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CASCO INDEMNITY COMPANY

 

 

REPORT OF EXAMINATION

AS OF

DECEMBER 31, 2007

 

TABLE OF CONTENTS

 

SCOPE OF EXAMINATION .............................................................................................2

DESCRIPTION OF THE COMPANY ................................................................................2

COMPANY HISTORY ............................................................................................3
MANAGEMENT AND CONTROL ............................................................................3
CORPORATE RECORDS .......................................................................................3
FIDELITY BOND AND OTHER INSURANCE ........................................................4
OFFICERS' AND EMPLOYEES' WELFARE AND PENSION PLANS ......................4
TERRITORY AND PLAN OF OPERATION ............................................................4
BUSINESS IN FORCE BY STATES .......................................................................4
DIRECT LOSSES PAID BY STATE .......................................................................5
REINSURANCE .....................................................................................................5
ACCOUNTS AND RECORDS .................................................................................5

FINANCIAL STATEMENTS .............................................................................................6

NOTES TO FINANCIAL STATEMENTS .........................................................................10

ACTUARIAL OPINION .................................................................................................14

 

 

I hereby certify that the attached report of examination dated August 14, 2008 shows the condition and financial affairs of

CASCO INDEMNITY COMPANY

located in Saco, Maine as of December 31, 2007 and has been filed in the Bureau of Insurance as a public document.

 

 

This report has been reviewed.

 

_________________________
Stuart E. Turney, CPA
Director of Financial Affairs and Solvency

 

Dated this _______ day of _____________, 2008

 

August 14, 2008

Honorable Mila Kofman
Superintendent
Bureau of Insurance
34 State House Station
Augusta, ME 04333-0034

Dear Superintendent:

Pursuant to your instructions and in accordance with the provision of 24-A M.R.S.A. §221, the Maine Bureau of Insurance (hereinafter, “Bureau”) conducted an examination of the condition and financial affairs of

CASCO INDEMNITY COMPANY

(hereinafter, "Company"), as of December 31, 2007.

The examination, performed at the Company’s home office in Saco, Maine, was made in accordance with the standards and procedures established by the Bureau and the National Association of Insurance Commissioners (hereinafter, “NAIC”) and accordingly, included tests of the accounting records and other procedures considered necessary under the circumstances.

The accompanying financial statements have been prepared in accordance with statutory accounting practices prescribed or permitted by the NAIC and the Bureau. These practices differ in certain respects from generally accepted accounting principles (hereinafter, “GAAP”).

For purposes of this report, comments on various items may be limited to matters involving departure from laws, rules or regulations, a significant change in the amount of the item, or where an explanation, comment and/or recommendation is warranted.

The following report is respectfully submitted.

SCOPE OF EXAMINATION

The Bureau conducted a routine statutory examination of the Company covering the period of January 1, 2005 to December 31, 2007. The full-scope examination was performed using the risk-focused approach. The following matters were reviewed to assess their impact on financial condition and conformity with related laws.

DESCRIPTION OF THE COMPANY

The Company, a property/casualty insurer, is domiciled in the State of Maine with corporate office located in Saco, Maine. The Company was last examined as of December 31, 2004 by the Bureau.

The Company is a wholly owned subsidiary of NE Corporation, an insurance holding company domiciled in the State of Maine.

 

Casco Organizational Chart

Company History

The Company was incorporated on June 27, 1985 in the State of Maine and commenced writing business during that year.

The Company was founded by several New England based mutual property insurers to write private passenger automobile liability and physical damage in all New England states. The Company started writing commercial auto liability and a limited amount of personal umbrella in 1997. The personal umbrella coverage is only offered in conjunction with the underlying coverage of a Casco Indemnity Company personal auto policy and a member company homeowners’ policy.

Management and Control

Management of the Company is vested in seven (7) members of the Board of Directors. The following is a list of the duly elected seven-member Board of Directors and the Officers serving as of December 31, 2007:

Directors

George A. Cole III Charles J. Gesen
Rolf H. Gesen Linda M. Proulx
William D. Swetland III Cheryl E. Wigmore
Brian R. Wilkin  

Officers

William D. Swetland., III President & CEO
John F. Donilon Treasurer & Sr. Vice President
David W. Hardy Secretary & Vice President
Laura A. Barth Asst. Vice President

 

Each Director and Officer of the Company is required to complete a conflict of interest statement annually to disclose any material interest or affiliation which is likely to be in conflict with his/her official duties and responsibilities to the Company.

Corporate Records

The Articles of Incorporation, Bylaws and Minutes of the Board of Directors’ meetings held during the period under examination were reviewed. Review of these records indicate that the Sixth Article and Section 4.2 of the Bylaws are not in compliance with 24-A M.R.S.A. §3411. The Articles of Incorporation and Bylaws were amended on January 31, 2003 changing the number of directors to “not less than three (3) and not more than seven (7)”. Title 24-A M.R.S.A. §3411 (1) states: “The affairs of every domestic insurer shall be managed by a Board of Directors consisting of not less than 7 directors or more than 21 directors”.
(See Comments and Recommendation #1)

Fidelity Bond and Other Insurance

The Company is adequately protected under a blanket fidelity bond in the amount of $1,000,000. The Company’s other insurance includes usual and customary coverage for property, casualty, and workers’ compensation coverage.

Officers’ and Employees’ Welfare and Pension Plans

The Company sponsors a noncontributory defined contribution pension plan. Employees are eligible to participate after attaining age 21 and completion of one-half year of service. The Company’s contribution is equal to 10% of participants’ compensation for the year.

The Company administers a 401(k) plan for its employees with the same eligibility criteria as the pension plan. The Company currently provides no matching contributions.

The Company has an annual profit sharing plan, to be distributed to all active employees at the end of the year up to a maximum of 15% of total salaries earned by each employee, when pre-tax operating income meets or exceeds $150,000.

Territory and Plan of Operation

The Company insures property and casualty risks located in Connecticut, Maine, New Hampshire, Rhode Island, and Vermont, and as of early 2007, became licensed in South Carolina.

Rhode Island, 26% in New Hampshire, 10% in Maine, 9% in Connecticut, and the remaining 3% in the State of Vermont.

Business In Force by States

Direct Premiums Written by State

 

  2007 2006 2005
CT $ 1,429,232 $ 1,488,390 $ 1,777,530
ME 1,504,466 1,522,427 1,515,300
MA - - (835)
NH 3,970,575 4,264,933 4,611,054
RI 7,970,886 7,388,006 7,537,592
VT 427,360 535,542 576,045
Total $ 15,302,519 $ 15,199,298 $ 16,016,686

 

Direct Losses Paid by State

Direct Losses Paid by State

 

  2007 2006 2005
CT $ 1,066,634 $ 1,268,438 $ 1,327,166
ME 961,345 1,034,230 993,086
MA 43,500 (8,535) (42,156)
NH 2,195,597 2,805,828 2,881,006
RI 4,777,885 4,962,034 4,842,572
VT 308,034 525,062 298,581
Total $ 9,352,995 $ 10,587,057 $ 10,300,255

 

Reinsurance

Assumed: The Company is required to participate in certain underwriting pools in states where it is licensed to write automobile insurance. Participants in the pool share in the underwriting results of the pools, generally based on each member’s share of the industry as a whole.

Ceded: Ceded reinsurance is principally with one highly rated reinsurance carrier (GenRe) and certain related parties (Hingham and Phenix), all authorized companies in the State of Maine.

The Company has a Quota Share Agreement with related parties Hingham (55.2%) and Phenix (44.8%) wherein the reinsurers are liable for 25% of the first $150,000 of the loss as respects to each occurrence on automobile business.

The Company has an Excess of Loss Agreement with GenRe wherein the Company’s net retention for automobile business is $150,000 with coverage up to $1,850,000 in excess of its net retention. The three layers of coverage are as follows:

First Excess: $50,000 in excess of $150,000
Second Excess: $300,000 in excess of $200,000
Third Excess: $1,500,000 in excess of $500,000

The Catastrophe endorsement in the Excess of Loss Agreement covers Automobile Physical Damage Business wherein the Company’s retention is the first $250,000 of each occurrence plus 5% of each subsequent layer. The two reinsurance layers provide coverage for 95% of the next $2,000,000 ultimate net loss in excess of the Company retention.

The Company has a Personal Umbrella Policy with GenRe. The limit of liability of the reinsurer is 95% of the first $1,000,000 each occurrence; and 100% of the difference, if any, between the policy limit and the first $1,000,000 each occurrence. Company retention is 5% of the first $1,000,000 each occurrence.

Accounts and Records

Accounts and records were reviewed and tested in order to assess their impact on the Company’s financial condition and conformity with related laws.

 

FINANCIAL STATEMENTS

The accompanying financial statements present fairly, in all material respects, the Company’s statutory financial position as of December 31, 2007, statutory results of operations for the period then ended and statutory capital and surplus since the last examination. The financial statements as of December 31, 2006 and December 31, 2005 are unexamined and are presented for comparative purposes only.

STATUTORY STATEMENTS OF ADMITTED ASSETS, LIABILITIES AND SURPLUS

December 31, 2007, 2006 and 2005

 

  2007 2006
(unexamined)
2005
(unexamined)
Admitted Assets:      
Bonds (Note 1) $ 13,911,184 $ 15,018,163 $ 15,523,142
Preferred Stocks 12,000 - -
Common Stocks (Note 2) 4,470,443 4,213,514 3,679,811
Cash (Note 3) 782,107 14,622 226,618
Receivable from securities 9 - 385
Investment income due and accrued 150,530 155,884 168,641
Premiums and considerations (Note 4) 4,469,132 4,340,817 4,505,478
Reinsurance recoverable (Note 5) 557,185 596,404 665,354
Federal income tax recoverable - 65,431 76,117
Net deferred tax asset - - 113,864
EDP equipment 26,298 36,885 23,971
Aggregate write-ins for other than invested assets 4,644 14,790 120,466
Total Admitted Assets $ 24,383,532 $ 24,456,510 $ 25,103,847
       
Liabilities and Surplus:      
Loss reserves (Note 6) $ 4,808,394 $ 5,320,175 $ 6,685,382
Loss adjustment expenses (Note 6) 675,372 749,693 693,034
Commissions payable, contingent commissions and other (Note 7) 283,150 321,786 311,843
Other expenses 186,210 187,142 185,204
Taxes, licenses and fees 2,897 - -
Federal and foreign income taxes 4,895 - -
Net deferred tax liability (Note 8) 135,071 109,835 -
Unearned premiums (Note 9) 5,445,501 5,326,217 5,574,470
Advance premiums 130,911 118,096 147,428
Ceded reinsurance premiums payable (Note 10) 711,682 697,244 742,367
Amounts withheld for account of others 30,013 28,285 27,955
Payable for securities - 20,062 -
Aggregate write-ins for liabilities 3,815 740 65
Total Liabilities $ 12,417,911 $ 12,879,275 $ 14,367,748
       
Common capital stock $ 2,500,000 $ 2,500,000 $ 2,500,000
Gross paid in and contributed surplus 2,900,000 2,900,000 2,900,000
Unassigned funds 6,565,621 6,177,235 5,336,099
Total Surplus $ 11,965,621 $ 11,577,235 $ 10,736,099
Total Liabilities and Surplus $ 24,383,532 $ 24,456,510 $ 25,103,847

STATUTORY STATEMENT OF OPERATIONS

Years Ended December 31, 2007, 2006 and 2005

  2007 2006
(unexamined)
2005
(unexamined)
Revenue:      
Premiums earned $ 10,937,832 $ 11,223,264 $ 11,812,803
Deductions:      
Losses incurred $ 6,423,252 $ 6,363,275 $ 6,982,725
Loss expenses incurred 1,133,172 1,280,827 1,234,765
Other underwriting expenses incurred 3,885,708 3,816,839 3,836,947
Aggregate write-ins for underwriting deductions 214 1,966 1,836
Total underwriting deductions $ 11,442,346 $ 11,462,907 $ 12,056,273
Net underwriting gain (loss) $ (504,514) $ (239,643) $ (243,470)
Investment Income:      
Net investment income earned $ 549,676 $ 583,303 $ 514,740
Net realized capital gain (losses) 91,053 28,034 121,546
Net investment gain (loss) $ 640,729 $ 611,337 $ 636,286
Other Income:      
Net gain (loss) from premium balances charged off $ (30,721) $ (33,598) $ (20,692)
Finance and service charges not included in premiums 307,313 307,501 313,547
Aggregate write-ins for miscellaneous income - - -
Total other income $ 276,592 $ 273,903 $ 292,855
       
Net income before dividends, federal and foreign tax $ 412,807 $ 645,597 $ 685,671
Federal and foreign income taxes incurred 9,303 82,099 105,113
Net Income $ 403,504 $ 563,498 $ 580,558

 

STATUTORY STATEMENT OF CAPITAL AND SURPLUS

Years Ended December 31, 2007, 2006 and 2005

  2007 2006
(unexamined)
2005
(unexamined)
       
Capital and Surplus, Beginning of Year 11,577,236 10,736,099 10,258,524
       
Net income 403,504 563,498 580,558
Change in unrealized capital gains 600 330,924 9,251
Change in net deferred income tax (24,928) (53,239) (111,094)
Change in non-admitted assets 9,210 (46) (1,140)
Change in surplus as regards to policyholders 388,386 841,137 477,575
       
Capital and Surplus, End of Year 11,965,622 11,577,236 10,736,099

 

NOTES TO FINANCIAL STATEMENTS

Note 1 - Bonds

Cost Par Value Market Value Carrying Value
Government $ 1,815,972 $ 1,828,620 $ 1,863,454 $ 1,816,089
States, Territories 560,406 500,000 552,484 547,529
Political Subdivisions 2,301,003 2,125,000 2,271,892 2,250,905
Special Revenue 6,294,524 6,190,716 6,348,943 6,244,906
Industrial & Miscellaneous 3,112,321 3,031,711 3,070,306 3,051,753
Total $ 14,084,226 $ 13,676,047 $ 14,107,079 $ 13,911,182

 

All bonds were rated highest quality and high quality (1 and 2) by the NAIC and are stated at amortized cost. Pursuant to 24-A M.R.S.A. §412, the Company has maintained the required security deposit with the Treasurer of Maine. The Company also maintains a security deposit in Massachusetts, New Hampshire and South Carolina in conjunction with licensing in those states.

Note 2 - Common Stocks

  Cost Market Value Carrying Value
Public Utilities $ 46,283 $ 141,792 $ 141,792
Bank, Trust, and Insurance 351,031 648,832 648,832
Industrial and Miscellaneous 2,037,726 3,551,035 3,551,035
Mutual Funds 128,150 128,784 128,784
Total $ 2,563,190 $ 4,470,443 $ 4,470,443

 

Common stock is stated at market value in accordance with valuations promulgated by the NAIC. Unrealized capital gains and losses on investments reported at market value are recorded directly in surplus.

Note 3 - Cash, Cash Equivalents, and Short-Term Investments

Bank balances at year-end were confirmed through direct correspondence with various depositories.

Note 4 - Premiums and Considerations

Premiums and Considerations at December 31, 2007 consisted of:

Uncollected premiums and agents’ balances in course of collection $ 463,636
Deferred premiums, agents' balances & installments booked by deferred and not yet due 4,005,496
Total $ 4,469,132

 

Premiums and agents’ balances due to the Company at December 31, 2007 were verified during the exam.

Note 5 – Reinsurance Recoverable

Recoverable was due from member companies and settlement of balances were verified subsequent to year-end.

Note 6 – Losses & Loss Adjustment Expense

The Bureau of Insurance contracted with Alliance Actuarial Services, Inc. to perform an actuarial analysis of the Company’s loss and loss adjustment expense reserves on both a net basis and a gross basis. Based on this analysis, the Company’s estimates for gross and net unpaid loss and loss adjustment expenses appear reasonably stated. See Appendix A for Actuarial Opinion.

Note 7 – Commissions Payable, Contingent Commission and Other

Testing was performed on this balance and it is deemed to be fairly stated.

Note 8 – Net Deferred Tax Liability

Gross deferred tax asset $ 536,226
Gross deferred tax liability (671,337)
Net deferred tax liability $ (135,071)

 

Net Deferred Tax Liability was verified and determined to be in compliance with SSAP No. 10.

Note 9 – Unearned Premium

The Company is utilizing the daily pro rata method in accordance with SSAP No. 53, ¶7. The unearned premium amount was recalculated using the 2007 written premium file and the daily pro rata method.

Note 10 – Ceded Reinsurance Premiums Payable

Ceded reinsurance premiums payable at December 31, 2007 was verified and appear to be reasonably stated.

COMMENTS AND RECOMMENDATIONS

  1. Comment: The Sixth Article of Incorporation and Section 4.2 of the Bylaws are not in compliance with 24-A M.R.S.A. §3411 (1). The Articles of Incorporation and Bylaws were amended on January 31, 2003 changing the number of directors to “not less than three (3) and not more than seven (7)”. Title 24-A M.R.S.A. §3411 (1) states: “The affairs of every domestic insurer shall be managed by a Board of Directors consisting of not less than 7 directors or more than 21 directors”.

    Recommendation:The Company is required to amend the Sixth Article of Incorporation and Section 4.2 of the Bylaws to comply with 24-A M.R.S.A. §3411 (1). Furthermore, the Company must promptly deliver the amendments to the Superintendent in accordance with 24-A M.R.S.A. §3310 (3) and §3359 (3).

 

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 Mila Kofman, Superintendent of Insurance, pursuant to the Insurance Laws of the State of Maine, has made an examination of the condition and financial affairs of

CASCO INDEMNITY COMPANY

located in Saco, Maine as of December 31, 2007, and that the foregoing report of examination, subscribed to by him, is true to the best of his knowledge and belief. The following examiners from the Bureau of Insurance assisted:

Jill C. Tobey, CPA, CFE
Faith A. Talbot, AFE
Debra L. Blaisdell
Analisa M. Gallant

 

Respectfully submitted,

 

__________________________

Michael R. Nadeau, CPA, CFE, CISA, AES
Examiner-In-Charge

Subscribed and sworn to before me

this ______ day of ______________, 2008

_____________________________
Notary Public
My commission expires:

 

 

APPENDIX A

ACTUARIAL OPINION

 

ALLIANCE ACTUARIAL SERVICES, INC.
765 Match Circle, Harleysville, PA 19438 PHONE: 215-256-6505 FAX: 215-256-6506


Statement of Actuarial Opinion
Casco Indemnity Company
For the Year Ended December 31, 2007


IDENTIFICATION

I, Richard Lo, am a Consulting Actuary associated with the firm of Alliance Actuarial Services, Inc. I am a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries and meet the Academy's qualification standards for signing statements of actuarial opinion on property and casualty loss reserves. I was engaged by the Maine Bureau of Insurance (the “Bureau”) to perform an actuarial examination of Casco Indemnity Company (“CASCO” or the “Company”) and to render this opinion with regard to loss and loss adjustment expense reserves of the Company as of December 31, 2007.

SCOPE OF OPINION

I have examined the reserves listed in Exhibit A, as shown in the Annual Statement of the Company, as prepared for filing with state regulatory officials, as of December 31, 2007. The items on which I am expressing an opinion are listed in Exhibit A and reflect the Loss Reserve Disclosure items listed in Exhibit B.

My examination of the loss and loss adjustment expense reserves was based upon data and related information provided by the Company. In this regard, I relied on Jack Donilon, Sr. Vice President and Treasurer of the Company, and Mr. Michael R. Nadeau, the Bureau’s examiner-in-charge of the CASCO examination, as to the accuracy and completeness of the data. I evaluated the data used directly in my analysis for reasonableness and consistency. In other respects, my examination included the use of such actuarial assumptions and methods and such tests of calculations as I considered necessary.

My opinion was limited to Items listed in Exhibit A and does not pertain to any income statement or other balance sheet items. For instance, I have formed no opinion regarding the value, validity or cash flow characteristics of the Company’s assets.

This opinion is intended to be used solely by the Bureau in its examination of the Company as of December 31, 2007 and is not intended for any other purpose.

OPINION

In my opinion, the amounts carried in the balance sheet on account of the items identified in Exhibit A (for losses and loss adjustment expenses combined):

A. Meet the requirements of the insurance laws of Maine;

B. Are stated in accordance with accepted loss reserving standards and principles; and

C. Make a reasonable provision for the aggregate of unpaid loss and loss expense obligations of the Company under the terms of its policies and agreements.

RELEVANT COMMENTS

Risk of Material Adverse Deviations

Since the emergence and settlement of claims are subject to uncertainty, actual future developments will vary, perhaps significantly, from the amounts carried on the balance sheet. Furthermore, the amounts carried on the Company’s balance sheet may not provide for the extraordinary future emergence of either new classes of losses or post-contractual expansions of policy coverage, nor for extraordinary future development of reserves that may have been established specifically for these events.

Based on my understanding of the use of this opinion, I evaluated materiality in the context of 10% of statutory surplus at December 31, 2007. I did not evaluate materiality in any other context. In this opinion, I considered the potential for adverse deviation of $1.2 million to be material. In my opinion, potential variability of the reserves in excess of this threshold would be of interest to the Bureau. At this time, my assessment is that the Company does not have a significant potential for a material adverse deviation from the carried net reserve amounts.

Reinsurance Collectibility

Based on a review of the Company’s ceded reinsurance balances as shown in Schedule F - Part 3. All of the unaffiliated assuming companies were rated A or better by A.M. Best and or balances are collateralized. The Company also represented to me that it knows of no uncollectible reinsurance cessions and on disputed reinsurance balances. I have performed no additional work to verify the financial condition of the assuming reinsurance companies or the adequacy of the collateralized balances. Relying on the information cited in this paragraph, I have treated the reported net reinsurance recoverables as collectible for the purpose of this Opinion.

Retroactive Reinsurance and Financial Reinsurance

The Company has informed me that it does not currently participate in any reinsurance that has or should have been accounted for as retroactive or financial reinsurance. I have reviewed the reinsurance agreements and they constitute a valid transfer of risk.

NAIC IRIS Ratios

The loss and loss adjustment expense reserves identified in Exhibit A did not create any exceptional values for NAIC IRIS Tests 10, 11, or 12.

Discounting

The Company does not discount loss and loss expense reserves.

Salvage and Subrogation

The data underlying my review and the resulting estimates are net of salvage and subrogation. The Company has booked $612,000 for all lines of business as the amount of salvage and subrogation recoverables in the Annual Statement.

Pools and Associations

The Company participates in a number of voluntary and involuntary pooling arrangements. The Company includes its pool participation in individual lines of business and in Reinsurance lines of business. The Company’s practice is to record its share of the reported reserves for these pools and associations without any adjustment for reporting lag. Aggregate loss and LAE reserves held for all pools and associations are $48,408.

Unearned Premium for Long Duration Contracts

The Company writes no policies or contracts related to single or fixed premium policies with coverage periods of thirteen months or greater which are non-cancelable and not subject to premium increase (excluding financial guaranty contracts, mortgage guaranty policies, and surety contracts).

Extended Loss and Expense Reserves

The Company writes no business that would require extended loss and expense reserves.

Asbestos and Environmental Exposures

Management has informed me that the Company does not have exposure to asbestos and environmental impairment liability.

Terrorist Attack Exposure

Management has informed me that the Company does not have exposure to terrorist attack claims. In my opinion, the risk of material liability from this exposure is remote as of December 31, 2007.

DOCUMENTATION

An actuarial report supporting the findings expressed in this Statement of Actuarial Opinion will be provided to the Bureau.

 

  ______________________________
Richard W. Lo, FCAS, MAAA, FCA
Alliance Actuarial Services, Inc.
765 Match Circle
Harleysville, PA 19438
(215) 256-6505
Date: August 6, 2008

 

Exhibit A: SCOPE

Loss Reserves:

  Item Amount
1. Reserve for Unpaid Losses (Liabilities, Surplus, and Other Funds page, Line 1) $4,808,394
2. Reserve for Unpaid Loss Adjustment Expenses (Liabilities, Surplus, and Other Funds page, Line 3) $675,372
3. Reserve for Unpaid Losses - Direct and Assumed (Schedule P, Part 1, Totals from Cols. 13 and 15) $6,621,000
4. Reserve for Unpaid Loss Adjustment Expenses - Direct and Assumed (Schedule P, Part 1, Totals from Cols. 17, 19 and 21) $850,000
5. The Page 3 write-in item reserve, “Retroactive Reinsurance Reserve Assumed” $0
6. Other Loss Reserve items on which the Appointed Actuary is expressing an opinion (list separately) $0

Premium Reserves:

  Item Amount
7. Reserve for Direct and Assumed Unearned Premiums for Long Duration Contracts $0
8. Reserve for Net Unearned Premiums for Long Duration Contracts $0
9. Other Premium items on which the Appointed Actuary is expressing an opinion (list separately):
• Premium Deficiency Reserve
$0

Exhibit B: DISCLOSURE

1. Name of the Appointed Actuary Lo Richard W.
2. The Appointed Actuary’s Relationship to the Company. Enter E or C (E if Employee, C if Consultant)   C  
3. The Appointed Actuary is a Qualified Actuary based upon what qualification? (F if FCAS, A if ACAS, M if not F nor A, but MAAA approved by the Casualty Practice Council with attached approval letter)   F  
4. Type of Opinion, as identified in the OPINION paragraph.
Enter R, I, E, Q, or N (R if Reasonable, I if Inadequate, E
if Excessive, Q is Qualified, N if No Opinion)
  R  

 

5. Materiality Standard expressed in US dollars (Used to Answer Question #6) $1,196,562      
6. Is there a significant Risk of Material Adverse Deviation?       Yes [ ]
No [X]
7. Statutory Surplus $11,965,621      
8. Anticipated net salvage and subrogation included as a reduction to loss reserves as reported in Schedule P $612,000      
9. Discount included as a reduction to loss reserves and loss expense reserves as reported in Schedule P $0      
10. The net loss and expense reserves for the Company’s share of voluntary and involuntary underwriting pools and associations’ unpaid losses and expenses that are included in reserves shown on the Liabilities, Surplus and Other Funds page, Losses and Loss Adjustment Expenses lines. $48,408      
11. The net loss and loss adjustment expense reserves that the Company carries for the following liabilities included on the Liabilities, Surplus and Other Funds page, Losses and Loss Adjustment Expenses lines.        
  11.1 Asbestos, as disclosed in the Notes to Financial Statements $0      
  11.2 Environmental, as disclosed in the Notes to Financial Statements $0      
12. The total claims made extended loss and expense reserve (Sch.P Interrogatories)        
  12.1 Amount reported as loss reserves $0      
  12.2 Amount reported as unearned premium reserves $0      
13. Other items on which the Appointed Actuary is providing Relevant Comments (list separately) $0      

 

 

Last Updated: August 22, 2012