
1 0.7
81
.00 1
.21 1
.35
1.4
41
.50
1.5
1
1.5
0
1.3
51.4
6
1.2
9
1
.20
1.011
.19
0.3
0.5
0.7
0.9
1.11.3
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 (3/13); Insurance Information Institute.
Homeowners Insurers Are Starting to See Meaningful Exposure Growth forthe First Time Since 2005. Commercial Insurers with Construction Risk
Exposure, Surety, Workers Comp Also Benefit
New home startsplunged 72% from2005-2009; A net
annual decline of 1.49million units, lowestsince records began
in 1959
Job growth, low inventories ofexisting homes, low mortgage
rates and demographics arestimulating new home construction
for the first time in years
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Average Premium forHome Insurance Policies**
* Insurance Information Institute Estimates/Forecasts **Excludes state-run insurers.Source: NAIC, Insurance Information Institute estimates for 2011-2012 based on CPI data and other data.
$508$536
$593
$668
$822 $830
$880$909
$945
$988
$804
$764$729
$400
$500
$600
$700
$800
$900
$1,000
$1,100
00 01 02 03 04 05 06 07 08 09 10 11* 12*
Countrywide Home Insurance Expenditures Increased by anEstimated 4.0%in 2011 and 4.5% in 2012
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Construction Employment,Jan. 2010February 2013*
*Seasonally adjusted
Sources: US Bureau of Labor Statistics at http://data.bls.gov; Insurance Information Institute.
5,5
81
5,5
22
5,5
42
5,5
54
5,5
27
5,5
12
5,4
97
5,5
19
5,4
99
5,5
01
5,4
97
5,4
68
5,4
35 5
,478
5,4
85
5,4
97
5,5
24
5,5
30
5,5
47
5,5
465
,583
5,5
76
5,5
775
,612
5,6
29
5,6
44
5,64
0
5,63
6
5,6
15
5,6
22
5,6
27
5,6
30
5,6
33
5,6
49
5,6
73 5
,711
5,7
36 5
,784
5,400
5,450
5,500
5,550
5,600
5,650
5,700
5,750
5,800
5,8505,900
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
2/30/2
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
2/30/2
Construction employment growthaccelerated in the second half of2012. Stronger growth in this key
sector is possible in 2013.
(Thousands)
Construction forthe new $4B
Tappan Zee Bridge
will createthousands of jobs
http://data.bls.gov/http://data.bls.gov/http://data.bls.gov/http://data.bls.gov/http://data.bls.gov/http://data.bls.gov/http://data.bls.gov/ -
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19
Construction Employment,Jan. 2003Feb. 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 andhousing bust destroyed 2.3
million constructions jobs
The Construction Sector Could Be a Growth Leader in 2013 and 2014 as the HousingMarket and Private Investment Recover. Commercial Insurers Will Benefit.
Constructionemployment
troughed at 5.435million in Jan.
2011, after a lossof 2.291 millionjobs, a 29.7%
plunge from theApril 2006 peak
19
Construction
employmentpeaked at
7.726 millionin April 2006
(Thousands)Construction
employment as of
Feb. 2013 totaled5.784 million, anincrease of 349,000
jobs or 6.4% from theJan. 2011 trough
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20
Nonfarm Payroll (Wages and Salaries):Quarterly, 20052012:Q4
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); InsuranceInformation Institute.
Billions
$5,500
$5,750
$6,000
$6,250
$6,500
$6,750
$7,000
$7,250
05:Q1
05:Q2
05:Q3
05:Q4
06:Q1
06:Q2
06:Q3
06:Q4
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
Prior Peak was2008:Q1 at $6.60 trillion
Latest (2012:Q4)was $6.96 trillion, anew peak--$708B
above 2009 trough
Recent trough (2009:Q3)was $6.25 trillion, down
5.3% from prior peak
Growth rates in 2012Q1:12 over Q4:11: 1.8%
Q2 over Q1: 1.4%
Q3 over Q2: 0.3%Q4 over Q3: 1.0%
Pace of payrollgrowth
accelerated inlate 2012
20
http://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCURhttp://research.stlouisfed.org/fred2/series/WASCUR -
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21
Commercial & Industrial Loans Outstandingat FDIC-Insured Banks, Quarterly, 2006-2012:Q4*
$1.1
6
$1.1
8$1.2
2
$1.4
4$1.4
8
$1.49
$1.5
0
$1.49
$1.4
3
$1.3
7
$
1.2
7
$1.2
1
$1.1
8
$1.1
7
$1.1
7
$1.1
8
$1.20$1
.24
$1.2
8 $1.3
5
$1.3
7$1.4
2
$1.4
6
$1.4
6$1.5
1
$1.1
3
$1
.25
$1.3
0$
1.3
9
$1.0
$1.1
$1.2
$1.3
$1.4
$1.5
$1.6
06:Q1
06:Q3
07:Q1
07:Q3
08:Q1
08:Q3
09:Q1
09:Q3
10:Q1
10:Q3
11:Q1
11:Q3
12:Q1
12:Q3
12:Q4
Outstanding Commercial Loan Volume Has Been Growing for Over TwoYears and Is Now Nearly Back to Early Recession Levels. Bodes Very Well
for the Creation of Current and Future Commercial Insurance Exposures*Latest data as of 3/18/2013.Source: FDIC at http://www2.fdic.gov/qbp/ (Loan Performance spreadsheet); Insurance Information Institute.
$Trillions
Commercial lending plungedby 21.2% ($330B) during thefinancial crisis and ensuing
period of tight credit
Commercial lending activity
is exceeds pre-crisis levels(+29.1% or $340B abovemid-2010 trough)
P f N C i l & I d i l
http://www2.fdic.gov/qbp/http://www2.fdic.gov/qbp/http://www2.fdic.gov/qbp/http://www2.fdic.gov/qbp/http://www2.fdic.gov/qbp/http://www2.fdic.gov/qbp/ -
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22
Percent of Non-current Commercial & IndustrialLoans Outstanding at FDIC-Insured Banks,Quarterly, 2006-2012:Q4*
0.7
0%
0.7
4%
0.6
4%
0.6
7%
0.8
1%
1.0
7%
1.1
8% 1.
69% 2
.25% 2
.80%
3.57
%
3.43
%
3.0
5%
2.8
3%
2.7
3%
2.4
4%
1.8
9%
1.65%
1.49
%
1.2
9%
1.1
7%
1.0
9%
0.9
7%
0.8
7%
0.7
1%
0.6
3%
0.6
2%
0.6
3%
0%
1%
2%
3%
4%
06:Q1
06:Q2
06:Q3
06:Q4
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
Non-current loans (those past due 90 days or more or in nonaccrual status)are back to early-recession levels, fueling bank willingness to lend.
*Latest data as of 3/18/2013.Source: FDIC at http://www2.fdic.gov/qbp/ (Loan Performance spreadsheet); Insurance Information Institute.
Almost back to normallevels of noncurrent
industrial & commercialloans
Recession
V l f C t ti P t i Pl
http://www2.fdic.gov/qbp/http://www2.fdic.gov/qbp/http://www2.fdic.gov/qbp/http://www2.fdic.gov/qbp/http://www2.fdic.gov/qbp/http://www2.fdic.gov/qbp/http://www2.fdic.gov/qbp/http://www2.fdic.gov/qbp/http://www2.fdic.gov/qbp/http://www2.fdic.gov/qbp/http://www2.fdic.gov/qbp/http://www2.fdic.gov/qbp/ -
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23
Value of Construction Put in Place,January 2013 vs. January 2012*
-3.0%
-11.7%
-2.7%
7.1% 7.1%
21.1%
0.8%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
Total
Construction
Total Private
Construction
Residential--
Private
Non-
Residential--
Private
Total Public
Construction
Residential-
Public
Non-
Residential--
Public
Overall Construction Activity is Up, But Growth Is Entirely in the PrivateSector as State/Local Government Budget Woes Continue
Growth (%)
Private sectorconstruction activity is upin both the residential andnonresidential segments
*seasonally adjustedSource: U.S. Census Bureau, http://www.census.gov/construction/c30/c30index.html ; Insurance Information Institute.
Private: +12.2% Public: -3.0%
Public sectorconstruction activityremains depressed
f C
http://www.census.gov/construction/c30/c30index.htmlhttp://www.census.gov/construction/c30/c30index.htmlhttp://www.census.gov/construction/c30/c30index.htmlhttp://www.census.gov/construction/c30/c30index.htmlhttp://www.census.gov/construction/c30/c30index.html -
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24
Value of Private Construction Put in Place,by Segment, Jan. 2013 vs. Jan. 2012*
3.0%
-1.9%
5.8%
-9.4%
4.4%
-0.5%-2.7%
13.1%
-6.1%
12.2%
22.0%
4.0%
13.3%
26.2%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
TotalPrivate
Construc
tion
Residential
Total
Nonresidential
Lodging
Office
Commercial
HealthC
are
Educational
Religious
Amusement&
Rec.
Transporta
tion
Communica
tion
Po
wer
Manufacturing
Private Construction Activity is Up in Most Segments, Including the KeyResidential Construction Sector
Growth (%)Led by the Residential Construction, Lodging, Office,
and Manufacturing industries, Private sector
construction activity is up across many segments afterplunging during the Great Recession
*seasonally adjustedSource: U.S. Census Bureau, http://www.census.gov/construction/c30/c30index.html ; Insurance Information Institute.
V l f P bli C t ti P t i Pl
http://www.census.gov/construction/c30/c30index.htmlhttp://www.census.gov/construction/c30/c30index.htmlhttp://www.census.gov/construction/c30/c30index.htmlhttp://www.census.gov/construction/c30/c30index.html -
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25
Value of Public Construction Put in Place,by Segment, Jan. 2013 vs. Jan. 2012*
-0.4%
-8.5%-12.8%
-10.1%
15.8%
4.2%
-13.2%
-6.9%
0.9%
14.3%
-11.7% -11.7%
-2.7%
-26.1%
-9.7%
-30%-25%-20%-15%-10%
-5%0%5%
10%15%20%
Total
Public
Construction
Residential
Tot
al
Nonresidential
Office
Comm
ercial
HealthCare
Educational
Public
Safety
Amusement&
Re
c.
Transpo
rtation
Power
High
way&
Street
Sewag
e&
WasteDi
sposal
WaterS
upply
Conservation&
Devel
op.
Public Construction Activity is Down in Many Segments as State andLocal Budgets Remain Under Stress; Improvement Possible in 2013.
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 manysegments, but is actually now up in
some key segments
Transportation and Powerprojects lead public sector
construction
ISM Manufacturing Index
http://www.census.gov/construction/c30/c30index.htmlhttp://www.census.gov/construction/c30/c30index.htmlhttp://www.census.gov/construction/c30/c30index.htmlhttp://www.census.gov/construction/c30/c30index.htmlhttp://www.census.gov/construction/c30/c30index.htmlhttp://www.census.gov/construction/c30/c30index.htmlhttp://www.census.gov/construction/c30/c30index.htmlhttp://www.census.gov/construction/c30/c30index.htmlhttp://www.census.gov/construction/c30/c30index.html -
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58
.3
57
.16
0.4
59
.6
57
.8
55
.3
55
.1
55
.2
55
.3 56
.958
.2
58
.5 60
.861.4
59
.7
59
.7
54
.2 55
.8
5
1.45
2.5
52
.5
5
1.8
52
.253
.154
.1
51
.953
.354
.1
52
.5
50.
2
50.5
50
.7
5
1.6
5
1.7
49.9
50.
25
3.15
4.2
40
45
50
55
60
65
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
ISM Manufacturing Index(Values > 50 Ind icate Expans ion )
January 2010 through February 2013
The manufacturing sector expanded for 33 of the 38 months from Jan.2010 through Feb. 2013. The expectation is that this will continue.
Source: Institute for Supply Management at http://www.ism.ws/ismreport/mfgrob.cfm; Insurance Information Institute.
Manufacturing activity expandedin 3 of the past 4 months, but only
slightly. The recent trend isbasically flat.
26
D ll V l * f M f t
http://www.ism.ws/ismreport/mfgrob.cfmhttp://www.ism.ws/ismreport/mfgrob.cfmhttp://www.ism.ws/ismreport/mfgrob.cfmhttp://www.ism.ws/ismreport/mfgrob.cfmhttp://www.ism.ws/ismreport/mfgrob.cfmhttp://www.ism.ws/ismreport/mfgrob.cfmhttp://www.ism.ws/ismreport/mfgrob.cfmhttp://www.ism.ws/ismreport/mfgrob.cfmhttp://www.ism.ws/ismreport/mfgrob.cfmhttp://www.ism.ws/ismreport/mfgrob.cfmhttp://www.ism.ws/ismreport/mfgrob.cfmhttp://www.ism.ws/ismreport/mfgrob.cfmhttp://www.ism.ws/ismreport/mfgrob.cfmhttp://www.ism.ws/ismreport/mfgrob.cfmhttp://www.ism.ws/ismreport/mfgrob.cfmhttp://www.ism.ws/ismreport/mfgrob.cfmhttp://www.ism.ws/ismreport/mfgrob.cfmhttp://www.ism.ws/ismreport/mfgrob.cfmhttp://www.ism.ws/ismreport/mfgrob.cfmhttp://www.ism.ws/ismreport/mfgrob.cfmhttp://www.ism.ws/ismreport/mfgrob.cfmhttp://www.ism.ws/ismreport/mfgrob.cfm -
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27
$200,000
$300,000
$400,000
$500,000
Jan-9
2Jan-9
3Jan-9
4Jan-9
5Jan-9
6Jan-9
7Jan-9
8Jan-9
9Jan-0
0Jan0
1Jan0
2Jan0
3Jan0
4Jan0
5Jan0
6Jan0
7Jan0
8Jan0
9Jan1
0Jan1
1Jan1
2Jan1
3
Dollar Value* of ManufacturersShipments Monthly, Jan. 1992Jan. 2013
*seasonally adjustedSource: U.S. Census Bureau, Full Report on Manufacturers Shipments, Inventories, andOrders, http://www.census.gov/manufacturing/m3/
Monthly shipments are nearly back to peak (in July 2008, 8 months into the recession).Trough in May 2009. Growth from trough to Jan. 2013 was 35%. Manufacturing is an
energy intensive activity and growth leads to gains in many commercial exposures: WC,Commercial Auto, Marine, Property and Various Liability Coverages
ENERGY INTENSIVE
The value of ManufacturingShipments in Jan. 2013 were up 35%to $481.8B from its May 2009 trough.
June figure is only 0.7% below itsprevious record high in July 2008.
$ Millions
27
M f t i G th f S l t d
http://www.census.gov/manufacturing/m3/http://www.census.gov/manufacturing/m3/http://www.census.gov/manufacturing/m3/http://www.census.gov/manufacturing/m3/http://www.census.gov/manufacturing/m3/http://www.census.gov/manufacturing/m3/http://www.census.gov/manufacturing/m3/http://www.census.gov/manufacturing/m3/http://www.census.gov/manufacturing/m3/http://www.census.gov/manufacturing/m3/http://www.census.gov/manufacturing/m3/http://www.census.gov/manufacturing/m3/http://www.census.gov/manufacturing/m3/http://www.census.gov/manufacturing/m3/http://www.census.gov/manufacturing/m3/http://www.census.gov/manufacturing/m3/http://www.census.gov/manufacturing/m3/http://www.census.gov/manufacturing/m3/http://www.census.gov/manufacturing/m3/http://www.census.gov/manufacturing/m3/http://www.census.gov/manufacturing/m3/http://www.census.gov/manufacturing/m3/http://www.census.gov/manufacturing/m3/http://www.census.gov/manufacturing/m3/ -
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28
Manufacturing Growth for SelectedSectors, 2013 vs. 2012*
10.2%
2.7%
6.0%
2.5%
3.8% 3.9%
-0.2%
3.6%
2.9%3.1%
3.8%
11.4%
1.4% 1.6%
-2%
0%
2%4%
6%
8%
10%
12%
A
ll
Manufa
cturing
Durab
leMfg.
W
ood
Products
P
rimary
Metals
Fabricated
Metals
Machinery
Electrical
E
quip.
Transportation
Equ
ip.
Non-D
urable
M
fg.
Food
Products
Petroleum&
C
oal
Ch
emical
Pla
stics&
Rubber
T
extile
Products
Manufacturing Is Expanding Across a Wide Range of Sectors that WillContribute to Growth in Insurable Exposures Including: WC, Commercial
Property, Commercial Auto and Many Liability Coverages
Growth (%)
Manufacturing of durablegoods was especially
strong in 2012
*Seasonally adjusted; Date are YTD comparing data through January 2013 to the same period in 2012.Source: U.S. Census Bureau, Full Report on Manufacturers Shipments, Inventories, andOrders, http://www.census.gov/manufacturing/m3/
Durables: +3.8% Non-Durables: +2.5%
Recovery in Capacity Utilization is a
http://www.census.gov/manufacturing/m3/http://www.census.gov/manufacturing/m3/http://www.census.gov/manufacturing/m3/ -
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66%
68%
70%
72%
74%
76%
78%
80%
82%
Mar01
Jun01
Sep01
Dec01
Mar02
Jun02
Sep02
Dec02
Mar03
Jun03
Sep03
Dec03
Mar04
Jun04
Sep04
Dec04
Mar05
Jun05
Sep05
Dec05
Mar06
Jun06
Sep06
Dec06
Mar07
Jun07
Sep07
Dec07
Mar08
Jun08
Sep08
Dec08
Mar09
Jun09
Sep09
Dec09
Mar10
Jun10
Sep10
Dec10
Mar11
Jun11
Sep11
Dec11
Mar12
Jun12
Sep12
Dec12
Recovery in Capacity Utilization is aPositive Sign for Commercial Exposures
Source: Federal Reserve Board statistical releases at http://www.federalreserve.gov/releases/g17/Current/default.htm. 29
Percent of Industrial Capacity
HurricaneKatrina
March 2001-November 2001
recession
Full Capacity
The closer the economy isto operating at full
capacity, the greater theinflationary pressure
The US operated at 79.6% ofindustrial capacity in Feb.2013, well above the June
2009 low of 68.3% and highestlevel since Mar. 2008
December 2007-June 2009 Recession
March 2001 through February 2013
29
Manufacturing Employment
http://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htmhttp://www.federalreserve.gov/releases/g17/Current/default.htm -
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30
Manufacturing Employment,Jan. 2010February 2013*
11,4
60
11,4
60
11,4
66
11,4
97
11,5
31
11,5
39
11,5
58
11,5
48
11,5
54
11,5
55
11,5
77
11,5
90
11,6
24
11,6
62
11,68
2
11,7
07
11,7
15
11,7
24
11,7
47
11
,760
11
,762
11
,770
11
,769
1
1,7
97
11,8
41
11,8
70
11,9
10
11,9
20
11,9
26
11,9
35
11,9
57
11,9
43
11,9
25
11,9
31
11,9
38
11,9
51
11,9
63
11,9
77
11,000
11,200
11,400
11,600
11,800
12,000
12,200
12,400
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
2/30/2
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Manufacturing employment is up by
more than 500,000 or 4.5% since Jan.2010a surprising source of strength
in the economy. Employment in thesector is close to a multi-year high.
*Seasonally adjusted
Sources: US Bureau of Labor Statistics at http://data.bls.gov; Insurance Information Institute.
(Thousands)
ISM Non-Manufacturing Index
http://data.bls.gov/http://data.bls.gov/http://data.bls.gov/http://data.bls.gov/http://data.bls.gov/http://data.bls.gov/http://data.bls.gov/http://data.bls.gov/ -
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50
.7 52
.754
.154
.6
54
.8
53
.5
53
.7
52
.853
.954
.656 5
7.1 5
9.4
59
.7
56
.3
54
.4
53
.3
53
.453
.8
52
.6
52
.6
52
.6
52
.653
.0
56
.8
56
.1
55
.0
53
.754
.1
52
.7
52
.954
.355
.2
54
.8
54
.855
.7
55
.256
.0
40
45
50
55
60
65
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
ISM Non-Manufacturing Index(Values > 50 Ind icate Expans ion )
January 2010 through February 2013
Non-manufacturing industries have been expanding and addingjobs. 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 expansionaryin 2013
31
Business Bankruptcy Filings
http://www.ism.ws/ismreport/nonmfgrob.cfmhttp://www.ism.ws/ismreport/nonmfgrob.cfmhttp://www.ism.ws/ismreport/nonmfgrob.cfmhttp://www.ism.ws/ismreport/nonmfgrob.cfmhttp://www.ism.ws/ismreport/nonmfgrob.cfmhttp://www.ism.ws/ismreport/nonmfgrob.cfmhttp://www.ism.ws/ismreport/nonmfgrob.cfmhttp://www.ism.ws/ismreport/nonmfgrob.cfmhttp://www.ism.ws/ismreport/nonmfgrob.cfmhttp://www.ism.ws/ismreport/nonmfgrob.cfmhttp://www.ism.ws/ismreport/nonmfgrob.cfmhttp://www.ism.ws/ismreport/nonmfgrob.cfmhttp://www.ism.ws/ismreport/nonmfgrob.cfmhttp://www.ism.ws/ismreport/nonmfgrob.cfmhttp://www.ism.ws/ismreport/nonmfgrob.cfmhttp://www.ism.ws/ismreport/nonmfgrob.cfmhttp://www.ism.ws/ismreport/nonmfgrob.cfmhttp://www.ism.ws/ismreport/nonmfgrob.cfmhttp://www.ism.ws/ismreport/nonmfgrob.cfmhttp://www.ism.ws/ismreport/nonmfgrob.cfmhttp://www.ism.ws/ismreport/nonmfgrob.cfmhttp://www.ism.ws/ismreport/nonmfgrob.cfmhttp://www.ism.ws/ismreport/nonmfgrob.cfmhttp://www.ism.ws/ismreport/nonmfgrob.cfm -
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32
43
,694
4
8,1
25
69
,300
62
,436
64
,004
71
,277
81
,23
5
82
,44
6
63
,853
63
,235
64
,853
71
,549
70
,643
62
,304
52
,374
51
,959
53
,549
54
,027
44
,367
37
,884
35
,47
2
40
,0
99
38
,5
40
35
,03
7
34
,317
39
,2
01
19
,695
28
,322 4
3
,546
60
,837
56
,282
4
7,8
06
30
,620
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
80
81
82
83
848586
8788
89
90
91
92
93
9495
96
9798
99
00
01
02
03
040506
0708
09
10
11
12:Q3
Business Bankruptcy Filings,1980-2012:Q3
Sources: American Bankruptcy Institute athttp://www.abiworld.org/AM/AMTemplate.cfm?Section=Home&TEMPLATE=/CM/ContentDisplay.cfm&CONTENTID=61633;Insurance Information Institute
Significant Exposure Implications for All Commercial Lines asBusiness Bankruptcies Begin to Decline
2011 bankruptcies totaled 47,806, down 15.1%from 56,282 in 2010the second consecutiveyear of decline. Business bankruptcies more
than tripled during the financial crisis. Through
Q3:2012, filings were down 15.8% vs. Q3:2011
% Change SurroundingRecessions
1980-82 58.6%1980-87 88.7%1990-91 10.3%2000-01 13.0%2006-09 208.9%*
32
Private Sector Business Starts
http://www.abiworld.org/AM/AMTemplate.cfm?Section=Home&TEMPLATE=/CM/ContentDisplay.cfm&CONTENTID=61633http://www.abiworld.org/AM/AMTemplate.cfm?Section=Home&TEMPLATE=/CM/ContentDisplay.cfm&CONTENTID=61633http://www.abiworld.org/AM/AMTemplate.cfm?Section=Home&TEMPLATE=/CM/ContentDisplay.cfm&CONTENTID=61633 -
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33
Private Sector Business Starts,1993:Q2 2012:Q2*
175
186
174
180
1861
92
18818718
9
18619
0194
191
1992
04
202
195
196
196
206
206
201
1
92
198
206
206
203
211
205
212
2002
05
204
204
197
203
209
201
1
92
1
92
193
2012
04
202
2102
12
209
2162
202
23
220
220
210
221
212
204
218
209
207
207
199
1911
93
1721
76
169
184
1751
79
188
200
1831
87191
197
193
191
203
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 Jun. 30, 2012 are the latest available as of Feb. 6, 2013; Seasonally adjusted.Source: Bureau of Labor Statistics, http://www.bls.gov/news.release/cewbd.t08.htm.
(Thousands)
Business starts were up 2.2% to748,000 in 2011 vs. 2010. In 2012,starts are likely to be up by about
2.7% over 2011 levels.
Business Starts2006: 872,0002007: 843,0002008: 790,0002009: 697,0002010: 742,0002011: 748,000*
33
http://www.bls.gov/news.release/cewbd.t08.htmhttp://www.bls.gov/news.release/cewbd.t08.htmhttp://www.bls.gov/news.release/cewbd.t08.htm -
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NFIB Small Business Optimism Index
January 1985 through February 2013
Source: National Federation of Independent Business at http://www.advisorperspectives.com/dshort/charts/indicators/Sentiment.html?NFIB-optimism-index.gif; Insurance Information Institute. 34
Small business optimism isreturning after taking a big hit
over Fiscal Cliff fears
12 Industries for the Next 10 Years:
http://www.advisorperspectives.com/dshort/charts/indicators/Sentiment.html?NFIB-optimism-index.gifhttp://www.advisorperspectives.com/dshort/charts/indicators/Sentiment.html?NFIB-optimism-index.gifhttp://www.advisorperspectives.com/dshort/charts/indicators/Sentiment.html?NFIB-optimism-index.gifhttp://www.advisorperspectives.com/dshort/charts/indicators/Sentiment.html?NFIB-optimism-index.gifhttp://www.advisorperspectives.com/dshort/charts/indicators/Sentiment.html?NFIB-optimism-index.gifhttp://www.advisorperspectives.com/dshort/charts/indicators/Sentiment.html?NFIB-optimism-index.gifhttp://www.advisorperspectives.com/dshort/charts/indicators/Sentiment.html?NFIB-optimism-index.gif -
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35
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
Manyindustries are
poised for
growth,though
insurersability to
capitalize onthese
industriesvaries widely
Shipping (Rail, Marine, Trucking, Pipelines)
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Hurricane Sandy Summary
36
Sandy Will Become One of theMost Expensive Events inInsurance History
36
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37
2012 Catastrophe Summary
Catastrophe Communications: US & Global
U.S. Focus: ~$37-$42B = 2nd Most Costliest Year Ever forInsured Catastrophe Loss (Behind 2005)
Economic Losses = $101B
Crop = Additional ~$16B ($7B-$8B privately insured)
NFIP Flood = Additional $9B+ Flood losses/NFIP/FEMA has been the #1 communications
issue in the wake of Sandy
Global Focus: $65B in Insured LossesWell Below $105B
in 2011 but Above 10-Yr. Avg. of $50B Cats abroad did not drive media cycle in 2012, save
ongoing Fukishima issues; Climate change
Market Consequences: Primary & Reinsurance
Impacts on price, availability
Top 12 Most Costly Hurricanes
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38
Top 12 Most Costly Hurricanesin U.S. History
(Insured Losses, 2012 Dollars, $ Billions)
*Estimate as of 12/09/12 based on estimates of catastrophe modeling firms and reported losses as of 1/12/13. Estimates range up to $25B.Sources: PCS; Insurance Information Institute inflation adjustments to 2012 dollars using the CPI.
$9.2 $11.1$13.4
$22.0$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 could
become the 3rd
costliesthurricane in USinsurance history
Hurricane Irenebecame the 12th mostexpensive hurricanein US history in 2011
10 of the 12 most costly hurricanes in insurancehistory occurred over the past 9 years (20042012)
Hurricane Sandy: Claim Payments to
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Hurricane Sandy: Claim Payments toPolicyholders, 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 W V NC NH DC ME VT
Insurers Will Pay at Least $18.75 Billion to 1.52 Million PolicyholdersAcross 15 States and DC in the Wake of Hurricane Sandy
39
At $9.6B and $6.6B,respectively, NY andNJ 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 InformationInstitute .
Hurricane Sandy: Number of Claims
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Auto,
250,500 ,
16%
Commercial
, 202,500 ,
13%
Homeowner, 1,067,000 ,
71%
Hurricane Sandyresulted in an
estimated 1.52 millionprivately insured
claims resulting in anestimated $18.75 to
$25 billion in insuredlosses. Hurricane
Katrina produced 1.74million claims and
$48.7B in losses (in2012 $)
Hurricane Sandy: Number of Claimsby 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. 40
Sandy is a high HOfrequency, (relatively
low) severity event (avg.severity
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Auto, $2,729, 15%
Commercial
, $9,024 ,48%
Homeowner, $6,997 ,
37%
Although Commercial
Lines accounted foronly 13% of total
claims, they accountfor 48% of all claim
dollars paid. In mosthurricanes,
Commercial Lines
accounts for about1/3 of insured losses.
Hurricane Sandy: Insured Loss byClaim Type* ($ 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. 41
Total Claim Value = $18.75 Billion*
Hurricane Sandy: Value of Homeowners
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New Jersey,
$2,500 , 36% New York,
$2,700 , 38%
All Other,$1,797 , 26%
Hurricane Sandy: Value of HomeownersClaims Paid, by State* ($ Millions)
*Preliminary as of 1/18/13.Source: PCS.
42
Hurricane Sandy
Estimated 1,067,000homeownersclaims**
$7.0 billion ininsured losses.
Average loss per
claim is $6,558
Claims in NJestimated at $2.5
billion (36%) and $2.7billion in NY (38%)
Hurricane Sandy: Number of Auto Claims
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New Jersey,
60,000 , 24%
All Other,40,500 , 16%
New York,
150,000 ,
60%
Hurricane Sandy
Estimated 250,500vehicle claims
$2.729 billion ininsured losses.
Average loss per
claim is $10,894
60% of the claimsoccurred in NY state.
Hurricane Sandy: Number of Auto Claimsby State*
*Preliminary as of 1/18/13.Source: PCS.
43
Hurricane Sandy: Value of Auto Claims
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New Jersey,
$250 , 32%
All Other,$129 , 17%
New York,$400 , 51%
Hurricane Sandy
Estimated 250,500vehicle claims
$2.729 billion ininsured losses.
Average loss perclaim is $10,894
About 50% of theclaim dollars will be
paid in NY, 32% in NJ.
Hurricane Sandy: Value of Auto ClaimsPaid, by State* ($ Millions)
*Preliminary as of 1/18/13.Source: PCS.
44
Hurricane Sandy: Loss Distribution by
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y yCommercial/Personal Lines andReinsurance vs. Primary Insurer
*Fitch Ratings assigns a range of 60-65% commercial and 35-40% personal lines., Hurricane Sandy Update, January 8, 2013.**Source: Insurance Information Institute rough estimate based on company reports as of January 13, 2013. Actual number will vary. 45
Personal
Lines
45%Commercial
Lines
55%
Primary
70%
Reinsurance30%
Personal vs. Commercial Lines* Primary vs. Reinsurer Share**
~55% of Sandy losses appear tobe commercial lines, and ~45%personal, the opposite of the
norm for hurricane losses
Reinsurers share of Sandy lossesappears to be in the 30% range,though this is highly preliminary
Hurricane Sandy: Average Claim Payment
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Hurricane Sandy: Average Claim Paymentby Type of Claim
$6,558$10,894
$43,056 $44,563
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000$45,000
$50,000
Home* Vehicle NFIP Flood** Commercial
Commercial (Business) Claims Were Nearly Seven Times More Expensivethan Homeowners Claims; Vehicle Claims Were Unusually Expensive
Due to Extensive Flooding
46
Commercial (i.e., businessclaims) are more expensive
because the value of property isoften higher as well as theimpact of insured business
interruption losses
*Includes rental and condo policies (excludes NFIP flood). **As of Feb. 20, 2013.
Sources: Catastrophe loss data is for Catastrophe Serial No. 90 (Oct. 28 31, 2012) from PCS as of Jan. 18, 2013; Insurance InformationInstitute .
The average insuredflood loss was 6.5 timeslarger than the averagenon-flood insured loss
(mostly wind)
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Hurricane Sandy: Flood Issues
47
Most of the Uninsured DirectLosses Are Due to Flooding
47
Residential NFIP Flood Take-Up Rates
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Source: Wharton Center for Risk Management and Decision Processes, Issue Brief, Nov. 2012; Insurance Information Institute.
Residential NFIP Flood Take Up Ratesin NJ (2010) & Sandy Storm Surge
48
Flood coverage penetration
rates were extremely low inmany very vulnerable areas in
NJ, with take-up rates far below50% in many areas
Residential NFIP Flood Take-Up Rates
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Source: Wharton Center for Risk Management and Decision Processes, Issue Brief, Nov. 2012; Insurance Information Institute.
Residential NFIP Flood Take Up Ratesin NY, CT (2010) & Sandy Storm Surge
49
Floodcoverage
penetrationrates were
extremely lowin many veryvulnerable
areas of NYand CT, withtake-up ratesfar below 50%in many areas
Hurricane Sandy: National Flood
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Hurricane Sandy: National FloodInsurance Program Payment, by State*
$2,437
$2,152
$149
$19 $12 $11 $8 $7 $0 $0$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
NY NJ CT RI MD DE VA NC ME DC
The NFIP Will Ultimately Likely Pay Close to $7 Billion to 100,000Policyholders Across 9 States and DC in the Wake of Hurricane Sandy
50
At $2.437B and$2.152B, respectively,NY and NJ sustained,
by far, the largest NFIPflood losses fromHurricane Sandy
TOTAL = $4.797 BILLION($ Millions)
*As of February 20, 2013.Sources: NFIP; Insurance Information Institute .
Flood Loss Paid by the National Flood
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51
Flood Loss Paid by the National FloodInsurance Program, 1980-2012E
*Estimate as of 11/25/12.Sources: Department of Homeland Security, Federal Emergency Management Agency, NFIP; Insurance Information Institute.
Billions (Original Values)
$0.23 $0.37 $0.17$1.30
$0.25
$17.74
$0.64 $0.61
$3.47
$0.78 $0.77$1.85
$7.50
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
$20
1980 1985 1990 1995 2000 2005 2006 2007 2008 2009 2010 2011 2012*
Hurricanes Katrinaand Rita accountedfor the majority of
2005s record
$17.4B payout
HurricaneIke
51
Hurricane Sandy and otherevents could result in $7.5billion in payouts from the NFIP
in 2012, second only to 2005and potentially exhausting the
NFIPs borrowing authority
Federal Aid Requests for States With Greatest
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52
Federal Aid Requests for States With GreatestSandy Impact & Federal Aid Proposals (as of 1/6/13)
*As of Jan. 2, 2013.Source: New YorkTimes, Dec. 6, 2012; Insurance Information Institute research.
Billions
$0
$10
$20
$30
$40
$50
$60
$70
New York New Jersey Connecticut Obama
Administration
Proposal
Senate
Proposal
(Dec. 28)
House
Proposal
(Jan. 2)Repair Mitigation/Prevention
States Requested Enormous Sums in Sandy Aid in the Middle of theFiscal Cliff Debate, Causing Delays
$33.0
$7.4
$29.5
$42.0
$9.0$6.0
$36.9$7.9
52
$33B to repairsubways, hospitals
and other facilities;$9B to upgradeinfrastructureagainst future
storms
$3.2
$60.4
$39.5B to repair schoolsroads, bridges,
businesses, homes andother facilities; $7.4B to
for mitigation andprevention against
future storms
$3.2B to burypower lines,
upgradetransmission
systems, buildsewage treatmentplants and other
mitigation projects
$60.2
$9.7
$51.0
Housepassed on
Jan. 5
$60.0*
Housepassed on
Jan. 15
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53
Federal Disaster
Declarations Patterns:1953-2012
53
Despite 11 Sandy Declarations,
Fewer Disasters Were Declared in2012 than the Record Number of
Declarations in 2010 and 2011
Number of Federal Disaster
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Declarations, 1953-2013*
13 1
718
16
16
7 71
212
22
20 2
525
11
11
19
29
17
17
48
46
46
38
30
22 2
5
42
23
15
24
21
34
272
8
23
11
31
38
45
32 3
6
32
75
44
65
50
45
45 4
9 5
6
69
48 52
63
75
59
81
99
47
5
43
0
20
40
60
80
100
120
53545556575859606162636465666768697071727374757677787980818283848586878889909192939495969798990001020304050607080910111213
*Through Mar. 16, 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 Recordsin 2010 an d2011. Hurricane Sandy Produced 13 Declarations in 2012/13.
The number of federal
disaster declarations set anew record in 2011, with 99,shattering 2010s record 81
declarations.
There have been 2,101federal disaster
declarations since1953. The average
number of declarationsper year is 35 from1953-2012, though
there few havent beenrecorded since 1995.
47 federal disasterswere declared in 2012
54
Federal Disasters Declarations by State,
http://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disastershttp://www.fema.gov/disasters -
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55
Federal Disasters Declarations by State,1953 2013: Highest 25 States*
86
78
72
66 6560
57
56
54
53
52
51
51
50
48
48
48
48
47
47
47
46
42
40
39
0
10
2030
40
50
6070
80
90
100
TX CA OK NY FL LA AL KY AR MO MS IL TN WV IA MN KS PA NE VA OH WA ND NC IN
Disas
ter
Dec
lara
tion
s
Over the past 60
years, Texas hashad the highest
number of FederalDisaster
Declarations
*Through Mar. 16, 2013. Includes Puerto Rico and the District of Columbia.Source: FEMA: http://www.fema.gov/news/disaster_totals_annual.fema; Insurance Information Institute.
Federal Disasters Declarations by State,
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56
Federal Disasters Declarations by State,1953 2012: Lowest 25 States*
39
39
38
36
36
35
34
30
28
28
26
26
25
24
24
24
23
22
18
17
17
15
15
13
11
10 9
0
10
20
30
40
50
ME SD AK GA WI NJ VT NH OR MA PR HI MI AZ MD NM ID MT CT NV CO DE SC DC UT RI WY
D
isas
ter
Dec
lara
tions
Over the past 60 years,Wyoming and RhodeIsland had the fewest
number of FederalDisaster Declarations
*Through Mar, 16, 2013. Includes Puerto Rico and the District of Columbia.Source: FEMA: http://www.fema.gov/news/disaster_totals_annual.fema; Insurance Information Institute.
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57
U.S. Insured Catastrophe
Loss Update
2012 Catastrophe Losses Were Close toAverage Until Sandy Hit
2011 Was the 5thMost Expensive
Year on Reco rd57
Natural Disaster Losses in the
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As of January 1, 2013
Number of
Events Fatalities
Estimated Overall
Losses (US $m)
Estimated Insured
Losses (US $m)
Tropical Cyclone 4 143 52,240 26,360
Severe
Thunderstorm115 118 27,688 14,914
Drought 2 0 20,000 16,000
Wildfire 38 13 1,112 595
Winter Storm 2 7 81 38
Flood 19 3 13 0
TOTALS 184 284 $101,134 $57,907
United States: 2012
58Source: MR NatCatSERVICE - Includes Federal Crop Insurance Losses. - Excludes federal flood.
Significant Natural Catastrophes, 2012
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g(Events with$1 billion economic loss and/or 50 fatalities)
Date Event
Estimated Economic
Losses (US $m)
Estimated Insured
Losses (US $m)June Sept 2012 Central US Drought 20,000 16,000
March 2 - 3 Thunderstorms 5,000 2,500
April 2 4 Thunderstorms 1,550 775
April 13- 15 Thunderstorms 1,800 910
April 28 29 Thunderstorms 4,500 2,500
May 25 30 Thunderstorms 3,400 1,700
June 6 7 Thunderstorms 1,400 1,000
June 11 13 Thunderstorms 1,900 950
June 28 July 2 Thunderstorms 4,000 2,000
August 26 - 30 Hurricane Isaac 2,000 1,220
October 28 - 30 Hurricane Sandy 50,000 25,000
5959Source: MR NatCatSERVICE - Includes Federal Crop Insurance Losses.; - Excludes NFIP losses.
Natural Disasters in the United States,1980 2012
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Numbe
r
Geophysical(earthquake, tsunami,volcanic activity)
Climatological(temperature extremes,drought, wildfire)
Meteorological (storm)
Hydrological(flood, mass movement)
1980 2012Number of Events (Annual Totals 1980 2012)
Source: MR NatCatSERVICE 60
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 184 naturaldisaster events in the
US in 2012
Losses Due to Natural Disasters in the US,
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19802012 (Overall & Insured Losses)
61
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 or3rd most expensiveyear on record for
insured catastrophelosses in the US.
Approximately 57% ofthe overall cost of
catastrophes in theUS was covered byinsurance in 2012
2012 Losses
Overall : $101.1B
Insured: $57.9B
U.S. Thunderstorm Loss Trends,
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,1980 2012
62Source: Property Claims Service, MR NatCatSERVICE
Averagethunderstorm
losses are up 7 foldsince the early
1980s. The 5- yearrunning 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.
Thunderstorm losses in 2012
totaled $14.9 billion, the 2ndhighest on record
Top 16 Most Costly Disasters
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in U.S. History
(Insured Losses, 2012 Dollars, $ Billions)
$7.8 $8.7 $9.2$11.1
$13.4
$22.0$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 couldbecome the 4th or 5thcostliest event in US
insurance history
Hurricane Irene became the12th most expense hurricane
in US history in 2011
IncludesTuscaloosa, AL,
tornado
IncludesJoplin, MO,tornado
12 of the 16 Most ExpensiveEvents in US History Have
Occurred Over the Past Decade
*Estimate as of 12/09/12 based on estimates of catastrophe modeling firms and reported losses as of 1/12/13. Estimates range up to $25B.Sources: PCS; Insurance Information Institute inflation adjustments to 2012 dollars using the CPI.
US Insured Catastrophe Losses
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64
$12
.6
$11
.0
$3
.8$
14
.3
$11
.6
$6
.1
$34
.7
$7
.6$
16
.3
$33
.7
$73
.4
$10
.5
$7
.5
$
29
.2
$11
.5
$14
.4
$33
.1$39
.0
$14
.0
$4
.8$8
.0
$37
.8
$8
.8
$26
.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*
US Insured Catastrophe Losses
*As of 1/2/13. Includes $20B gross loss estimate for Hurricane Sandy.
Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01 ($25.9B 2011 dollars). Includes only business andpersonal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B ($15.6B in 2011 dollars.)
Sources: Property Claims Service/ISO; Insurance Information Institute.
US CAT Losses in 2012 Will Likely Become the 2nd or3rd Highest in US History on An Inflation-Adjusted
Basis (Pvt Insured). 2011 Losses Were the 5th Highest
2012 was likely thesecond most expensive
year ever for insuredCAT losses
Record TornadoLosses Caused
2011 CAT Lossesto Surge
($ Billions, 2012 Dollars)
64
Top 16 Most Costly World Insurance
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65
Losses, 1970-2012*
(Insured Losses, 2012 Dollars, $ Billions)
*Figures do not include federally insured flood losses.
**Estimate based on PCS value of $18.75B as of 1/18/13 and assumption of upward development based on catastrophe modelerestimates ranging as high as $25B.
Sources: Swiss Re sigma 1/2011; Munich Re; Insurance Information Institute research.
$11.1$13.4 $13.4$13.4
$22.0 $23.9$24.6$25.6
$38.6
$48.7
$7.8 $8.1 $8.5 $8.7 $9.2 $9.6
$0
$10
$20
$30
$40
$50
$60
Hugo
(1989)
Winter
Storm
Daria
(1991)
Chile
Quake
(2010)
Ivan
(2004)
Charley
(2004)
Typhoon
Mirielle
(1991)
Wilma
(2005)
Thailand
Floods
(2011)
New
Zealand
Quake
(2011)
Ike
(2008)
Sandy
(2012)**
Northridge
(1994)
WTC
Terror
Attack
(2001)
Andrew
(1992)
Japan
Quake,
Tsunami
(2011)**
Katrina
(2005)
5 of the top 14 mostexpensive
catastrophes in worldhistory have occurredwithin the past 3 years
Hurricane Sandy couldbecome the 6th costliest eventin global insurance history
2012 insured CAT Los ses to taled$60B; Econom ic losses totaled$140B, acco rdin g to Sw iss Re
U.S. Insured Catastrophe Losses by
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66
Cause of Loss, 2011 ($ Millions)
2.8%
1.5%5.6%
72.1%
15.4%
.
Source: ISOs Property Claim Services Unit, Munich Re; Insurance Information Institute.
Hurricanes & Tropical Storms,$5,510
Wildfires, $855
Thunderstorms (Incl.Tornadoes , $25,813
Winter Storms, $2,017Geological Events, $50, (0.1%)
Flood , $535, (1.5%) Other, $1,000
2011s insured lossdistribution wasunusual with tornado
and thunderstormaccounting for the
vast majority of loss
Thunderstorm/
Tornado losseswere 2.5 timesabove the 30-year average
Inflation Adjusted U.S. Catastrophe1
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67
Losses by Cause of Loss, 199220111
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 losses
4. Includes wildland fires
5. Includes civil disorders, water damage, utility disruptions and non-property losses such as those covered by workers compensation.
Source: ISOs 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 byfar cause the mostcatastrophe losses,
even if hurricanes/TSare excluded.
Tornado share ofCAT losses is
rising
Insured cat losses
from 1992-2011totaled $384.3B, anaverage of $19.2Bper year or $1.6B
per month
Homeowners Insurance Catastrophe-RelatedCl i F d S it 1997 2012*
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Claim Frequency and Severity, 19972012*
*All policy forms combined, countrywide.Source: Insurance Research Council, Trends in Homeowners Insurance Claims, Sept. 2012 from ISO Fast Track data. 68
Avg. catastrophe
claim cost roseapproximately 200%
from 1997-2011
Cat claim frequency in2011 was at historichighs and more than
double the rate in 1997
Combined Ratio Points Associated withC h L 1960 2012*
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69
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
0.40
.71
.5
1.0
0.4
0.40
.7
1.8
1.1
0.6
1.4
2.0
1.3
2.0
0.5
0.50
.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
8.79
.4
3.6
0.9
0.1
1.1
1.1
0.8
0
1
2
3
45
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
2012E
The Catastrophe Loss Component of Private Insurer Losses HasIncreased Sharply in Recent Decades
Avg. CAT LossComponent of the
Combined Ratioby Decade
1960s: 1.041970s: 0.851980s: 1.311990s: 3.39
2000s: 3.522010s: 7.20*
Combined Ratio Points Catastrophe losses as ashare of all losses reached
a record high in 2012
Homeowners Insurance CombinedR ti 1990 2014F
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Ratio: 19902014F
113.0
11
7.7
158.4
113.6
101.0 1
09.4
108.2
111.4
1
21.7
109.3
98.2
94.4 1
00.3
89.0 95.7
11
6.9
105.8
106.7
122.2
11
8.0
105.5
106.811
8.4
112.7
1
21.7
80
90
100
110
120
130
140
150
160
170
9 0 9 1 92 9 3 9 4 9 5 9 6 9 7 9 8 9 9 0 0 0 1 0 2 03 0 4 05 0 6 0 7 0 8 09 1 0 1 1 1 2F1 3F1 4F
1
Homeowners Performance Deteriorated in 2011/12 Due toLarge Cat Losses. Extreme Regional Variation Can Be
Expected Due to Local Catastrophe Loss Activity
Sources: A.M. Best (1990-2013F);Conning (2014F); Insurance Information Institute.70
HurricaneIke
HurricaneSandy
Recordtornadoactivity
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71
Growth Analysis by State and
Business Segment
Premium Growth Rates Vary
Tremendously by State
71
Direct Premiums Written: Total P/C
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72
Percent Change by State, 2006-2011*
71
.5
41
.8
26
.4
22
.8
22
.6
20
.8
18
.2
1
1.8
10
.5
6.6
6.3
6.1
5.8
4.9
4.7
4.2
3.9
2.4
2.2
2.1
2.1
2.1
0.9
0.9
0.7
0.4
0
10
20
30
40
50
60
70
80
ND
SD
MT IA
NE
KS
OK
WY
TX
MN L
AAR
WI
TN IN A
KDE
NM
NC
KY
SC
WA
DC
MO V
TMS
Pecen
tc
hange
(%)
Sources: SNL Financial LC.; Insurance Information Institute.
Top 25 States
A limited number of statesshowed strong growth over
the past 5 years
Direct Premiums Written: Total P/CP Ch b S 2006 2011*
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73
Percent Change by State, 2006-2011*
0.4
-0.6
-0.8
-0.8
-1.1
-1.3
-1.4
-1.6
-
1.9
-
2.0
-2
.5
-3.1
-3.2
-3.5 -4.1
-4.4
-5.2
-5.8
-6.0
-10
.3
-10
.5
-10
.8
-11
.7
-12
.0
-13
.5
-19
.2
-25
-20
-15
-10
-5
0
5
AL
OH IL V
ANY
UT
US
GA
CT
PA
NJ
CO
MD
MA ID
OR R
I
ME M
IHI
NH
WV
FL
CA
AZ
NV
Pecen
tc
hange(
%)
Bottom 25 States
States with the poorestperforming economies alsoproduced the most negative
net change in premiums ofthe past 5 years
Sources: SNL Financial LC.; Insurance Information Institute.
NYs change inpremium growth
was similar tothe US average
Direct Premiums Written: PP AutoP t Ch b St t 2006 2011*
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74
Percent Change by State, 2006-2011*
16
.0
14
.6
13
.3
11
.5
9.1 9.0 8.7
8.1
8.0
7.7
7.1
6.7
6.7
6.0
5.7
5.7
5.3
5.0
4.8
4.6
4.3
4.3
3.5
3.5
3.4
2.8
0
2
4
6
8
10
12
14
16
TX
ND
OK
UT
WY
LA
KS W
ISD
SC
WA
NE IA A
KMT
WV
DC
DE
NC
NM
MO
TN V
AKY
MD
AR
Pecen
tc
hange
(%)
Sources: SNL Financial LC.; Insurance Information Institute.
Top 25 States
Direct Premiums Written: PP AutoP t Ch b St t 2006 2011*
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75
Percent Change by State, 2006-2011*
1.8
1.7
1.6
1.6
1.2
1.2
1.2
1.1
0.8
0.7
0.7
-0.4
-1.8
-2.0
-2.9
-2.9
-3.8
-4.4
-4.5
-5.0
-5.9
-6.9
-8
.2
-8.4
-9.5
-10
.1
-12
-10
-8
-6
-4-2
0
2
NY IN A
LUS IL P
AOR
CO ID G
ACT
FL
MS
NJ
OH
MN R
IHI
CA
VT
NV
MA
NH A
ZMI
ME
Pecen
tc
hange(
%)
Bottom 25 States
States with the poorestperforming economies also
produced the most negativenet change in premiums ofthe past 5 years
Sources: SNL Financial LC.; Insurance Information Institute.
NYs change in
premium growthwas similar tothe US average
Direct Premiums Written: HomeownersP t Ch b St t 2006 2011*
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76
Percent Change by State, 2006-2011*
25
.4
24
.6
24
.6
24
.4
24
.2
24
.2
23
.7
23
.6
23
.4
23
.4
23
.0
22
.0
20
.3
19
.8
18
.3
1
6.5
15
.9
15.3
14.5
14.4
12
.5
6.8
4.5
3.5
-0.5
-2.3
-5
0
5
10
15
20
25
30
RI
NY IL
CO
NE
NH V
A IN NJ
OH
TX
WA
OR
MA
US
PA
AK
WV
DC
VT
MD A
ZCA
MI
NV
FL
Pecen
tc
hange
(%)
Sources: SNL Financial LC.; Insurance Information Institute.
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