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SELECTIVE INSURANCE COMPANYOFNEW ENGLAND
REPORT OF EXAMINATIONAS OFDECEMBER 31, 2007
I hereby certify that the attached report of examination dated January 7, 2009 shows the condition and affairs of SELECTIVE INSURANCE COMPANY OF NEW ENGLAND of Branchville, New Jersey as of December 31, 2007, and has been filed in the Bureau of Insurance as a public document.
Dated this _____ day of _____, 200_
TABLE OF CONTENTS
STATE OF MAINE
IT IS HEREBY CERTIFIED THAT THE ANNEXED REPORT OF EXAMINATION FOR SELECTIVE INSURANCE COMPANY OF NEW ENGLAND 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. 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 _____, 2009
_________________________
January 7, 2009 Honorable Mila Kofman RE: Selective Insurance Company of New England Statutory Examination of the Period Ended December 31, 2007 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 conducted an examination, as of December 31, 2007, on the condition and financial affairs of SELECTIVE INSURANCE COMPANY OF NEW ENGLAND The examination, performed at the home office of Selective Insurance Company of New England in Branchville, New Jersey, was made in accordance with the standards and procedures established by the Bureau and the National Association of Insurance Commissioners 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 National Association of Insurance Commissioners and the Maine Bureau of Insurance. 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. Selective Insurance Company of New England (hereinafter, “Company”), formerly Cadillac Mountain Insurance Company (hereinafter, “Cadillac”), was last examined by the Maine Bureau of Insurance (hereinafter, “Bureau”) as of December 31, 2006. This examination, as of December 31, 2007, was performed by the Bureau acting as a participant in a full-scope multi-state coordinated risk-focused examination of Selective Insurance Group, Inc. (hereinafter, “SIGI”). The New Jersey Department of Banking and Insurance acted as the lead state. The New Jersey Department of Banking and Insurance performed a five year examination.
The Company is a member of an insurance holding company and is a wholly-owned subsidiary of SIGI, a publicly traded company. The Company is a stock insurance company organized and existing under the laws of the State of Maine. The Company was licensed for property and casualty authority by the State of Maine on January 1, 2004. The Company participates in a pooling arrangement with six other insurance affiliates pursuant to a written Reinsurance Pooling Agreement. Cadillac was incorporated on May 20, 1992 in the State of Maine as the Compensation Mutual Insurance Company (hereinafter, “CMIC”). Effective October 31, 1998, CMIC demutualized and reformed as a stock insurance company, Cadillac, and all the outstanding shares of stock were purchased by Acadia Insurance Company (hereinafter, “AIC”). On January 1, 2004, SIGI purchased Cadillac from AIC and renamed the Company. Simultaneously SIGI revised its intercompany pooling agreement to include the Company. The chart below is an abbreviated organizational chart of the Company as of December 31, 2007:
* Selective Way Insurance Company owns 75% of SelecTech, LLC and 75% of SRM Brokerage, LLC. The Company is governed by a twelve-member Board of Directors. The following are the duly elected members of the Board of Directors and the Officers serving at December 31, 2007:
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. A review of the minutes for all seven of SIGI’s legal insurance entities was performed. Fidelity Bond and Other Insurance Coverage As of December 31, 2007 and pursuant to 24-A M.R.S.A. §3359 (2)(F), the Company is covered by a Federal Insurance Company fidelity bond with a single loss limit of $5,000,000 and an aggregate limit of liability of $10,000,000 shared with its affiliates. As of December 31, 2007, the Company is also a party to an insurance program whereby its parent, SIGI, has purchased policies to protect itself and its subsidiaries, as applicable. Officers’ and Employees’ Welfare and Pension Plans The Company does not have any employees. The Company is allocated employee salary and benefit expense pursuant to a written Service Agreement with Selective Insurance Company of America (hereinafter, “SICA”). SICA is the lead company in the insurance affiliated pool. Territory and Plan of Operation As of December 31, 2007, the Company is licensed to write property and casualty insurance in the states of Maine and New Hampshire. Presently, the Company is only writing in New Hampshire. Accounts and records were reviewed and tested in order to assess their impact on financial condition and conformity with related laws. The Company is a participant in a pooling arrangement with six (6) affiliated companies under a written Reinsurance Pooling Agreement. Pool participants cede 100% of their insurance business to SICA, the lead company in the pool, and assume back from the pool their respective pool participation percentage. The Company’s pool participation percentage is 0.5%. The accompanying financial statements fairly present, in all material respects, the Company’s statutory financial position as of December 31, 2007 and statutory results of operations for the period then ended. The financial statements as of December 31, 2006 and December 31, 2005 are not reviewed under this examination and are presented for comparative purposes only. STATUTORY STATEMENT OF ADMITTED ASSETS, LIABILITIES, AND CAPITAL AS OF DECEMBER 31, 2007, 2006, 2005
STATUTORY STATEMENT OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, 2005
STATEMENT OF STATUTORY CAPITAL AND SURPLUS FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, 2005
NOTES TO THE FINANCIAL STATEMENTS Note 1 –Bonds Bonds are stated at amortized value using the scientific interest method pursuant to Statement of Statutory Accounting Principles (hereinafter “SSAP”) No. 26.
Pursuant to 24-A M.R.S.A. §412, the Company has maintained the required security deposit with the Treasurer of Maine. Note 2 – Common Stocks Corporate stocks are stated at market value in accordance with valuations promulgated by the National Association of Insurance Commissioners. Unrealized capital gains and losses on investments reported at market value are charged directly to policyholders’ surplus pursuant to SSAP No. 30. Note 3 – Cash and Short-term Investments Short-term investments consist of money market funds which are properly reported as short-term investments pursuant to SSAP No. 2.
Note 4 – Inter-Company Pooling Arrangement The Company is a party to an inter-company pooling arrangement under a written Reinsurance Pooling Agreement with other insurance company affiliates. The lead company, SICA, assumes from the affiliates all of their net premiums written and cedes 50.5% of all premiums written back to the pool. All losses, loss expenses, other underwriting and administrative expenses are pro-rated among each party on the basis of their respective pooling percentage. Reinsurance amounts receivable or payable to an affiliate under this pooling arrangement are properly reported as any other reinsurance arrangement, in accordance with SSAP No. 63. The inter-company pooling participants and their respective participation percentages follow:
Note 5 – Federal and Foreign Income Taxes The Company is party to an inter-company Tax Allocation Agreement. Current federal and foreign income tax recoverable and payable is based upon separate return calculations. SIGI, the ultimate parent, files a consolidated federal income tax return which includes all of its subsidiaries. The deferred tax asset was determined to be substantially in compliance with SSAP No. 10. Note 6 – Payable to Parent, Subsidiaries and Affiliates Amounts due or receivable from parent, subsidiaries and affiliates represent the amounts payable under a written inter-company Services Agreement. The administrative services are performed by SICA, the lead insurance affiliate, for all the insurance company affiliates. The balance due at December 31, 2007 represents the December charges under this Services Agreement. Note 7 – Capital and Surplus As of December 31, 2007, the Company had authorized, issued, and outstanding 500,000 shares of common stock, par value $5. SIGI, the immediate parent, owned 100% of the Company’s common stock. Capital and surplus of $12,952,398 was in compliance with the minimum net worth requirement pursuant to 24-A M.R.S.A. §410 (1). The Company’s financial condition, as disclosed by this examination, is reflected in the statements and the 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 is extended to the examiners by all Company personnel is hereby expressed.
STATE OF MAINE 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 SELECTIVE INSURANCE COMPANY OF NEW ENGLAND of Branchville, New Jersey as of December 31, 2007, 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 assisted: Michael R. Nadeau, CPA, CFE, CISA, AES ________________________________ Kendra L. Godbout, CPA, CFE Director Financial Analysis Subscribed and sworn to before me this ___day of _____, 2009
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Last Updated: December 8, 2011 |
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