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Maine.gov > PFR Home > Insurance Regulation > Company Services > Maine Domestic Companies > Examination Reports
June 5, 2012
Eric A. Cioppa, Superintendent
Pursuant to the provisions of 24-A M.R.S.A. §221 and in conformity with your instructions, a financial examination has been made of the
State Mutual Insurance Company
The following report is respectfully submitted.
REPORT OF EXAMINATION
STATE MUTUAL INSURANCE COMPANY
DECEMBER 31, 2010
Acceptance of Report of Examination
WHEREAS a verified Report of Examination of State Mutual Insurance Company dated June 5, 2012, was delivered to that insurer on June 12, 2012, and
WHEREAS State Mutual Insurance Company and Bureau of Insurance staff have agreed to certain modifications with respect to the Report of Examination, and
WHEREAS I find such modifications proper, and
WHEREAS no hearing with respect to the Report of Examination has been requested by State Mutual Insurance Company,
NOW THEREFORE, I accept the Report of Examination as modified and hereby order it placed on file in the Bureau of Insurance as provided for by 24-A M.R.S.A. §226(3).
Table of Contents
Scope of Examination............................................................................................................................................. 1
State Mutual Insurance Company (hereinafter, “State Mutual”) was last examined as of December 31, 2006, by the State of Maine Bureau of Insurance (hereinafter, “Bureau”). This examination covered the period from January 1, 2007, to December 31, 2010.
This examination was a coordinated examination. The State of New Hampshire was the lead state. The examination was conducted at the controlling company’s, Concord General Mutual Insurance Company (hereinafter, “Concord General”), offices in Concord, New Hampshire. The offices in Concord are the main administrative offices of State Mutual and all the companies of the Concord Group.
This examination was performed pursuant to the risk-focused approach promulgated by the National Association of Insurance Commissioners (hereinafter, “NAIC”) and consisted of a review of State Mutual’s operations, administrative practices, valuation of assets, and determination of liabilities at December 31, 2010, in conformity with statutory accounting practices, NAIC guidelines including the 2011 Financial Condition Examiners Handbook (hereinafter “FCEH”), and the laws, rules, and regulations prescribed or permitted by the State of Maine.
The results of this examination present the financial condition of State Mutual as of December 31, 2010. Comments on various balance sheet items, for purposes of this report, may be limited to matters involving clarification, departures from laws, rules and regulations, and/or significant changes in amounts.
State Mutual was incorporated in Gorham, Maine on May 15, 1899, as the Dirigo Mutual Fire Insurance Company and subsequently moved to Portland, Maine. On July 1, 1934, State Mutual changed its name to State Mutual Fire Insurance Company. On January 19, 1965, State Mutual changed its name to State Mutual Insurance Company. State Mutual’s statutory home office was moved to Auburn, Maine on July 1, 1965.
State Mutual’s articles of incorporation and bylaws were reviewed. In addition to legal documentation review, the minutes of the board of directors’ meetings, held during the period under examination, were reviewed.
State Mutual is governed and overseen by its board of directors and the management team of State Mutual.
As of December 31, 2010, the board of directors of State Mutual consisted of the following members:
As of December 31, 2010, the executive officers of State Mutual consisted of the following individuals:
In 2011, James Oliver Coyne and Wayne Edward Hutchins left the board of directors. As such, at December 31, 2011, State Mutual reported six members of the board of directors. At the March 26, 2012 annual meeting, Gordon Alvin Rehnborg Jr. was appointed to the board of directors in compliance with the 24-A M.R.S.A. §3411 (1).
Title 24-A M.R.S.A. §3413 identifies potential conflict of interest areas. State Mutual has a conflict of interest policy whereby all directors and officers must sign a disclosure and acknowledgement statement on an annual basis. State Mutual also has a code of business conduct and ethics policy.
State Mutual is a mutual insurance company under the common control of Concord General through a reinsurance arrangement in which 100% of the insurance operations are ceded to Concord General, 0% is assumed back to State Mutual, and all operations are administered by Concord General.
The organization charts below show Concord General and all affiliates:
Concord General controls the following companies through management and reinsurance agreements:
As of December 31, 2010, State Mutual had adequate fidelity bond coverage. The policy was issued to Concord General, and State Mutual was listed as a named insured. The $1,000,000 fidelity bond satisfied the NAIC suggested amount of $1,000,000.
State Mutual is licensed to transact business in the State of Maine. State Mutual primarily writes homeowners multiple peril coverage.
All insurance operations are managed by Concord General under a written Insurance Management Agreement effective January 1, 1996, as amended January 1, 2008.
The Company entered into a Reinsurance Agreement with Concord General effective January 1, 1996, as amended January 1, 2007. Please refer to the Reinsurance section of this report.
Growth of Company
The following table presents certain statistics related to the growth of State Mutual:
All policies are reinsured as written with Concord General under a written reinsurance agreement between Concord General and State Mutual entered into on January 1, 1997, and amended January 1, 2007.
Concord General agrees to reinsure and assume, and State Mutual agrees to cede and transfer to Concord General, automatically from inception, all liabilities incurred under or in connection with all contracts and policies of insurance issued by State Mutual. State Mutual agrees to pay to Concord General all premiums on business written by State Mutual, and Concord General agrees to pay all losses and loss expenses. The conditions of the reinsurance shall, in all cases, be identical with the conditions of the original insurance.
Accounts and records were reviewed and tested in order to assess the impact on State Mutual’s financial condition and conformity with related laws.
State Mutual reported the following security deposits as of December 31, 2010:
The security deposited with the State of Maine meets the requirements set forth in 24-A M.R.S.A. §412.
State Mutual is not aware of potential lawsuits or other legal action beyond the ordinary course of business which would be considered material in relation to the financial position of State Mutual.
The accompanying financial statements fairly present, in all material respects, State Mutual’s statutory financial position as of December 31, 2010, and statutory results of operations for the period then ended. The financial statements as of December 31, 2009, 2008, and 2007, are unexamined and are presented for comparative purposes only.
as of December 31, 2010, 2009, 2008, and 2007
Years Ended December 31, 2010, 2009, 2008, and 2007
Years Ended December 31, 2010, 2009, 2008, and 2007
State Mutual’s financial condition, as reported by management, is reflected in the statements and supporting exhibits contained in this report. The basis of preparation of such statements conforms to laws, rules, and regulations prescribed and/or permitted by the Bureau.
Acknowledgement of cooperation and assistance extended to the examiners by all State Mutual and the Concord Group personnel is hereby expressed.
State of Maine
James C. Williams, being duly sworn according to law deposes and says that, in accordance with authority vested in him by Eric A. Cioppa, Superintendent, pursuant to the Insurance Laws of the State of Maine, he has made an examination of the condition and affairs of the
State Mutual Insurance Company
located in Auburn, Maine as of December 31, 2010, 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 assisted:
James C. Williams, CPA, CFE, CIE
Subscribed and sworn to before me
Last Updated: August 22, 2012
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