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WARREN FARMERS MUTUAL FIRE
INSURANCE COMPANY

REPORT OF EXAMINATION
AS OF
DECEMBER 31, 2004

TABLE OF CONTENTS

SCOPE OF EXAMINATION
HISTORY AND ORGANIZATION
MANAGEMENT
LINES OF BUSINESS AND TERRITORY
SCHEDULE OF PREMIUM NOTES & POLICIES IN-FORCE
UNDERWRITING RULES AND PRACTICES
FINANCIAL STATEMENTS
EXAMINATION ADJUSTMENTS
NOTES TO FINANCIAL STATEMENTS
COMMENTS AND RECOMMENDATIONS

I hereby certify that the attached report of examination dated November 28, 2005 shows the condition and affairs of WARREN FARMERS MUTUAL FIRE INSURANCE COMPANY, Warren, Maine as of December 31, 2004 and has been filed in the Bureau of Insurance as a public document.

This report has been reviewed.

_______________________
James C. Williams, CPA, CFE
Director of Financial Affairs and Solvency

Dated this ____ day of __________, 2006

November 28, 2005

Alessandro A. Iuppa, 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

WARREN FARMERS MUTUAL FIRE INSURANCE COMPANY

at its Secretary/Treasurer’s office in Waldoboro, Maine, hereinafter referred to as the “Company”. The following report is respectfully submitted.

SCOPE OF EXAMINATION

The prior full scope examination covered the period January 1, 1996 to the close of business on December 31, 2000. This examination is a limited scope examination and covers the period January 1, 2001 through December 31, 2004.

A limited scope examination consists of confirming of all cash and investments, review of corporate records, and an analytical review and reasonableness testing of relevant Annual Statement line items. Only those adjustments considered material to the financial statements are being addressed in this Report of Examination. Other findings will be communicated to Company management in the form of a Management Comment Letter.

HISTORY AND ORGANIZATION

The Warren Farmers Mutual Fire Insurance Company was incorporated in 1871 and commenced business shortly thereafter. The Company is tax-exempt under Internal Revenue Code Section 501(c)(15).

MANAGEMENT

Management of the Company is vested in a Board of Directors. The following are the duly elected members of the Board of Directors and the Officers serving as of December 31, 2004.

Board of Directors: Edward Barrett
Robin Overlook
Otto Bowden, Jr.
Charles York
Willis Perry
Konrad Ulbrich

Officers: Konrad Ulbrich President
Edward Barrett Vice President
Leann McKusic Secretary/Treasurer

LINES OF BUSINESS AND TERRITORY

The Company issues fire and lightning policies in the State of Maine.

SCHEDULE OF PREMIUM NOTES & POLICIES IN-FORCE

Balances at 12/31/04

Insurance In-Force $240,000
Premium Notes $ 19,200

UNDERWRITING RULES AND PRACTICES

The Company issues fire and lightning policies for a three-year period under an assessment plan and requires a promissory note for each policy. The amount of the note is set in the Company’s Bylaws and is always 8% of the insured amount. The Company charges a premium, which is also set in the Bylaws, and is always 10% of the promissory note.

The amount of insurance that the Company may write is limited by the Board of Directors and the Bureau of Insurance. In 2004, the Bureau of Insurance approved an increase from $7,500 to $10,000. The Company does not participate in any type of reinsurance program, however, the amount of risk retained by the Company is in compliance with the State of Maine’s prescribed percentage of surplus and outstanding notes.

FINANCIAL STATEMENTS

The following financial statements show the results of the Company’s operations for the year ending December 31, 2004 as determined by this examination.

BALANCE SHEET

DECEMBER 31, 2004

Assets  
Cash and Certificates of Deposits (Note 1) $ 66,745
Stocks (Note 2) 97,485
Total Assets $ 164,230
   
Liabilities and Surplus  
Unearned Premium Reserve $ 338
Total Liabilities $ 338
   
Surplus as Regards to Policyholders $ 163,892
Total Liabilities and Surplus $ 164,230

STATEMENT OF INCOME

DECEMBER 31, 2004

Income

 
Net Assessment Income $ 676
Policy Fee Income 77
Interest & Dividend Income 3,573
Realized Gains 255
Total Income $ 4,581
   
Expenses  
   
Policy Fees Retained by Agents $ 168
Salaries 2,700
General Office Maintenance 43
Taxes, Licenses and Fees 26
Scholarships 3,000
Miscellaneous 200
Total Expenses $ 6,137
   
Net Income $ (1,556)

EXAMINATION ADJUSTMENTS

Unrealized gain of $7,962 was incorrectly included in income and should have been posted directly to surplus. As a result of this examination, the following adjustment was made and is presented here showing the effect on net income/(loss). (See Comment and Recommendation)

Net Income Per Company $ 6,406
Examination Adjustments for unrealized gains $ (7,962)
   
Net Loss per Examination $ (1,556)

NOTES TO FINANCIAL STATEMENTS

Note 1 - Cash and Certificates of Deposit Cash $ 1,888
  Certificates of Deposit 64,857
  Total $66,745

Bank balances were confirmed directly from the Company’s various depositories and reconciled to the Company’s book balance. The Company includes cash and certificates of deposit as Deposits in Trust Companies and Banks.

Note 2 - Stocks $ 97,485

Stock ownership and valuation was verified by obtaining confirmations from the depositories for these securities held under custodial agreements. Stocks, including Common Stocks and Mutual Funds, are reported at market value.

COMMENTS AND RECOMMENDATIONS

As discussed in the Examination Adjustments section, the unrealized gains on stock and mutual funds were deducted from Net Income, and posted directly to surplus.

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 Alessandro A. Iuppa, Superintendent of Insurance, pursuant to the Insurance Laws of the State of Maine, he has made an examination on the conditions and affairs of

WARREN FARMERS MUTUAL FIRE INSURANCE COMPANY

of Warren, Maine as of December 31, 2004 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:

Margaret S. Boghosian, CPA, CFE

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

Subscribed and sworn to before me
This ____ day of __________, 2006

__________________________
Notary Public
My Commission Expires:

 

Last Updated: October 22, 2013

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