FWCJUA Investment Committee Meeting Report: August 29
Sep 2, 2008
On Friday, August 29, 2008, the Florida Workers Compensation Joint Underwriting Association (“FWCJUA”) held an Investment Committee (“Committee”) meeting to discuss the FWCJUA Investment Custody and Investment Management Agreements and review FWCJUA investment portfolio compliance status. To view the complete agenda and meeting packet, click here.
Chairman Fred Bennett called the meeting to order with Committee members Terry Butler and Claude Revels in attendance. Also in attendance were Executive Director Laura Torrence and Laura Lopez from the FWCJUA.
Ms. Lopez gave a report on the FWCJUA Investment Custody and Investment Management Agreements (“Agreements”) updates proposed by staff members. These updates are being requested so that the Agreements will meet Florida regulatory requirements, which specifically apply to Florida domestic stock insurers and not to the FWCJUA.
In June 2008, the Florida Office of Insurance Regulation (“OIR”) alerted FWCJUA staff that the Agreements with South Trust Estate & Trust Company of Florida (now US Bank/Evergreen Investment) and SunTrust Capital Markets, Inc. must be amended in order to be compliant with Florida Administrative Code. Both FWCJUA investment partner representatives indicated that they will supply the needed information.
In considering these updates, questions arose regarding the security of FWCJUA investment holdings at US Bank and SunTrust Bank in light of the current volatile market. All investments held at US Bank are titled to the FWCJUA, and therefore would not be available to satisfy the claims of any creditors of the bank in the event of a bank failure. The amended SunTrust Agreement includes a provision that provides a very clear indemnification statement to indicate that the FWCJUA will be fully compensated for any loss of securities.
The Committee approved recommending amendments to the Agreements to the FWCJUA Board of Governors (“Board”) at its September meeting.
Ms. Lopez gave a compliance review of the current FWCJUA investment portfolio. The current investment portfolio is noncompliant with the FWCJUA Investment Policy due to further downgrading of the Washington Mutual bond already being held in exception.
Authorized exceptions to the Policy allowed bonds with ratings below an “A” rating to remain in the investment portfolio. Since June 27, 2008 when the Investment Policy exception was authorized, the Washington Mutual bond has been further downgraded, the Anheuser Busch bond has been downgraded below an “A” rating and the Countrywide Home Loans bond has been upgraded to above an “A” rating.
Chairman Bennett voiced concern about continuing market volatility, and suggested that if the FWCJUA can get a good rate, it might want to look at selling the Washington Mutual bond held in exception at a loss to prevent further devaluation.
After discussion, the Committee decided to allow the Anheuser Busch and Home Depot bonds to be held in the investment portfolio as exceptions, while continuing to hold the further-downgraded Washington Mutual bond in exception for the short-term. Its status then would be reviewed at the September Board meeting to determine whether to sell it at a loss.
The meeting was then adjourned.
Should you have any questions or comments, please do not hesitate to contact Colodny Fass.
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