Fitch: Charley Doesn’t Impact Citizens’ Ratings

August 17, 2004

Fitch Ratings commented that it does not expect the long-term and senior debt ratings of Florida-based Citizens Property Insurance Corporation (Citizens) to be affected by the losses from Hurricane Charley, as preliminary loss estimates are within expectations for the ratings.

Based on initial estimates of industry insured losses in the range of $5 billion to $10 billion, the ultimate losses to Citizens from Hurricane Charley will be significantly less than the 1-in-100 year storm season loss that Citizens’ high-risk account is required to maintain in claims-paying resources.

As a result, Fitch expects that Citizens’ losses will be funded from the company’s surplus and from reinsurance with the Florida Hurricane Catastrophe Fund (FHCF) and not from pre-event note funds. Citizens’ strong ratings reflect the company’s $7.0 billion in resources available to pay high-risk account claims. This includes $1.1 billion of statutory surplus in the high-risk account as of June 30, 2004, which is in the form of cash on hand and liquid investments and is immediately available to pay losses. Citizens also has reinsurance coverage with the FHCF (rated ‘AA’ by Fitch) for 90% of $3.5 billion in losses above an attachment point of $950 million.

In the event that cash holdings and FHCF reimbursements are insufficient to pay claims, Citizens has the state authorized power to levy regular assessments on effectively all insurance companies (both direct and surplus lines) that write property coverage in Florida, as a pass-through vehicle to policyholders.

In addition, above these regular assessments, Citizens has $2.2 billion of pre-event notes in a collateral account available to fund claims. Citizens also has the authority to levy emergency assessments as a means to service debt in the event that borrowed funds are needed to pay claims.

Citizens Property Insurance Corporation, High-Risk Account

— Long-term issuer ‘A’/Stable Outlook;

— Senior notes ‘A’/Stable Outlook;

— Senior notes guaranteed ‘AAA’/Stable Outlook.

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