Citizens Property Insurance to sell $2.5 billion of bonds

Mar 12, 2009

Miami Herald–March 11, 2009

Bloomberg News

Florida’s state-run property insurer plans to begin selling $2.5 billion of bonds next month to raise funds for claims from the coming hurricane season.

Citizens Property Insurance Corp. governors tentatively approved the sale Tuesday in Tallahassee. Funds will go into the insurer’s high risk account, used to pay claims for the six-month storm season that begins in June.

Citizens, with one million policyholders, was created in 2002 to cover homeowners without private insurance. It has $8 billion of assets, which could be wiped out ”in a few short hours” by a storm, Chairman James Malone said last month.

The agency plans the sale of fixed-rate, tax-exempt securities with maturities of one to five years, according to the Citizens website. After the initial sale next month, the insurer aims to sell the balance before the beginning of the storm season. The bonds won’t likely carry insurance, Citizens said.

The agency carries an A+ rating from Standard & Poor’s Corp. Its outlook was revised to ”negative” from ”stable” in January after S&P also changed the outlook for Florida’s general-obligation bonds to “negative.”

The insurer may sell taxable as well as variable rate debt. Maximum true interest will be 6 percent, with final maturities no later than Dec. 31, 2019, for fixed-rate bonds, or Dec. 31, 2029, for variable-rate bonds, Citizens said.

Four senior sale managers have been selected: Merrill Lynch, Citigroup, Goldman Sachs Group and Morgan Stanley, Citizens said.