© 2009 Burand & Associates, LLC

The State of the Insurance Industry

The State of the Insurance Industry

When Will the Market Finally Turn?When Will the Market Finally Turn?When Will the Market Finally Turn?When Will the Market Finally Turn?

Agenda

The difference between claims paying ratings and insurer stability Carrier stability How a company’s stability impacts:

Agency CompensationClaims paying behaviorE&O: Agents’ obligations to their clients

The state of the overall P&C industry and how it impacts individual carriers. Opportunities abound for agencies willing to study the market

© 2009 Burand & Associates, LLC© 2009 Burand & Associates, LLC

Agents & Brokers Must Understand:Agents & Brokers Must Understand:

• The difference between claims paying ratings and insurer stability

• Why stability is a strong indicator of future claims paying rating downgrades

© 2009 Burand & Associates, LLC© 2009 Burand & Associates, LLC

3

4

GrowthGrowth Too Fast Too Slow Too erratic See Study Available at:

www.burand-associates.com

© 2009 Burand & Associates, LLC© 2009 Burand & Associates, LLC

Warning SignsWarning Signs

A B C D E F G H I J K

40%

50%

60%

70%

80%

Perc

enta

ge

Five-year Breakeven Loss RatioFive-year Net Pure Loss Ratio

Five-year Industry Breakeven Loss RatioFive-year Industry Net Pure Loss Ratio

Five-year Breakeven Loss Ratio vs. Five-year Pure Loss Ratio

5© 2009 Burand & Associates, LLC© 2009 Burand & Associates, LLC

NWP (000) Growth Has Company's Growth Rate Lagged Industry

Average?

Company 2008 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999Last 2

Yrs Last 3 Yrs2 of Last 3

Yrs3 of Last 4

YrsState Farm 48,539,641 1.30% -1.50% 1.50% 0.30% 2.50% 9.00% 12.80% 13.80% -2.70% -1.60% No No Yes NoAIG 31,945,256 -9.40% 0.80% 10.30% 0.60% 18.40% 29.70% 50.30% 13.40% 6.70% 0.30% No No No NoAllstate 25,747,374 -2.40% -1.20% -0.30% 3.10% 5.50% 5.50% 6.10% 1.70% 3.70% 9.30% Yes Yes Yes YesLiberty Mutual 22,249,415 -2.70% 2.50% 10.20% 5.60% 5.50% 5.40% 17.90% 3.40% 5.50% -3.00% No No No NoBerkshire 21,523,977 12.30% -5.20% 15.60% 3.60% 2.70% 3.70% 30.40% 12.00% 16.80% 14.00% No No No NoSt. Paul Travelers 20,456,307 0.20% 2.00% 4.00% -1.50% -1.70% 12.70% 4.95% 14.29% 12.29% -7.29% No No No NoNationwide 15,470,758 -2.10% -0.30% 4.90% 5.90% 3.80% 15.10% 10.60% 12.10% 3.40% 6.50% No No No NoFarmers 13,840,568 -3.50% 3.40% 6.40% 9.60% 13.30% -6.23% -3.65% -3.55% 1.65% 5.40% No No No NoProgressive 13,605,545 -1.20% -2.20% 0.30% 4.70% 12.30% 26.00% 30.20% 17.10% 1.50% 15.90% No No Yes NoHartford 10,209,684 -2.20% -1.20% 1.50% 10.00% 8.50% 5.70% 61.10% -24.20% 8.40% 5.10% No No Yes NoChubb 9,466,228 -2.20% -2.90% -3.60% 0.70% 7.70% 22.10% 30.20% 7.80% 12.40% -0.20% No No Yes NoUSAA 9,083,478 4.30% -0.30% 6.90% 1.80% 4.30% 10.40% 13.00% 9.60% 8.30% 6.10% No No No NoCNA 6,713,554 -4.60% -4.80% 1.50% -3.00% 1.90% -11.70% 8.80% -5.60% -2.60% -17.20% Yes Yes Yes YesAmerican Family 5,786,238 -2.80% 0.80% -1.20% 0.30% 7.50% 13.60% 18.40% 9.30% 5.40% 7.60% No No Yes NoAllianz 5,343,288 6.20% 4.40% 8.60% 1.50% 4.60% 56.30% -39.40% 23.90% -5.40% 4.10% No No No NoZurich Finl Svc 4,934,327 -15.90% 7.90% 4.40% -28.60% 3.80% 4.29% 13.87% 12.74% 0.00% -13.50% No No No NoAutoOwners 4,244,872 -1.80% -0.80% -0.20% 2.20% 7.70% 20.30% 22.50% 17.10% 14.20% 8.00% No No No NoErie 3,787,689 0.30% -0.80% -3.70% -1.20% 6.20% 13.10% 23.40% 14.80% 8.30% 2.60% No No No NoW.R. Berkley 3,767,770 -13.60% -6.30% 4.20% 8.60% 15.50% 35.10% 53.40% 22.40% 3.40% 5.20% Yes No Yes NoAce 3,348,103 -17.20% -10.50% -2.00% 2.90% 31.50% 24.90% 43.30% 21.20% -17.70% 9.20% Yes Yes Yes YesMunich Re 3,189,224 1.80% -8.20% 154.40% -354.33% 15.80% 31.10% -56.70% -12.10% 12.40% 23.80% No No No NoCincinnati 3,012,197 -3.40% -1.90% 3.30% 2.60% 6.50% 7.80% 0.80% 37.70% 11.90% 7.90% Yes No Yes NoMetLife Auto & Home Group 2,962,503 -0.90% 1.20% 0.90% -1.20% 0.10% 2.90% 3.40% 2.60% 13.50% 29.00% No No No NoFairfax 2,786,936 -8.50% -4.20% 1.80% -2.60% 6.10% -1.10% 12.30% 15.20% 0.80% -11.30% Yes Yes Yes YesMercury General 2,726,875 -7.80% -2.10% 3.20% 11.20% 16.60% 21.60% 28.60% 13.40% 5.50% 5.40% Yes No Yes NoAssurant Group 2,688,695 8.50% 28.10% 30.10% 23.70% 4.70% 7.70% 3.60% 6.50% -1.80% -1.00% No No No NoGreat American 2,673,682 2.20% 1.40% 8.00% 9.60% 20.40% 2.00% -5.00% -3.80% 15.30% -11.50% No No No NoFM Global 2,652,385 -4.30% -2.80% 7.70% 15.90% -14.70% 19.40% 93.60% 32.40% 9.60% -11.70% Yes No Yes NoWhite Mtn-CGU 2,644,293 -6.30% 1.20% -4.40% -8.40% 7.50% -5.80% -24.50% -13.20% 3.40% 1.60% No No Yes YesHanover-Allmerica 2,578,272 3.70% 4.70% 7.20% -3.80% 0.10% -1.50% -0.40% 5.60% 8.40% 1.60% No No No No

Top 30 -1.77% -1.46% -6.07% 1.40% 6.00% 13.88% 0.94% 12.70% Total

6© 2009 Burand & Associates, LLC© 2009 Burand & Associates, LLC