-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C/kWatJxEUSmSGHCJcB9aLjceXFrxsSHqxd+4vc9BCcsieZh+bVR8272EwDmmcAs 7BZFdBj9xJQmkhLx2VQziA== 0000950137-08-000093.txt : 20080310 0000950137-08-000093.hdr.sgml : 20080310 20080104163528 ACCESSION NUMBER: 0000950137-08-000093 CONFORMED SUBMISSION TYPE: CORRESP PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20080104 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST MERCURY FINANCIAL CORP CENTRAL INDEX KEY: 0000929186 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 383164336 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: CORRESP BUSINESS ADDRESS: STREET 1: 29621 NORTHWESTERN HWY STREET 2: PO BOX 5096 CITY: SOUTHFIELD STATE: MI ZIP: 48034 BUSINESS PHONE: 8103584010 MAIL ADDRESS: STREET 1: 29621 NORTHWESTERN HGWY STREET 2: PO BOX 5096 CITY: SOUTHFIELD STATE: MI ZIP: 48086 CORRESP 1 filename1.htm corresp
 

January 4, 2008
VIA EDGAR
Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549
Attention: Jim B. Rosenberg, Senior Assistant Chief Accountant
     
Re:
  First Mercury Financial Corporation
 
  10-K for the year ended December 31, 2006
 
  File No. 001-33077
Ladies and Gentlemen:
On behalf of First Mercury Financial Corporation (the “Company”, “we”, “our”, or “us”), set forth below are the Company’s responses to the comments of the staff (“Staff”) of the Securities and Exchange Commission (“SEC”), dated December 20, 2007, concerning the above-referenced document. For your convenience, the responses by the Company follow the bolded text of the applicable SEC comment.
Comment 1. Critical Accounting Policies, page 35; Loss and Loss Adjustment Expense Reserves, page 35. Refer to your reference to an independent actuary in determining your reserves and to your reference to the valuation firm included on page 90 related to the acquisition valuations. While you are not required to make these references, when you do, you must also disclose the name of the independent actuary/valuation firm. If you include or incorporate by reference this disclosure into a 1933 Securities Act filing, you will also need to include the consent of the independent actuary/valuation firm.
Response.
In future filings with the Securities and Exchange Commission, as applicable, if the Company makes reference to an independent actuary or valuation firm, we will disclose the name of the independent actuary or valuation firm. If we include or incorporate by reference this disclosure into a 1933 Securities Act filing, we will include the consent of the independent actuary or valuation firm.
Comment 2. Item 7A. Quantitative and Qualitative Disclosures about Market Risk, page 64. Please revise to include the required quantitative discussion in one of the three prescribed formats or help us identify where you included this discussion. Refer to Item 3-05(a) of Regulation S-K.
Response.
In addition to our existing disclosure, we will include the requested information in future Forms 10-K, beginning with the 2007 Form 10-K to be filed in early March. We will perform an analysis that illustrates the sensitivity of the fair value of our fixed maturity securities to selected hypothetical changes in interest rates as of the period ended. The selected scenarios will not be predictions of future events, but rather illustrate the effect that such events may have on the fair value of our fixed maturity securities and stockholders’ equity.

 

 

An example of our sensitivity analysis is depicted below utilizing December 31, 2006 information:
                                 
                    Hypothetical  
                    % Increase  
                    (Decrease) in  
    Estimated     Estimated              
    Fair     Change in     Fair     Stockholders'  
    Value     Fair Value     Value     Equity  
    (Dollars in thousands)  
100 basis point increase
   $ 290,219     $ (7,622 )     (2.6 )%     (2.9 )%
50 basis point increase
     294,030       (3,811 )     (1.3 )     (1.4 )
No change
     297,841       —       —       —  
50 basis point decrease
     301,652       3,811       1.3       1.4  
100 basis point decrease
     305,463       7,622       2.6       2.9  
In addition, our investment portfolio contains convertible securities, which we carry on our balance sheet at fair value. The convertible securities have exposure to equity price risk from the underlying equity securities. This risk is defined as the potential loss in fair value resulting from adverse changes in stock prices. An example of our sensitivity analysis related to equity price risk utilizing December 31, 2006 information is as follows:
“At December 31, 2006, our convertible securities had a total fair value of $22.4 million. A hypothetical 10% increase in the fair value of the underlying equity securities could increase the fair value to $23.9 million and increase stockholders’ equity by 0.6%. Alternatively, a 10% decrease in the fair value of the underlying equity securities could decrease the fair value to $21.1 million and decrease stockholders’ equity by 0.5%.”
In connection with the above response, we acknowledge that:
  •   the Company is responsible for the adequacy and accuracy of the disclosure in the filings;
  •   Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filings; and
  •   the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
We believe the above responses have adequately addressed your comments. Given that we intend to file our Form 10-K for the year ended December 31, 2007 in early March, we would appreciate receiving the Staff’s confirmation that it has no further comments as promptly as practicable so that we can be assured that we have adequately addressed all of the Staff’s comments prior to filing the 2007 Form 10-K. Please do not hesitate to contact Edward LaFramboise at (248) 213-0406 if you have further questions or comments.
Sincerely,
/s/ John A. Marazza
John A. Marazza
Executive Vice President, Chief Financial Officer, and Treasurer
First Mercury Financial Corporation

 

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