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DECEMBER 31, 2006





MMG Insurance Company

has been compared with the original on file in this bureau and that it is a correct transcript thereof and of the whole of said original.


I have hereunto set my hand and affixed the official seal of this Office at the City of Augusta this

14 day of January, 2008


Eric A. Cioppa
Acting Superintendent
Bureau of Insurance


I hereby certify that the attached report of examination dated November 16, 2007 shows the condition and financial affairs of


located in Presque Isle, Maine as of December 31, 2006 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 11 day of January, 2008



















November 16, 2007

Honorable Eric A. Cioppa
Acting Superintendent
Bureau of Insurance
34 State House Station
Augusta, ME 04333-0034


Dear Sir:

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


(hereinafter, "Company"), as of December 31, 2006.

The examination, performed at the Company's home office in Presque Isle, 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.


The Company, a property/casualty insurer, is domiciled in the State of Maine with corporate headquarters located in Presque Isle, Maine. The Company was last examined as of December 31, 2003 by the Bureau.


The Bureau conducted a routine statutory examination of the Company covering the period of January 1, 2004 to December 31, 2006. The full-scope examination was performed using the specific risk analysis approach. The following matters were reviewed to assess their impact on financial condition and conformity with related laws.

Company History

The Company was incorporated on May 22, 1897 in the State of Maine and commenced writing business during that year.

On March 15, 2002, the Company completed the conversion of Maine Mutual Fire Insurance Company to MMG Insurance Company, a stock insurance company; the formation of Maine Mutual Group, a mutual holding company; and the formation of MMG Financial Services, Inc., a stock holding company. MMG Insurance Company is the same legal entity that it was before conversion. Pursuant to Maine law, the converted insurer is a continuation of the insurer in its mutual form and the conversion does not annul, modify or change any of the insurer's existing suits, rights, contracts or liabilities.

Management and Control

Management of the Company is vested in not less than seven (7) and not more than fifteen (15) members of the Board of Directors. The following is a list of the duly elected twelve-member Board of Directors and the Officers serving as of December 31, 2006:


Tom E. Gagnon, Chairman George H. Ellis, Honorary
Donald W. Perkins, Jr. John H. Cashwell, III
Dawn Hill Jon J. Prescott
Samuel W. Collins Michael D. MacPherson
Larry M. Shaw Harold A. Dakin
Jay Y. McCrum Lisa M. Ventriss



Larry M. Shaw President/CEO
Roger J. Roy Exec.VP/Secretary/Treasurer/COO
Michael M. Young Chief Financial Officer/Vice President
Matthew R. McHatten Senior VP External Operations
Steven D. Chandler Vice President
Pamela J. Johnson Vice President
Timothy W. Vernon Vice President
Lynn M. Lombard 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 Company's Articles of Incorporation, Bylaws, and Minutes of the Board of Directors' meetings held during the period of examination were reviewed. On March 15, 2002, the Company's Articles of Incorporation were amended and restated in accordance with the change from a mutual insurance company to a stock insurance company and new Bylaws were adopted. Review of these records indicates that the Company is operating in accordance with its Articles and Bylaws.

Fidelity Bond and Other Insurance

The Company carries both a Financial Institution Bond and a Fiduciary Responsibility Policy that covers both the Employee Retirement Plan and the 401(k) Plan. Each policy carries a limit of liability of $2,000,000. The Company's Other Insurance coverage includes usual and customary coverage for property, casualty and workers' compensation coverage.

Officers', Employees' and Agents' Welfare and Pension Plans

The Company has a defined benefit pension plan covering substantially all its employees. The benefits are based on years of service and the employee's average compensation.

The Company adopted a postretirement benefit plan in 2004 which covers 50% of Medicare supplement costs and prescription drugs at normal retirement age of 65 for officers of the Company. For currently retired officers, the benefit is 100%. This postretirement benefit plan is an unfunded plan.

The Company adopted a 401(k) Profit Sharing Plan on July 1, 1995. Since inception, the Company has approved a discretionary match of employee compensation contributed to the plan subject to approval by the Board of Directors.

Effective July 1, 2006, the Board of Directors, in compliance with Internal Revenue Service Section 409A, established voluntary non-qualified deferred compensation plans for executives and directors.

Territory and Plan of Operation

The Company insures property and casualty risks located in Maine, New Hampshire, Vermont, and Pennsylvania (effective March 14, 2006).

The Company offers a variety of Commercial Lines products including Businessowner, Commercial Package, Special Trade Contractor, Farmowner, Inland Marine, Commercial Auto and Commercial Umbrella. Commercial Lines represents nearly 26% of the Company's premium volume and has seen significant growth in the past several years.

The Company also offers numerous Personal Lines products with several Homeowner and Personal Auto pricing tiers, Personal Umbrella, Watercraft, and distinct Snowmobile products. The Company uses a packaging concept known as "portfolio" which comprises approximately two-thirds of the total premium volume written by the Company. At December 31, 2006, approximately 53% of the Company's business was written in the State of Maine, 32% in New Hampshire, and the remaining 15% in the State of Vermont.

Business In Force by States

Direct Premiums Written by State
  2006 2005 2004
ME $ 57,246,728 $ 53,772,011 $ 48,767,391
NH 33,950,412 32,561,065 30,903,190
VT 16,652,530 15,727,772 14,710,201
PA 528 - -
Total $ 107,850,198 $ 102,060,848 $ 94,380,782

Direct Losses Paid by State

Direct Losses Paid by State
  2006 2005 2004
ME $ 23,878,907 $ 18,956,482 $ 21,100,943
NH 18,619,649 19,213,549 13,768,667
VT 6,416,075 6,890,822 5,739,926
PA - - -
Total $ 48,914,631 $ 45,060,853 $ 40,609,536



The Company's primary reinsurance treaties include property and casualty excess of loss, catastrophe, facultative, and quota share contracts. Summaries of the contracts in place follow:

  • Casualty Excess. In 2004, the casualty excess treaty renewal date was changed to July 1. At that time the retention increased from $150,000 to $200,000. At July 1, 2006 the retention increased to $250,000.
  • Property Excess. Effective January 1, 2006 property excess treaty retention was $150,000. The treaty provides three layers of protection limited at $5,000,000.
  • Personal Umbrella. The Company cedes 95% of the first $1,000,000, and 100% of the next $1,000,000 up to $2,000,000.
  • Commercial Umbrella. The Company cedes 97.5% of the first $2,000,000 and 100% of the next $3,000,000.
  • All Lines Quota Share Contract. The underlying quota share percentage decreased from 14% in 2005 to 13% in 2006 in order to maintain leverage and provide risk transfer at nominal reinsurance costs.
  • Boiler and Machinery. Boiler and machinery coverage was added to the business owner and commercial package policies in September of 2000. This coverage is 100% reinsured.
  • Facultative Property Coverage. The Company added facultative property coverage in 2002. This coverage was added in order for the Company to handle larger commercial property risks.
  • Property Catastrophe Reinsurance. Property catastrophe reinsurance capacity is depicted on the table below:
Year Limit Excess of
2003 $38,000,000 $2,000,000
2004 $43,000,000 $2,000,000
2005 $57,000,000 $3,000,000
2006 $67,000,000 $3,000,000


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.


The accompanying financial statements present fairly, in all material respects, the Company's statutory financial position as of December 31, 2006, 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, 2005 and December 31, 2004 are unexamined and are presented for comparative purposes only.


December 31, 2006, 2005 and 2004

  2006 2005
Admitted Assets:      
Bonds (Note 1) $ 97,010,411 $ 92,277,194 $ 81,352,479
Preferred Stocks (Note 2) 96,045 99,560 163,831
Common Stocks (Note 3) 17,329,507 14,827,968 12,696,598
Real Estate (Note 4) 4,109,978 1,511,156 1,512,473
Cash (Note 5) 7,051,740 6,828,854 6,046,944
Investment income due and accrued 1,147,951 1,058,611 975,236
Premiums and considerations (Note 6) 27,882,276 25,822,065 24,164,320
Reinsurance recoverable 509,172 383,018 247,516
Federal income tax recoverable - - 229,853
Net deferred tax asset (Note 7) 3,206,654 2,896,649 2,652,687
EDP equipment 580,299 392,141 345,392
Receivable from parent, subsidiaries and affiliates 340,486 301,271 164,977
Total Admitted Assets $ 159,264,519 $ 146,398,487 $ 130,552,306
Liabilities and Surplus:      
Loss reserves (Note 8) $ 29,154,939 $ 28,067,763 $ 24,574,433
Loss adjustment expenses (Note 8) 6,718,298 6,481,355 5,786,466
Commissions payable, contingent commissions and other (Note 9) 9,185,728 8,375,831 7,431,296
Other expenses 978,462 1,339,964 1,098,673
Taxes, licenses, and fees 348,331 268,321 358,588
Federal and foreign income taxes 1,084,454 514,148 -
Unearned premiums (Note 10) 43,178,221 39,443,287 36,180,209
Advance premiums
832,265 961,831 905,625
Ceded reinsurance premiums payable 1,838,029 1,929,233 1,561,137
Funds withheld for reinsurance (Note 11) 9,846,934 9,954,265 9,829,508
Amounts withheld for account of others 64,684 5,264 19
Payable to parent, subsidiaries and affiliates 67,627 32,551 -
Total Liabilities $ 103,297,972 $ 97,373,813 $ 87,725,954
Common capital stock $ 2,500,000 $ 2,500,000 $ 2,500,000
Gross paid in and contributed capital 28,532,781 28,532,781 28,532,781
Unassigned funds 24,933,766 17,991,893 11,793,571
Total Surplus $ 55,966,547 $ 49,024,674 $ 42,826,352
Total Liabilities and Surplus $ 159,264,519 $ 146,398,487 $ 130,552,306



Years Ended December 31, 2006, 2005 and 2004


  2006 2005
Premiums earned $ 78,210,480 $ 72,744,640 $ 64,998,331
Losses incurred $ 40,047,502 $ 38,095,590 $ 35,388,976
Loss expenses incurred 7,438,311 6,696,148 6,416,347
Other underwriting expenses incurred 26,509,660 23,213,473 20,820,863
Total underwriting deductions $ 73,995,473 $ 68,005,211 $ 62,626,186
Net underwriting gain (loss) $ 4,215,007 $ 4,739,429 $ 2,372,145
Investment Income:      
Net investment income earned $ 4,178,348 $ 3,482,634 $ 2,905,252
Net realized capital gains (losses) 518,835 415,344 218,656
Net investment gain (loss) $ 4,697,183 $ 3,897,978 $ 3,123,908
Other Income:      
Net gain (loss) from premium balances charged off $ (21,146) $ (15,630) $ (12,622)
Finance and service charges not included in premiums 1,046,225 1,022,153 1,035,204
Aggregate write-ins for miscellaneous income (1,492) 259,877 2,122
Total other income $ 1,023,587 $ 1,266,400 $ 1,024,704
Net income before dividends, federal and foreign tax $ 9,935,777 $ 9,903,807 $ 6,520,757
Federal and foreign income taxes incurred 2,945,474 2,997,048 2,447,587
Net Income $ 6,990,303 $ 6,906,759 $ 4,073,170



Years Ended December 31, 2006, 2005 and 2004

  2006 2005
Capital and Surplus, Beginning of Year $ 49,024,674 $ 42,826,352 $ 31,783,896
Net income 6,990,303 6,906,759 4,073,170
Change in unrealized capital gains 237,602 63,444 793,121
Change in net deferred income tax 432,406 276,645 611,728
Change in non-admitted assets (57,495) (560,396) 8,184
Cumulative effect of changes in accounting principles - 96,692 -
Surplus adjustments-Paid in - - 5,876,500
Dividends to stockholders (660,942) (584,821) (320,249)
Other surplus change [rounding] (1) (1) 2
Change in surplus as regards to policyholders $ 6,941,873 $ 6,198,322 $ 11,042,456
Capital and Surplus, End of Year $ 55,966,547 $ 49,024,674 $ 42,826,352


Note 1 – Bonds $97,010,411


  Cost Par Value Market Value Carrying Value
Government $ 3,690,773 $ 3,670,933 $ 3,616,891 $ 3,685,075
States, Territories 8,786,111 7,950,000 8,584,431 8,508,767
Political Subdivisions 16,873,049 15,530,000 16,637,557 16,468,428
Special Revenue 42,591,110 40,324,733 42,291,643 41,934,214
Public Utilities 753,725 750,000 780,558 752,499
Industrial & Miscellaneous 25,912,901 25,292,406 25,347,735 25,661,428
Total $ 98,607,669 $ 93,518,072 $ 97,258,815 $ 97,010,411


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 with the Insurance Commissioner of New Hampshire in conjunction with licensing in that state.

Note 2 – Preferred Stock $96,045


  Cost Market Value Carrying Value
Industrial and Miscellaneous $ 97,977 $ 96,045 $ 96,045
Total $ 97,977 $ 96,045 $ 96,045


Both Common and Preferred Stocks are 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 - Common Stocks $17,329,507


  Cost Market Value Carrying Value
Bank, Trusts, and Insurance $ 952,588 $ 1,124,031 $ 1,124,031
Industrial and Miscellaneous 13,097,087 16,205,476 16,205,476
Total $ 14,049,675 $ 17,329,507 $ 17,329,507


Note 4 – Real Estate $4,109,978


Real estate owned and occupied by the Company is located at 44 Maysville Street, Presque Isle, Maine, and is stated at depreciated cost less encumbrances.

Note 5 – Cash $7,051,740


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

Note 6 – Premiums and Consideration $27,882,276


Premiums and Considerations at December 31, 2006 consisted of:

Uncollected premiums and agents' balances in course of collection $ 12,949,667
Deferred premiums, agents' balances & installments booked by deferred and
not yet due
Total $ 27,882,276


Premiums and agents' balances due to the Company at December 31, 2006 were verified during the exam.

Note 7 – Net Deferred Tax Asset $3,206,654


Gross deferred tax asset $ 4,403,483
Gross deferred tax liabilities (1,196,829)
Net deferred tax asset 3,206,654
Non-admitted deferred tax assets -
Net deferred tax asset $ 3,206,654

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

Note 8 - Losses & Loss Adjustment Expense Loss Reserves $29,154,939
LAE Reserves $6,718,298


The Company's claim files were reviewed to ensure that Schedule P data was properly reported. The Bureau of Insurance contracted with AMI Risk Consultants, Inc., to perform an actuarial analysis of the Company's loss and loss adjustment expense reserves. Based on this actuarial analysis, the Company's estimates for gross and net unpaid loss and loss adjustment expenses appear to be reasonably stated. (See Appendix A for the Actuarial Opinion)


Note 9 – Commissions Payable, Contingent Commission and Other $9,185,728


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

Note 10 - Unearned Premium $43,178,221


The Company is utilizing the monthly pro rata method in accordance with SSAP No. 53, ¶7. The unearned premium amount was recalculated using the 2006 written premium file and the monthly pro rata method.

Note 11 – Funds Held By Company Under Reinsurance Treaties $9,846,934


The withholding of funds under reinsurance contracts was verified to the applicable reinsurance contracts. Under the terms of these agreements, the Company is required to maintain and withhold funds related to the agreements until there is a complete and final release of all of the reinsurer's past, present or future liabilities and obligations to the Company. The amount withheld was determined to be fairly stated.





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


located in Presque Isle, 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. The following examiners from the Bureau of Insurance assisted:

Jill C. Tobey, CPA, CFE
Faith A. Talbot, AFE
Debra L. Blaisdell
Audrey L. Wade

Respectfully submitted,

Michael R. Nadeau, CPA, CFE, CISA, AES

Subscribed and sworn to before me
this 11 day of January, 2008


Patricia A. Galouch
Notary Public
My commission expires: March 2, 2014







For the Year Ended December 31, 2006


I, Aguedo M. Ingco, am an employee of the firm of AMI Risk Consultants, Inc. I have been retained by the State of Maine, Bureau of Insurance ("the Bureau") to express an opinion on the loss and loss adjustment expense (LAE) reserves of MMG Insurance Company ("MMG").

I am a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries. I meet the Academy's qualification standards for issuing an actuarial opinion on loss and LAE reserves.


I have examined the reserves listed in Exhibit A, as shown in the Annual Statement of MMG, as prepared for filing with state regulatory officials as of December 31, 2006. The reserves listed in Exhibit A reflect the Disclosure Items (3-8) listed in Exhibit B.

In forming my opinion on the loss and loss adjustment expense reserves, I relied upon data in MMG's 2006 Annual Statement. I evaluated the data that was provided for reasonableness and consistency. The data used reconciles to Schedule P of MMG's 2006 Annual Statement.


In my opinion, the amounts carried in Exhibit A on account of the items identified:

  • Meet the requirements of the insurance laws of the State of Maine

  • Are consistent with reserves computed in accordance with accepted actuarial standards and principles

  • Make a reasonable provision for all unpaid loss and loss adjustment expense obligations of MMG under the terms of its contracts and agreements.


Reinsurance Contracts

In my opinion, reinsurance credits are proper and the reinsurance contracts constitute a valid transfer of risk.

Risk of Material Adverse Deviation

In my opinion, there are no significant risks and uncertainties that I believe could result in material adverse deviation of net reserves.


An actuarial report and underlying workpapers supporting the findings expressed in this statement of actuarial opinion have been provided to the Bureau. I disclaim their use for any other purpose.

The required Exhibits A and B are attached to this statement.

Aguedo M. Ingco, FCAS, MAAA, CPCU, ARM
AMI Risk Consultants, Inc.
11410 N. Kendall Drive, Suite 208
Miami, FL 33176
(305) 273-1589

December 5, 2007


Exhibit A: SCOPE

Loss Reserves Amount (in whole dollars)
A. Reserve for Unpaid Losses (net) $29,154,939
B. Reserve for Unpaid Loss Adjustment Expenses (net) $6,718,298
C. Reserve for Unpaid Losses - Direct and Assumed $40,331,000
D. Reserve for Unpaid Loss Adjustment Expenses - Direct & Assumed $8,358,000
E. The Page 3 write-in item reserve, "Retroactive Reinsurance Reserve Assumed" $0
F. Other Loss Reserve items on which the Appointed Actuary is expressing an Opinion (list separately) $0


Premium Reserves Amount (in whole dollars)
G. Reserve for Direct and Assumed Unearned Premiums for Long Duration Contracts $0
H. Reserve for Net Unearned Premiums for Long Duration Contracts $0
I. Other Premium Reserve items on which the Appointed Actuary is expressing an Opinion (list separately) $0



  Amount (in whole dollars)
1. Materiality Standard expressed in $US $5,596,655
2. Surplus $55,966,547
3. Anticipated net salvage and subrogation included as a reduction to loss reserves as reported $400,000

4. Discount included as a reduction to loss reserves and loss expense reserves as reported

4 (a) Nontabular Discount
4 (b) Tabular Discount

5. The net reserves for losses and expenses for the company's share of voluntary and involuntary underwriting pools' and associations' unpaid losses and expenses $30,000

6. The net reserves for losses and loss adjustment expenses that MMG carries for the following

6 (a) Asbestos
6 (b) Environmental


7. The total claims made extended loss and expense reserve

7 (a) amount reported as loss reserves
7 (b) amount reported as unearned premium reserves

8. Other items on which the Appointed Actuary is providing Relevant Comment (list separately) $0


* The reserves disclosed in item 6 above, should exclude amounts relating to contracts specifically written to cover asbestos and environmental exposures. Contracts specifically written to cover these exposures include Environmental Impairment Liability (post 1986), Asbestos Abatement, Pollution Legal Liability, Contractor's Pollution Liability, Consultant's Environmental Liability, and Pollution and Remediation Legal Liability.


Last Updated: October 22, 2013