Skip Maine state header navigation

Agencies | Online Services | Help

Skip All Navigation

NORTH YARMOUTH - CUMBERLAND
MUTUAL FIRE INSURANCE COMPANY

REPORT OF EXAMINATION
AS OF
DECEMBER 31, 2006

 

TABLE OF CONTENTS

SCOPE OF EXAMINATION

HISTORY AND ORGANIZATION

CORPORATE RECORDS

MANAGEMENT

LINES OF BUSINESS AND TERRITORY

FIDELITY BOND

UNDERWRITING RULES AND PRACTICES

REINSURANCE

ACCOUNTS AND RECORDS

FINANCIAL STATEMENTS

COMMENTS AND RECOMMENDATIONS

 

I hereby certify that the attached report of examination dated March 19, 2007 shows the condition and financial affairs of

NORTH YARMOUTH-CUMBERLAND MUTUAL FIRE INSURANCE COMPANY

located in Falmouth, 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 _______ day of __________, 2007

 

STATE OF MAINE
BUREAU OF INSURANCE

 

It is hereby certified that the annexed report of examination for

North Yarmouth-Cumberland Mutual Fire Insurance Company

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

  In witness whereof, I have hereunto set my
hand and affixed the official seal of this
Office at the City of Gardiner this
__________ day of _____________, 2007

 


_________________________
Eric A. Cioppa
Acting Superintendent of Insurance

 

 

March 19, 2007

Honorable Eric A. Cioppa
Acting 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

NORTH YARMOUTH-CUMBERLAND MUTUAL FIRE INSURANCE COMPANY

located in Falmouth, Maine (hereinafter, “the Company”). The following report is respectfully submitted.

SCOPE OF EXAMINATION

The procedures in this examination considered the two year period from January 1, 2004 to the close of business on December 31, 2005 and included an examination for the one year period ended December 31, 2006. In accordance with the Examiner’s Handbook, the examination included significant transactions and/or events occurring subsequent to December 31, 2006 that were noted during the course of this examination.

The examination consisted of a survey of the Company’s business policies, review of the Articles of Incorporation, Bylaws, operational practices, Board of Directors’ meeting minutes, verification of assets and a determination of liabilities at December 31, 2006 in conformity with statutory accounting practices, NAIC guidelines and the laws, rules and regulations prescribed or permitted by the Maine Bureau of Insurance, where applicable.

The accompanying financial statements present fairly, in all material respects, the Company’s financial position as of December 31, 2006 and results of operations for the period then ended. The financial statements as of December 31, 2005 and December 31, 2004, prepared by management, are unexamined and presented for comparative purposes only.

HISTORY AND ORGANIZATION

The Company was incorporated in the State of Maine in 1853 as North Yarmouth Mutual Fire Insurance Company. In 1965, the Company merged with Cumberland Mutual Fire Insurance Company, incorporated in the State of Maine in 1848, resulting in the surviving corporation, North Yarmouth–Cumberland Mutual Fire Insurance Company. The Company is tax-exempt under IRS Code Section 501 (c) (15).

CORPORATE RECORDS

The Company’s Articles of Incorporation, Bylaws, and Minutes of the Board of Directors’ meetings held during the period under examination were reviewed.

MANAGEMENT

Management of the Company is vested in a seven-member Board of Directors. The following are the duly elected members of the Board of Directors and Officers serving as of December 31, 2006:

Directors

Donald Smith Lincoln Merrill, Jr.
William Stiles Duane Snow
Robert Maloney Kent Hilton, Jr.

Jerry Goodall

 

 

Officers:

William Stiles President
Jerry Goodall Vice-President
Mary Goodall Secretary/Treasurer

LINES OF BUSINESS AND TERRITORY

The Company is authorized to issue fire and lightning policies in the State of Maine.

FIDELITY BOND

The Company is protected as a named insured under a fidelity bond in the amount of $12,500. The bond amount was tested with regard to NAIC standards and was determined to be adequate.

UNDERWRITING RULES AND PRACTICES

The Company issues fire and lightning policies for a five year period under an assessment plan. The Company requires every policyholder to provide a premium note to the Company. Underwriting procedures utilize a pre-determined table which establishes a premium note face value as a percentage of the corresponding amount of insured risk. Presently, the underwriting table establishes a premium note face value requirement ranging from 4% to 25% of the insured risk. The Company charges an annual premium of 4.5% of the outstanding balance of the premium note. Policyholders are assessable up to the value of their respective premium notes. The amount of insurance that the Company may write is limited by Article I, §4, of the Articles of Incorporation, to 90% of the value of the building. The amount of risk retained by the Company on a per risk basis is limited by the State of Maine to 10% of the Company’s surplus plus 8% of the amount of the note outstanding.

The Company receives 31% of its revenue from one commercial sawmill, and the insured risk on the commercial sawmill represents 25% of the total insurance in-force at December 31, 2006 (See Comment & Recommendation 1).

REINSURANCE

During the period under examination, the Company had two reinsurance contracts (hereinafter, “Contract A” and “Contract B”) in-force. Contract A is a reciprocal reinsurance agreement with another, Maine domiciled, mutual fire assessment company. Contract A provides for each company to retain 100% of all policies up to and including $5,000. On policies with a face value in excess of $5,000 up to and including $40,000 the company issuing the policy retains one-half of the face value of the contract and reinsures the other half of the face value of the contract with the other company. Contract B is a facultative pro rata contract placed by a reinsurance broker. Contract B provides for cessions limited to an amount equal to five times the Company’s net retention plus the amount ceded to the Company’s working reinsurance contracts, subject to a minimum net retention of $20,000 and to a maximum cession hereunder of $100,000 on any one risk covered hereunder.

ACCOUNTS AND RECORDS

The Company records its books and records manually, primarily on a cash basis, and the books and records are maintained at the home of the Secretary/Treasurer. The Annual Statements are prepared on an accrual basis.

FINANCIAL STATEMENTS

The accompanying financial statements present fairly, in all material respects, the company’s financial position as of December 31, 2006 and results of operations for the period then ended. The financial statements for December 31, 2005 and December 31, 2004, prepared by management, are unexamined and are presented for comparative purposes only.

BALANCE SHEET

at

  12/31/2006 12/31/2005
(unexamined)
12/31/2004
(unexamined)
Assets      
Deposits in Cash $ 32,104 $ 6,042 $ 11,305
Assessments Receivable 2,426 1,321 457
Reinsurance Receivable -   409
Investments (Note 1) 431,321 427,132 411,256
Total Assets 465,851 434,495 423,427
       
Liabilities      
Reinsurance Payable 1,453 2,084 3,209
Estimated Taxes Due & Accrued 524 -  
Deferred Revenue 819 -  
Accrued Expenses - 3,177 2,888
Unearned Premium Reserve (Note 2) 8,591 7,023 4,650
Total Liabilities 11,387 12,284 10,747
       
Policyholder Surplus 454,464 422,211 412,680
       
Total Liabilities & Surplus $ 465,851 $ 434,495 $ 423,427

INCOME STATEMENT

for the years ended

  12/31/2006 12/31/2005
(unexamined)
12/31/2004
(unexamined)
Revenue      
Direct Assessments Levied $ 37,868 $ 34,160 $ 30,211
Reinsurance Assessment Assumed 2,499 2,559 2,470
Direct Assessments Abated (1,515) (335) (128)
Reinsurance Assessment Ceded (21,670) (22,339) (20,781)
Administrative Fees 10 10 -
Net Assessment Revenue 17,192 14,055 11,772
Investment Income 22,619 10,006 4,043
Total Revenue 39,811 24,061 15,815
       
Expenses      
Losses Paid - - 10,000
Agents' compensation 3,504 3,296 2,969
Salaries and fees 9,250 9,450 7,825
General office maintenance 357 234 418
Taxes, licenses, fees 1,864 2,071 1,744
Legal Expense 482 371 292
Insurance Expense 979 916 864
Miscellaneous 309 - 381
Total Expenses 16,745 16,338 24,493
       
Net Income $ 23,066 $ 7,723 $ (8,678)
       
SURPLUS ACCOUNT RECONCILIATION
       
  12/31/2006 12/31/2005 12/31/2004
Surplus - Beginning $ 422,211 $ 412,680 $ 408,269
Net Income 23,066 7,723 (8,678)
Change in Unearned Premium (1,568) (2,373) 4,896
Change in Unrealized Gains/(Losses) 10,717 4,181 8,193
Misc Adjustment to Surplus 38    
Surplus - Ending $ 454,464 $ 422,211 $ 412,680

NOTES TO FINANCIAL STATEMENTS

Note 1 - Investments: $431,321

Investments, primarily mutual funds, are stated at market value. Unrealized capital gains and losses on investments reported at market value are recorded directly in policyholder’s surplus.

Note 2 – Unearned premium: $8,591

Title 24-A M.R.S.A. Chapter 51 §3624 requires mutual assessment companies to maintain an unearned premium reserve equal to 50% of net premiums and net assessments on its policies in-force.

COMMENTS AND RECOMMENDATIONS

  1. Comment:

    As noted in the Underwriting section, the Company receives 31% of its revenue from one commercial sawmill and the insured risk on the sawmill represents 25% of the total insurance in-force at December 31, 2006.

    Recommendation:

    The Board of Directors should analyze the concentration of insured risk assumed by the Company and possibly consider certain changes to the insured risk profile of the Company.

 

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 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

NORTH YARMOUTH - CUMBERLAND MUTUAL FIRE INSURANCE COMPANY

of Falmouth, 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.

 

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

 

Subscribed and sworn to before me
This ____day of ___________, 2007

 

_________________________
Patricia A. Galouch, Notary Public
My Commission Expires:

 

Last Updated: October 22, 2013

January 2, 2008