Skip Maine state header navigation

Agencies | Online Services | Help

Skip All Navigation

 

 

 

June 5, 2012

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

Dear 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

AS OF

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).

 

Dated:                                                                         ________________________
                                                                                    Stuart E. Turney, CPA, AFE
                                                                                    Director of Examination


Table of Contents

Scope of Examination............................................................................................................................................. 1
Summary of Significant Findings.............................................................................................................................. 1
Prior Examination................................................................................................................................................... 1
Current Examination............................................................................................................................................... 1
Subsequent Events................................................................................................................................................. 1
The Company........................................................................................................................................................ 1
History................................................................................................................................................................... 1
Corporate Records................................................................................................................................................ 2
Corporate Governance.......................................................................................................................................... 2
Code of Conduct and Conflict of Interest............................................................................................................... 2
Corporate Control................................................................................................................................................. 2
Fidelity Bond and Other Insurance......................................................................................................................... 3
Territory & Plan of Operation................................................................................................................................ 3
Transactions with Affiliates..................................................................................................................................... 3
Reinsurance........................................................................................................................................................... 4
Accounts and Records........................................................................................................................................... 4
Statutory Deposits.................................................................................................................................................. 4
Litigation................................................................................................................................................................ 5
Financial Statements............................................................................................................................................... 5
Statement of Admitted Assets, Liabilities, and Surplus............................................................................................. 6
Statement of Operations......................................................................................................................................... 7
Statement of Capital and Surplus............................................................................................................................ 8
Conclusion............................................................................................................................................................. 9


Scope of Examination

 

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.

 

Summary of Significant Findings

Prior Examination

None noted.

Current Examination

None noted.

 

Subsequent Events

None noted.

 

The Company

History

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.

Corporate Records

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.

Corporate Governance

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:

NAME TITLE
Richard Dale Bartlett Director
J Dudley Colcord Director
James Oliver Coyne Director
Linda Joy Day Chairman
Wayne Edward Hutchins Director
Thomas Holmes Moore Director
George Harold Morehouse Director

As of December 31, 2010, the executive officers of State Mutual consisted of the following individuals:

NAME TITLE
Linda Joy Day Chairman & President
John Everett Goodwin Secretary & Clerk
Daniel Rodgers Vice President - Treasurer
Warren Christopher McLean Jr. Vice President - Administration
Michael Phili Nolain Jr. Vice President - Underwriting
Thomas John McConnell Vice President - Claims

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).

Code of Conduct and Conflict of Interest

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.

Corporate Control

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 Mutual, Green Mountain, Vermont Accident, Peoples Service

Concord General controls the following companies through management and reinsurance agreements:

Concord General Mutual, Sunapee Mutual, State Mutual (ME), Weare Mutual Fire, Bow Mutual Fire

Fidelity Bond and Other Insurance

 

Fidelity Bond and Other Insurance

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.

Territory & Plan of Operation

State Mutual is licensed to transact business in the State of Maine.  State Mutual primarily writes homeowners multiple peril coverage.

Transactions with Affiliates

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:

Growth 2007-2010

 

Reinsurance

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

Accounts and records were reviewed and tested in order to assess the impact on State Mutual’s financial condition and conformity with related laws.

Statutory Deposits

State Mutual reported the following security deposits as of December 31, 2010:

Statutory deposit

The security deposited with the State of Maine meets the requirements set forth in 24-A M.R.S.A. §412.


Litigation

 

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.

 

Financial Statements

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.


Statement of Admitted Assets, Liabilities, and Surplus

as of December 31, 2010, 2009, 2008, and 2007

Admitted Assets 2007 - 2010

Statement of Operations

Years Ended December 31, 2010, 2009, 2008, and 2007

Statement of operations


Statement of Capital and Surplus

Years Ended December 31, 2010, 2009, 2008, and 2007

Statement of Capital and Surplus 2007 - 2010

Conclusion

 

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
County of Kennebec, SS

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
Margaret S. Boghosian, CPA, CFE

 

                                                           
James C. Williams, CPA, CFE, CIE

 

 

Subscribed and sworn to before me
This _____day of _________, 2011

 

                                                           
Notary Public
My Commission Expires:

Last Updated: October 22, 2013