Michigan Future Business Index Survey

1. Mike Britt – President Accident Fund Insurance Company of America Michigan Future Business Index Survey

2. Introduction • Michigan Future Business Index (MFBI) • Conducted semi-annually since 2006 by Accident Fund in partnership with Marketing Resource Group, Inc. and Michigan Business Network • Surveys owners of small- to medium-sized businesses in Michigan • Gain perspective of State’s economy • Measure expectations for future growth • Results provide data to track trends and offer insights into their contribution to regional and statewide economy

3. MFBI and Accident Fund • Useful to Accident Fund for taking economic pulse of Michigan business owners • Small and midsize businesses are our customers –their opinions on economy are important to us • 35% of our revenue comes from Michigan • Accident Fund in Michigan for 100 years

4. October 2012 Survey • Full economic recovery for Michigan may be on hold for near future • Regulatory and health care policies shrinking bottom line • Setbacks in national economy • Fear of looming fiscal cliff • Uncertainty of (then-unrealized) Presidential election • Newly realized government mandates • Fear of added taxes and health care costs

5. October 2012 Survey • There are signs of recovery materializing • Reported growth in sales • Plans revealed for new product and service launches • Fear of looming fiscal cliff • Uncertainty of (the-unrealized) Presidential election • Majority still believe Michigan economy trending upward and outlook for business remains positive

6. Satisfaction with Economy • Satisfaction with state economy remains steady after significant increase from Oct. 2011

7. Outlook – Next Six Months • Optimism for future growth remains positive, but growing percentage report shrinking bottom line • Government regulatory policy and “slow economy” seen as top challenge to Michigan business (11%) • Cost of providing health care benefits – 10% • Keeping/attracting skilled employees – 9%

8. Outlook – Next Six Months

9. Hiring – Next Six Months • 24% of respondents said they plan to hire more employees in next six months • Two points lower than June, but nine points higher than Oct. 2011) • Outlook for new hires strongest in Detroit area • Larger businesses and new businesses (particularly childcare) are hiring most (33%) • Manufacturing most likely to lay off workers (17%)

10. Employee Benefits • For first time ever, we see significant increase in possible reduction of employee health insurance benefits or increasing share employees pay for premium • 13% expect to reduce all benefits over next six months • 18% expect to decrease health care benefits • 28% will increase premiums (up 23% from June) • Only 8% don’t expect to increase health care costs

11. Business Tax Structure • Perceptions of Michigan’s consumer market continue to improve • Growing majority of business owners believe the business tax structure is fair • 54% rate Michigan’s business tax system as “fair” • 8% say they’ll add a new business location within next six months • 19% say they’ll add a new product line • 23% will add new service

12. Government Regulations • Increased business costs and government regulations are adding uncertainty • 36% are encouraged for their businesses 10 years from now (4% drop from June) • 36% are concerned • 26% now say they’re uncertain about the future of their business (up three points from June)

13. Summary • Michigan business leaders are not yet going all-in for a full recovery • Top three challenges of doing business in Michigan: • Government regulatory policy • Slow economy/looming fiscal cliff • Providing health care benefits • Regulatory pressure and health care costs are causing employers to consider reducing employee benefits and limiting wage increases/hiring • To minimize uncertainty, Government needs to act quickly to calm concerns over fiscal cliff