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FFH Conference Call


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Here a few random notes I took:


1.) 'More recently' they have been purchasing corporate bonds as they feel they are now being paid for the risk. Going forward this will help interest income and operating income.

- tax free muni's have increased from $4.1 to $4.4 billion (Dec 31 to March 31)

- corporate bonds have increased from $16 million to $1 billion

- US treasuries have decreased from $700 million to $415 million

- annualized portfolio yield in Q1 was 3.55% (not adj for taxes)... I am not sure if this amount includes dividends...

2.) Regarding OTTI:

- once a security is written down you can't in future quarters write it up. If the value rebounds, it will benefit OCI and not earnings. When  it is sold the benefit will flow through earnings.

- once a security is written down if it falls in the next quarter it must be written down again.

3.) Plan to hedge stock position? No, not right now. But do review on regular basis

4.) Share buybacks? Will not do and sacrifice financial position. Look at cash levels and stock price. As demonstrated over the years, this is their 1st option to deploy excess cash.

5.) 5 year inflation outlook? Not an issue near term; deflation is. 20% (gov't) is spending. 80% is deleveraging. Can 20% change the trend with 80%? Didn't in Japan. Monitor carefully and will likely have a better sense in a year.

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They also asked him if he was putting on his hedge for the equities given the rally.  He said good question, and they think about that but at this point, they have no intention of doing that.


Given the recent run-up in the markets of roughly 30%, which I think is way overdone, I hope they do put some hedges back in place. I am very pleased overall with the steady progress the company is showing although, I must confess it was disappointing to see book value growth drop from 53% in 2007 to only 21% last year. Sigh. Prem will just have to try harder this year.






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Crum 10-Q is available for those who didn't peak.  http://www.cfins.com/assets/downloads/financial/CFHC-10Q-04302009.pdf


Major notes (I missed the FFH conf call) that I see:


1) $100m divied up to FFH after quarter close

2) Page 39 has an interest rate sensitivity table for the bond port - looks like the duration is 10 years.  Increasing duration over the past few years, and up 10+% just this quarter (assuming again that Crum is representative of FFH which may be offbase).

3) Crum seems to be taking a more aggressive stance wrt to soft market as they are shuttering lines of business


Just my quick read.



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