Florida Workers’ Compensation Joint Underwriting Association Investment Committee Report: September 25, 2009

The Florida Workers’ Compensation Joint Underwriting Association (“FWCJUA”) Investment Committee (“Committee”) met via teleconference on September 25, 2009.

At the most recent FWCJUA Board (“Board”) of Governors meeting on September 9, the Board had voted to continue holding nine bonds rated less than “A”, as authorized by previously approved FWCJUA Investment Policy exceptions. Since that time, Home Depot bonds, which were among the exceptions, have matured and the FWCJUA has been paid full principal and interest.

Of the eight remaining bonds representing exceptions held within the FWCJUA Investment Portfolio, most of the bonds were performing well and no action was recommended by the FWCJUA investment advisors.  However, the status of Lehman Brothers holdings within the Portfolio generated a great deal of discussion among the Committee. With Lehman Brothers in bankruptcy, its bonds are trading at approximately 17 cents on the dollar.

The FWCJUA’s investment advisors explained that the Lehman Brothers bonds will not pay anything upon their maturity and that the Committee should decide whether to sell the FWCJUA’s Lehman Brothers holdings now, or, with the expectation of greater proceeds, wait a year or two until the bankruptcy is completed.

The Committee decided to discuss the issue again at its October 30 meeting and consider selling the Lehman bonds before their maturity date or continue holding them through the bankruptcy process.

The Committee voted to keep all of its bonds that fall within the authorized Investment Policy exceptions.

Discussion took place regarding how the FWCJUA investment strategy remains solid and that the FWCJUA Investment Portfolio has survived the recent financial crisis with minimal losses. The current balance of the Portfolio is $107.8 million.

New guidelines for competitive bids on investment management and banking services, as well as the purchase of a comprehensive investment software package were on the agenda, but not discussed by the Committee because these items had already been considered at the most recent Board meeting.

Laura Lake of Wells Capital Management was introduced as the new portfolio manager.

The meeting agenda and accompanying documents are attached.

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