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YORK INSURANCE COMPANY

OF MAINE

 

REPORT OF EXAMINATION

AS OF

DECEMBER 31, 2006

 

I hereby certify that the attached report of examination dated February 29, 2008 shows the condition and affairs of YORK INSURANCE COMPANY OF MAINE of South Portland, 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 Examination

 

Dated this _____ day of ____________, 2008

 

TABLE OF CONTENTS

SCOPE OF EXAMINATION ...................................................................................................................2
DESCRIPTION OF COMPANY ..............................................................................................................2

License and Location .......................................................................................2
History ...........................................................................................................2
Affiliated Entities .............................................................................................2
Management and Control .................................................................................4
Corporate Records ...........................................................................................4
Growth of the Company ....................................................................................5
Fidelity Bond ...................................................................................................5
Territory and Plan of Operation .........................................................................5
Accounts and Records ......................................................................................5

REINSURANCE ......................................................................................................................................5
FINANCIAL STATEMENTS ....................................................................................................................6
NOTES TO THE FINANCIAL STATEMENTS .........................................................................................10
CONCLUSION .....................................................................................................................................11

 

 

February 29, 2008

Honorable Mila Kofman
Superintendent
Bureau of Insurance
34 State House Station
Augusta, Maine 04333-0034

RE: York Insurance Company of Maine Statutory Examination of the Period Ended December 31, 2006

Dear Superintendent:

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, as of December 31, 2006, on the condition and financial affairs of

YORK INSURANCE COMPANY OF MAINE

The examination of York Insurance Company of Maine, (hereinafter, “Company” or “YICM”), was performed at the home office of the Company’s lead insurance affiliate, OneBeacon Insurance Company, in Canton, Massachusetts. The examination was made in accordance with the standards and procedures established by the Maine Bureau of Insurance and the National Association of Insurance Commissioners (hereinafter, “NAIC”) and for that reason, included tests of the accounting records and other procedures considered necessary under the circumstances.

The accompanying financial statements have been prepared pursuant to statutory accounting practices prescribed or permitted by the NAIC and the Bureau. These practices differ in certain respects from generally accepted accounting principles.

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.

SCOPE OF EXAMINATION

The Company was last examined as of December 31, 2004 by Bureau of Insurance of the State of Maine. This examination of the Company covers the period of January 1, 2005 through December 31, 2006, and was conducted by the Pennsylvania Department of Insurance representing the Maine Bureau of Insurance.

This examination covers a two year period in order to coordinate with the examination of the affiliated group. Examined concurrently with the Company were all the affiliated insurance companies in the OneBeacon Group. See the companies in the Affiliated Entities section and the Reinsurance section of this report.

DESCRIPTION OF COMPANY

License and Location

The Company writes multiple lines, and is currently licensed in Maine, Massachusetts, New Hampshire and Vermont. The Company is a member of the OneBeacon Group Insurance Companies.

The statutory home office is at 707 Sable Oaks Drive, South Portland, Maine. The main administrative office is located at One Beacon Lane, Canton, Massachusetts. The primary location of the Company’s books and records is Canton, Massachusetts.

History

The Company was first chartered in 1987, as York Mutual Insurance Company, subsequent to the demutualization of the former Maine Bar Association Mutual Title Insurance Company. The Company was acquired in 1997 by Commercial Union Insurance Company (a wholly owned subsidiary of CGU Corporation) and changed its name to Commercial Union York Insurance Company. In 2001 CGU Corporation was acquired by White Mountains Insurance Group, Ltd. and the Company’s name was changed to York Insurance Company of Maine.

The present entity, YICM, is wholly owned by OneBeacon American Insurance Company, which, in turn, is wholly owned by OneBeacon Insurance Company, and its ultimate parent is White Mountains Insurance Group, Ltd.

Affiliated Entities

YICM is affiliated with all the Companies in the White Mountain Insurance Group and shares several services with the group including investment management services, financial statement preparation, reinsurance, federal tax preparation, and general accounting services.

The following abbreviated organization chart shows the direct ownership of YICM and its ultimate parent, White Mountains Insurance Group, Ltd.

Organizational chart

 

Management and Control

The Company is governed by at least a seven (7), but not more than twenty-one (21) member Board of Directors. The following are the duly elected members of the Board of Directors and the Officers serving at December 31, 2006:

Directors

Alexander Constantine Archimedes Andrew Coleman Carnase
Mark Kevin Dorcus Thomas Lester Forsyth
Roland Patrick Lavoie Paul Harrington McDonough
Michael Joseph McSally Timothy Michael Miller
Brian David Poole Thomas Norman Schmitt
Roger Milgram Singer  

Officers

Roland Patrick Lavoie President
Dennis Robert Smith Secretary
Frederick James Turcotte Treasurer
Brain David Poole Senior Vice President and Chief Actuary

 

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. The Company is in substantial compliance with its conflict of interest policy.

Corporate Records

Reviews of the Company’s Articles of Incorporation, Bylaws, and Minutes of the Board of Directors’ meetings held from the period January 1, 2004 to the completion of field work were performed. The reviews indicated that the Company is conducting its affairs substantially in compliance with its Articles of Incorporation and Bylaws.

Growth of the Company

The following table presents selected comparative data that YICM reported for the period under examination:

  December 31
  2006 2005
Cash & Invested Assets $ 31,007,403 $ 33,591,724
Total Assets $ 31,295,912 $ 33,923,054
Total Policyholder Surplus $ 31,115,569 $ 33,720,829
     
  Years Ended December 31
  2006 2005
Direct Written Premium $ 97,706,416 $ 162,931,080
Ceded Written Premium (97,706,416) (162,931,080)
Net Written Premium $ - $ -
Net Investment Gain $ 1,205,802 $ 1,532,383
Net Income $ 670,557 $ 980,380

 

Fidelity Bond

As of December 31, 2006, the Company had adequate coverage under a Dishonesty Bond in compliance with 24-A M.R.S.A. §3359 (2)(F). The policy is issued to the parent company and includes subsidiaries. The aggregate limit of liability is $20,000,000.

Territory and Plan of Operation

The Company operates as a stock property and casualty insurance company providing multiple lines of insurance products, and is currently licensed in Maine, Massachusetts, New Hampshire and Vermont.

Accounts and Records

Account and records were reviewed and tested in order to assess their impact on financial condition and conformity with related laws.

REINSURANCE

The Company participates in an inter-company reinsurance agreement with an affiliate, OneBeacon Insurance Company, a Pennsylvania corporation, under a written reinsurance agreement and cedes 100% of its business to the affiliate. The Company does not assume business from either affiliates or non-affiliates.

FINANCIAL STATEMENTS

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

STATUTORY STATEMENT OF ADMITTED ASSETS, LIABILITIES, AND CAPITAL
AS OF DECEMBER 31

  2006 2005
(unexamined)
Admitted Assets:    
Bonds (Note 2) $ 24,222,204 $ 32,417,525
Cash and short-term investments (Note 3) 6,785,199 1,174,199
Investment income due and accrued 288,509 331,330
TOTAL ADMITTED ASSETS $ 31,295,912 $ 33,923,054
     
Liabilities and Surplus:    
Other expenses (excluding taxes, licenses, and fees) $ 27,170 $ 31,184
Current federal and foreign income taxes (Note 5) 113,000 147,000
Net deferred tax liability 26,984 21,113
Payable to parent, subsidiaries and affiliates (Note 4) 13,189 610
Aggregate write-ins for liabilities - 2,318
TOTAL LIABILITIES 180,343 202,225
     
Common capital stock
3,125,000 3,125,000
Gross paid in and contributed surplus 21,818,855 21,818,855
Unassigned funds 6,171,714 8,776,974
TOTAL SURPLUS 31,115,569 33,720,829
TOTAL LIABILITIES AND SURPLUS $ 31,295,912 $ 33,923,054

STATUTORY STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31

  2006 2005
(unexamined)
Investment Income:    
Net investment income earned $ 1,489,887 $ 1,352,447
Net realized capital gains or (losses), net of income taxes (284,085) 179,936
NET INVESTMENT GAIN 1,205,802 1,532,383
Aggregate write-ins for miscellaneous loss (6,499) -
Federal and foreign income taxes incurred 528,746 552,003
NET INCOME $ 670,557 $ 980,380

 

STATEMENT OF STATUTORY CAPITAL AND SURPLUS
FOR THE YEARS ENDED DECEMBER 31

  2006 2005
(unexamined)
     
Capital and surplus prior reporting period $ 33,720,829 $ 32,516,208
     
Net income or (loss) 670,557 980,380
Change in net unrealized capital gains or (losses) 32,466 229,275
Change in net deferred income tax (5,871) (5,034)
Change in nonadmitted assets (2,412) -
Dividends to stockholders (3,300,000) -
Net change in capital and surplus (2,605,260) 1,204,621
Capital and surplus end of reporting period $ 31,115,569 $ 33,720,829


NOTES TO THE FINANCIAL STATEMENTS

Note 1 – Accounting Practices

YICM reports its financial statements in the Annual Statement in accordance with the Statement of Statutory Accounting Principles as required by the State of Maine.

Note 2 - Bonds

Bonds are stated at amortized value using the scientific interest method as required by the Statements of Statutory Accounting Principles (hereinafter, “SSAP”) No. 26.

Bond Classification Actual
Cost
Par
Value
Market
Value
Book
Value
U.S. Government $ 12,495,370 $ 11,914,000 $ 12,510,446 $ 12,567,895
Industrial & Miscellaneous 11,901,130 11,740,990 11,558,946 11,654,309
Total $ 24,396,500 $ 23,654,990 $ 24,069,392 $ 24,222,204

 

Pursuant to 24-A M.R.S.A. §412 YICM has maintained the required security deposit with the Treasurer of Maine.

Note 3 – Cash, Cash Equivalents, and Short-term Investment

Cash, cash equivalents, and short-term investments consist entirely of U.S. Treasury bills and money market accounts.

Note 4 – Affiliates

YICM cedes 100% of its written premium to an affiliate under a written reinsurance agreement; see the reinsurance section. Pursuant to this agreement, the reinsuring affiliate performs all insurance operations for YICM.

YICM also has an investment management agreement with an affiliate, White Mountains Advisors LLC, a Delaware limited liability company. Pursuant to this agreement, the affiliate manages all investments and performs all recording and reporting of investment transactions for YICM.

Note 5 – Federal and Foreign Income Taxes

YICM is party to an inter-company Tax Allocation Agreement with all of its insurance company affiliates. Current federal and foreign income tax recoverable or payable is based upon separate return calculations.

The deferred tax asset was determined to be substantially in compliance with SSAP No. 10.

CONCLUSION

The Company’s financial condition is reflected in statements and supporting exhibits contained in this report. The basis of preparation of such statements conforms to the laws, rules and regulations prescribed and/or permitted by the Maine Bureau of Insurance.

Acknowledgement of cooperation and assistance extended by the examiners to all Company personnel is hereby expressed.

 

STATE OF MAINE

COUNTY OF KENNEBEC, SS

Kendra L. Godbout, CPA, CFE, being duly sworn according to law, deposes and says that in accordance with the authority vested in her by Mila Kofman, Superintendent of Insurance, pursuant to the Insurance Laws of the State of Maine, she has made an examination on the conditions and affairs of the

YORK INSURANCE COMPANY OF MAINE

of South Portland, Maine as of December 31, 2006 and that the foregoing report of examination, subscribed to by her, is true to the best of her knowledge and belief. The following examiners from the Bureau of Insurance assisted:

Graham S. Payne
Margaret S. Boghosian, CPA, CFE
Analisa M. Gallant
Audrey L. Wade

______________________________
Kendra L. Godbout, CPA, CFE
Director of Financial Analysis

 

Subscribed and sworn to before me

This ____ day of July, 2008

 

_____________________________
Vanessa J. Leon, Notary Public
My commission expires:

 

Last Updated: October 22, 2013