Citizens Finance and Investment Committee Meeting Report: April 2

The Citizens Property Insurance Corporation (“Citizens”) Finance and Investment Committee (“Committee”) met on April 2, 2009, during which reports on bond and line of credit financing were given, along with updates on Citizens’ investment portfolio and investment returns.  To view the meeting agenda, click here.

Because a quorum was not present, no votes were taken during this meeting, and therefore, all Staff recommendations were presented to Citizens’ Board of Governors during its April 3 meeting for approval instead.

Citizens’ financial advisor John Forney, of Raymond James, gave the bond financing update.   Since the most recent Committee meeting, the Florida Office of Insurance Regulation (“OIR”) issued an Order approving the issuance of up to $2.5 billion in Series 2009 High-Risk Account (“HRA”) Senior Secured Bonds.  For more information on the OIR’s order, click here. 

A mandatory 30-day waiting period before any bonds may be purchased is currently in effect.  During this time, Citizens’ Finance Team has been meeting with investors to talk about financing options and provide information on Citizens and the Florida Hurricane Catastrophe Fund (“FHCF”), partially as a means of combating media inaccuracies regarding Florida’s property insurance marketplace.

Citizens’ Chief Financial Officer (“CFO”) Sharon Binnun addressed the Finance Team’s recommendations on the selection of JP Morgan, Wells Fargo/Wachovia and Loop Capital as co-managers of the HRA Bonds for a three-year term. 

CFO Binnun announced the Personal Lines Account (“PLA”)/Commercial Lines Account (“CLA”) upcoming execution of a $400 million 364-day revolving bank line of credit, which will be part of the previously-approved PLA/CLA liquidity program in preparation for the 2009 hurricane season.  The 2009 line of credit will supplement a $2.66 billion surplus in the PLA/CLA and will afford Citizens the cash resources to pay claims through the FHCF mandatory layer.   If draws are made against the line of credit, it is anticipated that the money will be repaid from FHCF reimbursements. 

J.P. Morgan Chase, Bank of America, Wells Fargo/Wachovia, BONY Mellon, Emigrant Bank, Goldman Sachs and Morgan Stanley Bank are expected to finance the line of credit.

To view CFO Binnun’s report, click here.

Citizens’ Staff recommended approval of the financing plan, together with the following related documents:

• Authorizing Resolution, including the form of credit agreement
• Vendor Consent Agenda, including the cost of issuance

CFO Binnun summarized Citizens’ investment portfolio and investment returns, reporting that, as of February 28, 2009, Citizens has over $7 billion in operating cash, $1.75 billion of which is in unused bond proceeds. 

Citizens’ investment portfolio consists of: 

• 34 percent of investments in government treasuries/agencies;
• 24 percent in tax-exempt money market funds;
• 20 percent in corporate investments;
• 18 percent in prime money market funds;
• three percent in asset-backed commercial paper and default bonds; and
• one percent in illiquid Local Government Investment Pool Fund B investments.

To view CFO Binnun’s investment portfolio overview, click here.  To view the investment returns report, click here.  

 

The meeting was then adjourned.

 

Should you have any questions or comments, please contact Colodny Fass. 

 

To unsubscribe from this newsletter, please send an e-mail to ccochran@cftlaw.com