Wednesday, October 24, 2018

The Kentucky Association of Counties Workers' Compensation Fund held a special Board of Trustees' meeting, pursuant to proper notice given in accordance with KRS 61.823, at 11:10 a.m. on Wednesday, October 24, 2018 at 400 Englewood Drive in Frankfort, Kentucky.

The roll was called. The following Trustees were present: Chairman Greg Terry, Carlisle Co. Judge/Executive; Vice-Chairman Kelly Callaham, Martin Co. Judge/Executive (via phone); Michael Logsdon, Oldham Co. Magistrate; and Michael Riggs, Shelby Co. Magistrate (via phone).

Others present were: Temple Juett, Director of Insurance; Brian Roy, Executive Director/CEO; Jim Henderson, Deputy Director; Kris Dunn, Underwriting Manager; Michael Ray, Safety & Loss Control Manager/Interim Claims Manager; Bruce Lawson, Senior Accountant; Karen Basham, Chief Financial Officer; Crystal Hellard, Litigated Claims Specialist; Marie Skinner, Accountant/UI Manager; Rich Ornstein, Staff Attorney; Clint Combs, Peel & Holland/KACo Marketing Agent; Rob Brown and Joe Greathouse, Local Government Insurance Agency/KACo Marketing Agents; Sue Porter and David Livingston, Roeding Insurance/KACo Marketing Agents; Greg Sisson, Ed Meredith and Terry Banaszak, Underwriters Safety & Claims; Rob Miller, Crash Analysis & Reconstruction, LLC; Andrea Morse, Customer Service Representative; Grant Satterly, Director of Financial Services; John Logan and Kristie Whistle, Marsh, Inc.; Jeff McCaffrey, Deming, Malone, Livesay & Ostroff, PLLC; Roger Recktenwald, Director of Planning & Infrastructure; and Sonya Chesser, Executive Secretary.

Chairman Terry called the meeting to order at 11:10 a.m.

Motion made by Michael Logsdon, seconded by Kelly Callaham, to approve the minutes of the September 26, 2018 meeting as presented.  Motion carried.

Ms. Basham presented and discussed the following reports: balance sheet as of September 30, 2018; FY 2018/19 budget detail for the three months ending September 30, 2018; check history report for September 1 - 30, 2018; FY 2018/19 PAF budget for period July 1, 2018 - September 30, 2018; FY 2018/19 agent commissions as of September 30, 2018; and FY 2018/19 investment portfolio summary as of September 30, 2018.

Ms. Basham presented the FY 2018/19 final draft budget for the board's approval.

Motion made by Michael Logsdon, seconded by Michael Riggs, to adopt the FY 2018/2019 budget as presented.  Motion carried.

Motion made by Michael Logsdon, seconded by Kelly Callaham, to approve the financial reports as presented.  Motion carried.

Mr. Ray presented and discussed the following claims activity reports: summary of losses valued as of September 30, 2018; graph of opened and closed claims during fiscal year 2018; graphs of average paid claims from 2014 - 2018; stats of open loss time and open medical claims from 2015 - 2018 and from 2008 - 2018; open claims for all years as of September 30, 2018; and a chart comparing the number of claims from the last three, five and ten years. There were a total of 142 newly reported claims totaling an incurred value of $3,327,575.72 for the month of September 2018 as compared to 130 reported claims totaling an incurred value of $278,800.28 for the month of September 2017.

Mr. Miller provided an overview of the services that Crash Analysis & Reconstruction, LLC provides to the Fund's members.

Mr. McCaffrey presented and discussed the draft audited financial statement as of June 30, 2018.  He said there were no changes to the accounting policy and only two minimal adjustments to the claims reserves.

Motion made by Kelly Callaham, seconded by Michael Logsdon to approve the audited financial statement as presented.  Motion carried.

Mr. McCaffrey presented and discussed the annual statement as of June 30, 2018 and the quarterly statement as of September 30, 2018 to be submitted to the Department of Insurance.

Motion made by Michael Logsdon, seconded by Michael Riggs, to approve the annual and quarterly statements as presented.  Motion carried.

The board members who were present signed the Trustee Confirmation of Receipt for the Fund's quarterly financial statement for quarter ended September 30, 2018.

Mr. Satterly presented and discussed the investment report as of September 30, 2018 including the quarterly security position changes for period July 1, 2018 through September 30, 2018.  He also offered his opinion on the economic outlook.

Motion made by Michael Logsdon, seconded by Kelly Callaham, to approve the investment report and ratify the quarterly security position changes.  Motion carried.

Mr. Juett presented the board with a copy of the Fund's current investment policy as adopted December 18, 2013.

Motion made by Kelly Callaham, seconded by Michael Logsdon, to maintain the current investment policy.  Motion carried.

Mr. Ornstein requested approval to send out a request for qualifications for Regional Agent Territory A, currently with Peel & Holland and expires June 30, 2019.  He said this will be the first time Territory A has gone out to bid.  The proposal would include a three year term with (2) three year options to renew.  He also said the three year contract with Local Government Insurance Agency (LGIA) for Territory C will expire June 30, 2019.  The current agreement allows for the option to renew with LGIA for another three year term or to bid out.

Motion made by Michael Logsdon, seconded by Kelly Callaham, for staff to send out request for qualifications for Regional Agent Territory. Motion carried.

Motion made by Michael Logsdon, seconded by Michael Riggs, to exercise the option to renew the contract for Territory C with Local Government Insurance Agency for another three year period per the terms of the contract.  Motion carried.

Mr. Juett presented a proposed dividend policy for the board's review. Ms. Basham presented her formula in calculating a dividend which would make $5.6 million available based on her calculations for 2007. She said the last dividend was declared in 2012 based on the 2006 amounts.  Mr. Juett explained the criteria for considering a dividend and the conditions on which a member would qualify to receive a dividend. A suggestion was made be declare a moderate dividend and also vote to apply a portion of the surplus to reduce premiums so that all members could benefit. Mr. Juett noted that, under Member Qualification for Dividend, the language "have been a fund member in the year for which the dividend is being declared and paid a premium of no less than $5,000" has since been stricken from the policy.  Mr. Juett recommended that the dividend be paid after July 1, 2019.

Motion made by Kelly Callaham, seconded by Michael Logsdon, to adopt the dividend policy as amended striking language as noted by Mr. Juett.  Motion carried.

Motion made by Michael Riggs, seconded by Michael Logsdon, to declare a $3 million dividend on policy year 2007, subject to approval by the commissioner of insurance, to be distributed in accordance with the newly adopted dividend policy and to use $2 million in reserves attributed to that policy year to lower member premiums for the 2019/20 policy year.  Motion carried.

The next scheduled board meeting will be held November 28th at 11:00 a.m.

There was no closed session.

Motion made by Michael Logsdon, seconded by Kelly Callaham, to adjourn the meeting at 12:50 p.m.  Motion carried.