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<br />Florida Municipal Insurance Trust
<br />MANAGEMENT'S DISCUSSION & ANALYSIS
<br />For the Year Ended September 30, 2010
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<br />Some of the more important fund transactions during 2009-2010 are:
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<br />· The Trust earned $27.5 million in investment income during the fiscal year, resulting in a return
<br />on invested assets (excluding cash) of 7.2%, The high allocation to fixed income helped provide
<br />investment income of $19,9 million during the year, while allocation to equities rebounded this
<br />fiscal year to post positive investment income of $7,6 million during the fiscal year, The markets
<br />were still volatile as evidenced by having seven months of positive investment income and five
<br />months of negative investment income for the fiscal year, For the year, the Expanded High Yield
<br />Bond Fund once again outpaced all other portfolios with a total return of 15,1 %, while the
<br />Diversified Small to Mid Cap Equity Portfolio outpaced all equity portfolios with a return of 14.6%,
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<br />· The overall Claims Expense is $85,3 million for 2009-2010, which is up from $83,9 million in
<br />2008-2009, The slight increase was the result of deterioration in prior years' claim development
<br />in claims reserves,
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<br />· For the fiscal year ended September 30, 2010, the Trust had reported earned premium of $96,5
<br />million compared to $102.6 million in the previous year, The primary reason for the year-over-
<br />year decrease was a very soft market, which resulted in rate decreases across several lines of
<br />coverage and made it difficult to offset premium decreases with net new business,
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<br />Capital Asset and LonQ-Term Debt Activitv
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<br />The Trust has no capital assets or any long-term debt.
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<br />Economic Factors
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<br />The U,S. economy is in the early stages of a recovery, According to the Trust's investment consultant,
<br />the economy continued to expand during the third quarter, albeit at a more moderate pace from the first
<br />half of 2010,' because of restrained consumer spending, Consumers are constrained by continued
<br />economic uncertainty, high unemployment levels, and modest income growth, However, business
<br />spending on equipment and software has been healthy as corporations use excess cash that
<br />accumulated during the economic downturn,
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<br />The Federal Reserve (Fed) began considering additional steps to boost economic growth, such as
<br />purchasing additional Treasury bonds, By purchasing more Treasuries, the Fed seeks to drive down
<br />interest rates on mortgages, corporate debt and other loans, hoping lower interest rates will spur credit
<br />lending and increase spending.
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<br />Florida's Office of Economic and Demographic Research (EDR) reports that the state is on a different
<br />recovery path than the nation as a whole, The Deepwater Horizon oil spill has exacerbated these
<br />differences, The national recession significantly slowed Florida's population gains, the primary engine of
<br />economic growth for the state. This has led to record unemployment and poor job growth, Additionally,
<br />with the meltdown in the mortgage market and the subsequent credit crunch, housing starts and jobs
<br />associated with the construction industry went into a significant decline that showed little improvement
<br />until this year. Finally, Florida's $60 billion tourism industry, already reeling from the downturn, took an
<br />additional hit from the oil spill.
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