Document Docket No. 03-407 : Hearing Decision : Bureau of Insurance

STATE OF MAINE
DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION
BUREAU OF INSURANCE

IN RE:

APPLICATION OF NORTH EAST INSURANCE COMPANY AND AMERICAN COLONIAL INSURANCE COMPANY FOR APPROVAL OF AN AGREEMENT AND PLAN OF MERGER

Docket No. INS-03-407

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DECISION AND ORDER

Alessandro A. Iuppa, Superintendent of the Maine Bureau of Insurance, issues this Decision and Order in the above captioned proceeding.

I. THE PROPOSED MERGER

On April 18, 2003, North East Insurance Company (hereinafter “North East”) and American Colonial Insurance Company (hereinafter “American Colonial”) (collectively “the Applicants”) filed their Agreement and Plan of Merger along with other documentation pertaining to an anticipated merger between the two companies. On May 20, 2003, North East and American Colonial filed a Form A pursuant to 24-A M.R.S.A. § 222(4-A) seeking approval of their proposed merger.

The Applicants propose to merge American Colonial, a New York domestic insurance company, with and into its parent and sole shareholder North East, a Maine domestic insurance company with North East becoming the surviving corporation. Under the terms of the Agreement and Plan of Merger, each share of American Colonial common stock shall, by virtue of the merger, be cancelled and extinguished, and all of the issued and outstanding common stock of North East shall be and remain the issued and outstanding stock of North East, held by its sole shareholder, Preserver Group, Inc.

II. PROCEDURAL HISTORY

On May 1, 2003, the Superintendent issued a Notice of Hearing for May 30, 2003, and set an intervention deadline of May 20, 2003. No one applied to be an intervenor. After receipt of the Applicant’s Form A filing on May 22, 2003, the Superintendent issued an Information Request dated May 27, 2003. The Applicant’s filed a timely response to this request on May 29, 2003. The Superintendent then held the scheduled hearing on May 30, 2003.

III. THE RECORD

At the hearing the Applicant’s requested that the response to Request 5 of the Superintendent’s Information Request pertaining to the status of American Colonial’s open claims be designated confidential. The Superintendent granted the request at the hearing and issued an order to that effect the same day.

Testifying at the hearing for the Applicants were Stephen A. Gilbert, President and CEO of American Colonial and Chairman and CEO of North East, Patrick J. Haveron, Executive Vice President, CEO, CFO, and Treasurer of both American Colonial and North East, and Ronald A. Libby, President and COO of North East. The Superintendent also admitted the following materials into the record of this proceeding:

Exhibit 1	The Applicant’s Form A Statement dated May 20, 2003, including Appendix A (Agreement and Plan of Merger), Appendix B (2002 Annual Statement of North East), and Appendix C (2002 Annual Statement of American Colonial)
Exhibit 2	Pre-filed testimony of Stephen A. Gilbert dated May 20, 2003
Exhibit 3	The package of materials filed by the Applicants on April 18, 2003, consisting of the following documents: (a) Certificate of Merger pursuant to Section 907 of the Business Corporation Law of the State of New York and Section 903 of the Business Corporation Act of the State of Maine with all exhibits; (b) Unanimous Written Consent of the Board of Directors of North East; (c) Waiver of Notice of Meeting of Shareholder of North East; (d) Consent of the Sole Stockholder of North East; (e) Unanimous Written Consent of the Board of Directors of American Colonial (f) Waiver of Notice of Meeting of Stockholder of American Colonial (g) Consent of the Sole Stockholder of American Colonial (h) Certificate of Adoption of Agreement and Plan of Merger (i) Certificate of Fees; and (j) The State of New York Insurance Department’s written approval of the proposed merger, together with the issuance of a license for North East to engage in the business of providing certain insurance lines in New York.
Exhibit 4	The response to the Superintendent’s Information Request dated May 29, 2003.

No one from the public testified at the hearing.

IV. STANDARD OF REVIEW

As established by 24-A M.R.S.A. §§ 222(7)(A) and 3474(2) and identified in the Notice of Hearing, the Superintendent shall approve the application for merger unless he finds that one of the following conditions exist:

(1) The effect of the proposed merger may be substantially or materially to lessen competition in insurance or the insurance business in the State of Maine or elsewhere as to the kinds of insurance involved, or would materially tend to create a monopoly as to such business therein, or would violate the laws of the State of Maine or of the United States relating to monopolies or restraints of trade;

(2) The proposed merger plan would jeopardize the financial stability of North East or prejudice the interest of the policyholders;

(3) The Applicants’ proposed plans to merge or to make any other major change in the business or corporate structure or management of North East are unfair or prejudicial to the policyholders;

(4) The proposed merger plan would substantially reduce the security of and service to be rendered to the policyholders in the State of Maine or elsewhere; or

(5) The proposed merger plan is contrary to law, or is subject to other material and reasonable objection.

In addition to the legal standards of review under 24-A M.R.S.A. §§ 222(7)(A) and 3474(2) as identified in items (1) through (5) above, the Superintendent, in his discretion, has the authority to consider such other relevant issues identified by participating parties or otherwise. No other issues were presented for consideration.

V. FINDINGS OF FACT AND CONCLUSIONS OF LAW

Based on the testimonial and documentary evidence presented at the hearing, and upon a review of the record of this proceeding, the Superintendent finds that no issues of material concern exist with respect to the Applicants’ abilities to satisfy the legal standards for approval set forth in 24-A M.R.S.A. §§ 222(7)(A) and 3474(2), summarized as follows:

(1) No evidence was presented that demonstrates, and the Superintendent does not find, that the effect of the proposed merger may be substantially or materially to lessen competition in insurance or the insurance business in the State of Maine or elsewhere as to the kinds of insurance involved, or would materially tend to create a monopoly as to such business therein, or would violate the laws of the State of Maine or of the United States relating to monopolies or restraints of trade.

(2) No evidence was presented that demonstrates, and the Superintendent does not find, that the Proposed Acquisition would jeopardize the financial stability of North East or prejudice the interest of its policyholders.

(3) No evidence was presented that demonstrates, and the Superintendent does not find, that the Applicants’ proposed plans to merge or to make any other major change in the business or corporate structure or management of North East are unfair or prejudicial to the policyholders.

(4) No evidence was presented that demonstrates, and the Superintendent does not find, that the proposed merger plan would substantially reduce the security of and service to be rendered to the policyholders in the State of Maine or elsewhere.

(5) No evidence was presented that demonstrates, and the Superintendent does not find, that the proposed merger plan is contrary to law, or is subject to other material and reasonable objection.

For all of the foregoing reasons, the Superintendent concludes that the Applicants’ have met the legal standards for approval set forth in 24-A M.R.S.A. §§ 222(7)(A) and 3474(2).

VI. ORDER

The Superintendent hereby APPROVES the application to merge American Colonial Insurance Company with and into North East Insurance Company. Pursuant to the requirements of 24-A M.R.S.A. § 222(4-A)(C), the merger may take effect upon the lapse of ten days from the date of this order provided that no court issues an injunction or other order precluding the consummation of the merger agreement. The Superintendent further ORDERS that North East provide written notice to him upon the consummation of the merger.

VII. NOTICE OF APPEAL RIGHTS

This Decision and Order is a final agency action of the Superintendent of Insurance within the meaning of the Maine Administrative Procedure Act. It may be appealed to the Superior Court in the manner provided by 24-A M.R.S.A. § 236, 5 M.R.S.A. § 11001, et seq. and M.R. Civ. P. 80C. Any party to the proceeding may initiate an appeal within thirty days after receiving this notice. Any aggrieved non-party whose interests are substantially and directly affected by this Decision and Order may initiate an appeal within forty days of the issuance of this decision. There is no automatic stay pending appeal; application for stay may be made in the manner provided in 5 M.R.S.A. § 11004.

PER ORDER OF THE SUPERINTENDENT OF INSURANCE

DATED: June 3, 2003

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ALESSANDRO A. IUPPA
Superintendent of Insurance

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