Fraternity-Testvériség, 2003 (81. évfolyam, 1-4. szám)

2003-01-01 / 1. szám

Page 6 TESTVÉRISÉG From the Office of the Secretary-Treasurer/CFO “IS MY MONEY SAFE WITH THE HRFA?” by William Béla Puskás, Jr. Over the past year, it seems that not a day has gone by without the revela­tion of new corporate scandals, mismanagement and shady deals. The finan­cial world has been rocked by these revelations, and everyone wonders which company will become the next Enron / WorldCom / Arthur Anderson. The small individual investor has lost much confidence in the financial markets, wondering if there are any com­panies which can be trusted in this day and age. This general malaise may serve to give many of our current and prospective members reason to wonder, “Is my money safe with the Hungarian Reformed Federation of America?” Given the current mood, this is a reasonable and appropriate question to ask, and I would like to ad­dress some of the factors which go into providing the an­swer to that question. A long history of faithful and dedicated service to our members. The HRFA was founded in 1896 to address the financial, cultural and social needs of Hungarian-Ameri­cans, their families and their friends. We are now in our 107th year of helping to provide financial assurance to our members and through all that time we have satisfied all member claims and met all of our financial obligations. A strong and sound financial base. Even more im­portant than our proven history of financial responsibility is our ability to meet our future obligations to our mem­bers. The HRFA currently has a surplus of assets over liabilities of more than 8 million dollars! The insurance in­dustry generally expresses the financial solidity of a com­pany by means of a statistic called the solvency ratio. For example, a solvency ratio of 110 means that for every $100.00 of liabilities, a company has $110.00 in assets. If you take a look at the 25 largest United States life insur­ance companies (which includes Aetna, Allstate, Hartford, Massachusetts Mutual, New York Life, Prudential, State Farm, Transamerica and Travelers), their average solvency ratio is 105.12, based upon their 2001 Annual Statements which are required to be fded with the various states and the National Association of Insurance Commissioners (NAIC). The 2001 solvency ratio for HRFA is 156.70 (!), or $ 156.70 for every $ 100.00 in liabilities, which is a strong assurance that HRFA will be in a position to meet these obligations for many years to come. A carefully regulated industry. The life insurance in­dustry is one of the most closely and carefully regulated industries in this country. Among the many regulations with which the HRFA must comply are certain limitations on the types and amounts of investments which can be made. These regulations provide additional assurance that the quality of an investment portfolio must be maintained at a high level and that investment risk is diversified and spread out over a range of investments. As of our 2001 Annual Statement, approximately 70% of our assets are in bonds, of which approximately 90% have received a NAIC-1 des­ignation, which is the top quality designation from the NAIC. Additionally, there are strict reporting requirements to which we must adhere. For the 1st, 2nd and 3rd quarters of each year, a comprehensive quarterly statement must be filed with the various state insurance departments and the NAIC, detailing the operations, expenses and investments of our society, with an even more comprehensive and detailed Annual Statement filed at the end of each year. These state­ments are carefully reviewed to determine if an insurance company is in compliance with applicable laws and regula­tions and if any company is in jeopardy of being unable to satisfy its obligations to its policyholders. Multiple input into investment decision-making. H RFA investment decisions are made by consensus decision of the Executive Committee, with periodic input and review by the Finance and Investment Committee of the Board of Directors and the entire Board as well. Also, all investments are made in accordance with an established set of investment guidelines, which are approved by the Board of Directors and periodi­cally reviewed. This system of procedures and oversight mini­mizes the opportunity for one or two individuals to dilute the quality of the investment portfolio through unduly speculative and ill-chosen investment purchases. Top quality investment research, advice and moni­toring. In order to improve its investment response and performance in today’s rapidly moving financial markets, the Board of Directors of the HRFA voted at its Spring 2002 meeting to retain Morgan Stanley to serve as the cus­todian for its investments and to provide investment ser­vices and advice. Morgan Stanley is internationally re­nowned for the quality and performance of its research department, and all investment recommendations are based upon the consensus opinion of teams of skilled and experi­enced analysts in their respective market areas. HRFA is now the beneficiary of all this research and information, much of which can be quite costly to obtain and some of it not available at any price on the outside. All of our assets at Morgan Stanley are fully insured against loss by fraud or misappropriation. More importantly, we now have skilled assistance in the ongoing monitoring of the status of our portfolio to quickly take advantage of investment opportu­nities as they arise (and before they quickly disappear) in the lightning-speed activity of today’s markets and just as

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