1. Credit Suisse Teleconference Florida Homeowners Reinsurance
April 8, 2009
Joseph L. Petrelli, President
Barry J. Koestler, II, CFA, Chief Ratings Officer
Robert M. Warren, CPA, CPCU, Client Services Manager
Demotech, Inc.
(800)

2. Demotech, Inc.
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.

3. Insurance Fundamentals
Quality and Liquidity of Invested Assets
Adequacy of Loss and Loss Adjustment Expense Reserves 
Quality of Reinsurance
Adequacy of Rate Levels
Ability to Serve Niche(s)

4. Florida Domiciled P&C Insurers – Data Reviewed
Biographical information on principals and key employees
Summaries of the duties of key personnel
Business plan
Pro forma financial statements
Catastrophe modeling analysis
Underwriting guidelines
Initial rate, rule and form filings
Claims department procedures and practices

5. Florida Domiciled P&C Insurers – Data Reviewed (cont.)
Investment guidelines
Management and administrative agreements
Reinsurance information
Marketing and sales materials
Producer contracts
Any other information necessary to familiarize Demotech with the company and its operations

6. Why Do Others Favor Larger Insurers?
Magnitude of surplus
Broad array of insurance products
Diversified geographical exposure
Well-known brand names
Access to capital
However, in practice, size and diversification may have limited impact on the risk of insolvency.

7. Practices That Lead To Trouble
Lack of focus on marketing, underwriting and claims practices
Pricing decisions
Emphasis on earning projections
Emphasis on market share
Inadequate loss reserves in order to meet earning projections (at least on paper)
Entrance into new markets/product lines
Inefficient Information Technology systems

9. Summary
We have been part of the solution to the property insurance situation since 1996
Demotech’s track record on long-term solvency – Florida and countrywide – is enviable
We hope to be a part of the solution for years to come