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STATE OF MAINE
DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION
BUREAU OF INSURANCE
IN RE:
APPLICATION OF SELECTIVE INSURANCE GROUP, INC. FOR APPROVAL OF
ACQUISITION OF CONTROL OF CADILLAC MOUNTAIN INSURANCE COMPANY PURSUANT
TO STOCK PURCHASE AGREEMENT
Docket No. INS-03-439 |
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DECISION AND ORDER |
Eric A. Cioppa, Deputy Superintendent of the Maine Bureau of Insurance,
issues this Decision and Order in the above-captioned proceeding. Superintendent
Alessandro A. Iuppa delegated all legal authority for the procedural processing
and decision making with respect to this proceeding to Deputy Superintendent
Cioppa by Order Delegating Authority, dated November 5, 2003.
I. THE PROPOSED ACQUISITION
The proceeding was instituted upon the application by Selective Insurance
Group, Inc. (“Selective”), a New Jersey insurance holding
company, for approval pursuant to 24-A M.R.S.A. §§ 222 and 3476,
of a Stock Purchase Agreement for the acquisition of control of Cadillac
Mountain Insurance Company (“Cadillac Mountain” or “the
Company”), a Maine domestic insurance company, from its parent corporation
Acadia Insurance Company (“Acadia”), a Maine domestic insurance
company. The parties to the Stock Purchase Agreement desire to close on
the proposed acquisition on December 31, 2003. Upon closing, Selective
will change the name of Cadillac Mountain to Selective Insurance Company
of New England.
If the proposed acquisition is approved, Selective will acquire from
Acadia five hundred shares of common stock of Cadillac Mountain, which
is all of the Company’s issued and outstanding shares of capital
stock. Pursuant to bulk reinsurance agreement effective October 1, 2003,
Acadia has assumed all of Cadillac Mountain’s liabilities and obligations
arising under or in connection with all policies of insurance and contracts
of reinsurance written or reinsured by the Company and assumed all other
non-insurance liabilities and obligations of the Company of every nature
relating to the business conducted by Cadillac Mountain prior to closing.
Also at or prior to closing, Cadillac Mountain will transfer to Acadia
by dividend or other distribution or return of capital certain assets
of the Company, but at all times Cadillac Mountain will maintain the amount
necessary to satisfy the statutory capital and surplus requirements for
licensure to transact insurance business in the State of Maine.
II. PROCEDURAL HISTORY
Selective filed the Form A Statement, including Exhibits and Appendices,
with the Superintendent by correspondence dated October 29, 2003.1 Thereupon, the Deputy Superintendent issued a Notice of Pending Proceeding
and Hearing on November 7, 2003. In the Notice, interested persons were
provided an opportunity to submit an application to intervene as a full
party in the proceeding, but no one chose to do so.
On November 20, 2003 the First Discovery Request of the Deputy Superintendent
was issued. Selective filed certain supplemental information, including
its Business Plan and various intercompany agreements, by correspondence
dated November 19, 2003. Selective’s responses to the First Discovery
Request were filed by correspondence dated December 4, 2003. Acadia’s
responses to the First Discovery Request were filed by correspondence
dated December 1, 2003.
The public hearing was held as scheduled at 9:00 a.m. on December 16,
2003. No persons from the public attended or participated in the public
hearing.
III. THE RECORD
At the hearing, the Deputy Superintendent offered and admitted the following
materials into the record of the proceeding:
Hearing Officer Exhibit 1: Comprised of Selective’s Form A filing,
including Exhibits and Appendices, submitted by correspondence dated
October 29, 2003.
Hearing Officer Exhibit 2: Comprised of Selective’s supplemental
information including the Business Plan and various intercompany agreements,
submitted by correspondence dated November 19, 2003.
Hearing Officer Exhibit 3: Comprised of Selective’s responses
to information requests in this proceeding, specifically responses to
the First Discovery Request of the Deputy Superintendent, submitted
by correspondence dated December 4, 2003.
Hearing Officer Exhibit 4: Comprised of Acadia’s responses to
information requests in this proceeding, specifically responses to the
First Discovery Request of the Deputy Superintendent, submitted by correspondence
dated December 1, 2003.
Hearing Officer Exhibit 5: Comprised of the Bulk Reinsurance Agreement
between Cadillac Mountain and Acadia, dated October 1, 2003.
In addition to the foregoing, Selective’s witness, Dale A. Thatcher,
Executive Vice President, Chief Financial Officer and Treasurer, provided
oral testimony as part of the record. On behalf of Acadia and Cadillac,
Charles A. Hamblen, Vice President of Finance and Treasurer for both Companies,
provided oral testimony for the record.
IV. STANDARD OF REVIEW
As identified in the Notice of Pending Proceeding and Hearing, the legal
standard of review for consideration of the pending application include
the following under 24-A M.R.S.A. §§ 222(7)(A) and 3476(2):
(1) whether, after the proposed acquisition, Cadillac Mountain (to
be renamed Selective Insurance Company of New England) could satisfy
the requirements for the issuance of a certificate of authority according
to requirements in force at the time of the issuance, or last renewal
or continuation of its certificate of authority to do the insurance
business which it intends to transact in the State of Maine;
(2) whether the effect of the proposed acquisition 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;
(3) whether the financial condition of Selective is such as would jeopardize
the financial stability of Cadillac Mountain or prejudice the interest
of its policyholders;
(4) whether Selective’s proposed acquisition or proposals to
make any major change in the business or corporate structure or management
of Cadillac Mountain are unfair or prejudicial to policyholders;
(5) whether the competence, experience, and integrity of Selective’s
directors and officers indicate that it would not be in the interest
of policyholders or the public to permit them to control the operation
of Cadillac Mountain; and whether Selective’s directors and officers
are qualified by character, experience, and financial responsibility
to control and operate Cadillac Mountain, or cause it to be operated
in a lawful and proper manner;
(6) whether the proposed acquisition would tend to affect adversely
the contractual obligations of Cadillac Mountain or its ability and
tendency to render service in the future to its policyholders and the
public; and
(7) whether the interests of Cadillac Mountain or its stockholders
would be impaired through the proposed acquisition.
In addition to the legal standards of review under 24-A M.R.S.A. §§
222(7)(A) and 3476(2) as identified in items (1) through (7) above, the
Deputy Superintendent, in his discretion, may consider such other relevant
issues identified by 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 Deputy Superintendent
finds that no issues of material concern exist with respect to Selective’s
abilities to satisfy the legal standards for approval set forth in 24-A
M.R.S.A. §§ 222(7)(A) and 3476(2), summarized as follows:
(1) No evidence was presented to the contrary, and the Deputy Superintendent
finds, that Cadillac Mountain (to be renamed Selective Insurance Company
of New England) can satisfy the requirements for the issuance of a certificate
of authority according to requirements in force at the time of the issuance,
or last renewal or continuation of its certificate of authority to do
the insurance business which it intends to transact in the State of
Maine.
(2) No evidence was presented that demonstrates, and the Deputy Superintendent
does not find, that any aspect of the proposed acquisition will substantially
or materially 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.
(3) No evidence was presented that demonstrates, and the Deputy Superintendent
does not find, that any aspect of the proposed acquisition would jeopardize
the financial stability of Cadillac Mountain or prejudice the interest
of its policyholders.
(4) No evidence was presented that demonstrates, and the Deputy Superintendent
does not find, that Selective’s proposed acquisition or proposals
to make any other major change in the business or corporate structure
or management of Cadillac Mountain are unfair or prejudicial to policyholders.
(5) No evidence was presented to the contrary, and the Deputy Superintendent
finds, that the competence, experience, and integrity of Selective’s
directors and officers indicate that it would be in the interest of
policyholders or the public to permit them to control the operation
of Cadillac Mountain; and that Selective’s directors and officers
are qualified by character, experience, and financial responsibility
to control and operate Cadillac Mountain, or cause it to be operated,
in a lawful and proper manner.
(6) No evidence was presented that demonstrates, and the Deputy Superintendent
does not find, that the proposed acquisition would tend to affect adversely
the contractual obligations of Cadillac Mountain or its ability and
tendency to render service in the future to its policyholders and the
public.
(7) No evidence was presented that demonstrates, and the Deputy Superintendent
does not find, that the interests of Cadillac Mountain or its stockholders
would be impaired through the proposed acquisition.
For all of the foregoing reasons, the Deputy Superintendent concludes that
Selective has met the legal standards for approval set forth in 24-A M.R.S.A.
§§ 222(7)(A) and 3476(2).
VI. ORDER
The application of Selective Insurance Group, Inc. to acquire control
of Cadillac Mountain Insurance Company from its parent corporation, Acadia
Insurance Company, is APPROVED, subject to the following conditions:
- Selective shall file with the Superintendent the name and address
of Cadillac Mountain / Selective Insurance Company of New England’s
statutory home office located in the State of Maine (including the name
and address of its agent for service of process located in the State
of Maine).
- If the Superintendent or his designee(s) find it necessary for any
reason to travel out-of-state for purposes of examining the books and
records of Cadillac Mountain / Selective Insurance Company of New England
or for any other valid regulatory purpose, Cadillac Mountain / Selective
Insurance Company of New England or its parent company, Selective, shall
bear all reasonable costs related thereto.
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: December 18, 2003 |
_______________________________
ERIC A. CIOPPA
Deputy Superintendent of Insurance |
1 In its October 29th correspondence, Selective requested
confidentiality for the Stock Purchase Agreement entered into between
Acadia and Selective, and for the information contained in Item 4 of the
Form A Statement. At the public hearing on December 16, 2003, Selective
withdrew its request for confidentiality. Accordingly, the entire record
of this proceeding is public.
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