February 3, :00 – 4:00 P.M. EST

 Incorporated in 1985, Demotech, Inc. is a financial analysis and actuarial services firm that provides Financial Stability Ratings ® (FSRs) to the P&C and Title insurance industry.  Demotech was the first company to have its rating process formally reviewed and accepted by: ◦ Fannie Mae (1989) ◦ Freddie Mac (1990) ◦ HUD (1994 & 2005)  1996 ◦ Worked with Florida Office of Insurance Regulation (then DOI) to develop FSRs for Florida “take out” insurers to depopulate the residual market.  2005 ◦ Accepted by HUD for rating Professional Liability insurers of long term care facilities.  2009 ◦ Received carve-back on insolvency provision from several insurance agents’ errors and omissions insurance carriers.  2010 ◦ Participant in independent Florida State University and Wharton School studies evaluating insurer financial ratings.

9/30/2010 Total Direct Premium Written for Rated Companies of more than $23,000,000, Rated Companies as of 2/2/2011

 Balance sheet fundamentals  Management – planning/strategy  Rate adequacy  Operating results  Guidance on Financial Stability Ratings ® and Catastrophe Reinsurance Program Reporting for Florida Property Insurers  Florida is a difficult market to earn an FSR upgrade due to uncertainty, variability and regulatory pressure

Risk Based CapitalGreater than 300% TAC/ACL Liquidity – Cash & Invested Assets to Total Liabilities Greater than 1:1 Total Liabilities to SurplusLess than 3:1 Favorable Loss Reserve DevelopmentAnnual and Quarterly Underwriting ResultsLoss of no more than 10% of Prior Year Surplus GPW to SurplusLess than 6:1 NPW to SurplusLess than 3:1 Net CAT Retention to Surplus *Less than 15% of Current Surplus These criteria are not a safe harbor or bright-line indicator for acceptable financial performance * APPLICABLE TO FLORIDA PROPERTY WRITERS

 Modeling is reflected in the evaluation of the reinsurance program  Reinsurance program is evaluated on the quality and quantity of reinsurance including the catastrophe coverage within the program  Demotech does not recommend a particular model or model version, public or private  Evaluation of current modeling results  Model creep - what we are willing to consider  Provide comparison to prior season’s model results

Dr. Shahid Hamid Professor, Department of Finance RB 208, College of Business Florida International University Miami, Florida Tel: fax:

 Overview  Florida Hurricane Catastrophe Fund – Mandatory, TICL  Aggregate cover  Credit worthiness  Affiliates, captives and alternative programs  Net catastrophe retentions, event period and limits  CAT Reinsurance Data Call update Demotech does not publish prescribed acceptable parameters for reinsurance retentions or other aspects of a reinsurance program. We believe that the variables inherent in evaluating the appropriateness of each insurer’s reinsurance program preclude the establishment of rigid, universal benchmarks. However, we do provide feedback on aspects of company-specific reinsurance programs that are pertinent to our review.

1. Capital Adequacy - underwriting results, capital sources 2. Rate Adequacy 3. Reinsurance Program  Investments in government issued bonds  Unauthorized Reinsurance Rule – Paragraph 3 (e) approval  Citizens Property Insurance Corporation  Regulatory and legislative matters impacting Financial Stability Ratings ®  Independent studies discussing Demotech Financial Stability Ratings ® will be finalized and published