CountyCommissioners’ Association of Ohio
Request for Proposal (RFP)
Investment Consulting Services
I.INTRODUCTION
The CountyCommissioner’s Association of Ohio (CCAO) requests proposals from investment consulting firms to provide professional investment consulting and oversight services for its two self insurance pools, CORSA and CEBCO. CORSA’s fiscal year is 5-1/4-30, and CEBCO’s fiscal year ends on 12-31. Attached are the latest audit reports and IPS’s for both programs.
II.BACKGROUND
A.CORSA
County Risk Sharing Authority, Inc. (CORSA) is a self-insurance pool that was established in 1987 by the (CCAO) for the purpose of providing property and liability coverage and comprehensive risk-management services for CCAO members. The coverage provided includes property coverage for member owned property, crime, automobile liability and physical damage coverage, general liability, public officials/errors and omissions liability, nursing home professional liability (25 nursing homes), and law enforcement liability. CORSA retains the first $1M of any loss ($2M for nursing home professional), and purchases reinsurance for limits in excess of $1M. As of December 1, 2009, 62 counties and 19 multi-county facilities were members of CORSA. CORSA is an Ohio not-for-profit corporation, and is authorized under Ohio Revised Code (ORC) Section 2744.081.
B.CEBCO
The County Employee Benefits Consortium of Ohio, Inc. (CEBCO) is an Ohio non-profit organization established on January 1, 2004 by the CCAO to provide employee benefit programs for Ohio county governments. CEBCO is a self-funded, joint self-insurance program authorized pursuant to Section 9.833 of the Ohio Revised Code to offer medical, dental, vision, and prescription drug coverage, as well as a fully insured life insurance product. As of September 30, 2009, CEBCO had 20 member counties, and provided benefits to approximately 21,120 employees and dependents.
CEBCO is self-insured for health and prescription drug coverage, for the first $400,000 of each claim, and purchases stop loss coverage from Anthem for claims in excess of $400,000. CEBCO maintains third-party administrative agreements for adjudication of its health, dental and vision claims.
III.INVESTMENT PORTFOLIO
A.CORSA
As of 8/31/09, CORSA had total assets of $72 M and an investment portfolio of $57.2M. CORSA’s current asset custodian and investment advisor is Morgan Stanley Smith Barney (MSSB). MSSB selects investment managers, and currently there are four active managers.McDonnell is the fixed income manager, managing a total fixed income portfolio of $39.6M, and the three equity managers are Dana, NFJ Investments, and Renaissance, with the three managing a total of $17.6M, all as of 8/31/09.
B.CEBCO
As of 12/31/08, CEBCO had total assets of $44.8M and an investment portfolio of $29.8M. MSSB currently provides asset custodian services, investment advisory services, and investment management.
MSSB is managing investments for four funds. The claims fund is used to reimburse third party administrators for payment of claims. The claims reserve account is used to pay for run-out claims in the event a member would ever leave the program. The contingency reserve fund would be used in the in the event that claims significantly exceeded the amount of expected claims. The pooling reserve is established to pay for claims that fall in between an internal pooling point that is established for each member, and CEBCO’s $400,000 self insured retention.
Since members pay their premiums on a monthly basis, and since claims are paid monthly form the claims account, portfolio balances can vary from month to month. As of 10-12-09, the total investment portfolio was $39.6M. The claims fund balance was $18.2, and consisted of two money market funds, one corporate bond, and seven
US agency/mortgage-backed bonds. The pooling fund balance was $5.4M, and consisted of one money market fund, and four USagency/mortgage-backed bonds. The claims reserve fund balance was $10.1M, and consisted of one money market fund, one corporate bond, and six US agency/mortgaged backed bonds. The contingency reserve balance was $5.9M, and consisted of one money market fund, two equity securities, and three US agency/mortgage backed bonds.
IV.SCOPE OF SERVICES
The selected investment-consulting firm will be expected to:
1)Provide quarterly investment performance evaluation reports on the individual managers, and the overall portfolios on a combined basis. The reports should address the overall status of the portfolio, including the quality of the investments, risk associated with the investments, and comparisons to the market.
2) Provide continuous monitoring and review of investment managers in relation to sector allocation guidelines, and to other comparable fund managers, investment indices, and manager universe averages.
3) Assist, as required, in the identification of alternative active and passive management as the need may arise, based on an incumbent’s lagging performance.
4) Provide comprehensive reviews and recommendations of appropriate allocation strategies for the portfolios. These recommendations shall be made on a semi-annual basis.
5) Review as necessary the company’s investment policy in order to maintain optimal risk/reward expectations. Recommendations for improvement and modifications are expected.
6) Attend and present reports at two CORSA Board Meetings and two CEBCO Board Meetings.
V.RESPONSE
Please respond to the following questions in your response.
A.Administration/Organization:
1)List the name and address of your organization, primary contact person and their telephone number.
2)Give a brief history of your firm.
3)Explain your organization’s present ownership structure, including affiliates and subsidiaries.
4)Please identify the office from which this account will be serviced.
5)Please list the name and location of the primary management team that will be responsible for our account, and provide detailed biographies of such persons including their tenure with your organization, along with an appropriate organization chart.
6) How many clients does the proposed account team service? Please provide a list of representative clients and the range of asset size of the clients.
7) Please provide a list of any property and liability and health insurance company and risk sharing pool clients for whom investment consulting services are provided, and indicate the services provided to each client.
8)Please provide a list of client references. Provide the name, title, and
telephone number of each reference.
B.Asset Allocation & Investment Policy Development
1)Describe your firm’s approach to developing an asset allocation strategy.
2)When and how do you determine that assets need to be rebalanced?
3)Describe your approach to the development of an investment policy, and
also your process for recommending modifications to investment
guidelines.
4)Provide an outline on the guidelines and the issues and items that would
be covered in a typical policy statement.
5)Please describe how you would apply the operations and features of property/casualty and health insurance companies and risk sharing pools to the development of an asset allocation strategy and investment policy.
6)Describe your investment policy review process. How frequently do you
review investment policy documents?
C.Manager Search and Performance Evaluation
1)How many money managers are listed in the database(s) that you utilize for manager searches?
2)Please specify whether the database is maintained in-house or is purchased. If purchased, please specify from whom.
3)Describe the manager search process provided by your firm.
4) Describe your firm’s process in monitoring investment managers for a client. Relate the process to clients’ goals and investment policy.
5)Describe the criteria that you would use to recommend a managersearch to replacethe incumbent manager
D.Reports:
1)Describe the types of analysis included in a typical performance evaluation report. Please provide a sample quarterly performance report.
2)What methods and sources of data do you use in calculating asset valuation and investment performance of a client’s portfolio? Do you reconcile your calculated performance with investment managers and custodians? Describe this process.
3)Describe how benchmarks are chosen or developed. Describe your custom benchmark capabilities.
4)To what extent can your performance reports be customized to meet a particular client’s needs? Please comment on your capability to provide
performance reports based on a fiscal year vs. a calendar year.
5)Please comment on any value-added features and strengths of your firm’s performanceevaluation services.
E. Potential Conflicts
Please note that potential conflicts of interest will not disqualify investment consulting firms. However, we do want to understand them.
1)Does your organization offer or sell any services to investment managers? If so, identify these in detail.
2)Does your organization charge to include any investment managers in your database or any search? If so, please explain.
3)Describe any circumstances under which your firm receives any compensation, whether direct or indirect, from any investment managers, custodians, or other third parties in connection with the consulting services provided to your current clients?
F.Fee Proposal
1)State the total annual fee for the services indicated in Section IV, Scope of Services, including costs for staff, travel, clerical, and any other indirect costs. Please indicate the fees separately for CORSA and CEBCO. It is CCAO’s intent and desire to have the same consultant for both programs. However, the boards for each program are independent. Therefore, to allow for the possibility of the boards selecting different consultants, pleasealso provide the fees for each program on a stand-alone basis.
2)One or both programs may request additional consulting services not listed in Section IV, or may require attendance at additional meetings. Please indicate how fees would be established for additional consulting services or for attendance at additional meetings.
3)Please note that we are also reviewing asset custody services. How would the addition of this service affect your investment consulting services fees?
4)Please attach a sample contract with your proposal.
Option:
The CCAO has accumulated cash reserves throughout the years from when inflows exceeded outflows, separate from the operation of the two insurance programs. As of 12-3-2009, approximately $285,000 is in a fund for Termination Conversion, used to pay for unused sick/vacation pay for employees who retire or are terminated, and $10,000-$20,000 is added to the fund every year. Approximately $643,000 is in a Retiree Health Fund, that would be used to pay the premium for health insurance for retired employees, and $40,000-$60,000 is contributed to this fund each year. Currently, there are no retirees receiving this benefit. These two funds are made up of CD’s, except for $20,000 kept in money funds in each account. Any remaining moneys are maintained in an “Operating Fund”, with the current balance being approximately $2M, made up of CD’s and money funds. CCAO’s investment policy basically allows CD’s and investment grade bonds with a time horizon of five years.
Please indicate the annual fee for providing direction on how to maximize returns and review investment policy. The services provided for the above funds would be totally separate from the investment consulting services requested in this rfp for CORSA and CEBCO.
Please provide any additional information that you think will help CCAOevaluate your firm properly.
Please also indicate if there are additional services not requested in Section IV that are available from your firm that you believe would be of benefit to either CORSA or CEBCO, and indicate either the cost for such services, or how the cost would be established.
Proposals from responding investment-consulting firms are to be delivered no later than at 4:00 PM EST on Friday, January 8, 2010, to:
David Brooks
Managing Director, Property and Casualty Insurance
CountyCommissioners Association of Ohio
209 E. State Street
Columbus, OH43215-4309
Phone: 614-220-7988
Electronic copies of your proposals are preferred. If you need to send hard copies, please provide at least 3 copies to the address above.
Please note that we may request an oral interview / presentation from the top firms. If we elect to do this, we anticipate a meeting in Columbus, Ohioin January.
Please contact David Brooks if you have any comments or questions about this RFP.
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