Insurance rates can vary significantly between states based on actual loss experience, catastrophe exposure, state requirements and prospective views of product and market performance. This rate reduction reflects factors specific to California including continued favorable loss experience in the state and different assumptions about future experience.   

The new rates in California will be implemented in January 2013 and will apply to policies issued or renewed with effective dates after implementation.

For 2012, American Security Insurance Company estimates that it will record approximately $140 million of gross written premiums and $108 million of net earned premiums in California for the type of policies that are subject to the rate reduction. This is based on actual September year-to-date California results of $105 million in gross written premiums and $81 million in net earned premiums.

On the basis of 2012 placement rates and the current book of business, the Company estimates that annualized net earned premiums and net income would be reduced by approximately $33 million and $18 million, respectively. The actual effect of the California rate decrease on the Company's net earned premiums and net income over the course of 2013 and beyond will depend on a variety of factors, including the Company's mix of lender-placed insurance products, lapse rates, rate and timing of renewals, placement rates, changes in client contracts and actual expenses incurred.