2 Citizens was created in 2002 in the merger of the state’s two insurers of last resort, the Florida Windstorm Underwriting Association (FWUA) and the Florida Residential Property and Casualty Joint Underwriting Association (FRPCJUA). The merger has allowed Citizens to become exempt from all federal taxes, resulting in millions of dollars in annual savings. Citizens is also designed to realize additional administrative and economic efficiencies over its predecessor organizations. Quick Reference –FWUA: created in 1972 to provide wind-only coverage in coastal regions. –FRPCJUA: created in December, 1992 following Hurricane Andrew for Floridians unable to find homeowners insurance. Creation of Citizens Property Insurance Corporation

3 Citizens Board of Governors MemberAppointed ByCountyOccupation Bruce Douglas Chairman GovernorSt. Johns CountyChief Executive Officer Douglas Capital Management Gloria Fletcher Vice Chair President of the SenateAlachua CountyGloria W. Fletcher, P.A. Richard DeCheneGovernorLeon CountyRetired - CNA Allan KatzChief Financial OfficerLeon CountyAttorney Akerman Senterfitt Andrea “Andy” BennettChief Financial OfficerManatee CountyPresident A.M. Bennett & Company Carol EverhartPresident of the SenatePinellas CountyVice President BB&T Jay OdomSpeaker of the HouseOkaloosa CountyPresident Crystal Beach Development Company of Northwest Florida Earl HortonSpeaker of the HousePinellas CountyExecutive Vice President Bouchard Insurance, Inc.

4 Staff/Facilities Location# of Employees Jacksonville Main Office Corporate Center Parkway377 Jacksonville Cypress Plaza Drive105 Tallahassee Main Office - Monroe Park Towers 101 N. Monroe Street 59 Tallahassee – Citizens Centre 2101 Maryland Circle 116 Tampa 302 Knights Run Avenue 153 TOTAL Total employees does not include contract consultant or temporary employees 810 Employees

5 Each of the following three accounts are separate statutory accounts and have separate calculations of surplus, plan year deficit and assessment bases. Assets may not be commingled or used to fund losses in another account. Personal Lines Account (PLA) - Multi-peril policies –Former FRPCJUA : Homeowners, mobile homeowners, dwelling fire, tenants, condominium unit owners and similar policies. Commercial Lines Account (CLA) - Multi-peril policies –Former FPCJUA: Condominium association, apartment building and homeowners association policies. –Currently developing statutorily mandated commercial non-residential program. High-Risk Account (HRA) – Wind-only policies –Former FWUA: Personal lines wind-only policies, commercial residential wind-only policies and commercial non-residential wind-only policies issued in coastal HRA eligible areas. –In the process of introducing statutorily mandated multi-peril residential and commercial policies to be written in eligible areas. Overview of Accounts

6 Citizens Coverage Areas The Personal and Commercial Lines Accounts write personal and commercial residential coverage, respectively, in all 67 counties. The High-Risk Account (HRA) writes in 29 counties.

7 PLA Risk Counts–12/31/07

8 CLA Risk Counts– 12/31/07

9 PLA/CLA Policy and Coverage Trend

10 HRA Risk Counts – 12/31/07

11 HRA Policy and Coverage Trend

12 Risk Count Growth by Account – as of 12/31/07

13 Florida Residential Admitted Market Breakdown  The Florida residential property insurance admitted market is divided into 4 major parts based on policy counts:  Citizens – 21%  “Pups” of the major national writers – 28%  Florida-only domestic companies – 34%  Others, including USAA, etc. – 17%

14 PLA Policy Trends Nov 2007 Homeowner 245, , , ,600 Dwelling 113, , , ,992 Condo Unit Owner 27,124 25,757 47,338 59,038 Mobile Homeowner 23,244 59, , ,502 Tenant 6,305 2,117 2,870 4,420

15 CLA Policy Trends Nov 2007 Apartment Buildings 4,948 3,680 16,939 14,919 Condo Associations 12,137 9,651 50,339 63,462 Homeowners Associations 2,008 1,944 8,861 12,005 Note: The assumption of the Poe Group commercial residential policies during 2006 caused a large portion of the significant increase in risk counts.

16 Determination of Rates Starting in 2002, rates were based on the “top twenty” insurers Citizens rates were chosen to be equal to the highest rated company in a particular territory Citizens’ rates were set to be uncompetitive Only eligible for insurance with Citizens if you could not get insurance elsewhere

17 Rates In 2006, the “highest rated” mandate was relaxed Citizens’ rates were ordered to be based on actuarial principles Rate indications showed Citizens’ rates to be inadequate Rate increases went into effective 1/1/2007 A policyholder is now eligible for coverage by Citizens only if any offers from admitted insurers are more than 15% higher than Citizens’ rates for comparable coverage

18 Rates The rate increases effective January 1, 2007 were rescinded by legislative action. Any amounts collected were ordered to be refunded, and rates were frozen at 12/31/06 levels for all of 2007 and 2008 Thereafter, Citizens will submit recommended rates to OIR and OIR will set rates within 45 days; no challenge is allowed. The senate is considering a bill that would extent the rate freeze until 1/1/2010 with severe restrictions on rate increases in years 2011, 2012, 2013

19 Depopulation Programs and Projections  Only non-bonus takeout contracts for PLA and HRA are currently available.  Assuming carrier must remove during the 18-month contract period a minimum of either: 10,000 policies with wind coverage; or Policies with wind coverage with TIV (coverages A, B, C, and D) of $2 billion.  Each assumption during a contract period must remove a minimum of either: 2,500 policies; or TIV of $500 million.  Policies must be retained by the assuming carrier for a minimum of three (3) years.  CLA takeout program being developed. Projected implementation to occur in  Projected number of policies to be assumed during 2008: PLA: 320,000 CLA: 5,500

20 Historical Depopulation – Policy Counts Policy Removal12/31/200312/31/200412/31/200512/31/200612/31/2007 PLA 28, , ,128 26, ,923 HRA - 12,457 75,556 41,628 - Total Policies Removed 28, , ,684 67, ,923 Total Policies Remaining 820, , ,017 1,298,922 1,344,240

21 Capital Build-UP Incentive Program Created in 2006 for the purpose of increasing the availability of residential property insurance The Florida legislature appropriated $250 Million for use in providing Surplus Notes to qualified companies Estimated that 1.7 million policies were written by other companies as a result of this program This program has also lead to 165K policies being removed from Citizens Estimated that 480K policies have been kept of Citizens due to this program

22 Capital Build-UP Incentive Program – Goals Further spread of hurricane risk to new capital in Florida Continued depopulation of Citizens Mitigation of policy growth in Citizens Reduction in exposure and assessment potential for Florida Currently considering making more capital available for 2008

23 Wind Mitigation Credits In 2001, there were changes to the Florida Building Codes ARA conducted a study to quantify the impact of the new building codes Studied characteristics such as roof covering, roof shape, roof-to wall connections, openings, building height, roof framing, etc Developed hurricane severity relativities OIR has mandated wind premium discounts based on results of this study

24 Windstorm Mitigation Credit Statistics – as of 9/30/07 ProgramNumber of Policies including wind Number of Policies with WMC Percentage of Policies with WMC Total Wind Mitigation Credits Personal Residential – Multi Peril628,662189,53630%$87,790,347 Personal Residential – Wind Only358,581185,42452%$144,516,217 Commercial Residential – Multi Peril10,8974,91745%$44,881,524 Commercial Residential – Wind Only16,7465,62234%$70,439,886 Total Residential1,014,886385,49938%$347,627,974 For Personal Residential and Commercial Residential Policies Only

25 Reduction in Coverage Offer higher hurricane deductibles Exclude screen enclosures – offer buyback Exclude sinkhole coverage – offer buyback Limit HO coverage A amount to $1 million Offer lower coverage B coverage Over $750K and in a WBDR, must have storm shutters Within 2,500 of coast, must be built to Code Plus (built after 1/1/2009)

26 Florida Hurricane Cat Fund Purpose : Improve the availability and affordability of property insurance in Florida by providing inexpensive reinsurance to insurers Created in 1993 after Andrew Under the control and direction of the State Board of Administration of Florida (SBA - Board of Trustees: Governor, CFO, Attorney General ) Nine member committee – 3 Consumer reps, 3 industry business professionals (agent, reinsurer, primary insurer), 3 technical professionals (meteorologist, engineer, & actuary) Participation is mandatory FHCF provides more then 50% of all reinsurance coverage in the state

27 Florida Hurricane Cat Fund  Insurers pay the FHCF a premium based on their proportionate residential risk in the state – $1.4B of premium in 2007  Insurers have individual retentions – Industrial-wide retention of $6.1B in 2007  After the retention is filled, FHCF reimburses insurers for 90% of their covered residential losses; insurers pay 10% co-payment (There are 25% and 45% co-payment options available)  FHCF’s total liability is defined and limited statutorily – maximum 2007 liability was $27.85B

28 FHCF - Funding  The FHCF receives annual reimbursement premiums from participating insurers; these premiums are actuarially set to be equal to the average annual expected loss for the FHCF  If losses occur, and accumulated reimbursement premiums are insufficient to pay claims, the FHCF can issue tax-exempt bonds secured by emergency assessments for up to 30 years on a broad range of P&C insurance premiums in the state (This liability for losses is limited to the lesser of the statutory maximum or what the FHCF can raise in the capital markets)  The “post-event” bonds would be repaid by an ongoing emergency assessment of up to 6% per year on direct premiums for most P&C lines of business in Florida (current assessment base is $37.4B)  The FHCF has one tax-exempt bond issue outstanding in the amount of $1.35B with a final maturity of 2012, secured by a 1% emergency assessment

29 FHCF - Liquidity  $2.8 B of proceeds from 2006 pre-event extendible note transaction  $1.0 B from 2006 reimbursement premiums  $1.4 B collected from 2007 reimbursement premiums  Total of $5.2 B on hand

30 Funding the FHCF

31 Citizens’ Financial Highlights 2007 net income of $1.46 b on net earned premium of $3.16b 2008 budgeted income of $1.54 b 2008 year end surplus of $4.18 b Cash and investments of over $10 b Cash paying ability before emergency assessments of over $22 b –This includes premium revenue, surplus, pre-event financing, and FHCF reimbursements

32 Assessment Base is Broad and Diverse Total Premium Subject to Assessment Direct Written$33.3B Surplus Lines $4.1B Total$37.4B

33 Assessment Base is Broad and Diverse  The following lines are subject to assessment in 2008:

34 Citizens’ Assessment Types 1  Non-homestead assessment – levied on non-homestead Citizens’ policyholders, up to a total of 10% of premium for each account with a deficit (up to 30% total); billed immediately  Citizens policyholder surcharge – levied on all Citizens’ policyholders up to an additional 10% of premium of premium for each account with a deficit (up to 30% total); billed on renewal/new business  Additional Citizens policyholder assessment – levied on all Citizens’ policyholders up to 10% of premium for each account with a deficit (up to 30% total); billed on renewal/new business  Regular assessment – levied on all non-Citizens property and casualty policyholders up to 10% of premium for each account with a deficit (up to 30%); billed on renewal/new business  Emergency assessments – levied on all P&C policyholders up to 10% of premium (per account); this assessment is collected for as many years as necessary to cover deficits, but not exceed 10% per account in a calendar year (per account).

35 PLA/CLA Projected Claims Paying Resources (2008 Hurricane Season) 100 Year PML - $8.59 Billion (Not to scale) FHCF Recovery - Regular (90% of $2.826 Billion xs $969 Million) $2.543 Billion FHCF Attachment Point - $969 Million Surplus - $969 Million $0.969 Billion $5.814 Billion $ Billion 10% of $2.826 B or $283 M from Surplus Regular Assessments - $5.800 Billion 1 in 5-year PML 1 in 27-year PML Remaining Surplus - $1.302 Billion FHCF Recovery - TICL (90% of $2.019 Billion= $1.817 Billion) 10% of $2.019 B or $202 M from Surplus 100 Year PML - $9.278 Billion As of 12/31/07 1 in 220-year PML 1 in 49-year PML $7.116 Billion 1 in 68-year PML Liquidity Target $3.794 Billion Citizens’ Policyholder Surcharge - $800 Million Additional Assessment - $800M Non Homestead Assessments $140 million

36 HRA Projected Claims Paying Resources (2008 Hurricane Season) Surplus - $1.425 Billion Remaining Regular Assessments - $2.406 Billion FHCF Recovery - Regular (90% of $4.789 Billion xs $1.638 Billion) $4.310 Billion FHCF Attachment Point - $1.638 Billion $9.847Billion $1.425 Billion 100 Year PML $ Billion As of 12/31/07 10% of $4.79 B ($ 479 M) from AAs + CPS Citizens NH+ Additional Assessment + CPS - $213 M $ Billion 1 in 6-year PML 1 in 31-year PML $1.638 Billion 1 in 100-year PML (Not to scale) FHCF Recovery - TICL (90% of $3.420 Billion) $3.078 Billion 10% of $3.42 B ($ 342M) from AAs +CPS $ Billion 1 in 55-year PML 1 in 76-year PML Remaining Citizens’ Policyholder Surcharge - $330 Million 1 in 5-year PML Emergency Assessments $2.032 Billion (.40% for 30 years) Liquidity Target $6.427 Billion

37 Claim Stats for Hurricanes as of 12/31/07 HurricaneTotal Claims Payments % of Total Payments Charley530,837,26810% Frances1,075,967,15020% Ivan837,407,19115% Jeanne431,944,9927% Dennis85,128,8532% Katrina191,229,2254% Rita7,329,6070% Wilma2,313,717,73743% TOTAL5,381,250,727100% Data includes PLA, HRA, and CLA claims.

38 Insured Losses in Florida ……..Who Paid FL quasi-governmental entities paid almost 40% of losses (even without considering FIGA payments for Poe insolvency)

39 Reported Claims and Complaints

40 FIGA (Florida Insurance Guaranty Assoc.) $10 billion residential premium (estimated), representing $2 trillion of insured property value = Quasi-governmental entity Private Reinsurers (approx. 125) Private Insurers (5.2 million policies; 205 insurers) FHCF ($28 B in coverage; approx. 50% mkt share) Citizens (1.3 million policies) Residential Policyholders (6.5 million risks) Florida Residential Property Insurance Market