New Jersey’s Insurance Markets at the Crossroads: Update on Catastrophes, Fraud and Industry...

New Jersey’s Insurance Markets at the Crossroads:

Update on Catastrophes, Fraud and Industry Performance

Insurance Council of New JerseyLegislative Briefing

Trenton, NJMarch 5, 2012

Download at www.iii.org/presentationsRobert P. Hartwig, Ph.D., CPCU, President & Economist

Insurance Information Institute 110 William Street New York, NY 10038Tel: 212.346.5520 Cell: 917.453.1885 [email protected] www.iii.org

2

Presentation Outline

New Jersey Insurance Facts Summary of NJ & US P/C Insurance Financial Performance

Growth

Profitability

Capacity

Financial Strength

New Jersey’s No-Fault (PIP) Crisis Overview, Trends and Costs

Catastrophe Loss Developments & Trends US

New Jersey

Q&A

3

New Jersey Insurance Facts

EMPLOYMENT

U.S. Bureau of Labor Statistics data show the insurance industry provided 92,165 jobs in New Jersey in 2009, accounting for about $ 8.5 billion in compensation.

GROSS STATE PRODUCT

The insurance industry contributed $17.3 billion to the New Jersey gross state product (GSP) in 2008, accounting for 3.5 percent of the state GSP.

TAXES

Premium taxes paid by insurance companies in New Jersey totaled $509.3 million in 2010.

MUNICIPAL BONDS

Insurance companies invest the premiums they collect in state and local municipal bonds, helping to fund the building of roads, schools and other public projects. They provide businesses with capital for research, expansions and other ventures through their investments in corporate equities and bonds. Insurers held $11.8 billion in NJ municipal bonds in 2009, including $8.7 billion by property/casualty according to SNL Financial.

Source: Insurance Information Institute Firm Foundation report for NJ: http://www2.iii.org/assets/docs/pdf/NewJerseyFactBook2011.pdf

http://www2.iii.org/assets/docs/pdf/NewJerseyFactBook2011.pdf

4

New Jersey Insurance Facts

PREMIUMS

Direct premiums written by property/casualty insurance companies in New Jersey were $16.4 billion in 2010 (7th largest volume of the 50 states)

CLAIMS PAYMENTS

Insurance company claims payments help ensure the economic security of individuals and businesses and help sustain a number of related industries. In 2010 these payments in New Jersey as measured by direct property/casualty incurred losses, were over $10 billion.

CATASTROPHES

The insurance industry plays a vital role in helping New Jersey residents and businesses prepare for and recover from the potentially devastating effects of a disaster such as a catastrophic hurricane. 2011 was the most expensive year on record for New Jersey catastrophe losses, with insurers paying some $1.1 billion on more than 718,000 claims.

Source: Insurance Information Institute Firm Foundation report for NJ: http://www2.iii.org/assets/docs/pdf/NewJerseyFactBook2011.pdf

http://www2.iii.org/assets/docs/pdf/NewJerseyFactBook2011.pdf

5

P/C Insurance Industry Financial Overview

Profit Recovery Was Set Back in 2011 by High Catastrophe

Loss & Other Factors

5

P/C Net Income After Taxes1991–2011:Q3 ($ Millions)

$1

4,1

78

$5

,84

0

$1

9,3

16

$1

0,8

70

$2

0,5

98

$2

4,4

04 $

36

,81

9

$3

0,7

73

$2

1,8

65

$3

,04

6

$3

0,0

29

$6

2,4

96

$3

,04

3

$3

4,6

70

$7

,97

9

$2

8,6

72

-$6,970

$6

5,7

77

$4

4,1

55

$2

0,5

59

$3

8,5

01

-$10,000

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11*

2005 ROE*= 9.6% 2006 ROE = 12.7% 2007 ROE = 10.9% 2008 ROE = 0.1% 2009 ROE = 5.0% 2010 ROE = 5.6% 2011:Q3 ROAS1 = 1.9%

P-C Industry 2011:Q3 profits were down 71% to $8.0B vs. 2010:Q3,

due primarily to high catastrophe losses and as non-cat

underwriting results deteriorated

* ROE figures are GAAP; 1Return on avg. surplus. Excluding Mortgage & Financial Guaranty insurers yields a 3.0% ROAS for 2011:Q3, 7.5% for 2010 and 7.4% for 2009.Sources: A.M. Best, ISO, Insurance Information Institute 6

7

US Non-Life Combined Ratio,1969-2012F

90

95

100

105

110

115

120

69

70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09

10

11

12

Co

mb

ine

d R

ati

o

Source: A.M. Best; Insurance Information Institute

Recent underwriting results are not as poor

as in prior periods preceding “hard

markets”

Current Period Underwriting Results Have Deteriorated

Inflation, liability issues

Liability crisis

Capacity decline, Torts, market crash,

Med cost inflation

10

ROE: Property/Casualty Insurance vs. Fortune 500, 1987–2011*

* Excludes Mortgage & Financial Guarantee in 2008 - 2011.Sources: ISO, Fortune; A.M. Best (2011 P/C ROE); Insurance Information Institute (2011 Fortune 500 est.)

-5%

0%

5%

10%

15%

20%

87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11E

P/C Profitability Is Both by Cyclicality and Ordinary Volatility

Hugo

Andrew

Northridge

Lowest CAT Losses in 15 Years

Sept. 11

Katrina, Rita, Wilma

4 Hurricanes

Financial Crisis*

(Percent)

11

Treasury Yield Curves: Pre-Crisis (July 2007) vs. Jan. 2012

0.02% 0.03% 0.07% 0.12% 0.24%

1.38%

1.97%

4.82% 4.96% 5.04% 4.96% 4.82% 4.82% 4.88% 5.00% 4.93% 5.00%5.19%

0.84%

0.36%

3.03%2.70%

0%

1%

2%

3%

4%

5%

6%

1M 3M 6M 1Y 2Y 3Y 5Y 7Y 10Y 20Y 30Y

January 2012 Yield CurvePre-Crisis (July 2007)

Treasury yield curve remains near its most depressed level

in at least 45 years. Investment income is falling as a result. Fed is unlikely to hike rates until well into 2014.

The Fed Is Actively Signaling that it Is Determined to Keep Rates Low Through Late 2014

Source: Federal Reserve Board of Governors; Insurance Information Institute.

12

-1.8

%

-1.8

%

-2.0

%

-3.6

%

-3.3

%

-3.3

%

-3.7

%

-4.3

%

-5.2

%

-5.7

%

-7.3%

-1.9

%

-2.1

%

-3.1

%

-8%-7%-6%-5%-4%-3%-2%-1%0%

Perso

nal L

ines

Pvt Pass

Aut

o

Pers P

rop

Comm

ercia

l

Comm

l Auto

Credit

Comm

Pro

p

Comm

Cas

Fidelity

/Sure

ty

Warra

nty

Surplu

s Line

s

Med

Mal

WC

Reinsu

rance

**

Lower Investment Earnings Place a Greater Burden on Underwriting and Pricing Discipline

*Based on 2008 Invested Assets and Earned Premiums**US domestic reinsurance onlySource: A.M. Best; Insurance Information Institute.

Reduction in Combined Ratio Necessary to Offset 1% Decline in Investment Yield to Maintain Constant ROE, by Line*

12

A Brief History of Growth in the P/C Insurance Industry

13

Growth in New Jersey Has Been Below Average in Recent Years

13

14

-5%

0%

5%

10%

15%

20%

25%

71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11*

12

US Net Written P/C Premium Growth:1971—2012F

(Percent)1975-78 1984-87 2000-03

*2011 and 2012 figures are A.M. Best EstimatesShaded areas denote “hard market” periodsSources: A.M. Best (historical and forecast), ISO, Insurance Information Institute.

Net Written Premiums Fell 0.7% in 2007 (First Decline

Since 1943) by 2.0% in 2008, and 4.2% in 2009, the First 3-Year Decline Since 1930-33.

NWP was up 3.5% (est.) in

20112012

expected growth is

3.8%

15

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…

16

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

-8.0

-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

States with the poorest performing economies also produced the most negative net change in premiums of

the past 5 years

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

Premiums in NJ contracted 3 times faster

than the US overall between 2005 and 2010

SURPLUS/CAPITAL/CAPACITY

17

Have Large Global Losses Reduced Capacity in the Industry, Setting

the Stage for Higher Prices?

17

19

Policyholder Surplus, 2006:Q4–2011:Q3

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

$538.6

$564.7

$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:Q1 11:Q2 11:Q3

2007:Q3Previous Surplus Peak

Quarterly Surplus Changes Since 2011:Q1 Peak

11:Q2: -$5.6B (-1.0%)

11:Q3: -$26.1B (-4.6%)

Surplus as of 9/30/11 was down 4.6% below its all

time record high of $564.7B set as of 3/31/11

*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 $0.83 of NPW, close to the strongest claims-

paying status in its history.

19

Financial Strength in the P/C Insurance Industry

20

Despite the “Great Recession,” Near-Record Catastrophe Losses and Low Interest Rates, the Industry

Remains Financially Strong20

P/C Insurer Impairments, 1969–20118

15

12

71

19

34

91

31

21

99

16

14

13

36

49

31 3

45

04

85

56

05

84

12

91

61

23

11

8 19

49 50

47

35

18

14 15 16 1

9 21

28

5

0

10

20

30

40

50

60

70

69

70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09

10

11

Source: A.M. Best Special Report “1969-2011 Impairment Review,” January 23, 2012; Insurance Information Institute.

The Number of Impairments Varies Significantly Over the P/C Insurance Cycle, With Peaks Occurring Well into Hard Markets

3 small insurers in Missouri did encounter

problems in 2011 following the May

tornado in Joplin. They were absorbed by a

larger insurer and all claims were paid.

21

22

P/C Insurer Impairment Frequency vs. Combined Ratio, 1969-2011

90

95

100

105

110

115

1206

97

07

17

27

37

47

57

67

77

87

98

08

18

28

38

48

58

68

78

88

99

09

19

29

39

49

59

69

79

89

90

00

10

20

30

40

50

60

70

80

91

01

1

Co

mb

ine

d R

ati

o

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

Imp

airm

en

t Ra

te

Combined Ratio after Div P/C Impairment Frequency

Source: A.M. Best; Insurance Information Institute

2011 impairment rate was 0.91%, up from 0.67% in 2010; the rate is slightly higher than the 0.82% average since 1969

Impairment Rates Are Highly Correlated With Underwriting Performance and Reached Record Lows in 2007; Recent Increase Was Associated

Primarily With Mortgage and Financial Guaranty Insurers and Not Representative of the Industry Overall

26

Profitability and Growth in New Jersey P/C Insurance

Markets

Analysis by Line and Nearby State Comparisons

27

RNW All Lines: NJ vs. U.S., 2001-2010

Sources: NAIC.

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

01 02 03 04 05 06 07 08 09 10

US All Lines NJ All Lines

P/C Insurer profitability in NJ is above that of the US

overall over the past decade

US: 7.1%

NJ: 8.0%

(Percent) 2011 figures will show a sharp decline in

profitability in NJ due to record catastrophe

losses, including Hurricane Irene

28

RNW PP Auto: NJ vs. U.S., 2001-2010

Sources: NAIC.

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

01 02 03 04 05 06 07 08 09 10

US PP Auto NJ PP Auto

Average 2001-2010

US: 7.6%

NJ: 7.1%

29

RNW Comm. Auto: NJ vs. U.S.,2001-2010

Sources: NAIC.

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

01 02 03 04 05 06 07 08 09 10

US Comm Auto NJ Comm Auto

(Percent)

Average 2001-2010

US: 9.2%

NJ: 6.9%

30

RNW Comm. Multi-Peril: NJ vs. U.S.,2001-2010

Sources: NAIC.

-10%

-5%

0%

5%

10%

15%

20%

01 02 03 04 05 06 07 08 09 10

US Comm M-P NJ Comm M-P

(Percent)

Average 2001-2010

US: 9.2%

NJ: 11.2%

2011 figures will likely show a negative return for

NJ CMP insurers due to record catastrophe losses, including Hurricane Irene

31

RNW Homeowners: NJ vs. U.S.,2001-2010

Sources: NAIC.

-10%

-5%

0%

5%

10%

15%

20%

25%

01 02 03 04 05 06 07 08 09 10

US HO NJ HO

(Percent)

Average 2001-2010

US: 5.0%

NJ: 12.5%

2011 figures will show a large negative return for NJ

home insurers due to record catastrophe losses, including Hurricane Irene

32

RNW Workers Comp: NJ vs. U.S.,2001-2010

Sources: NAIC.

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

01 02 03 04 05 06 07 08 09 10

US WComp NJ WComp

(Percent)

Average 2001-2010

US: 6.1%

NJ: 3.1%

All Lines: 10-Year Average RNW NJ & Nearby States

4.2%

7.1%

8.0%

8.5%

11.1%

3.2%

6.6%

0% 2% 4% 6% 8% 10% 12%

Connecticut

Maryland

New Jersey

U.S.

Pennsylvania

Delaware

New York

Source: NAIC, Insurance Information Institute

2001-2010

New Jersey All Lines profitability is above the US and regional

average

PP Auto: 10-Year Average RNW NJ & Nearby States

7.1%

7.6%

8.0%

8.9%

11.1%

5.1%

7.1%

0% 2% 4% 6% 8% 10% 12%

Connecticut

New York

Maryland

U.S.

Pennsylvania

New Jersey

Delaware


2001-2010

New Jersey PP Auto profitability is below the

US and regional average

35

Top Ten Most Expensive And Least Expensive States For Automobile Insurance, 2009 (1)

RankMost

expensive statesAverage

expenditure RankLeast


expenditure1 District of Columbia $1,128 1 North Dakota $510

2 New Jersey 1,101 2 South Dakota 521

3 Louisiana 1,099 3 Iowa 532

4 New York 1,057 4 Idaho 555

5 Delaware 1,021 5 Nebraska 559

6 Florida 1,006 6 Kansas 578

7 Rhode Island 969 7 Wisconsin 591

8 Connecticut 952 8 Maine 598

9 Nevada 944 9 North Carolina 610

10 Maryland 929 10 Ohio 616

(1) Based on average automobile insurance expenditures. Latest available as of March 2, 2012.

Source: © 2012 National Association of Insurance Commissioners.

New Jersey ranked 2nd in 2009, with an average expenditure for auto insurance of $1,101.

Comm. Auto: 10-Year Average RNW NJ & Nearby States

7.0%

8.7%

9.2%

12.2%

13.3%

6.9%

7.1%

0% 5% 10% 15%

Connecticut

Maryland

U.S.

Pennsylvania

New York

Delaware

New Jersey


2001-2010

New Jersey Commercial Auto

profitability is below the US and regional average

Comm. M-P: 10-Year Average RNW NJ & Nearby States

8.3%

10.3%

11.2%

11.7%

14.6%

4.9%

9.4%

0% 5% 10% 15% 20%

Connecticut

Maryland

New Jersey

Delaware

Pennsylvania

U.S.

New York


2001-2010

New Jersey Commercial Multi-Peril profitability is

above the US average and the regional average

Homeowners: 10-Year Average RNW NJ & Nearby States

9.4%

12.7%

18.1%

18.4%

20.2%

5.0%

12.5%

0% 5% 10% 15% 20% 25%

Connecticut

Delaware

New York

Pennsylvania

New Jersey

Maryland

U.S.


2001-2010NJ Homeowners profitability was above the US average and

below the regional average from 2001-2010; $2.9B in insured catastrophe losses in 2011,

including Hurricane Irene, will significantly lower this figure

39

Top Ten Most Expensive And Least Expensive States For Homeowners Insurance, 2009 (1)

RankMost


expenditure RankLeast


expenditure1 Texas (3) $1,511 1 Idaho $485

2 Florida (4) 1,460 2 Wisconsin 542

3 Louisiana 1,430 3/4 Oregon 544

4 Mississippi 1,185 3/4 Utah 544

5 Oklahoma 1,123 5 Washington 552

6/7 D.C. 1,069 6 Delaware 610

6/7 Rhode Island 1,069 7 Ohio 613

8 Massachusetts 1,035 8 Arizona 642

9 New York 1,021 9 Iowa 645

10 Connecticut 1,016 10 South Dakota 645

(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: © 2011 National Association of Insurance Commissioners (NAIC). Reprinted with permission. Further reprint or distribution strictly prohibited without written permission of NAIC.

New Jersey ranked as the 21st most expensive state for homeowners insurance in 2009, with an average expenditure of $848.

Workers Comp: 10-Year Average RNW NJ & Nearby States

3.1%

4.1%

5.2%

5.6%

6.1%

1.6%

3.9%

0% 2% 4% 6% 8%

U.S.

Pennsylvania

Connecticut

Maryland

New York

New Jersey

Delaware

(1) Data not available.Source: NAIC, Insurance Information Institute.

2001-2010

New Jersey Workers Comp profitability is

below the US average and regional average

41

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

Source: SNL Financial.

12.1

% 14.5

%

9.9%

7.5%

2.2% 3.

3%

0.4%

-2.4

%

-3.0

%

0.3%

10.8

% 14.6

%

8.8%

6.4%

1.6%

0.7%

-1.4

%

-2.0

%

-1.9

%

-0.2

%

-15%

-10%

-5%

0%

5%

10%

15%

20%

01 02 03 04 05 06 07 08 09 10

US DWP: All Lines NJ DWP: All Lines

(Percent)

42

Comm. Lines DWP Growth: NJ vs. U.S., 2001-2010


15

.6%

19

.8%

11

.4%

4.7

%

3.0

%

5.3

%

0.3

%

-1.6

%

-7.1

% -2.2

%

16

.0%

20

.3%

10

.8%

8.8

%

3.4

%

2.2

%

-2.8

%

-3.7

%

-5.3

%

-4.9

%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

01 02 03 04 05 06 07 08 09 10

US DWP: Comm. Lines NJ DWP: Comm. Lines

(Percent)

43

Personal Lines DWP Growth: NJ vs. U.S., 2001-2010


8.3

% 10

.8%

9.4

%

5.3

%

2.4

%

2.3

%

1.2

%

0.1

%

1.1

% 2.6

%

5.6

%

9.8

%

7.5

%

4.3

%

-0.6

%

-1.1

%

0.5

%

-0.1

% 2.5

% 4.8

%

-10%

-5%

0%

5%

10%

15%

20%

01 02 03 04 05 06 07 08 09 10

US DWP: Personal Lines NJ DWP: Personal Lines

(Percent)

44

Private Passenger Auto DWP Growth: NJ vs. U.S., 2001-2010


8.3% 9.

8%

8.1%

3.5%

0.6%

0.5%

0.0%

0.0% 1.

5%

5.6%

10.6

%

7.1%

2.7%

-2.6

%

-3.1

% -1.2

%

-1.4

%

1.9%

5.6%

-0.3

%

-10%

-5%

0%

5%

10%

15%

20%

01 02 03 04 05 06 07 08 09 10

US DWP: PP Auto NJ DWP: PP Auto

(Percent)

45

Homeowner’s MP DWP Growth: NJ vs. U.S., 2001-2010


8.3

%

14

.4%

13

.5%

11

.0%

7.9

%

7.2

%

4.2

%

0.8

%

3.8

% 5.0

%

5.5

%

6.3

%

9.7

% 11

.4%

7.8

%

6.6

%

6.3

%

4.1

%

4.3

%

2.6

%

0%

5%

10%

15%

20%

01 02 03 04 05 06 07 08 09 10

US DWP: HO Lines NJ DWP: HO Lines

(Percent)

46

New Jersey No-Fault Update

No-Fault Costs in New Jersey Are the Second Highest in the US

47

Increase in No-Fault Claim Severity: Selected States, 2004-2011*

*2011 figures are for the 4 quarters ending 2011:Q3. Sources: Insurance Information Institute research from ISO/PCI Fast Track data.

$36,229

$17,664

$8,019 $9,108$7,194

$5,198$6,674$5,871

$12,136

$24,385

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

Michigan New Jersey New York Florida Minnesota

2004 2011*

The no-fault systems in MI, NJ, NY, FL, and MN are under stress due to rising fraud and abuse, which leads to higher premiums for honest drivers.

+48.6%

+45.6%

+36.6% +36.5% +38.4%

48

Average No-Fault Claim Severity, 2011:Q3*

$1

7,6

64

$9

,10

8

$8

,01

9

$5

,04

2

$5

,16

0

$4

,19

4

$2

,91

9

$2

,22

1

$1

,86

8

$3

6,2

29

$7

,19

4

$5

,51

0

$4

,61

5$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 KY DC HI ND PA KS UT MA

Several States Including NJ 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:Q3.Source: ISO/PCI Fast Track data; Insurance Information Institute.

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

problems in their no-fault system

NJ has the 2nd highest auto no-fault average claim cost (severity) in the US

49

NJ No-Fault (PIP) Claim Severity Has Trended Up Sharply Upward, 2000-2011:Q3*

$13,290

$14,653

$16,075$17,261

$16,468$17,664

$9,024$9,911$10,106$9,966

$12,068$12,455

$5,000

$7,000

$9,000

$11,000

$13,000

$15,000

$17,000

$19,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011*

The Average Cost of New Jersey No-Fault Claims Rose Rapidly in Recent Years and

No-Fault claim severity (average cost per claim) was up 7.2% in 2011 and

has nearly doubled (+95.7%) to $17,664 in 2011 compared to 2000

*2011 figure is based on data for the 4 quarters ending Q3:2011.Source: Insurance Information Institute calculations and research from ISO/PCI Fast Track data.

50

NJ No-Fault (PIP) Claim Severity Has Trended Up Sharply Upward, 2000-2011:Q3*

1.341.20 1.15 1.17

1.251.16

1.80 1.74 1.751.65

1.501.33

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011*

Rising Claim Costs Are No Longer Being Offset by Declining Claim Frequencies

No-Fault claim frequency fell between 2000 and 2008 but has

remained relatively stable since 2007 2011 compared to 2000


51

New Jersey State No-Fault Claim Frequency and Severity, 2000–2011:Q3*

$9,0

24 $9,9

11

$10,

106

$9,9

66

$12,

068

$12,

455

$13,

290 $14,

653 $1

6,07

5

$17,

261

$16,

468

$17,

664

$5,000

$7,000

$9,000

$11,000

$13,000

$15,000

$17,000

$19,000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

*

No

-Fa

ult

Cla

im S

ev

eri

ty

1.0%

1.1%

1.2%

1.3%

1.4%

1.5%

1.6%

1.7%

1.8%

1.9%

No

-Fa

ult C

laim

Fre

qu

en

cy

NJ PIP Claim Severity

Frequency

Rising Claim Severities Since 2000 Have Swamped the Decline in Frequency, Which Ended in 2008

No-Fault Claim SeverityClaim Severity nearly reached a record high

in 2011: $17,664

Avg. Claim Severity is up 96% since 2000

Claim Frequency was relatively flat in

recent years


52

NJ No-Fault (PIP) Pure Premium Has Trended Up Sharply Upward, 2000-2011:Q3*

$177.66$176.46

$185.23

$201.79$205.67$206.02

$162.49

$172.13$177.03

$164.48

$180.91

$165.43

$150

$160

$170

$180

$190

$200

$210

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011*

The Average Cost of Insuring No-Fault Losses in New Jersey Is Rising Rapidly

No-Fault pure premiums (premium based on claim frequency and

severity only) was up 24.8% in 2011 compared to 2005


Global Catastrophe Loss Developments and Trends

53

2011 Rewrote Catastrophe Loss and Insurance History

But Will Losses Turn the Market?

53

Geophysical events(earthquake, tsunami, volcanic activity)

Meteorological events (storm)

Hydrological events(flood, mass movement)

Selection of significant loss events (see table)

Natural catastrophes

Earthquake, tsunami Japan, 11 March

EarthquakeNew Zealand, 22 Feb.

Cyclone Yasi Australia, 2–7 Feb.

Landslides, flash floodsBrazil, 12/16 Jan.

Floods, flash floods Australia, Dec. 2010–Jan. 2011

Severe storms, tornadoesUSA, 22–28 April

Severe storms, tornadoesUSA, 20–27 May

WildfiresUSA, April/Sept.

EarthquakeNew Zealand, 13 June

FloodsUSA, April–May

Climatological events(extreme temperature, drought, wildfire)

Number of Events: 820Number of Events: 820

DroughtUSA, Oct. 2010– ongoing

Hurricane IreneUSA, Caribbean22 Aug.–2 Sept.

WildfiresCanada, 14–22 May

DroughtSomaliaOct. 2010–Sept. 2011

FloodsPakistanAug.–Sept.

FloodsThailandAug.–Nov.

Earthquake Turkey23 Oct.

Flash floods, floodsItaly, France, Spain4–9 Nov.

Floods, landslidesGuatemala, El Salvador11–19 Oct.

Tropical Storm WashiPhilippines, 16–18 Dec.

Winter Storm JoachimFrance, Switzerland, Germany, 15–17 Dec.

55Source: MR NatCatSERVICE

Natural Loss Events, 2011

World Map

57

Top 16 Most Costly World Insurance Losses, 1970-2011**

(Insured Losses, 2011 Dollars, $ Billions)

*Average of range estimates of $35B - $40B as of 1/4/12; Privately insured losses only.**Figures do not include federally insured flood losses.Sources: Swiss Re sigma 1/2011; Munich Re; Insurance Information Institute research.

$10.0$11.9 $13.0$13.1

$19.1$21.3

$24.0$25.0

$37.5

$47.6

$7.7 $8.1 $8.3 $8.5 $9.3 $9.7

$0$5

$10$15$20$25$30$35$40$45$50

Hugo (1989)

WinterStormDaria(1991)

ChileQuake(2010)

Ivan (2004)

TyphoonMirielle(1991)

Charley(2004)

ThailandFloods(2011)

Wilma(2005)

NewZealandQuake(2011)

Ike (2008)

Northridge(1994)

SpringTornadoes/

Storms(2011)

WTC TerrorAttack(2001)

Andrew(1992)

JapanQuake,

Tsunami(2011)*

Katrina(2005)

Taken as a single event, the Spring 2011 tornado and

thunderstorm season would likely become the 5th

costliest event in global insurance history

5 of the top 14 most expensive

catastrophes in world history have occurred within the past 2 years

Source: Guy Carpenter, GC Capital Ideas.com, November 23, 2011.

Historical Capital Levels of Guy Carpenter Reinsurance Composite, 1998—2Q11

Most excess reinsurance capacity was removed from the market in 2011, but there does not

appear to be a shortage, leading relatively flat 2012

reinsurance renewals except in areas hit

hard by CATs.

58

59

Global Property Catastrophe Rate on Line Index, 1990—2012 (as of Jan. 1)

15%

-3%

-13%

-8%

-20% -18% -1

1%

3%

14%

-11%

-6%

-9%

-16%

10%

-12%

-3%

8%

14%

76%

68%

25%

20%

0%

115

141

230

200184

147

123

152

255

233

195

235

184

199

133111

105

237

100

154

173

145

190

-40%

-20%

0%

20%

40%

60%

80%

100%

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

Ye

ar

Ov

er

Ye

ar

% C

ha

ng

e in

RO

L

0

50

100

150

200

250

300

Cu

mu

lativ

e R

ate

on

Lin

e (1

99

0=

10

0)

Year Over Year % Change

Cumulative Rate on Line Index

Sources: Guy Carpenter; Insurance Information Institute.

Property-Cat reinsurance pricing is up about 8% as of 1/1/12—modest relative

to the level CAT losses

60

U.S. Insured Catastrophe Loss Update

2011 Was One of the Most Expensive Years on Record

60

61

Top 14 Most Costly Disastersin U.S. History

(Insured Losses, 2011 Dollars, $ Billions)

*Losses will actually be broken down into several “events” as determined by PCS. Includes losses for the period April 1 – June 30.Sources: PCS; Insurance Information Institute inflation adjustments.

$9.0$11.9 $13.1

$19.1$21.3

$24.0 $25.0

$47.6

$8.5$7.7$6.5$5.5$4.4$4.3

$0$5

$10$15$20$25$30$35$40$45$50

Irene(2011)

Jeanne(2004)

Frances(2004)

Rita (2005)

Hugo (1989)

Ivan (2004)

Charley(2004)

Wilma(2005)

Ike (2008)

Northridge(1994)

SpringTornadoes& Storms*

(2011)

9/11Attack(2001)

Andrew(1992)

Katrina(2005)

Taken as a single event, the Spring 2011 tornado and storm season are

is the 4th costliest event in US insurance history

Hurricane Irene became the 11th most expense

hurricane in US history

Nu

mb

er

Geophysical (earthquake, tsunami, volcanic activity)

Climatological (temperature extremes, drought, wildfire)

Meteorological (storm)

Hydrological (flood, mass movement)

Natural Disasters in the United States, 1980 – 2011Number of Events (Annual Totals 1980 – 2011)

Source: MR NatCatSERVICE 62

37

8

51

2

50

100

150

200

250

300

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

There were 117 natural disaster events in 2011

64

$1

2.3

$1

0.7

$3

.7 $1

4.0

$1

1.3

$6

.0

$3

3.9

$7

.4 $1

5.9 $

32

.9

$7

1.7

$1

0.3

$7

.3

$2

8.5

$1

1.2

$1

4.1

$3

2.6

$1

00

.0

$1

3.7

$4

.7

$7

.8

$3

6.9

$8

.6

$2

5.8

$0

$20

$40

$60

$80

$100

$120

89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11*20??

US Insured Catastrophe Losses

*PCS estimate through Sept. 30, 2011.Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01 ($25.9B 2011 dollars). Includes only business and personal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B ($15.6B in 2011 dollars.) Sources: Property Claims Service/ISO; Insurance Information Institute.

US CAT Losses in 2011 Were the 5th Highest in US History on An Inflation Adjusted Basis

$100 Billion CAT Year is Coming Eventually

Record Tornado Losses Caused

2011 CAT Losses to Surge

($ Billions, 2011 Dollars)

64

$500

$530

$830

$975

$980

$1,000

$1,200

$1,400

$1,510

$2,000

$5,000

$6,900

$7,300

$840

$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000

Flooding, April*

Wildfire, Sep. 4-19

Thunderstorms, Apr. 19-20

Thunderstorms, Aug. 18-19

Winter Storm, Jan. 31-Feb. 3

Thunderstorms, Jul. 10-14

Texas Drought, 2011*

Thunderstorms, Jun. 16-22




Hurricane Irene, Aug. 26-28**

Thunderstorms, May 20-27


**Includes $700 million in flood losses insured through the National Flood Insurance Program.Source: PCS except as noted by “*” which are sourced to Munich Re; Insurance Information Institute.

2011’s Most Expensive Catastrophes, Insured Losses

Hurricane Irene produced $915

million in privately insured catastrophe losses in NJ arising from 165,000 claims

66

67

Combined Ratio Points Associated with Catastrophe Losses: 1960 – 2011*

*Insurance Information Institute estimates for 2010 and 2011 based on A.M. Best data.Notes: Private carrier losses only. Excludes loss adjustment expenses and reinsurance reinstatement premiums. Figures are adjusted for losses ultimately paid by foreign insurers and reinsurers.Source: ISO; Insurance Information Institute.

0.4

1.2

0.4 0.

8 1.3

0.3 0.4 0.

71.

51.

00.

40.

4 0.7

1.8

1.1

0.6

1.4 2.

01.

3 2.0

0.5

0.5 0.7

3.0

1.2

2.1

8.8

2.3

5.9

3.3

2.8

1.0

3.6

2.9

1.6

5.4

1.6

3.3

3.3

8.1

2.7

1.6

5.0

2.6

4.4

8.0

3.6

0.9

0.1

1.1

1.1

0.8

0

1

2

3

4

5

6

7

8

9

10

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

The Catastrophe Loss Component of Private Insurer Losses Has Increased Sharply in Recent Decades

Avg. CAT Loss Component of the Combined Ratio

by Decade

1960s: 1.04 1970s: 0.85 1980s: 1.31 1990s: 3.39 2000s: 3.52 2010s: 6.20*

Combined Ratio Points

U.S. Thunderstorm Loss Trends, 1980 – 2011

68Source: Property Claims Service, MR NatCatSERVICE

Average thunderstorm

losses are up more than 5 fold since the early 1980s

Hurricanes get all the headlines, but thunderstorms are consistent

producers of large scale loss. 2008-2011 are the most expensive

years on record.

Thunderstorm losses in 2011 totaled a record

$25.8 billion

Source: Property Claims Service, MR NatCatSERVICE

U.S. Winter Storm Loss Trends, 1980 – 2011

69

Insured winter storm losses in 2011 totaled $2.0 billion. Average winter storm losses have nearly doubled

since the early 1980s

Slide 69

73

2011: Nowhere to Run, Nowhere to Hide

Most of the Country East of the Rockies Suffered Severe Weather in 2011, Impacting

Most Insurers

73

Number of Federal Disaster Declarations, 1953-2012*

13 1

7 18

16

16

7 71

21

22

22

0 25

25

11

11

19

29

17

17

48

46

46

38

30

22 2

54

22

31

52

42

13

42

7 28

23

11

31

38

45

32 3

63

27

54

46

55

04

54

5 49

56

69

48 5

26

37

55

98

19

95

43

0

20

40

60

80

100

120

53

54

55

56

57

58

59

60

61

62

63

64

65

66

67

68

69

70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09

10

11

12

*Through March 2, 2012.Source: Federal Emergency Management Administration: http://www.fema.gov/news/disaster_totals_annual.fema ; Insurance Information Institute.

The Number of Federal Disaster Declarations Is Rising and Set a New Record in 2011

The number of federal disaster declarations set a

new record in 2011, with 99, shattering 2010’s record 81

declarations.

There have been 2,050 federal disaster

declarations since 1953. The average

number of declarations per year is 34 from

1953-2010, though that few haven’t been

recorded since 1995.

5 federal disasters were declared

through Mar. 2, 2012

74

http://www.fema.gov/news/disaster_totals_annual.fema

75

Federal Disasters Declarations by State, 1953 – 2012: Highest 25 States*

86

78

70

65 63

58 56 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

*Through Mar. 2, 2012.

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


76

Federal Disasters Declarations by State, 1953 – 2012: Lowest 25 States*

39 39

37 36 35

33 33

28 28 27 26 25 25 24 24 23 22

20

17 17 16 15 14

11 10 9 9

0

10

20

30

40

50

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

Dis

aste

r Dec

lara

tions

*Through Mar. 2, 2012. 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, Utah and Rhode Island had the fewest

number of Federal Disaster Declarations

33 federal disasters were declared in NJ

over the past 60 years, about one every other year


Number of Federal Disaster Declarations In New Jersey, 1953-2012*

0 01

0 0 0 0 01

0 0 01

0 01

0 01

01

01 1 1

0 0 0 0 0 01 1

0 0 0 0 0

10 0 0

1 1 1 1 10 0 0

21 1 1

01

35

00

0.0

1.0

2.0

3.0

4.0

5.0

6.0

53

54

55

56

57

58

59

60

61

62

63

64

65

66

67

68

69

70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09

10

11

12

*Through March 2, 2012.Source: Federal Emergency Management Administration: http://www.fema.gov/news/disaster_totals_annual.fema ; Insurance Information Institute.

New Jersey Appears to Be Experiencing and Increased Frequency of Severe Weather Events

New Jersey had a record 5 federal disaster declaration in 2011:

Snowstorms (2) (Jan/Oct) Severe Storms & Flooding (Summer)

TS Lee Remnants Hurricane Irene

There have been 33 federal disaster

declarations in NJ since 1953. The average

number of declarations per year is 0.55 from

1953-2012, though the number has been higher

in recent years


Location of Tornadoes in the US, 2011

Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2011_annual_summary.html# 78

1,894 tornadoes killed 552 people in 2011, including

at least 340 on April 26 mostly in the Tuscaloosa area, and 130 in

Joplin on May 22

http://www.spc.noaa.gov/climo/online/monthly/2011_annual_summary.html

Location of Large Hail Reports in the US, 2011


There were 9,417 “Large Hail”

reports in 2011, causing extensive damage to homes,

businesses and vehicles


Location of Wind Damage Reports in the US, 2011


There were 18,685 “Wind Damage” reports through Dec. 27, causing

extensive damage to homes and,

businesses


Severe Weather Reports, 2011

81Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2011_annual_summary.html#

There were 29,996 severe

weather reports in 2011;

including 1,894 tornadoes;

9,417 “Large Hail” reports

and 18,685 high wind events


82

New Jersey’s 2011 Severe Loss Summary

Severe Weather Took its Toll on the Garden State Last Year

Severe Weather Reports in New Jersey,January 1—December 31, 2011

83Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2011_annual_summary.html#

NEW JERSEY

Total Reports = 172

Tornadoes = 1 (Red)

Hail Reports = 30 (Green)

Wind Reports = 141 (Blue)

There were 172 severe weather

reports in NJ in 2011 (none so far in 2012)


84

History of Insured Catastrophe Losses in

New Jersey

New Jersey is No Stranger to Catastrophic Losses

85

Value of New Jersey Insured Catastrophe Losses: 1998–2011*

($ Millions)

$95$190

$67 $10 $45

$230 $176 $132 $134 $175$78

$0

$487

$1,087

$0

$200

$400

$600

$800

$1,000

$1,200

98 99 00 01 02 03 04 05 06 07 08 09 10 11

At $1.1 billion, 2011 was the most expensive year ever for insured

catastrophe losses in NJ, shattering the previous record of

$487 million set only in 2010.

Insurers Paid an Average of $208 million per Year to More than 51,000 Victims of Catastrophes in New Jersey from 1998-2011

From 1998-2011 insurers paid $2.9 billion to more than 718,000 NJ victims of catastrophes for

damage to their homes, businesses and vehicles

*Data are current through March 2, 2012.Source: PCS unit of ISO; Insurance Information Institute.

86

Number of Homeowners Catastrophe Losses Paid by Insurers in NJ, 1998-2011*

48

,36

5 81

,95

0

27

,65

0

3,5

00

20

,80

0 59

,70

0

35

,60

0

42

,80

0

39

,20

0

37

,50

0

22

,25

0

0

86

,90

0

21

2,1

70

0

50,000

100,000

150,000

200,000

250,000

98 99 00 01 02 03 04 05 06 07 08 09 10 11*

*Data are current through March 2, 2011.Source: PCS unit of ISO; Insurance Information Institute calculations.

2011 saw the largest number of catastrophe claims ever in NJ.

Catastrophe claim costs also set a record at $1.1 billion. 2011 claims

were more than quadruple the 51,000 annual average since 1998.

(Number of Claims Paid)

Insurers in New Jersey Paid More Than 718,000 Catastrophe Claims Between 1998 and 2011 to Policyholders Across the State

The Strength of the Economy Will Influence P/C Insurer

Growth Opportunities

87

Growth Will Expand Insurable Exposures and Help Absorb Excess Capital

87

88

US Real GDP Growth*

* Estimates/Forecasts from Blue Chip Economic Indicators.Source: US Department of Commerce, Blue Economic Indicators 2/12; Insurance Information Institute.

2.7

%0

.9%

3.2

%2

.3%

2.9

%-0

.7%

0.6

%-4

.0%

-6.8

% -4.9

%-0

.7%

1.6

%5

.0%

3.9

%3

.8%

2.5

%2

.3%

0.4

%1

.3%

1.8

% 3.0

%2

.1%

2.2

%2

.4%

2.6

%2

.5%

2.7

%2

.9%

3.0

%4.1

%1

.1%

1.8

%2

.5% 3.6

%3

.1%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

2

00

0

2

00

1

2

00

2

2

00

3

2

00

4

2

00

5

2

00

6

07

:1Q

07

:2Q

07

:3Q

07

:4Q

08

:1Q

08

:2Q

08

:3Q

08

:4Q

09

:1Q

09

:2Q

09

:3Q

09

:4Q

10

:1Q

10

:2Q

10

:3Q

10

:4Q

11

:1Q

11

:2Q

11

:3Q

11

:4Q

12

:1Q

12

:2Q

12

:3Q

12

:4Q

13

:1Q

13

:2Q

13

:3Q

13

:4Q

Demand for Insurance Continues To Be Impacted by Sluggish Economic Conditions, but the Benefits of Even Slow Growth Will Compound and

Gradually Benefit the Economy Broadly

Real GDP Growth (%)

Recession began in Dec. 2007. Economic toll of credit crunch, housing

slump, labor market contraction has been

severe but modest recovery is underway

The Q4:2008 decline was the steepest since the Q1:1982 drop of 6.8%

2012 is expected to see a steady

acceleration in growth continuing into 2013

89

Annual Real GDP* Growth,NJ vs. US, 1998-2010

*chained 2005 dollarsSource: U.S. Department of Commerce at http://www.bea.gov .

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

US NJNew Jersey’s real GDP growth has been below the US average every year since 1998, except for 2001-02 and (barely) 2008

http://www.bea.gov/

First Half of 2012: Fastest Growth [3+%] Expected in MI, AL, NV, ND, SC

90

NJ: +1.56%, lower than

23 other states

91

Labor Market Trends

Massive Job Losses Sapped the Economy and Commercial/Personal

Lines Exposure, But Trend is Improving

91

92

Unemployment and Underemployment Rates: Stubbornly High in 2011, But Falling

2

4

6

8

10

12

14

16

18

Jan00

Jan01

Jan02

Jan03

Jan04

Jan05

Jan06

Jan07

Jan08

Jan09

Jan10

Jan11

Jan12

Traditional Unemployment Rate U-3

Unemployment + Underemployment Rate U-6

Unemployment stood at 8.3% in

January 2012

Unemployment peaked at 10.1% in October 2009, highest monthly rate since 1983.

Peak rate in the last 30 years:

10.8% in November -

December 1982

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

U-6 went from 8.0% in March

2007 to 17.5% in October 2009; Stood at 15.1%

in Jan. 2012

January 2000 through January 2012, Seasonally Adjusted (%)

Recession ended in

November 2001

Unemployment kept rising for

19 more months

Recession began in

December 2007

Stubbornly high unemployment and underemployment constrain overall economic growth, but the job market is now clearly improving

92

186

7921

365

127

42 15-1

09-1

465

9723

-12

-85 -58

-161

-253 -230

-257

-347

-456

-547

-734 -6

67-8

06-7

07-7

44-6

49-3

34-4

52-2

97-2

15 -186

-262

75-8

316

62

229

51 6111

714

311

2 193

128 16

711

925

726

126

410

810

2 175

5221

613

9 178 22

0 257

144

(1,000)

(800)

(600)

(400)

(200)

0

200

400

Jan-

07F

eb-0

7M

ar-0

7A

pr-0

7M

ay-0

7Ju

n-07

Jul-0

7A

ug-0

7S

ep-0

7O

ct-0

7N

ov-0

7D

ec-0

7Ja

n-08

Feb

-08

Mar

-08

Apr

-08

May

-08

Jun-

08Ju

l-08

Aug

-08

Sep

-08

Oct

-08

Nov

-08

Dec

-08

Jan-

09F

eb-0

9M

ar-0

9A

pr-0

9M

ay-0

9Ju

n-09

Jul-0

9A

ug-0

9S

ep-0

9O

ct-0

9N

ov-0

9D

ec-0

9Ja

n-10

Feb

-10

Mar

-10

Apr

-10

May

-10

Jun-

10Ju

l-10

Aug

-10

Sep

-10

Oct

-10

Nov

-10

Dec

-10

Jan-

11F

eb-1

1M

ar-1

1A

pr-1

1M

ay-1

1Ju

n-11

Jul-1

1A

ug-1

1S

ep-1

1O

ct-1

1N

ov-1

1D

ec-1

1Ja

n-12

Monthly Change in Private Employment

January 2008 through January 2012* (Thousands)

Private Employers Added 3.771 million Jobs Since Jan. 2010 After Having Shed 4.66 Million Jobs in 2009 and 3.81 Million in 2008 (State and Local Governments Have Shed Hundreds of Thousands of Jobs

Source: US Bureau of Labor Statistics: http://www.bls.gov/ces/home.htm; Insurance Information Institute

Monthly Losses in Dec. 08–Mar. 09 Were

the Largest in the Post-WW II Period

257,000 private sector jobs were created in

January

93

94

Nonfarm Payroll (Wages and Salaries):Quarterly, 2005–2011:Q4

Note: Recession indicated by gray shaded column. Data are seasonally adjusted annual rates.Sources: http://research.stlouisfed.org/fred2/series/WASCUR; National Bureau of Economic Research (recession dates); Insurance Information Institute.

Billions

$5,500

$5,750

$6,000

$6,250

$6,500

$6,75005

:Q1

05:Q

2

05:Q

3

05:Q

4

06:Q

1

06:Q

2

06:Q

3

06:Q

4

07:Q

1

07:Q

2

07:Q

3

07:Q

4

08:Q

1

08:Q

2

08:Q

3

08:Q

4

09:Q

1

09:Q

2

09:Q

3

09:Q

4

10:Q

1

10:Q

2

10:Q

3

10:Q

4

11:Q

1

11:Q

2

11:Q

3

11:Q

4

Peak was 2008:Q1 at $6.60 trillion

Latest (2011:Q4) was $6.71 trillion,

a new peak

Recent trough (2009:Q3) was $6.25 trillion, down

5.3% from prior peak

Growth rates in 2011Q2 over Q1: 0.6%

Q3 over Q2: 0.4% Q4 over Q3: 1.0%

Pace of payroll growth is

accelerating

94

95

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

12.6

11.1

10.8

10.4

10.4

9.9

9.9

9.8

9.7

9.5

9.3

9.1

9.0

9.0

8.9

8.7

8.7

8.5

8.5

8.4

8.2

8.1

8.1

8.0

8.0

7.9

0

2

4

6

8

10

12

14

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

Une

mpl

oym

ent R

ate

(%)

*Provisional figures for December 2011, seasonally adjusted.

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

In December, 37 states and the District of Columbia reported over-the-month unemployment rate decreases, 3 had

increases, and 10 had no change.

96

7.9

7.8

7.7

7.6

7.4

7.3

7.1

7.0

6.8

6.8

6.8

6.7

6.6

6.6

6.3

6.2

6.1

6.0

5.8

5.7

5.6

5.1

5.1

4.2

4.1

3.3

0

2

4

6

8

10

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

Une

mpl

oym

ent R

ate

(%)

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

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

In December, 37 states and the District of Columbia reported over-the-month

unemployment rate decreases, 3 had increases, and 10 had no change.

97

Unemployment Rate: NJ vs. US

3

4

5

6

7

8

9

10

11

Jan01

Jan02

Jan03

Jan04

Jan05

Jan06

Jan07

Jan08

Jan09

Jan10

Jan11

Jan12

US Unemployment Rate (U-3)NJ Unemployment Rate

Sources: U.S. Bureau of Labor Statistics; Insurance Information Institute.

Monthly, January 2001 through December 2011, Seasonally Adjusted (%)

Recession

Recession

NJ’s unemployment rate was been above the US in 2011, which will

slow insurance growth

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Thank you for your timeand your attention!

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Insurance Information Institute Online:

98

New Jersey’s Insurance Markets at the Crossroads: Update on Catastrophes, Fraud and Industry...

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