OAMIC Washington Update

October 18, 2012

Presentation Outline

• About NAMIC • Legislative and Political Environment • Key Federal Issues for Industry • 2012 Elections and Political Involvement for P/C Industry

NAMIC

• Largest P/C trade association with 1,400 member companies • More than 135,000,000 policyholders served • More than $196 billion in annual premiums • 50% of the U.S. auto/homeowners market • 30% of the U.S. commercial market • More than 200,000 people employed by NAMIC members

A Nation’s Capitol Divided

• Democrats control the White House and the Senate 53-47

• GOP controls House with 242 of the 435 seats • So much at stake in 2012 elections

Spending at Historic Pace

US Debt to GDP

Translated for Politicians

Anything Getting Done?

Lots of talk about…

- Jobs and the Economy No progress on…

- Expiring tax provisions - Federal Budget - Debt ceiling - Tax Reform - Healthcare Costs - Entitlement Spending - Sequestration

Federal Government

& Insurance

The Dodd-Frank Act

Second Anniversary

Putting It In Perspective

Dodd-Frank: more than 2,300 pages •Graham-Leach-Bliley: 145 pages • Sarbanes-Oxley: 66 pages, 16 rules, 6 studies •Creation of the Federal Reserve: 31 pages •U.S. Department of Treasury: 3 pages

Implementation Continues…

• 10 different regulatory agencies will

write • more than 300 new rules

- Only 1/3 way through process and 1/2 of all deadlines missed

• More than 20 new offices created: - Federal Insurance Office

- Financial Stability Oversight Council / Office of Financial Research

- Consumer Financial Protection Bureau

• 60 new studies • 93 new Congressional reports

National Flood Insurance

• 2005 storm season created

mountain of debt

• Reform history - bogged down since 2006

• Wind peril and debt forgiveness prevent reform

• 13 short and last minute extensions since 2002

• 4 lapses

NAMIC Moves NFIP Forward

• NAMIC Chairman Sandy Parrillo

testified March 11, 2011

• Reform NFIP – Adequate Rates – Updated Maps – Take-up Rates – Repetitive Loss – Operational Inefficiencies

• HR 1309 passed the House in

July, 2011 with 406 votes

NAMIC Moves NFIP Forward

Capitol Hill Press Conference – February 14, 2012

Flood The Hill

“Flood the Hill” participants include: • Fifteen trade associations representing 83,410 companies (employers); • Four professional associations representing 1,496,000 individual members; • Two environmental groups representing 5,000,000 individual members; • Ten private companies representing 295,393 employees.

“Participants showed strength and diversity in support of NFIP reform:

• Fifteen trade associations = 83,410 companies

• Four professional associations = 1,496,000 individuals

• Two environmental groups = 5,000,000 individuals

• Ten private companies = 295,393 employees. Senate felt the pressure mount, and is forced to act:

• Every Senate Office heard the call and urged Majority Leader Reid to hold a vote • U.S. Senate votes on June 29th

Flood Insurance Reform Act

President signed the Biggert-Waters Flood Insurance Reform and Modernization Act of 2012 into law June 30, 2012,

achieving comprehensive reform and five-year reauthorization

Importance of Strong Buildings

IBHS Research Center – Richburg, South Carolina

www.ibhs.org

Effects of Building Codes

• Model building codes ensure homes and businesses are built to resist the ravages of a variety of natural catastrophes

• LSU Hurricane Center estimated modern building codes would have spared 80% of Hurricane Katrina wind damage ($8 billion)

• 2005 NIBS study concluded for every $1 spent on pre-disaster mitigation, disaster relief assistance is reduced by $4

• Strong building codes are good for homeowners, good for businesses, and good for taxpayers

Safe Building Code Incentive Act

• The “Safe Building Code Incentive Act” incentivizes states through additional disaster relief funding (4%) to adopt and enforce nationally-recognized model building codes for residential and commercial structures

• Rewards responsible states for pre-disaster mitigation

• Provides an incentive for already qualifying states to maintain up-to-date codes

Incentives, NOT Mandates

BuildStrong Coalition

Dynamic Campaign

• www.buildstrongamerica.com / Facebook

• Nationwide Earned Media (WSJ, Detroit Free Press, Sacramento Bee, Roll Call)

• Ads

• Public Event “Tour Stops”

Results? 40 Cosponsors

Most of all Disaster Legislation

Rep Diaz-Balart, Mario [FL-21] Rep Andrews, Robert E. [NJ-1]

Rep Carnahan, Russ [MO-3] Rep Clarke, Yvette D. [NY-11]

Rep Coble, Howard [NC-6] Rep Connolly, Gerald E. "Gerry" [VA-11]

Rep Courtney, Joe [CT-2] Rep Denham, Jeff [CA-19]

Rep Filner, Bob [CA-51] Rep Fitzpatrick, Michael G. [PA-8]

Rep Gibson, Christopher P. [NY-20] Rep Grimm, Michael G. [NY-13] Rep Hanna, Richard L. [NY-24]

Rep Hayworth, Nan A. S. [NY-19] Rep Holden, Tim [PA-17] Rep Israel, Steve [NY-2] Rep King, Peter T. [NY-3] Rep Larsen, Rick [WA-2]

Rep Loebsack, David [IA-2] Rep Matsui, Doris O. [CA-5]

Rep Michaud, Michael H. [ME-2] Rep Miller, Candice S. [MI-10]

Rep Miller, Jeff [FL-1] Rep Norton, Eleanor Holmes [DC]

Rep Owens, William L. [NY-23] Rep Pallone, Frank, Jr. [NJ-6]

Rep Rangel, Charles B. [NY-15] Rep Renacci, James B. [OH-16]

Rep Rivera, David [FL-25] Rep Rooney, Thomas J. [FL-16]

Rep Ross, Dennis [FL-12] Rep Sires, Albio [NJ-13]

Rep Smith, Adam [WA-9] Rep Southerland, Steve [FL-2]

Rep Tonko, Paul [NY-21] Rep Towns, Edolphus [NY-10]

Rep Webster, Daniel [FL-8] Rep West, Allen B. [FL-22] Rep Young, Todd C. [IN-9]

H.R. 2069 Cosponsors

Results?

• NAMIC and BuildStrong testify before House Transportation and Infrastructure Subcommittee hearing on H.R. 2069 July 24, 2012

• Senate bill S. 1630 sponsored by Sen. Mary Landrieu (D-LA) and Sen. Thad Cochran (R-MS) – Incentive Language is the same as H.R. 2069, but

the incentive payment is an additional 10% in Stafford Act disaster relief funds

The PARTS Act (H.R. 3889)

Preserves competition in the aftermarket parts industry, which helps to keep costs down for policyholders and consumers

Promoting Automotive Repair,

Trade, and Sale Act

Creates 30 month window • Current patent law is 14 years

First global sale

• “Shot clock begins” Infringement is public sale

• Allows for manufacture, distribution, and advertising

• Does not prohibit sale

Rep. Darrell Issa (R-CA)

H.R. 3889 introduced February 2, 2012

Other Federal Issues

• Terrorism Insurance Act • Underwriting Restrictions – CBIS • Federalizing Natural Disasters • Pre-Disaster Mitigation Efforts • McCarran-Ferguson • Small Mutual Inflation Update • Fin. Crisis Responsibility Fee • Distracted Driving • Workplace Regulation – OSHA,

DOL • Licensing Uniformity • Highway Safety

• HUD Disparate Impact Rule • Expansion of Risk Retention

Groups • FTC involvement w/Insurers • Legal Reform • Patent Trolls and Patent

Reform • Workers compensation issues • Distracted Driving • Taxes

2012 Elections

Navigating the Political Landscape

Roadmap of Our Discussion: Navigating a Fluid Political Environment

30

Focus on What Matters

Key Indicators of Voter Attitudes

The Race for the Presidency

House and Senate Outlook

Blue/Red Lens Marks the Conventional View on Presidential Races

Key Indicators: Past Elections

31

But Past Isn’t Always Prologue

Source: http://www.presidency.ucsb.edu.

2004 2008

2000 1996

The Great Recession’s Lasting Mark on the Political Landscape

Key Indicators: The Economy

32

Obama Has Spent Much of His Presidency in the Danger Zone

Above 3% is favorable for Obama

1.3%

Below 2% is unfavorable for Obama

Source: Bureau of Economic Analysis, 2012; US Bureau of Labor Statistics, 2012.

0.0%

5.0%

10.0%

Actual YTD Unemployment Rates Jan 1992 – Sep 2012

Key Indicators: The Economy

33

7.3% Oct 1992 Before Lost Reelection

✖ ✓ 5.2% Oct 1996 Before Won Reelection

Obama’s First Term

5.5% Oct 2004 Before Won Reelection

✓

7.8%

Unemployment’s Small Drop Breaks Big Barrier Below 8%, Rates Point More Positively for Obama

Above 9% Is unfavorable for Obama

Below 8% Is favorable for Obama

Rat

e

Source: Bureau of Economic Analysis, 2012; US Bureau of Labor Statistics, 2012.

Key Indicators: Perceptions About the Economy

34

Consumer Perspectives Rise in Consumer Positivity Despite Low GDP, High Unemployment

Source: Conference Board, 2012; Thomson Reuters/University of Michigan Surveys of Consumers, 2012; St. Louis Federal Reserve, 2012.

70.3

54.6

✓ 107.3

Oct 1992 Before Lost Reelection

✖ Oct 1996 Before Won Reelection

92.9

Oct 2004 Before Won Reelection

Obama’s First Term

✓

Con

sum

er C

onfid

ence

83.1

Conference Board’s Consumer Confidence Index®

Michigan/Reuters Consumer Sentiment

Source: NBC/Wall Street Journal Survey, 2012. 35

People Express More Positive Outlook on Economy

Key Indicators: Perceptions About the Economy

During the next twelve months, do you think that the nation’s economy will get better or worse?

Apr 2009 – Sep 2012

44%

13%

% B

ette

r/W

orse

During the Recent Recession Pessimism Ruled, But It’s Looking Up

Better Worse

Most optimism in 3 years

Obama’s Job Approval Increasingly Positive

Key Indicators: Presidential Job Approval

36

Recent Figures At or Above 50% for First Time Since May 2011

Source: Gallup Presidential Approval Tracker, 2012.

Lowest Job Approval Rating of Re-Elected President: 48% (George W. Bush, 2004)

Approval above 50% is favorable

Approval below 47% is unfavorable

52% Approve

43% Disapprove

Reelection 2004

Reelection 1996

Overall Job Approval Rating May-Oct Before Election

34% Reelection

1992

✓

✖

✓

Lost

Won

Won

56%

36%

54%

20%

45%

70%

48% 49%

Approve

Disapprove

Disapprove

Approve

Disapprove

Approve

Vast Majority of Democrats Approve and Vast Majority of Republicans Disapprove of Obama

Key Indicators: Presidential Job Approval

37

Independent Approval is Key Given the Polarized Electorate

8%

52%

89%

Source: Gallup Presidential Approval Tracker, 2012.

Source: Gallup Poll, 2011, 2008, 2006; National Journal Research. 39

Partisans and Independents Are Very Different Republicans and Democrats Have Passion, Independents Have Lives

Key Indicators: Party Labels

Democrats MSNBC

Rachel Maddow Huffington Post

Republicans Fox

Sean Hannity RedState

USA Network American Idol Biggest Loser

Dislike politics and politicians

Media Consumption by Party

Independents

31%

35%

34%

40%

53%

Optimism on the Rise

Key Indicators: Direction of the Country

40 Source: NBC/Wall Street Journal Survey, 2012.

“All in all, do you think things in the nation are generally headed in the right direction, or do you feel things are off on the wrong track?”

Perception of Direction Is a Historically Important Election Indicator

Reelection 2004

Reelection 1996

39% 48%

39% 42%

Right Direction/Wrong Track May-Oct Before Reelection Challenge

16%

69%

Reelection 1992

✓

✖

✓

Lost

Won

Won

Right Direction

Wrong Track

Wrong Track

Right Direction

Highest in 3 years

Roadmap of Our Discussion: Navigating a Fluid Political Environment

41

Focus on What Matters

Key Indicators of Voter Attitudes

The Race for the Presidency

House and Senate Outlook

Will Obama’s Four Pillars Stand Strong?

The Presidential Race: Keys for Obama

42

Obama’s Share of Vote in 2008 Per Pillar

46%

Obama’s Current Approval Trend Per Pillar

66%

Independents 18-29 Yr Olds African Americans Hispanics

88%

Independents 18-29 Yr Olds African Americans Hispanics

52% 66% 95% 66%

Source: CNN Exit Polls, 2008; Gallup Presidential Job Approval Center, 2012.

Watch Variances of Support from Key Demographic Groups

58%

Non-College-Educated Whites

40%

Source: CNN Exit Polls, 2008; Gallup Presidential Job Approval Center, 2012. 43

Maintaining Non-College-Educated Whites Obama Can’t Let His Support Slip Too Much

The Presidential Race: Keys for Obama

Obama’s Non-College-Educated White Share of Vote in 2008

Obama’s Current Non-College-Educated White Approval

36%

Non-College-Educated Whites

Obama’s Hold on National Polls Slips Post-Debate

Percent Margin Lead Romney Obama

National Polls Chronologically by Date

Date

44 Source: Cook Political Report, 2012.

The Presidential Race: Polling the Nation

Pollster

NBC/WSJ/Marist 3.0% Sep. 26-30

Pew Research 4.0% Oct. 4-7

1.0% Politico/GWU/Battleground Oct. 1-4

4.0% Quinnipiac Univ. Sep. 25-30

3.0% CNN/ORC Sep. 28-30

7.0% NPR/Democracy Corps/Resurgent Republic Sep. 26-30

6.0% Bloomberg Sep. 21-24

1.0% AP/GfK Sep. 13-17

United Technologies/National Journal Sep. 27-30 Even

Gallup tracking (Post-debate, among registered voters) Even Oct. 4-6 First

Presidential Debate: Oct. 3

Gallup (3 week) Sep. 25-Oct. 7 4.0%

ABC/Washington Post Sep. 26-29 2.0%

Allstate/National Journal Sep. 15-19 7.0%

CBS/NYT Sep. 8-12 3.0%

5.0% Democracy Corps Sep. 8-12

Gallup (7-day, among likely voters) Oct. 5-11

1.0% Fox News Oct. 7-9

2.0%

Obama’s Hold on Battlegrounds Weaker Post-Debate

Real Clear Politics Polling Averages % Difference

Pollster.com Polling Averages % Difference

Romney Obama Romney Obama

Real Clear Politics and Pollster.com Polling Averages in Battleground States

Electoral College Votes

0.5% Florida 1.4% 29

Ohio 1.3% 2.1% 18

Pennsylvania 4.5% 5.1% 20

Michigan 3.7% 6.3% 16

North Carolina 3.3% 3.7% 15

Wisconsin 2.3% 3.4% 10

Colorado 0.6% 0.7% 9

Nevada 1.6% 1.6% 6

New Hampshire 4.5% 4.6% 4

45 Source: Real Clear Politics, 2012; Pollster.com, 2012.

The Presidential Race: Polling the Swing States

6 Iowa 3.2% 4.1%

Virginia 0.6% 0.7% 13

Roadmap of Our Discussion: Navigating a Fluid Political Environment

47

Focus on What Matters

Key Indicators of Voter Attitudes

The Race for the Presidency

House and Senate Outlook

Source: Gallup Poll, 2012. 48

Congressional Approval at Historic Low Incumbents Beware

House and Senate Outlook: Public Opinion

Congressional Approval Rating Apr1974 – Sep 2012

% A

ppro

ve/D

isap

prov

e

13%

83% “Just 33 percent of voters say their own representative in Congress deserves to be re-elected, and 57 percent say it’s time to elect someone else — another record level of dissatisfaction.”

Representatives of Congress Are Losing Favor

- CBS News/New York Times Poll, Sept 2011

Source: National Journal Research, 2012. 49

Expect High Turnover 2013 Will Bring Lots of New Freshman Faces

49

Number of Freshmen in Congress 2005 – 2013

Served 2-6 years

Served 0-2 years

Distribution of Congress by Tenure NJ Research Forecast: Jan 2013

Served more than 6 years

* 2013 figures are NJ Research forecast based on open seats to date (includes announced retirements), projected retirements, and projected incumbent losses (based on a re-election rate of 90%).

2005 (109th)

2007 (110th)

2009 (111th)

2011 (112th)

2013 (113th)

Open Seats to Date

Projected Retirements

House and Senate Outlook: Throw the Bums Out

46%

34%

?

Navigating a Fluid Political Environment Making the Call on Likelihood of Victory

Presidential Election

Control of the Senate

Control of the House

60% 60% 10%

40% 40% 90%

Electoral Votes Obama 201 Romney 191

Toss Up 85 GOP Gain 2-4 Dem Gain 0-10

55%- 45% Romney

50% - 50% GOP Gain 3 - 5

75% - 25% Dems -5 - +5

Race Ratings

Source: Cook Political Report, 2012.

Jimi’s Picks

• The PAC increased funds raised by over 20%

• give $700,000 for

Politics Is Not A Spectator Sport

Insurers must be engaged in shaping the legislative and regulatory landscape

“If insurance is your profession, then politics is your business.”

Together, We Can Make A Difference

Success of NAMIC PAC

Growth 2005-2012

• CCP – Grassroots – Premiere grassroots advocacy program in the country

• Legislative Action Center – Take Action to influence public policy and affect upcoming decisions – Instantly communicate your views to members of Congress

• NAMIC PAC – Get authorized and conduct a NAMIC PAC campaign at your company – Invite NAMIC PAC to arrange a visit to your office from your

Congressman

NAMIC’s Political Involvement

Jimi Grande

SVP – Federal and Political Affairs National Association of Mutual Insurance Companies

(202) 628-1558 jgrande@namic.org

QUESTIONS