REPORT ON EXAMINATION
OF
UTICA MUTUAL INSURANCE COMPANY
AS OF
DECEMBER 31, 2019
DATE OF REPORT JUNE 8, 2021
EXAMINER WAYNE LONGMORE
TABLE OF CONTENTS
ITEM NO.
PAGE NO.
1.
Scope of examination
2
2.
Description of Company
3
A. Corporate governance
4
B. Territory and plan of operation
5
C. Reinsurance ceded
7
D. Affiliated group
9
E. Significant ratios
14
F. Accounts and records
15
3.
Financial statements
17
A. Balance sheet
17
B. Statement of income
19
C. Capital and surplus
20
4.
Losses and loss adjustment expenses
21
5.
Subsequent events
21
6.
Compliance with prior report on examination
22
7.
Summary of comments and recommendations
24
One State Street, New York, NY 10004-1511 │ (212) 480-6400│ www.dfs.ny.gov
ANDREW M. CUOMO
Governor
LINDA A. LACEWELL
Superintendent
June 8, 2021
Honorable Linda A. Lacewell
Superintendent
New York State Department of Financial Services
Albany, New York 12257
Madam:
Pursuant to the requirements of the New York Insurance Law, and in compliance with the instructions
contained in Appointment Number 32056 dated March 27, 2020, attached hereto, I have made an
examination into the condition and affairs of Utica Mutual Insurance Company as of December 31, 2019,
and submit the following report thereon.
Wherever the designations “UMIC” or “the Company” appears herein without qualification, it should be
understood to indicate Utica Mutual Insurance Company.
Wherever the term “Department” appears herein without qualification, it should be understood to mean the
New York State Department of Financial Services.
The examination was conducted remotely due to the Governor’s Executive Order of New York State on
PAUSE regarding the COVID-19 pandemic.
2
1. SCOPE OF EXAMINATION
The Department has performed an examination of the Company, a multi-state insurer. The previous
examination was conducted as of December 31, 2014. This examination covered the five-year period from
January 1, 2015, through December 31, 2019. Transactions occurring subsequent to this period were
reviewed when deemed appropriate by the examiner.
New York was the lead state of the Utica National Insurance Group (“Group”). The examination
was performed concurrently with the examinations of the following insurers:
Company
State of Domicile
Illinois
Michigan
New York
Ohio
Texas
New York
Ohio
Texas
Texas
Other states participating in this examination were Illinois, Michigan, Ohio and Texas.
This examination was conducted in accordance with the National Association of Insurance
Commissioners (“NAIC”) Financial Condition Examiners Handbook, which requires that we plan and
perform the examination to evaluate the financial condition and identify current and prospective risks of
the Company by obtaining information about the Company including corporate governance, identifying and
assessing inherent risks within the Company and evaluating system controls and procedures used to mitigate
those risks. This examination also includes assessing the principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation, management’s compliance
with New York laws, statutory accounting principles, and annual statement instructions.
This examination report includes, but is not limited to, the following:
Company history
Management and control
Territory and plan of operation
Reinsurance
Affiliated group description
Financial statement presentation
3
Loss review and analysis
Significant subsequent events
Summary of recommendations
A review was also made to ascertain what action was taken by the Company regarding the
recommendations contained in the prior report on examination.
This report on examination is confined to financial statements and comments on those matters that
involve departures from laws, regulations or rules, or that are deemed to require explanation or description.
2. DESCRIPTION OF COMPANY
Utica Mutual Insurance Company was incorporated under the laws of the State of New York on
February 13, 1914, as the Utica Mutual Compensation Insurance Corporation. It became licensed on June
1, 1914 and commenced business on July 1, 1914. The Utica Mutual Insurance Company name was adopted
on February 1, 1919.
In 1967, the Company entered into an agreement with Graphic Arts Mutual Insurance Company
(“GAMIC”) providing for common management of the two companies. Since 1969, UMIC has pooled
premiums, losses, and expenses with GAMIC through a reinsurance pooling agreement.
In 1983, UMIC purchased Republic-Franklin Insurance Company (“RFIC”), a stock property and
casualty company organized under provisions of the State of Ohio Insurance Law. UMIC subsequently sold
6% of its interest in RFIC to GAMIC, creating 94% and 6% ownership. In 1984, RFIC was admitted to the
pooling agreement between UMIC and GAMIC.
In 1995, UMIC acquired all the outstanding capital stock of Utica National Insurance Company of
Texas (“UNIT”), which was then admitted to the above-mentioned pooling agreement.
In 1995, UMIC acquired all the common stock of Graphic Arts Insurance Company, a New York
insurer. Graphic Arts Insurance Company changed its corporate title to Utica National Assurance Company
and was admitted to the pooling agreement in 1997.
In 2010, UMIC acquired 100% of Nationwide Holdings, Inc., which is the owner of Founders
Insurance Company (“FIC”), an Illinois domestic insurer. FIC in turn owns 100% of Founders Insurance
Company of Michigan (“FICOM”), a Michigan domiciled insurer. FIC was admitted to the pooling
4
agreement in 2014. Nationwide Holdings, Inc. was dissolved, effective September 29, 2015, leaving UMIC
as 100% owner of FIC.
A. Corporate Governance
Pursuant to the Company’s charter, management of the Company is vested in a board of directors
consisting of not less than seven nor more than 31 persons. The board meets at least four times during each
calendar year. At December 31, 2019, the board of directors was comprised of the following 13 members:
Name and Residence
Principal Business Affiliation
Russell A. Acevedo, MD
Fayetteville, NY
Medical Director of Intensive Care,
Crouse Hospital
Clarence W. Bachman
The Villages, FL
Retired
Donald P. Cardarelli
Skaneateles, NY
Professor,
Syracuse University
Richard P. Creedon
Vernon, NY
Chief Executive Officer,
Utica Mutual Insurance Company
Paul A. Hagstrom, Ph.D.
Clinton, NY
Professor,
Hamilton College
Gregory M. Harden
McConnellsville, NY
Retired
Zelda J. Holcomb, Ph.D.
Columbia, MD
Retired
Kristen H. Martin
Clinton, NY
President and Chief Operating Officer,
Utica Mutual Insurance Company
Nicholas O. Matt
New Hartford, NY
Chairman and Chief Executive Officer,
Matt Brewing Company
Peter J. O’Neill
Fayetteville, NY
Retired
Timothy R. Reed
Utica, NY
Consultant - self-employed
5
Linda E. Romano, Esq.
New Hartford, NY
Attorney at Law,
Bond, Schoeneck & King
Eric K. Scholl
Anna Maria, FL
Investor/Consultant - self-employed
As of December 31, 2019, the principal officers of the Company were as follows:
Name
Title
Richard P. Creedon
Chairman and Chief Executive Officer
Kristen H. Martin
President and Chief Operating Officer
Brian W. Miller, Jr.
Vice President, Chief Financial Officer
and Treasurer
Louisa S. Ruffine
Secretary
B. Territory and Plan of Operation
As of December 31, 2019, the Company was licensed to write business in all 50 states, the District
of Columbia, and Puerto Rico.
As of the examination date, the Company was authorized to transact the kinds of insurance as
defined in the following numbered paragraphs of Section 1113(a) of the New York Insurance Law:
Paragraph
Line of Business
3
Accident and health
4
Fire
5
Miscellaneous property
6
Water damage
7
Burglary and theft
8
Glass
9
Boiler and machinery
10
Elevator
11
Animal
12
Collision
13
Personal injury liability
14
Property damage liability
15
Workers' compensation and employers' liability
16
Fidelity and surety
17
Credit
19
Motor vehicle and aircraft physical damage
20
Marine and inland marine
6
21
Marine protection and indemnity
24
Credit unemployment
26
Gap
27
Prize indemnification
28
Service contract reimbursement
29
Legal services insurance
The Company is also licensed to conduct the business of special risk insurance pursuant to Article
63 of the New York Insurance Law.
Based upon the lines of business for which the Company is licensed, and pursuant to the
requirements of Articles 13, 41 and 63 of the New York Insurance Law, the Company is required to maintain
a minimum surplus to policyholders in the amount of $6,900,000. However, pursuant to Section 6302(c)(1)
of the New York Insurance Law, to be licensed to write special risks, the Company is required to maintain
surplus as regards policyholders of at least 250% of its authorized control level risk-based capital; therefore,
the Company was required to maintain a minimum surplus to policyholders in the amount of $335,542,055,
as of December 31, 2019.
The following schedule shows the direct and assumed premiums written by the Company for the
period under examination:
Calendar Year
Direct
Premiums
Assumed
Premiums
Total
Gross Premiums
2015
$199,047,351
$641,228,865
$ 840,276,216
2016
$196,587,769
$709,275,903
$ 905,863,672
2017
$204,444,451
$785,202,413
$ 989,646,864
2018
$227,317,313
$831,811,370
$1,059,128,683
2019
$256,858,035
$896,884,049
$1,153,742,084
The following lines of business represent the largest lines written by the Company (by percentage
of total 2019 direct written premiums): commercial multiple peril, workers’ compensation, commercial auto
liability, other liability – claims-made and auto physical damage, which accounted for 22.08%, 20.32%,
13.63%, 11.41% and 9.66%, respectively. Other liability – claims-made includes personal and commercial
umbrella. The Company produced a majority of its 2019 direct written premiums (67.38%) in the following
states: New York (20.96%), Connecticut (15.44%), Pennsylvania (12.89%), New Jersey (10.46%) and
Massachusetts (7.64%).
7
As of December 31, 2019, the Company utilizes independent agents to produce and distribute most
of its business. Brokers produced less than 10% of total business.
Due to the pooling agreement (described in section 2C of this report), the net exposure of the
Company is significantly different than its direct and assumed exposure. At December 31, 2019, assumed
premiums written represents intercompany pooling agreement participation as well as mandatory and
voluntary participation in various pools. The Company utilizes reinsurance accounting as defined in the
NAIC Accounting Practices and Procedures Manual, Statement of Statutory Accounting Principles
("SSAP") No. 62R for all its assumed reinsurance business.
C. Reinsurance Ceded
UMIC is the lead company in an inter-company reinsurance pooling agreement with five other
property and casualty affiliates that cede 100% of their written premiums to UMIC. The Company
retroceded 16% of the pooled premiums, net of external reinsurance, to other pool members. As of
December 31, 2019, the retrocession, which resulted in sharing of premium income, losses and expenses,
was as follows:
Graphic Arts Mutual Insurance Company
5%
Founders Insurance Company
5%
Republic–Franklin Insurance Company
3%
Utica National Assurance Company
2%
Utica National Insurance Company of Texas
1%
Under the present agreement, all transactions and items related to the insurance and/or general
operations of the companies are pooled. The only major items that remain exempt are those related to
investments and inter-company accounts.
At December 31, 2019, the business written by three other affiliates, Utica Specialty Risk Insurance
Company (“USRIC”), Utica Lloyds of Texas (“ULOT”) and Utica National Insurance Company of Ohio
(“UNICO”), is ceded 100% to UMIC and is shared with the pool members in accordance with the above-
mentioned pooling percentages.
The Group’s 2019 reinsurance program included the following significant coverages:
8
Treaty Type
Cession
Property Per Risk
3 layers
$8,000,000 in excess of $2,000,000 with 6
reinstatements
$15,000,000 in excess of $10,000,000 with 2
reinstatements
$25,000,000 in excess of $25,000,000 with 2
reinstatements
Property Catastrophe
4 layers
$25,000,000 in excess of $25,000,000 with 1
reinstatement
$50,000,000 in excess of $50,000000 with 1
reinstatement
$200,000,000 in excess of $100,000,000 with 1
reinstatement
$100,000,000 in excess of $300,000,000 with 1
reinstatement
Casualty
4 layers
$5,000,000 in excess of $5,000,000 with 3
reinstatements
$10,000,000 in excess of $10,000,000 with 1
reinstatement
$20,000,000 in excess of $20,000,000 with 1
reinstatement
$60,000,000 in excess of $40,000,000 with 1
reinstatement
UMIC entered into a run-off reinsurance agreement with National Indemnity Company, as reinsurer,
to transfer all losses related to asbestos claims up to a contract limit of $475,985,800 for certain policies
written by UMIC and affiliates on or prior to December 31, 2003. Pursuant to this arrangement, loss and
loss adjustment expense payments for direct asbestos claims, on or after January 1, 2012, are ceded to the
reinsurer. In accordance with SSAP No. 62R, Paragraph 81, the accounting treatment for property and
casualty run-off agreements must be approved by domiciliary regulators. On August 21, 2012, the
Department issued a non-objection letter to UMIC on utilization of prospective accounting treatment
regarding the agreement.
Most of the Company’s ceded business was to authorized reinsurers, and the amount in cessions to
authorized companies has increased since the last exam. It is the Company's policy to obtain the appropriate
collateral for its cessions to unauthorized reinsurers.
9
All significant ceded reinsurance agreements in effect as of the examination date were reviewed and
found to contain the required clauses, including an insolvency clause meeting the requirements of Section
1308 of the New York Insurance Law.
Examination review found that the Schedule F data reported by the Company in its filed annual
statement accurately reflected its reinsurance transactions. Additionally, management has represented that
all material ceded reinsurance agreements transfer both underwriting and timing risk as set forth in the
SSAP No. 62R. Representations were supported by an attestation from the Company's Chief Executive
Officer and Chief Financial Officer. Additionally, examination review indicated that the Company was not
a party to any finite reinsurance agreements. All ceded reinsurance agreements were accounted for utilizing
reinsurance accounting as set forth in SSAP No. 62R.
D. Affiliated Group
UMIC is the ultimate parent of the group of companies that operate under the trade name Utica
National Insurance Group.
Pursuant to Section 1502(a) of the New York Insurance Law, UMIC is exempt from the filing
requirements of Article 15. However, pursuant to Department Circular Letter No. 10 (2010), domestic
insurers are required to file with the superintendent copies of the insurance holding company system annual
registration statement ("NAIC Form B") filed in another state by the insurer or its parent authorized insurer,
and any amendments thereto, at the same time that the insurer files the statement and any amendments with
another state. If an insurer is not required to file the NAIC Form B in another state, then the insurer should
file the information contained in NAIC Form B with the Department within 120 days following the close
of the ultimate holding company's fiscal year. UMIC is noted to have made the required filings in a timely
manner during the period covered by the examination.
The following is an organizational chart outlining the relationship between members of the affiliated
group at December 31, 2019:
10
(1) Owned 100% by Utica Mutual Insurance Company; operates as attorney-in-fact for Utica Lloyd’s
of Texas.
(2) Owned 94% by Utica Mutual Insurance Company and 6% by Graphic Arts Mutual Insurance
Company.
(3) Owned 100% by Utica Mutual Insurance Company.
(4) A Texas Lloyd’s association of twelve underwriters under sponsorship of the Utica Mutual
Insurance Company.
(5) Owned 100% by Founders Insurance Company.
(6) Shares common management with the Group.
Utica Mutual Insurance
Company
(New York)
(4)
Utica Lloyd's of Texas
(Texas)
(1)
Utica Lloyd's, Inc.
(Texas)
(3)
Utica Specialty Risk
Insurance Company
(Texas)
(3)
UNI-Service Life
Agency, Inc.
(New York)
(3)
Utica National Insurnace
Company of Ohio
(Ohio)
(3)
Utica National
Assurance Company
(New York)
(2)
Republic-Franklin
Insurance Company
(Ohio)
(3)
Utica National Insurance
Company of Texas
(Texas)
(3)
Founders Insurance
Company
(Illinois)
(5)
Founders Insurance
Company of Michigan
(Michigan)
(5)
Pillar Premium Finance
Company
(Illinois)
(3)
UNI-Service Operations
Corporation
(New York)
Graphic Arts Mutual
Insurance Company
(New York)
(6)
Utica National Group
Foundation, Inc.
(New York)
11
At December 31, 2019, the Company was party to the following agreements with other affiliated
entities:
UMIC and GAMIC Common Management Agreement
This agreement became effective August 1, 1967 between UMIC and GAMIC.
The agreement may be terminated by the action of the board of directors of either party, but no such
termination shall be effective until at least one year after notice thereof is given to the other party.
Tax Allocation Agreement
This Tax Allocation Agreement was entered into July 1, 2010, by and between the Company and
various other affiliates.
It was noted during the review of the agreement that some parties to the agreement are no longer in
existence. It is recommended that the Company draft an updated tax allocation agreement, consisting of
existing entities, and submit the new agreement to the Department in accordance with Circular Letter No.33
(1979).
UMIC and FICOM Service Agreement
This service agreement was entered into December 11, 2014, by and between UMIC and FICOM.
UMIC, the ultimate parent company, provides certain services to FICOM, including executive management
services, actuarial services, accounting services, technology services and all other activities necessary to
the conduct of FICOM as FICOM may from time to time request.
In consideration for the services rendered by UMIC, FICOM shall pay UMIC a fee equal to the
following incurred expenses:
• Loss adjustment expenses for adjusting, recording and paying of claims which are directly related
to FICOM;
• Investment expenses for the investment of funds and pursuit of investment income that are directly
related to FICOM;
• Other underwriting expenses that are directly related to FICOM.
Such fee shall be paid by FICOM within fifteen days following receipt by FICOM of a report
showing the relevant expenses.
12
This agreement shall continue in force and effect until terminated by any party upon mutual
agreement or upon 60 days’ prior written notice to the other.
UMIC and USRIC Service Agreement
This service agreement is between UMIC and USRIC. This agreement became effective on April 1,
2012.
UMIC agrees to render certain services for and on behalf of USRIC including underwriting advice
and services, policy issuing and billing services, premium collection, auditing and record keeping, office
accommodations, claim adjustment and payment services and all other activities necessary to the conduct
of USRIC as USRIC may from time to time request.
UMIC is responsible for all operating expenses of USRIC other than the following expenses and
costs that are to be retained by USRIC:
• Commissions allowed to producers;
• Taxes;
• Board and bureau assessments;
• Insurance Department licenses and fees;
• Legal expenses other than those incurred in connection with loss adjustments;
• Investment expenses, if any;
• All losses and loss adjustment expenses.
In consideration of the services rendered by UMIC, USRIC pays UMIC, in accordance with the
provisions of Regulation No. 30 (11 NYCRR 105-109). This agreement shall continue to be in force until
terminated by either party’s giving at least thirty (30) days’ written notice to the other party.
UMIC and ULOT Service Agreement
This agreement is by and between UMIC and ULOT. This contract became effective on September
1, 1999.
UMIC agrees to render certain services for and on behalf of ULOT, under the supervision and
control of an Attorney-in-Fact, including underwriting advice and services, policy issuing and billing
services, premium collection, auditing and record keeping, office accommodations, claim adjustment and
payment services and all other activities necessary to the conduct ULOT, as ULOT may from time to time
request.
13
UMIC is responsible for all operating expenses of ULOT other than the following expenses and
costs, which are to be retained by ULOT:
• Commissions allowed to producers;
• Taxes;
• Board and bureau assessments;
• Insurance Department licenses and fees;
• Legal expenses, other than those incurred in connection with loss adjustments;
• Investment expenses, if any;
• All losses and loss adjustment expenses.
This agreement shall continue to be in force until cancelled by either party’s giving thirty (30) days
written notice to the other party.
UMIC and UNIT Service Agreement
This service agreement between UMIC and UNIT became effective on October 1, 2014. UMIC
agrees to render certain services for and on behalf of UNIT that include underwriting advice and services,
policy issuing and billing services, auditing and record keeping, premium collection, office
accommodations, claim adjustment and payment services, and all other activities necessary to the conduct
of UNIT, as UNIT may from time to time request.
Except as otherwise provided, each party to this agreement shall have the right to terminate this
agreement for any reason by giving the other party written notice received sixty (60) days prior to the
effective date thereof. In addition, UNIT shall have the right to terminate this agreement immediately for
cause.
UMIC and UNI-Service Operations Service Agreement
This service agreement is made and entered into between UMIC and UNI-Service Operations
Corporation (“Operations”). This agreement was executed March 13, 2001 and became effective January
1, 2001.
UMIC shall provide to Operations such services as may be needed by Operations in the course of
its business operations. UMIC shall charge Operations for such services on terms that are fair, equitable,
reasonable, and in conformity with customary insurance accounting practices consistently applied. Each
party shall have the right, at its own expense and at any reasonable time, to audit the records of the other
party.
14
The agreement shall continue in effect until cancelled by either party giving at least thirty (30) days’
notice in writing to the other party.
UMIC and UNICO Amended and Restated Service Agreement
This amended and restated service agreement between UMIC and UNICO was entered into on
September 7, 2011 and amend the original agreement that was effective December 22, 2010.
UMIC agrees to render certain services for and on behalf of UNICO that include underwriting advice
and services, policy issuing and billing services, auditing and record keeping, premium collection, office
accommodations, claim adjustment and payment services and all other activities necessary to the conduct
of UNICO, as UNICO may from time to time request.
UMIC is responsible for all operating expenses of UNICO, other than the following expenses and
costs that are to be retained by UNICO:
• Commissions allowed to producers;
• Taxes;
• Board and bureau assessments;
• Insurance Department licenses and fees;
• Legal expenses other than those incurred in connection with loss adjustments;
• Investment expenses, if any;
• All losses and loss adjustment expenses.
This agreement shall continue in force until terminated by either party’s giving at least thirty (30)
days’ written notice to the other party.
E. Significant Ratios
The Company’s operating ratios, computed as of December 31, 2019, fall within the benchmark
ranges set forth in the Insurance Regulatory Information System of the NAIC.
Operating Ratios
Result
Net premiums written to policyholders' surplus
89%
Adjusted liabilities to liquid assets
81%
Two-year overall operating
90%
15
Underwriting Ratios
The underwriting ratios presented below are on an earned/incurred basis and encompass the five-
year period covered by this examination:
Amount
Ratio
Losses and loss adjustment expenses incurred
$2,502,195,285
63.87%
Other underwriting expenses incurred
1,364,807,984
34.84
Net underwriting gain
50,650,127
1.29
Premiums earned
$3,917,653,396
100.00%
The Company’s reported risk-based capital (“RBC”) score was 762.9% as of December 31, 2019.
The RBC score is a measure of the minimum amount of capital appropriate for a reporting entity to support
its overall business operations in consideration of its size and risk profile. An RBC score of 200% or below
can result in regulatory action. There were no financial adjustments in this report that impacted the
Company’s RBC score.
F. Accounts and Records
i. Compliance with Department Regulation 118
A review of the 2019 CPA engagement letter shows that the following language, required by
Department Regulation 118, were not included.
Department Regulation 118, Section 89.4(b) states:
“The company shall obtain a letter from the CPA, and file a copy with the
superintendent, stating that the CPA is aware of the provisions of the
insurance law and the regulations thereunder of the state of domicile that
relate to accounting and financial matters and affirming that the CPA will
express his or her opinion on the financial statements in terms of their
conformity to the statutory accounting practices prescribed or otherwise
permitted by that insurance department, specifying such exceptions as the
CPA may believe appropriate.”
Department Regulation 118, Section 89.8(a) states, in part:
“Every company required to furnish an annual audited financial report shall
require the CPA to submit written notification to the superintendent, the
board of directors and the company's audit committee within five business
days of any determination by the CPA that the company has materially
misstated its financial condition as reported to the superintendent as of the
16
balance sheet date currently under audit or that the company does not meet
the minimum capital or surplus requirement of the insurance law as of that
date…”
Department Regulation 118, Section 89.11 states:
“Every company shall require the CPA to make available for review by
Department examiners, all work papers prepared in the conduct of the CPA's
audit and any communications related to the audit between the CPA and the
company, at the offices of the company, at the Department, or at any other
reasonable place designated by the superintendent. Every company shall
require that the CPA retain the audit work papers and communications for six
calendar years from the date of the audit report or until the filing of the report
on examination covering the period of the audit, whichever is longer, as
required by Part 243 of this Title (Regulation 152).”
It is recommended that the Company establish procedures to ensure that its engagement letter with
its independent certified public accountant include all language required by Department Regulation 118,
Sections 89.4(b), 89.8(a), and 89.11.
ii. Compliance with Expense Limitation for Mutual Companies
Section 4110(a) of the New York Insurance Law states, in part:
“No domestic mutual property/casualty insurance company licensed to write
a kind of insurance specified in paragraph seven, eight, nine, ten, eleven,
thirteen, fourteen, fifteen, sixteen or seventeen of subsection (a) of section
one thousand one hundred thirteen of this chapter shall expend in any one
calendar year for management expenses a greater amount than thirty percent
of the sum of its net premium income and seventy-five percent of its
investment income for such year…”
Examination review revealed that the Company exceeded the management expense limits in all five
years covered by this examination. It is recommended that the Company establish procedures to ensure
compliance with Section 4110(a) of the New York Insurance Law. It is noted that a similar recommendation
was included in the previous two filed reports on examination.
17
3. FINANCIAL STATEMENTS
A. Balance Sheet
The following shows the assets, liabilities and surplus as regards policyholders as of December 31,
2019, as reported by the Company.
Assets
Assets
Assets Not
Admitted
Net Admitted
Assets
Bonds
$1,801,851,462
$ 0
$1,801,851,462
Common stocks (stocks)
590,754,896
150,163
590,604,733
First liens - mortgage loans on real
Estate
3,720,958
0
3,720,958
Properties occupied by the company
13,693,555
0
13,693,555
Cash, cash equivalents and short-term
investments
15,102,132
0
15,102,132
Other invested assets
18,230,098
0
18,230,098
Securities lending reinvested
collateral assets
8,935,990
0
8,935,990
Investment income due and accrued
14,292,540
0
14,292,540
Uncollected premiums and agents' balances
in the course of collection
316,458,341
7,426,970
309,031,371
Deferred premiums, agents' balances and
installments booked but deferred and not
yet due
19,872,914
188,274
19,684,640
Amounts recoverable from reinsurers
7,191,124
0
7,191,124
Current federal and foreign income tax
recoverable and interest thereon
9,187,868
0
9,187,868
Net deferred tax asset
37,435,461
37,435,461
Guaranty funds receivable or on deposit
385,606
0
385,606
Electronic data processing equipment and
software
910,616
0
910,616
Furniture and equipment, including health
care delivery assets
178,871
178,871
0
Equities and Deposits in Pools and
Associations
5,645,089
80,554
5,564,535
Accounts Receivable - Other
4,187,494
2,199,068
1,988,426
Prepaid Expenses
20,421,606
20,190,176
231,430
Clearing Accounts
3,104,314
2,744,313
360,001
Miscellaneous Office Equipment
26,411,166
26,411,166
0
Deposits
5,400
5,400
0
Total assets
$2,917,977,501
$ 59,574,955
$2,858,402,546
18
Liabilities, Surplus and Other Funds
Liabilities
Losses and loss adjustment expenses
$1,181,919,961
Commissions payable, contingent commissions and other similar
charges
30,127,937
Other expenses (excluding taxes, licenses and fees)
36,339,787
Taxes, licenses and fees (excluding federal and foreign
income taxes)
7,840,877
Current federal and foreign income taxes
5,101,768
Unearned premiums
470,643,338
Advance premium
3,953,408
Policyholders (dividends declared and unpaid)
6,909,992
Ceded reinsurance premiums payable (net of ceding
commissions)
6,456,092
Funds held by company under reinsurance treaties
5,202,428
Amounts withheld or retained by company for account of
others
8,690,028
Provision for reinsurance
3,862,039
Payable to parent, subsidiaries and affiliates
10,640,250
Payable for securities
5,528,296
Payable for securities lending
8,935,990
Contingent balance in safety groups
333,479
Miscellaneous accounts payable
348,198
Reserve for corporate loss
100,000
Payable for securities
1,000
Liability for pension benefits
(6,524,283)
Total liabilities
$1,786,410,585
Surplus and Other Funds
General voluntary surplus
$ 1,500,000
Reserve for undeclared dividends
7,004,082
Special contingent surplus
1,700,000
Unassigned funds (surplus)
1,061,787,879
Surplus as regards policyholders
1,071,991,961
Total liabilities, surplus and other funds
$2,858,402,546
Note: The Internal Revenue Service did not audit any of the Company’s federal income tax returns during
the period under examination. The examiner is unaware of any potential exposure of the Company to any
tax assessment and no liability has been established herein relative to such contingency.
19
B. Statement of Income
The net income for the examination period as reported by the Company was $276,986,163, as
detailed below:
Underwriting Income
Premiums earned
$3,917,653,396
Deductions:
Losses and loss adjustment expenses incurred
$2,502,195,285
Other underwriting expenses incurred
1,361,638,590
Limited Assignment Distribution program expenses
3,169,394
Total underwriting deductions
3,867,003,269
Net underwriting gain or (loss)
$ 50,650,127
Investment Income
Net investment income earned
$ 297,753,397
Net realized capital gain
31,691,194
Net investment gain or (loss)
329,444,591
Other Income
Net gain (loss) from agents' or premium balances
charged off
$ (12,087,684)
Finance and service charges not included in premiums
40,738,813
Miscellaneous income
(22,360,409)
Gain (loss) on sale of assets
(116,302)
Foreign exchange
(10,308)
Corporate loss
(66,634)
Total other income
6,097,476
Net income before dividends to policyholders and
before federal and foreign income taxes
$ 386,192,194
Dividends to policyholders
45,492,589
Net income after dividends to policyholders but
before federal and foreign income taxes
$ 340,699,605
Federal and foreign income taxes incurred
63,713,442
Net income
$ 276,986,163
20
C. Capital and Surplus
Surplus as regards policyholders increased $266,117,253 during the examination period January 1,
2015 through December 31, 2019 as reported by the Company, detailed as follows:
Surplus as regards policyholders as reported by
the Company as of December 31, 2014
$ 805,874,708
Gains in
Losses in
Surplus
Surplus
Net income
$276,986,163
Net transfers (to) from protected cell accounts
Net unrealized capital gains or (losses)
65,737,467
Change in net unrealized foreign exchange
capital gain (loss)
5,171
Change in net deferred income tax
$20,393,020
Change in nonadmitted assets
30,508,627
Change in provision for reinsurance
538,517
Contingent balance in safety groups
487,199
Pension expense
18,432,307
Pension benefit obligation
8,358,959
Miscellaneous surplus adjustments
55,649
0
Total gains and losses
$343,810,166
$77,692,913
Net increase (decrease) in surplus
266,117,253
Surplus as regards policyholders as reported by
the Company as of December 31, 2019
$1,071,991,961
No adjustments were made to surplus as a result of this examination.
21
4. LOSSES AND LOSS ADJUSTMENT EXPENSES
The examination liability for the captioned items of $1,181,919,961 is the same as that reported by
the Company as of December 31, 2019. The examination analysis of the loss and loss adjustment expense
reserves was conducted in accordance with generally accepted actuarial principles and statutory accounting
principles, including SSAP No. 55. The reported reserves are concentrated in the commercial lines, which
is consistent with the business written by the Company.
5. SUBSEQUENT EVENTS
On March 11, 2020, the World Health Organization declared an outbreak of a novel coronavirus
(“COVID-19”) pandemic. The COVID-19 pandemic has continued to develop throughout 2020, with
significant uncertainty remaining regarding the full effect of COVID-19 on the U.S. and global insurance
and reinsurance industry. At the time of releasing this report, the examination’s review noted that there has
not been a significant impact to the Company. The Department has been in communication with the
Company regarding the impact of COVID-19 on the Company’s operations and financial position and will
take necessary action if a solvency concern arises.
22
6. COMPLIANCE WITH PRIOR REPORT ON EXAMINATION
The prior report on examination contained the following recommendations (page number refers to
the prior report):
ITEM
PAGE NO.
A.
Corporate Governance
It was recommended that the Company comply fully with Article VI of
its Charter as well as Section 1209(b) of the New York Insurance Law by
reducing to no more than four, the number of directors who are neither
members of the Company nor officers of member corporations. It should
be noted that a similar recommendation was included in the previous
report on examination.
5
The Company has complied with this recommendation.
B.
Reinsurance
i.
It was recommended that in the future the Company accurately prepare
Schedule F, in accordance with the NAIC’s annual statement instructions.
8
The Company has complied with this recommendation.
ii.
It was recommended that the Company only take statutory credit for
reinsurance cessions to authorized insurers or accredited reinsurers,
unless it receives collateral in accordance with Department Regulation
20.
9
The Company has complied with this recommendation.
iii.
It was recommended that the Company include specific language from
Department Circular Letter No. 5 (1988) in all reinsurance contracts
which make reference to a novation.
11
The Company has complied with this recommendation.
23
iv.
It was recommended that the offset provision of certain reinsurance
agreements be amended to state that in the event of the insolvency of
either party to the agreement then offsets shall only be allowed to the
extent permitted by the provision of Section 7427 of the New York
Insurance Law.
12
The Company has complied with this recommendation.
v.
It was further recommended that all future reinsurance agreements with
an offset provision entered into by the Company include such required
language.
12
The Company has complied with this recommendation.
C.
Accounts and Records
i.
It was recommended that the Company ensure that future engagement
letters with its independent certified public accountant include the five-
day notice
requirement called for in Section 89.8(a) of Department
Regulation No. 118.
19
The Company has not complied with this recommendation. A similar
comment is made in this report.
ii.
It was again recommended that the Company comply with the
management expense limitations set forth in Section 4110(a) of the New
York Insurance Law. It should be noted that a similar recommendation
was included in the previous report on examination.
20
The Company has not complied with this recommendation. A similar
comment is made in this report.
24
7. SUMMARY OF COMMENTS AND RECOMMENDATIONS
ITEM
PAGE NO.
A.
Holding Company
It is recommended that the Company draft an updated tax allocation
agreement, consisting of existing entities, and submit the new agreement
to the Department in accordance with Circular Letter No.33 (1979).
11
B.
Accounts and Records
i.
It is recommended that the Company establish procedures to ensure that
its engagement letters with its appointed CPA firm include all language
required by Regulation 118, Sections 89.4 (b), 89.8 (a), and 89.11.
16
ii.
It is recommended that the Company establish procedures to ensure
compliance with Section 4110(a) of the New York Insurance Law.
16
Respectfully submitted,
/S/
Wayne Longmore
Associate Insurance Examiner
STATE OF NEW YORK )
)ss:
COUNTY OF NEW YORK )
Wayne Longmore, being duly sworn, deposes and says that the foregoing report, subscribed by
him, is true to the best of his knowledge and belief.
/S/
Wayne Longmore
Subscribed and sworn to before me
this day of , 2021.
APPOINTMENT NO. 32056
NEW YORK STATE
DEPARTMENT OF FINANCIAL SERVICES
I, Linda A. Lacewell, Superintendent of Financial Services of the State of New
York, pursuant to the provisions of the Financial Services Law and the Insurance
Law, do hereby appoint
:
Wayne Longmore
as a proper person to examine the affairs of the
Utica Mutual Insurance Company
and to make a report to me in writing of the condition of said
COMPANY
with such other information as he shall deem requisite.
In Witness Whereof, I have hereunto subscribed by name
and affixed the official Seal of the Department
at the City of New York
this 27th day of March, 2020
LINDA A. LACEWELL
Superintendent of Financial Services
By:
Joan L. Riddell
Joan Riddell
Deputy Bureau Chief