Florida Insurance Marketsat the Crossroads

Critical Issues in Property, Auto & Other Key Coverages in a Weak Economy

5th Annual Insurance Summit, Florida Chamber of CommerceOrlando, FL

November 17, 2011Download at www.iii.org/presentations

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

Florida’s Insurance Markets Are Among the Biggest and

Most Volatile in the US

A Strong Insurance Industry Is in the Best Interest of Policyholders and Insurers and Is Essential to

Healthy Economy

3

Top Ten States by P/C Premium Volume, 2010*

$16.4$13.7 $13.2 $12.9

$55.0

$36.7 $35.2 $34.9

$20.2 $19.2

$0

$10

$20

$30

$40

$50

$60

CA TX FL NY IL PA NJ MI GA OH

*Direct premiums written.Source: SNL Financial; Insurance Information Institute

$ Billions Florida is a very important state to p/c insurers, with $35.2 billion in premiums written in 2010—

3rd highest in the country and accounting for 7.5% of all premium written in the US

Florida P/C Premiums Written Fell by Approximately 17% Between 2007 and 2009 As the State’s Economy Crashed

4

All Lines DWP Growth: FL vs. U.S., 2001-2010

Source: SNL Financial.

12.0

% 14.3

%

9.8%

7.4%

2.2% 3.

4%

0.5%

-2.1

%

-3.3

%

0.0%

13.4

%

15.3

%

11.4

%

11.9

%

10.3

% 14.1

%

-1.1

%

-9.0

% -6.5

%

1.2%

-15%

-10%

-5%

0%

5%

10%

15%

20%

01 02 03 04 05 06 07 08 09 10

US DWP: All Lines FL DWP: All Lines

(Percent)

5

Direct Premiums Written: All P/C Lines Percent Change by State, 2005-2010

44

.8

25

.4

19

.8

17

.3

16

.6

14

.2

13

.9

12

.4

12

.3

11

.9

9.1

8.1

8.1

7.1

6.8

5.4

5.2

4.7

3.8

3.7

3.1

3.0

1.5

1.2

1.1

0

5

10

15

20

25

30

35

40

45

ND

SD LA

WY

OK

WV

KS IA TX

MT

NE

DE

MS

NM SC

DC

UT

AR

NC ID WA

AL

WI

AK

TN

Pe

ce

nt

ch

an

ge

(%

)

Sources: SNL Financial LC.; Insurance Information Institute.

Top 25 States

North Dakota is the growth juggernaut of the P/C

insurance industry—too bad nobody lives there…

6

0.7

0.6

0.1

-0.1

-0.3

-0.5

-0.8

-1.4

-1.6

-1.7

-2.5

-2.8

-2.9

-3.4

-3.6

-4.1

-4.5

-4.7

-4.8

-5.7

-5.8

-8

-8.2

-8.3

-13

.5

-14

.2

-15

.5

-20

-15

-10

-5

0

5M

D

MO

KY IN NY

GA

MN

VA

US

PA

OR FL IL CT

VT

OH RI

CO

NJ HI

ME

NH

MA

AZ

NV MI

CA

Pe

ce

nt

ch

an

ge

(%

)

Sources: SNL Financial LC; Insurance Information Institute.

Bottom 25 States

Florida’s weak economy contributed to a nearly 3% net contraction in the size of the state’s P/C insurance market

between 2005 and 2010

Direct Premiums Written: All P/C Lines Percent Change by State, 2005-2010

US Direct Premiums Written declined by 1.6% between 2005

and 2010

7

Direct Premiums Written: Worker’s CompPercent Change by State, 2005-2010*

34

.4

23

.1

14

.2

10

.2

9.0

4.6

1.4

-3.7

-7.3

-9.3

-10

.0

-10

.3

-10

.9

-10

.9

-13

.0

-14

.7

-15

.3

-15

.9

-16

.9

-17

.8

-19

.8

-21

.4

-21

.7

-35-30-25-20-15-10-505

10152025303540

OK

MT ID LA

SD IA KS

NY WI

PA

MS IL

NM NJ

NE

MD

NC AL

CT VA

SC

AR

MN

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

Only 7 (small) states showed growth in workers

comp premium volume between 2005 and 2010

8

Direct Premiums Written: Worker’s CompPercent Change by State, 2005-2010*

-22

.6

-23

.7

-24

.2

-25

.0

-25

.2

-25

.2

-25

.3

-26

.8

-26

.9

-28

.1

-28

.3

-28

.7

-29

.0

-30

.1

-32

.5

-32

.6

-33

.8

-34

.7

-36

.1

-42

.7

-45

.4

-50

.7

-51

.2

-57

.7

-70

-60

-50

-40

-30

-20

-10

0

AZ

ME

GA

KY IN NH

OR

DC

MA

TN VT

US

TX

AK

MO MI

UT RI

CO

DE

NV HI

CA

FL

Pe

ce

nt

ch

an

ge

(%

)

Bottom 25 States

Nearly 60% of workers comp premiums in FL disappeared between 2005 and 2010, more

than in any other state

*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.

US Workers Comp DPW plunged 28.7% from

between 2005 and 2010

9

RNW All Lines: FL vs. U.S., 2000-2009

Sources: NAIC.

6.5%

-0.5%3.3%

9.5% 10.0%

5.3%

14.4%12.5%

2.4%6.3%

8.6% 7.7% 8.1%

16.9%

-8.3%

19.0% 20.1%

12.5% 12.4%

-30.2%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

00 01 02 03 04 05 06 07 08 09

US All Lines FL All Lines

P/C Insurer profitability in FL is below that of the US

overall over the past decade

US: 7.0%

FL: 6.7%

(Percent)

10

RNW PP Auto: FL vs. U.S., 2000-2009

Sources: NAIC.

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

00 01 02 03 04 05 06 07 08 09

US PP Auto FL PP Auto

Average 2000-2009

US: 7.2%

FL: 2.9%

11

RNW Homeowners: FL vs. U.S.,2000-2009

Sources: NAIC.

-53.4%

-183.3%

-200%

-150%

-100%

-50%

0%

50%

100%

00 01 02 03 04 05 06 07 08 09

US HO FL HO

(Percent)

Average 2000-2009

US: 4.7%

FL: 0.5%

15

Florida No-Fault (PIP) Fraud Update

Fraud and Abuse Have Cost Floridians More Than

$1 Billion Since 2009

16

Average No-Fault Claim Severity, 2011:Q2*

$1

7,0

25

$8

,54

9

$8

,16

2

$5

,17

8

$5

,16

5

$4

,21

2

$2

,91

9

$2

,24

5

$1

,89

2

$3

6,7

86

$7

,23

0

$5

,53

6

$5

,26

9$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

MI NJ FL NY MN DC KY HI ND PA KS UT MA

Several States Including FL Have Severe and Growing Problems With Rampant Fraud and Abuse in their No-Fault Systems. Claim Severities Are Up Sharply.

*Average of the four quarters ending 2011:Q2.Source: ISO/PCI Fast Track data; Insurance Information Institute.

MI, NJ, NY and FL currently are the largest states that have the most severe

problems in their no-fault system

FL has the 3rd highest auto no-fault average claim cost (severity) in the US

and recently surpassed NY

18

Top Ten Most Expensive And Least Expensive States For Automobile Insurance, 2008 (1)

RankMost

expensive statesAverage

expenditure RankLeast

expensive statesAverage

expenditure1 D.C. $1,126 1 North Dakota $503

2 Louisiana 1,105 2 Iowa 519

3 New Jersey 1,081 3 South Dakota 520

4 Florida 1,055 4 Nebraska 547

5 New York 1,044 5 Idaho 562

6 Delaware 1,007 6 Kansas 576

7 Rhode Island 986 7 Wisconsin 581

8 Nevada 970 8 North Carolina 595

9 Connecticut 950 9 Maine 600

10 Maryland 922 10 Indiana 612

(1) Based on average automobile insurance expenditures.

Source: © 2010 National Association of Insurance Commissioners.

Florida Is Now Ranked as the 3rd Most Expensive State for Auto Insurance, Recently Overtaking NY, With an Average Expenditure of $1,055. FL Could Become the Most Expensive State in the US

if Nothing Is Done to Control No-Fault Fraud and Abuse

20

Florida No-Fault (PIP) Claim Severity Is Trending Sharply Upward*

$7,552 $7,536

$8,022

$7,689

$8,085

$8,796 $8,758$8,602

$5,812

$7,045$6,741

$7,159$7,427 $7,534

$5,000

$5,500

$6,000

$6,500

$7,000

$7,500

$8,000

$8,500

$9,000

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

*Claim frequency is defined as the number of claims per 100 earned car years.Source: ISO/PCI Fast Track data; Insurance Information Institute

2008:Q4 through 2011:Q2

The Average Cost of FL No-Fault Claims Is Rising Rapidly

No-Fault claim severity (average cost per claim) is up 48.0% between Q1 2008 and Q2 2011 to a near-record high $8,602 per claim. No-fault fraud and abuse is the main driver.

21

Florida No-Fault (PIP) Claim Frequency Is Trending Sharply Upward*

1.761.82

1.90

2.01 2.05

1.88 1.881.95

1.54

1.421.49

1.421.52

1.72

1.00

1.20

1.40

1.60

1.80

2.00

2.20

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

*Claim frequency is defined as the number of claims per 100 earned car years.Source: ISO/PCI Fast Track data; Insurance Information Institute

2008:Q4 through 2011:Q2

Both the Number and Average Cost of FL No-Fault Claims Are Up Sharply Since Mid-2008

No-Fault claim frequency surged by 37.3% between Q2 2008 and Q2 2011. No-fault fraud and abuse is the only explanation

24

Florida’s No-Fault Fraud Tax: Estimated Cost per Insured Vehicle, 2009-2011E

$26.21

$54.27$57.60

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

2009 2010 2011E

*2011 estimate is based on data through Q2:2011. Source: Insurance Information Institute calculations and research.

Fraud Tax Per Vehicle

Unscrupulous Medical Providers and Attorneys Are Costing Honest Florida Drivers Hundreds of Millions of Dollars

In 2011, the estimated average Florida driver’s fraud tax is $57.60 per vehicle. This means that the fraud tax on a typical family with 2 cars is more than $115 this year last

year, more than doubling since 2009

+107.1% +6.1%

25

Florida’s No-Fault Fraud Tax: Estimated Aggregate Annual Cost, 2009-2011E ($ Millions)

$657.6$617.3

$297.0

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

2009 2010E 2011F

Fra

ud

Ta

x (

$ M

illio

ns

)

*2011 estimate is based on data through Q2:2011.Source: Insurance Information Institute calculations and research from ISO/PCI and AIPSO data.

Unscrupulous Medical Providers and Attorneys Are Costing Honest Florida Drivers Hundreds of Millions of Dollars

The total fraud tax levied on Florida vehicle owners

is an estimated $658 million in 2011.

+107.6% +6.5%

26

Florida’s No-Fault Fraud Tax: Estimated Cumulative Cost, 2009-2011E ($ Millions)

$297.0

$914.3

$1,274.9

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2009 2010 2011E

Cu

mu

lati

ve

Fra

ud

Ta

x

Cumulative Fraud Tax

Unscrupulous Medical Providers and Attorneys Could Cost Honest Florida Drivers Billions of Dollars

The cumulative fraud tax levied on Florida vehicle owners is

estimated at $1.275 billion from 2009 through 2011

+107.6%

+6.5%

*2011 estimate is based on data through Q2:2011.Source: Insurance Information Institute calculations and research from ISO/PCI and AIPSO data.

27

Florida Property Insurance Market Update Update

More Than Six Years After the Last Major Storm Hit Florida,

Deep Problems Remain

29

Top 12 Most Costly Disastersin U.S. History: Most Impacted Florida

(Insured Losses, 2010 Dollars, $ Billions)

Sources: PCS; Insurance Information Institute inflation adjustments.

$11.5 $12.8$17.5

$22.6 $23.1

$45.8

$8.6$8.2$6.7$6.3$5.3$4.3

$0$5

$10$15$20$25

$30$35$40

$45$50

Jeanne(2004)

Frances(2004)

Rita (2005)

Hugo (1989)

Ivan (2004)

Charley(2004)

Wilma(2005)

Ike (2008)

Northridge(1994)

Andrew(1992)

9/11Attack(2001)

Katrina(2005)

8 of the 12 largest catastrophes in US history have had direct

impacts on Florida property insurance markets

= Impacted FL; = No FL impact

31

Top 15 Most Costly World Insurance Losses, 1970-2011*

(Insured Losses, 2010 Dollars, $ Billions)

*Through June 20, 2011. 2011 disaster figures are estimates; Figures include federally insured flood losses, where applicable.Sources: Swiss Re sigma 1/2011; Munich Re, AIR Worldwide, RMS, Eqecat; Insurance Information Institute.

$20.5 $20.8 $23.1 $24.9$30.0

$72.3

$14.9$14.0$11.3$10.0$9.3$9.0

$0

$10

$20

$30

$40

$50

$60

$70

$80

TyphoonMirielle(1991)

Charley(2004)

NewZealandQuake(2011)

Rita (2005)

Wilma(2005)

Ivan (2004)

Ike (2008)

Northridge(1994)

WTCTerrorAttack(2001)

Andrew(1992)

JapanQuake,

Tsunami(2011)*

Katrina(2005)

6 of the 12 largest catastrophes in global history

have had direct impacts on Florida property insurance

markets, despite recent record losses abroad

= Impacted FL; = No FL impact

Florida is clearly one of the riskiest place on earth for insurers to

operate, but the risk is largely manageable

through private insurance and

reinsurance markets

32

Hurricanes, Insolvencies and Insured Losses, 1984-2011Insured Loss ($ Bill, 2009 Dollars)

No. of Insolvent Insurers

Sources: Florida TaxWatch, Risk & Reform: A Florida TaxWatch Analysis of Florida’s Property Insurance System, November 2011, citing the Insurance Information Institute and the Florida Hurricane Fact File.

33

Top Ten Most Expensive And Least Expensive States For Homeowners Insurance, 2008 (1)

RankMost

expensive statesAverage

expenditure RankLeast

expensive statesAverage

expenditure1 Texas (3) $1,460 1 Idaho  $387

2 Florida (4) 1,390 2 Utah  432

3 Louisiana  1,155 3 Oregon  439

4 Oklahoma 1,048 4 Washington 471

5 Massachusetts  1,026 5 Wisconsin  503

6 New York  983 6 Delaware  535

7 Connecticut 980 7 Ohio  565

8 Mississippi  980 8 Maine 572

9 D.C.  926 9 Pennsylvania  586

10 Kansas 916 10 Kentucky  601

(1) States with the same premium receive the same rank.(2) Based on the HO-3 homeowner package policy for owner-occupied dwellings, 1 to 4 family units. Provides “all risks” coverage (except those

specifically excluded in the policy) on buildings and broad named-peril coverage on personal property, and is the most common package written.(3) The Texas Department of Insurance developed home insurance policy forms that are similar but not identical to the standard forms.(4) Florida data excludes policies written by Citizen's Property Insurance Corporation, the state's insurer of last resort, and therefore are not directly

comparable to other states.

Note: Average premium=Premiums/exposure per house years. A house year is equal to 365 days of insured coverage for a single dwelling. The NAIC does not rank State Average Expenditures and does not endorse any conclusions drawn from this data.

Source: © 2010 National Association of Insurance Commissioners (NAIC). Reprinted with permission. Further reprint or distribution strictly prohibited without written permission of NAIC.

Florida ranked as the 2nd most expensive state for homeowners insurance in 2008, with an average expenditure of $1,390.

34

Federal Disasters Declarations by State, 1953 – Nov. 13, 2011: Highest 25 States

86

78

70

65 63

58

55 55 53 53 51 50 50 48 48 47 47 47 46 45 45 44 42 40 39

0

10

20

30

40

50

60

70

80

90

100

TX CA OK NY FL LA AL KY AR MO IL MS TN IA MN KS NE PA WV OH VA WV ND NC IN

Dis

aste

r Dec

lara

tions

Source: FEMA: http://www.fema.gov/news/disaster_totals_annual.fema; Insurance Information Institute.

Over the past nearly 60 years,

Texas has had the highest number of Federal Disaster

Declarations

FL has had 63 federal disaster declarations

since 1953, approximately 1 per

year, but has had none since 2009

35

Federal Disasters Declarations by State, 1953 – Nov. 13, 2011: Lowest 25 States*

39 39

36 35 35

32 32

27 27 26 26 25 25 24 23 23 22

20

17 16 16 15 14

11

9 9 9

0

10

20

30

40

50

ME SD GA AK WI VT NJ NH OR MA PR HI MI AZ ID NM MD MT NV CO CT SC DE DC RI UT WY

Dis

aste

r Dec

lara

tions

*Includes Puerto Rico and the District of Columbia.

Source: FEMA: http://www.fema.gov/news/disaster_totals_annual.fema; Insurance Information Institute.

Over the past nearly 60 years, Wyoming, Utah and Rhode Island had the fewest number of

Federal Disaster Declarations

36Source: MR NatCatSERVICE

Natural Loss Events,January – September 2011

World Map

Insured losses 1980 - 2011 (January – June only): US$ 389bn Insured losses 1980 - 2011 (January – June only): US$ 389bn

37Source: MR NatCatSERVICE © 2011 Munich Re

58%58%

2%

21%21%

<1%

12%12%

6%

Worldwide Natural Disasters, 1980-2011% Distribution of Insured Losses Per Continent (January – June only)

Source: Guy Carpenter, GC Capital Ideas.com, September 26, 2011.

Global Property Catastrophe Rate on Line Index, 1990-2011 YTD (6/1/11)

A modest increase in global property catastrophe reinsurance pricing was

evident in June 1 renewals in the wake of record global catastrophe

losses. Larger increase could occur for the Jan.1, 2012 renewals

Global Reinsurance Capital, 2007-2011:H1

Reinsurer Capital%

Change

Source: Aon Reinsurance Market Outlook, September 2011 from Individual Company and AonBenfield Analytics; Insurance Information Institute.

$411

$342

$402

$445$470

17%

-17%

-5%

18%

$300

$320

$340

$360

$380

$400

$420

$440

$460

$480

$500

2007 2008 2009 2010 2011:H1-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Reinsurer Capital Change

High Global Catastrophe Losses Have Had a Modest Adverse Impact on Global Reinsurance Market Capacity

Global reinsurance market capacity is down in mid-2011 due to large

catastrophe losses

40

U.S. Policyholder Surplus, 2006:Q4–2011:Q2

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$556.9

$559.1

$505.0$515.6$517.9

$420

$440

$460

$480

$500

$520

$540

$560

$580

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:Q2

2007:Q3Previous Surplus Peak

Quarterly Surplus Changes Since 2007:Q3 Peak

09:Q1: -$84.7B (-16.2%) 09:Q2: -$58.8B (-11.2%)09:Q3: -$31.0B (-5.9%)09:Q4: -$10.3B (-2.0%)10:Q1: +$18.9B (+3.6%)

10:Q2: +$8.7B (+1.7%)10:Q3: +$23.0B (+4.4%)10:Q4: +$35.1B (+6.7%)11:Q1: +$42.9B (+8.2%)11:Q2: +37.3B (+7.1%)

Surplus as of 6/30/11 fell by 1% below its all time record high of $564.7B set

as of 3/31/11. Further declines are likely

*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 $0.78 of

NPW—the strongest claims-paying status in its history.

41

Florida’s Economy: Weakness Hurts Insurer

Growth Prospects

Insurance Will Help Facilitate Accommodate Future Growth

in the Florida Economy

42

Real GDP Growth: Florida vs. US, 2007-2012F

1.1%

-3.4%

1.4%2.0% 2.2%1.9%

-0.3%

-3.5%

3.0%

1.8% 2.1%

-3.7%-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

2007 2008 2009 2010 2011F 2012F

US FL

Annual Change, 2007 through 2012F

Faster Growth Will Benefit All Floridians as Well as Their Insurers

FL economy sank faster than the US during the crisis;

Recovery is similar to US.

Source: US Depart. of Labor, US Dept. of Commerce (historical); Wells Fargo Securities (FL forecasts) as of September 2011; Blue Chip Economic Indicators (US Forecast, Nov. 2011); Insurance Information Institute.

43

European Exports as a Percent of State GDPInsured Loss ($ Bill, 2009 Dollars)

No. of Insolvent Insurers

Source: US Dept. of Commerce ; Wells Fargo Securities estimates, November 2011; Insurance Information Institute.

FL has a moderate

exposure to weakness in

Europe

Unemployment Surged, Incomes Plunged in FL As the Real Estate Bubble CollapsedUnemployment Rate (%)

% Change in Nominal Personal Income

Source: US Department of Labor (historical); Wells Fargo Securities (FL forecasts) as of September 2011; Insurance Information Institute.

4.0

10.211.0

6.2

11.510.7

2.2%2.5%4.5% 4.2%

4.3%-2.3%

0

2

4

6

8

10

12

14

2007 2008 2009 2010 2011F 2012F-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

FL Unemployment Rate Change in Nominal Personal Income

High Unemployment and Lower Income Are a Drag on Florida’s Economy

FL unemployment remains above the US average but income growth in recovering

Unemployment in FL in 2012 is estimated at

10.7% vs. 9.0% for the US

45

Unemployment Rates by State, September 2011:Highest 25 States*

13.4

11.9

11.1

11.0

10.6

10.6

10.5

10.5

10.3

10.0

9.8

9.8

9.7

9.6

9.2

9.1

9.1

9.1

9.1

9.0

8.9

8.9

8.7

8.5

8.3

0

2

4

6

8

10

12

14

NV CA MI SC FL MS NC RI GA IL AL TN KY OR NJ AZ OH WA US ID CT IN MO TX AR

Une

mpl

oym

ent R

ate

(%)

*Provisional figures for September 2011, seasonally adjusted.

Sources: US Bureau of Labor Statistics; Insurance Information Institute.

Florida has the 5th highest unemployment rate among

the 50 states

46

8.3

8.3

8.2

8.1

8.0

7.8

7.7

7.6

7.5

7.4

7.4

7.3

6.9

6.9

6.7

6.6

6.5

6.4

6.0

5.9

5.8

5.8

5.4

4.6

4.2

3.5

0

2

4

6

8

10

CO PA WV DE NY WI MT AK ME MD UT MA LA MN KS NM VA HI IA OK VT WY NH SD NE ND

Une

mpl

oym

ent R

ate

(%)

Unemployment Rates By State, September 2011: Lowest 25 States*

*Provisional figures for September 2011, seasonally adjusted.Sources: US Bureau of Labor Statistics; Insurance Information Institute.

Cold States = Low Unemployment

47

Weak Population Growth, Slow Household Formation Is Tempering FL Growth

108.1

68.2

28.2 38.750.0

264.3

135.6

99.7117.2 110.0

128.8

26.0

0

50

100

150

200

250

300

2007 2008 2009 2010 2011F 2012F

Change in FL PopulationChange in No. Households

Thousands

FL’s Construction Sector, One of Most Critical of FL’s Growth Engines, Remains in a Deep Recession

Household formation slowed faster than population

growth, suggesting people are consolidating

households as the state’s foreclosure crisis continues

Source: Dept. of Commerce (historical); Wells Fargo Securities (FL forecasts) as of September 2011; Insurance Information Institute.

48

Housing Permits: Multi-Family Unit Growth Poised to Soar, Single-Family Weak

32

,52

6

22

,85

5

7,8

63

11

,00

0

18

,50

0

73,200

39,788

27,51530,873 33,000

37,500

8,6

01

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2007 2008 2009 2010 2011F 2012F

Single-Family PermitsMulti-Family Permits

Annual Change, 2007 through 2012F

FL’s Construction Sector, One of Most Critical of FL’s Growth Engines, Remains in a Deep Recession

Single-family home construction in 2012 is

expected to be barely half what it was pre-crisis. Multi-family dwelling great is expected to rise by 68% in 2012 as people

shun homeownership or it remains beyond their means

Source: Dept. of Commerce (historical); Wells Fargo Securities (FL forecasts) as of September 2011; Insurance Information Institute.

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