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NORTH YARMOUTH - CUMBERLAND
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This report has been reviewed.
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Dated this _______ day of __________, 2007
STATE OF MAINE
BUREAU OF INSURANCE
It is hereby certified that the annexed report of examination for
North Yarmouth-Cumberland Mutual Fire Insurance Company
has been compared with the original on file in this bureau and that it is a correct transcript there from and of the whole of said original.
| In witness whereof, I have hereunto set my hand and affixed the official seal of this Office at the City of Gardiner this __________ day of _____________, 2007
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March 19, 2007
Honorable Eric A. Cioppa
Acting Superintendent
Bureau of Insurance
34 State House Station
Augusta, ME 04333
Dear Sir:
In accordance with your instructions and pursuant to statutory provisions, an examination has been made on the conditions and financial affairs of
NORTH YARMOUTH-CUMBERLAND MUTUAL FIRE INSURANCE COMPANY
located in Falmouth, Maine (hereinafter, “the Company”). The following report is respectfully submitted.
The procedures in this examination considered the two year period from January 1, 2004 to the close of business on December 31, 2005 and included an examination for the one year period ended December 31, 2006. In accordance with the Examiner’s Handbook, the examination included significant transactions and/or events occurring subsequent to December 31, 2006 that were noted during the course of this examination.
The examination consisted of a survey of the Company’s business policies, review of the Articles of Incorporation, Bylaws, operational practices, Board of Directors’ meeting minutes, verification of assets and a determination of liabilities at December 31, 2006 in conformity with statutory accounting practices, NAIC guidelines and the laws, rules and regulations prescribed or permitted by the Maine Bureau of Insurance, where applicable.
The accompanying financial statements present fairly, in all material respects, the Company’s financial position as of December 31, 2006 and results of operations for the period then ended. The financial statements as of December 31, 2005 and December 31, 2004, prepared by management, are unexamined and presented for comparative purposes only.
The Company was incorporated in the State of Maine in 1853 as North Yarmouth Mutual Fire Insurance Company. In 1965, the Company merged with Cumberland Mutual Fire Insurance Company, incorporated in the State of Maine in 1848, resulting in the surviving corporation, North Yarmouth–Cumberland Mutual Fire Insurance Company. The Company is tax-exempt under IRS Code Section 501 (c) (15).
The Company’s Articles of Incorporation, Bylaws, and Minutes of the Board of Directors’ meetings held during the period under examination were reviewed.
Management of the Company is vested in a seven-member Board of Directors. The following are the duly elected members of the Board of Directors and Officers serving as of December 31, 2006:
Directors |
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| Donald Smith | Lincoln Merrill, Jr. |
| William Stiles | Duane Snow |
| Robert Maloney | Kent Hilton, Jr. |
Jerry Goodall |
|
Officers: |
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| William Stiles | President |
| Jerry Goodall | Vice-President |
| Mary Goodall | Secretary/Treasurer |
LINES OF BUSINESS AND TERRITORY
The Company is authorized to issue fire and lightning policies in the State of Maine.
The Company is protected as a named insured under a fidelity bond in the amount of $12,500. The bond amount was tested with regard to NAIC standards and was determined to be adequate.
UNDERWRITING RULES AND PRACTICES
The Company issues fire and lightning policies for a five year period under an assessment plan. The Company requires every policyholder to provide a premium note to the Company. Underwriting procedures utilize a pre-determined table which establishes a premium note face value as a percentage of the corresponding amount of insured risk. Presently, the underwriting table establishes a premium note face value requirement ranging from 4% to 25% of the insured risk. The Company charges an annual premium of 4.5% of the outstanding balance of the premium note. Policyholders are assessable up to the value of their respective premium notes. The amount of insurance that the Company may write is limited by Article I, §4, of the Articles of Incorporation, to 90% of the value of the building. The amount of risk retained by the Company on a per risk basis is limited by the State of Maine to 10% of the Company’s surplus plus 8% of the amount of the note outstanding.
The Company receives 31% of its revenue from one commercial sawmill, and the insured risk on the commercial sawmill represents 25% of the total insurance in-force at December 31, 2006 (See Comment & Recommendation 1).
During the period under examination, the Company had two reinsurance contracts (hereinafter, “Contract A” and “Contract B”) in-force. Contract A is a reciprocal reinsurance agreement with another, Maine domiciled, mutual fire assessment company. Contract A provides for each company to retain 100% of all policies up to and including $5,000. On policies with a face value in excess of $5,000 up to and including $40,000 the company issuing the policy retains one-half of the face value of the contract and reinsures the other half of the face value of the contract with the other company. Contract B is a facultative pro rata contract placed by a reinsurance broker. Contract B provides for cessions limited to an amount equal to five times the Company’s net retention plus the amount ceded to the Company’s working reinsurance contracts, subject to a minimum net retention of $20,000 and to a maximum cession hereunder of $100,000 on any one risk covered hereunder.
The Company records its books and records manually, primarily on a cash basis, and the books and records are maintained at the home of the Secretary/Treasurer. The Annual Statements are prepared on an accrual basis.
The accompanying financial statements present fairly, in all material respects, the company’s financial position as of December 31, 2006 and results of operations for the period then ended. The financial statements for December 31, 2005 and December 31, 2004, prepared by management, are unexamined and are presented for comparative purposes only.
at
| 12/31/2006 | 12/31/2005 (unexamined) |
12/31/2004 (unexamined) |
|
|---|---|---|---|
| Assets | |||
| Deposits in Cash | $ 32,104 | $ 6,042 | $ 11,305 |
| Assessments Receivable | 2,426 | 1,321 | 457 |
| Reinsurance Receivable | - | 409 | |
| Investments (Note 1) | 431,321 | 427,132 | 411,256 |
| Total Assets | 465,851 | 434,495 | 423,427 |
| Liabilities | |||
| Reinsurance Payable | 1,453 | 2,084 | 3,209 |
| Estimated Taxes Due & Accrued | 524 | - | |
| Deferred Revenue | 819 | - | |
| Accrued Expenses | - | 3,177 | 2,888 |
| Unearned Premium Reserve (Note 2) | 8,591 | 7,023 | 4,650 |
| Total Liabilities | 11,387 | 12,284 | 10,747 |
| Policyholder Surplus | 454,464 | 422,211 | 412,680 |
| Total Liabilities & Surplus | $ 465,851 | $ 434,495 | $ 423,427 |
for the years ended
| 12/31/2006 | 12/31/2005 (unexamined) |
12/31/2004 (unexamined) |
|
|---|---|---|---|
| Revenue | |||
| Direct Assessments Levied | $ 37,868 | $ 34,160 | $ 30,211 |
| Reinsurance Assessment Assumed | 2,499 | 2,559 | 2,470 |
| Direct Assessments Abated | (1,515) | (335) | (128) |
| Reinsurance Assessment Ceded | (21,670) | (22,339) | (20,781) |
| Administrative Fees | 10 | 10 | - |
| Net Assessment Revenue | 17,192 | 14,055 | 11,772 |
| Investment Income | 22,619 | 10,006 | 4,043 |
| Total Revenue | 39,811 | 24,061 | 15,815 |
| Expenses | |||
| Losses Paid | - | - | 10,000 |
| Agents' compensation | 3,504 | 3,296 | 2,969 |
| Salaries and fees | 9,250 | 9,450 | 7,825 |
| General office maintenance | 357 | 234 | 418 |
| Taxes, licenses, fees | 1,864 | 2,071 | 1,744 |
| Legal Expense | 482 | 371 | 292 |
| Insurance Expense | 979 | 916 | 864 |
| Miscellaneous | 309 | - | 381 |
| Total Expenses | 16,745 | 16,338 | 24,493 |
| Net Income | $ 23,066 | $ 7,723 | $ (8,678) |
| SURPLUS ACCOUNT RECONCILIATION | |||
| 12/31/2006 | 12/31/2005 | 12/31/2004 | |
| Surplus - Beginning | $ 422,211 | $ 412,680 | $ 408,269 |
| Net Income | 23,066 | 7,723 | (8,678) |
| Change in Unearned Premium | (1,568) | (2,373) | 4,896 |
| Change in Unrealized Gains/(Losses) | 10,717 | 4,181 | 8,193 |
| Misc Adjustment to Surplus | 38 | ||
| Surplus - Ending | $ 454,464 | $ 422,211 | $ 412,680 |
| Note 1 - Investments: | $431,321 |
Investments, primarily mutual funds, are stated at market value. Unrealized capital gains and losses on investments reported at market value are recorded directly in policyholder’s surplus.
| Note 2 – Unearned premium: | $8,591 |
Title 24-A M.R.S.A. Chapter 51 §3624 requires mutual assessment companies to maintain an unearned premium reserve equal to 50% of net premiums and net assessments on its policies in-force.
As noted in the Underwriting section, the Company receives 31% of its revenue from one commercial sawmill and the insured risk on the sawmill represents 25% of the total insurance in-force at December 31, 2006.
Recommendation:
The Board of Directors should analyze the concentration of insured risk assumed by the Company and possibly consider certain changes to the insured risk profile of the Company.
STATE OF MAINE
COUNTY OF KENNEBEC, SS
Michael R. Nadeau, CPA, CFE, CISA, AES being duly sworn according to law, deposes and says that, in accordance with the authority vested in him by Eric A. Cioppa, Acting Superintendent of Insurance, pursuant to the Insurance Laws of the State of Maine, has made an examination of the condition and financial affairs of
NORTH YARMOUTH - CUMBERLAND MUTUAL FIRE INSURANCE COMPANY
of Falmouth, Maine as of December 31, 2006 and that the foregoing report of examination, subscribed to by him, is true to the best of his knowledge and belief.
_________________________
Michael R. Nadeau, CPA, CFE, CISA, AES
Examiner-In-Charge
Subscribed and sworn to before me
This ____day of ___________, 2007
_________________________
Patricia A. Galouch, Notary Public
My Commission Expires:
Last Updated: July 10, 2008
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