Our Unique Approach to Insurance

"Core" Consulting Services

Project Oriented

  • Investment Guideline Review
  • Asset Allocation Analysis
  • Investment Manager Searches
  • Manager Fee Negotiations
  • Capital Markets Research
  • Fiduciary Education
  • Surplus Stress Testing
  • DFA Modeling
  • Peer Company Analysis
  • SRQ Preparation
  • AM Best Investment Preparation

Ongoing Reporting

  • Investment Guideline Compliance
  • Investment Portfolio Evaluations
  • Total Portfolio/Individual Manager Results
  • Performance Attribution Analysis
  • Timely Capital Markets/Economic Research
  • Investment Opportunities
  • Fiduciary Education

Investment Policy

  • Document Rating Agency & Regulatory Requirements
  • Identify Accountability
  • Document Surplus Guidelines and Objectives

Asset Allocation Studies

  • Customized Capital Markets Assumptions
  • Proactive Assessment
  • Surplus Application

Performance Monitoring

  • Monthly Flash Reports
  • Customized Quarterly Reviews

Understanding the Enterprise

Help Balance Needs of Income and Surplus Growth with Policyholder Security

Work with Outside Actuaries and External Auditors

Integrate Investment Objectives with  Underwriting Insurance Risk

  • Loss and Premium Expectations
  • Regulatory Issues
  • Cash Flow Generation
  • Capital Position
  • Liquidity
  • Maximize After-Tax Book Yield
  • Maximize After-Tax Booked Income
  • Maximize After-Tax Total Return
  • Manage Surplus

Due Diligence Process

What Differentiates Successful Investment Management Firms?

  • Experienced Credit Research Team
  • Ability to retain and attract the best and the brightest talent
  • A strong, defining culture that perseveres
  • An abiding commitment to disciplined processes and to serving clients
  • An ability and willingness to adapt and evolve

Insurance-Related Fixed Income Managers (Customized Criteria)

Experienced Credit Research Team

Dedicated Insurance Practice

Understands Regulatory Requirements

  • State
  • National Association of Insurance Commissioners (NAIC)
  • A.M. Best Company

Strategic Advice

  • Dynamic Financial Analysis
  • Tax Optimization
  • Stress Testing
  • Best's Capital Adequacy Ratio (BCAR) Analysis & Projections

Accounting Requirements

  • Book Yield
  • Schedule D
  • Gain/Loss
  • Cash Flow Needs


Performance Measurement
After-Tax Total Return
Booked Income
Imbedded Book Yield

Asset Allocation and Manager Recommendations

Historical Performance

  • Actual Investment Portfolio Results
  • Benefits from Active Management
  • Diversification and Manager Selection were Critical

Past Performance cannot guarantee future results.
It should not be assumed that recommendations made in the future will be profitable or will equal past performance.

Investment Opportunities for Insurers
(Pre-Tax Yields for Companies Have Dropped 0.5% since 2003)

  • Experienced Credit Research Team
  • Emerging Markets Debt (Local Currency)
  • Preferred Securities
  • Convertible Bonds
  • Global Stocks Through a Diversified Portfolio
  • REITs
  • Municipal Bonds for Tax-Equivalent Yield & Total Return

Why The Optimal Service Group?

  • 18+ Years Working With Medical Malpractice Insurance Companies
  • Member of Physicians Insurers Association of America (PIAA)
  • Presenter to Hosptial Insurance Forum
  • Writer for Insurance Finance & Investment
  • Selective in Pursuit of Institutional Relationships
  • Experienced, Low Turnover Institutional Consulting Team
  • Customized Reporting
  • Commitment to Client Service
  • Proactive Investment Ideas  (Economy and Capital Markets)

Investment Consulting Process
Blueprint for Fiduciary Standards

Prudent Person Standards


  • Duty to Client
  • Solely In Their Interest


  • Consider Purposes, Terms And Liquidity
  • Exercise Reasonable Care, Skill and Caution
  • Context of Whole Portfolio
  • Strategy with Risk and Return Objectives
  • Diversification
  • Consider Environmental Circumstances


  • Scope and Terms of  Delegation
  • Reasonable Care In Selection
  • Monitor and Review

Compliance Documentation

Investment Policy Statement

  • Describes Intent
  • Establishes a Work Plan

Asset Allocation Modeling

  • Establishes a Risk Control Plan
  • Establishes a Rate of Return Objective
  • Considers Multiple Asset Classes
  • Seeks Optimal/Practical Diversification

Client Education Modules

  • Remaining Informed About
    Economic and Capital Market Conditions

Manager Search and Due Diligence

  • Demonstrates Reasonable Care

Performance Reporting

  • Demonstrates Monitoring, Review & Analysis

Investment Consulting Process


Work With Management to Understand
Company's Philosophy & Investment Needs

Understand Company's Objectives
and Develop Investment Strategy

Implement Investment Consulting Process
on Company's Investment Portfolio

Ongoing Monitoring and Service

  • Cash Flow Generation
  • Capital Position
  • Liquidity
  • Maximize Book Yield/Booked Income
  • Maximize Total Return
  • Manage Surplus
  • Minimize Tax Impact (if taxable)

Which One Are You?

Matrix of Insurance Company Portfolio Strategies

Strategy Focus Benefits Issues Types of Investors
Total Return * 100% Investment Flexibility for Manager
* Long-Term Appreciation Potential
* Easier Performance Measurement
* Volatility in Investment Income/Book Yield
* Realized Gain/(Loss) Volatility
* Potentially Higher Turnover
* Tax Considerations
* Mark-to-Market Investors
* Well Capitalized P&C Companies
* Some Health Care Companies
Income-Driven * Addresses Liability Payout Requirements
* Easy For Security Analysts and Rating
  Agencies to Assess
* Lower Turnover
* Less Realized Gain/(Loss) Volatility
* Buy-and-Hold Strategy
* Less Investment Flexibility
* Harder Performance Measurement
* Define/Restate Target Income/Yield Levels
* May Interfere with Duration/Convexity Management
* Most Life Companies
* P&C Companies Not Well-Capitalized
Total Return With
Income and Gain/(Loss)
* Focus on Total Return Within Booked Income
  and/or Gain/(Loss) Constraints
* Meets Internal and External Objectives
* Harder Performance Measurement
* Develop Total Return and Income Performance
* Total Return and Income Could Conflict
* Stresses Client/Manager Dialogue
* Life Companies
* Domestic P&C Companies
* Some Health Care Companies

The communication is designed to provide accurate, authoritative information.  Wells Fargo Advisors is not engaged in rendering legal, accounting or tax advice.  If legal, accounting, or tax assistance is required, the services of a competent professional should be sought.

This information is being provided for informational purposes only and is not a solicitation or offer to participate in a trading strategy.  The strategy focus discussed may not be suitable for all investors.