FINANCIAL CONDITION REPORT ON EXAMINATION
OF
COLUMBIAN MUTUAL LIFE INSURANCE COMPANY
AS OF DECEMBER 31, 2020
EXAMINER: JAN PIERRE SANTIAGO, CFE
DATE OF REPORT: JUNE 1, 2022
TABLE OF CONTENTS
ITEM
PAGE NO.
1.
Executive summary
2
2.
Scope of examination
4
3.
Description of Company
6
A. History
6
B. Holding company
7
C. Organizational chart
7
D. Service agreements
8
E. Management
10
4.
Territory and plan of operations
13
A. Statutory and special deposits
13
B. Direct operations
13
C. Reinsurance
14
5.
Financial statements
15
A. Independent accountants
15
B. Net admitted assets
16
C. Liabilities, capital and surplus
17
D. Condensed summary of operations
18
E. Capital and surplus account
19
6.
Reserves
20
7.
Subsequent events
21
8.
Prior report summary and conclusions
22
9.
Summary and conclusions
23
June 7, 2022
Honorable Adrienne A. Harris
Superintendent of Financial Services
New York, New York 10004
Dear Adrienne A. Harris:
In accordance with instructions contained in Appointment No. 32261, dated June 17, 2021,
and annexed hereto, an examination has been made into the condition and affairs of Columbian
Mutual Life Insurance Company, hereinafter referred to as “the Company”. The Company’s home
office is located at 4704 Vestal Parkway East, Binghamton, NY 13902. Due to the COVID-19
pandemic, the examination was conducted remotely.
Wherever “Department” appears in this report, it refers to the New York State Department
of Financial Services.
The report indicating the results of this examination is respectfully submitted.
2
1. EXECUTIVE SUMMARY
The material violations and comments contained in this report are summarized below.
• The Department conducted a review of the reserves as of December 31, 2020. This
review included an examination of the asset adequacy analysis in accordance with
11 NYCRR 95 (Insurance Regulation 126). During the review of asset adequacy
analysis, concerns were raised regarding the potential lack of conservatism in both
the Company's methodology and assumptions used. In particular, the methodology
used to develop expenses allocated to in force policies – especially the treatment of
non-recurring and acquisition expenses; and the development of the experience
assumptions – including a review of the experience study process and the inclusion
of the policies identified as part of the unclaimed property review. Concerns were
also raised regarding the allocation of expenses between affiliated companies. In
response, the Company committed to refine its expense development methodology,
update experience studies and assumptions, and enhance its model validation as
discussed with the Department. The Department will continue to review these
refinements as they are completed and at this juncture, the certificate of reserve
valuation is being held and is not expected to be issued until the Department’s
concerns are resolved. (See item 6 of this report.)
• The Company violated Section 1712(b)(4) of the New York Insurance Law by
changing the billing terms of its Administrative and Management Agreement
without notifying the superintendent in writing of its intention at least thirty days
prior thereto and by including affiliated companies in its 2016 through 2020
consolidated federal tax returns that were not part of its filed and approved Federal
Income Tax Allocation Agreement without notifying the superintendent in writing
of its intention at least thirty days prior thereto. (See item 3D of this report.)
• The Company violated Section 1712(a) of the New York Insurance Law by
providing administrative services to an affiliate without allocating and receiving
payment for the appropriate fees as outlined in its service agreement. This is a
repeat violation. (See item 3D of this report.)
3
• On June 29, 2021, the Company’s board of directors approved a strategic
transaction with Constellation Insurance Holdings, Inc. (“Constellation”). This
strategic transaction includes the conversion of the Company to a stock company
and the issuance of all its newly issued stock to Constellation pursuant to a
sponsored demutualization. Upon closing, Constellation will invest up to $100
million to fund cash payment of eligible policyholders and to significantly
strengthen capitalization of the Company and Columbian Life Insurance Company
(“CLIC”). (See item 7 of this report.)
4
2. SCOPE OF EXAMINATION
The examination of the Company was a full-scope examination as defined in the National
Association of Insurance Commissioners’ (“NAIC”) Financial Condition Examiners Handbook,
2021 Edition (the “Handbook”). The examination covers the five-year period from January 1,
2016, through December 31, 2020. The examination was conducted observing the guidelines and
procedures in the Handbook and, where deemed appropriate by the examiner, transactions
occurring subsequent to December 31, 2020 but prior to the date of this report (i.e., the completion
date of the examination) were also reviewed.
The examination was conducted on a risk-focused basis in accordance with the provisions
of the Handbook published by the NAIC. The Handbook guidance provides for the establishment
of an examination plan based on the examiner’s assessment of risk in the insurer’s operations and
utilizing that evaluation in formulating the nature and extent of the examination. The examiner
planned and performed the examination to evaluate the current financial condition as well as
identify prospective risks that may threaten the future solvency of the insurer. The examiner
identified key processes, assessed the risks within those processes and evaluated the internal
control systems and procedures used to mitigate those risks. The examination also included
assessing the principles used and significant estimates made by management, evaluating the
overall financial statement presentation, and determining management’s compliance with New
York statutes and Department guidelines, Statutory Accounting Principles as adopted by the
Department, and annual statement instructions.
The examination was called by the Department in accordance with the Handbook
guidelines, through the NAIC’s Financial Examination Electronic Tracking System. New York
served as the lead state with participation from the State of Illinois. Since the lead and participating
states are accredited by the NAIC, the states deemed it appropriate to rely on each other’s work.
Information about the Company’s organizational structure, business approach and control
environment were utilized to develop the examination approach. The Company’s risks and
management activities were evaluated incorporating the NAIC’s nine branded risk categories.
These categories are as follows:
• Pricing/Underwriting
• Reserving
• Operational
5
• Strategic
• Credit
• Market
• Liquidity
• Legal
• Reputational
The Company was audited annually, for the years 2016 through 2020, by the accounting
firm of RSM US LLP (“RSM”). The Company received an unqualified opinion in all years.
Certain audit workpapers of the accounting firm RSM were reviewed and relied upon in
conjunction with this examination. The Company has an internal audit department performing
operational, Information Technology, financial and compliance reviews. Where applicable,
internal audit related documentation and reports were reviewed, and where applicable, portions
were utilized to gain an understanding of the control environment.
The examiner reviewed the corrective actions taken by the Company with respect to the
violation contained in the prior report on financial condition examination. The results of the
examiner’s review are contained in item 8 of this report.
This report on examination is confined to financial statements and comments on those
matters which involve departure from laws, regulations, or rules, or which require explanation or
description.
6
3. DESCRIPTION OF COMPANY
A. History
The Company was incorporated as a charitable and benevolent association under the laws
of New York on November 1, 1882 under the name American Protective Association. The
Company was licensed on January 25,1883 and commenced business on February 1, 1883.
In 1907, the name was changed to Columbian Protective Association and the home office
was moved to Binghamton, New York. At the same time, the Company commenced operations
as a cooperative life and accident and health insurance company.
On March 11, 1952, the Company converted to a mutual life insurance company and
adopted its present name. On December 30, 1996, Golden Eagle Mutual Life Insurance
Corporation merged with and into the Company. On November 30, 2005, Columbian Family Life
Insurance Company, (“CFLIC”) a subsidiary, merged with and into the Company. On February
28, 2006, Philanthropic Mutual Life Insurance Company (“PMLIC”), a Pennsylvania based
company, merged with and into the Company.
On October 1, 2007, Farmers and Traders Life Insurance Company (“F&T”), a New York
domestic life insurance company, merged with and into the Company. On November 26, 2008,
Mutual of Detroit Life Insurance Company (“MoD”) merged with and into the Company. On July
1, 2011, Unity Mutual Life Insurance Company merged with and into the Company.
On April 1, 2017, Securitas Financial Group, Inc. (“SFG”) sold its wholly owned
subsidiary, Securitas Financial Life Insurance Company (“SFLIC”), to an unrelated life insurance
company.
On June 29, 2021, the Company’s board of directors approved a strategic transaction with
Constellation. This strategic transaction includes the conversion of the Company to a stock
company and the issuance of all its newly issued stock to Constellation pursuant to a sponsored
demutualization. Upon closing, Constellation will invest up to $100 million to fund cash payment
to eligible policyholders and to significantly strengthen capitalization of the Company and CLIC.
7
B. Holding Company
The Company owns Columbian Life Holdings, Inc. (“CLH”), which in turn wholly owns
CLIC, an Illinois domiciled life insurer that is also an accredited reinsurer in New York, which in
turn owns SFG, a Delaware domiciled company. The Company and its affiliates collectively refer
to themselves and operate as the Columbian Financial Group (“CFG”). Other members of CFG
include Columbian Financial Services Corporation, a general agency; Production Partners, LLC,
a limited liability corporation, which in turns owns 100% of Administrative Partners, Inc., an
administrative service company; and New Vision Service Corporation of New York, an
administrative service company.
C. Organizational Chart
An organization chart reflecting the relationship between the Company and significant
entities in its holding company system as of December 31, 2020 follows:
Columbian Mutual Life
Insurance Company
Columbian Life
Holdings Inc.
Columbian Life
Insurance Company
Securitas Financial
Group, Inc.
Columbian Fiancial
Services
Corporation
Production Partners
LLC
Administrative
Partner, Inc.
New Vision Services
Corporation of New York
8
D. Service Agreements
The Company had four service agreements in effect with affiliates during the examination
period.
Type of
Agreement
and
Department
File Number
Effective
Date
Provider(s)
of
Service(s)
Recipient(s)
of
Service(s)
Specific Service(s)
Covered
Income* For
Each Year of the
Examination
Administrative
and
Management
Services
Agreement
10/27/1993
The
Company
CLIC
Centralized
underwriting,
actuarial, legal,
accounting,
investment
advisory,
marketing,
administrative,
personnel and
management
services.
2016 $23,703,769
2017 $24,827,824
2018 $25,181,092
2019 $27,381,593
2020 $28,719,088
Intercompany
Borrowing
Agreement
05/01/1996
The
Company
CLIC
Make funds
available to assist
in managing the
fluctuations of
day-to-day cash
flow.
2016 $0**
2017 $0
2018 $0
2019 $0
2020 $0
Intercompany
Borrowing
Agreement
07/24/2013
CLIC
The
Company
Make funds
available to assist
in managing the
fluctuations of
day-to-day cash
flow.
2016 $0**
2017 $0
2018 $0
2019 $0
2020 $0
Administrative
Service
Agreement
07/01/2009
The
Company
SFLIC
Provide facilities,
equipment, and
services of
personnel.
2016 $4,494
2017 $ 0***
2018 $ 0
2019 $ 0
2020 $ 0
* Amount of income earned by the Company.
** There were no inter-company borrowings during the examination period.
*** SFLIC was sold on April 1, 2017.
The Company participates in a federal income tax agreement with its parent and affiliates.
9
Section 1712(b)(4) of the New York Insurance Law states, in part, the following:
“(b) The following transactions between a parent corporation and any subsidiary
may not be entered into unless the parent corporation has notified the
superintendent in writing of its intention to enter into any such transaction at least
thirty days prior thereto, …
(4) management agreements, service contracts, tax allocation agreements…”
The Administrative and Management Services Agreement between the Company and
CLIC, dated October 29, 1993, states, in part, the following:
“Within 30 days after the end of each calendar quarter Columbian Mutual shall
provide a written report to the Subsidiary setting forth a summary of the services
and facilities provided to the Subsidiary during such calendar quarter and the
expenses incurred by Columbian Mutual in providing such services and facilities.
The amount of compensation due to Columbian Mutual as provided herein shall be
paid on a quarterly basis within 30 days after receipt by the Subsidiary of the
quarterly reports.”
A review of the billing and payments made during the examination period under review,
related to the Administrative and Management Services Agreement between the Company and
CLIC indicated that billings were issued and settled on a monthly basis, rather than quarterly as
required by the filed and approved Administrative and Management Services Agreement.
The Company violated Section 1712(b)(4) of the New York Insurance Law by changing
the billing terms of its Administrative and Management Agreement without notifying the
superintendent in writing of its intention at least thirty days prior thereto.
A review of the Company’s consolidated federal income tax returns for the period under
review revealed that the following companies participated in the 2016 through 2020 consolidated
federal income tax returns without being named as participating companies in the Federal Income
Tax and Allocation Agreement, dated May 1, 2006, and amended June 1, 2006, and December 31,
2012:
• New Vision Services Corporation of New York
• Columbian Life Holdings, Inc.
• Columbian Financial Services Corporation
10
The Company violated Section 1712(b)(4) of the New York Insurance Law by including
affiliated companies in its 2016 through 2020 consolidated federal tax returns that were not part
of its filed and approved Federal Income Tax Allocation Agreement, dated May 1, 2006, without
notifying the superintendent in writing of its intention at least thirty days prior thereto.
Section 1712(a) of the New York Insurance Law states, in part:
“ . . . All transactions between the parent corporation and its subsidiaries shall be
fair and equitable, charges or fees for services performed shall be reasonable and
all expenses incurred and payments received shall be allocated to the parent
corporation on an equitable basis in conformity with customary insurance practices
consistently applied. The books, accounts and records of each party to all
transactions shall be so maintained as to disclose clearly and accurately the nature
and details of the transactions, including such accounting information as is
necessary to support the reasonableness of the charges or fees to the respective
parties.”
A review of inter-company charges between the Company and SFLIC, revealed that the
Company failed to charge SFLIC for administrative services performed as outlined in its filed
service agreement during the first three months of 2017, prior to the sale of SFLIC on
April 1, 2017.
The Company violated Section 1712(a) of the New York Insurance Law by providing
administrative services to an affiliate without allocating and receiving payment for the appropriate
fees as outlined in its service agreement. This is a repeat violation.
E. Management
The Company’s by-laws provide that the board of directors shall be comprised of not less
than seven directors. Directors are elected for a period of three years at the annual meeting of the
stockholders held in May of each year. As of December 31, 2020, the board of directors consisted
of 14 members. Meetings of the board are held quarterly. The 14 board members and their
principal business affiliation, as of December 31, 2020, were as follows:
11
Name and Residence
Principal Business Affiliation
Year First
Elected
William W. Atkin*
Fort Myers, FL
Retired, Senior Vice President, Chief Financial Officer,
Secretary and Treasurer
Annuity Life Reinsurance, LTD.
2004
Helen S. Boyer*
Columbia, Maryland
Retired, Vice President, Secretary and Treasurer
Monumental Life Insurance Company
2017
Sharon A. Brangman*
Syracuse, New York
Professor of Medicine and Division Chief of Geriatric Medicine
SUNY Upstate Medical University in Syracuse
2011
John A. Dore*
Northfield, Illinois
Insurance Consultant, Arbitrator and Mediator
Sheridan Ridge Advisors, LLC
2013
Alan W. Feagin*
Ellerslie, Georgia
Retired, President and Chief Executive Officer
Assurant Preneed
2006
Michael C.S. Fosbury
Vestal, New York
President
Columbian Mutual Life Insurance Company
2015
Isabelle C. Goossen*
Winnetka, Illinois
Retired, Vice President of Finance and Administration
Chicago Symphony Orchestra
2007
Arnold G. Gough, Jr.*
Hinsdale, Illinois
Retired, Attorney and Partner
Winston & Strawn LLP
2013
William R. Hess*
Wilmington, North Carolina
Retired, Chairman, President and Chief Executive Officer
Farmers and Traders Life Insurance Company
2007
Charles J. Kavanaugh*
Delmar, New York
Retired, Partner
KPMG, LLP
2012
Michael W. Lowe*
Louisville, Kentucky
Retired, Director, President, Chief Operating Officer,
and General Counsel
Settlers Life Insurance Company
2019
Patrick A. Mannion
Fayetteville, New York
Retired, Vice Chairman
Columbian Mutual Life Insurance Company
2011
Edward R. Morrissey*
White Plains, New York
Retired Partner
Deloitte and Touche, LLP
2019
Thomas E. Rattmann
Binghamton, New York
Retired, Chief Executive Officer
Columbian Mutual Life Insurance Company
1996
12
* Not affiliated with the Company or any other company in the holding company system
In May 2021, Thomas E. Rattmann resigned and Alan W. Feagin retired from the board
and were not replaced.
The examiner’s review of the minutes of the meetings of the board of directors and its
committees indicated that meetings were well attended, and that each director attended a majority
of meetings.
The following is a listing of the principal officers of the Company as of December 31,
2020:
Name
Title
Michael C.S. Fosbury
President and Chief Executive Officer
Amy C. Purdy Godleski
Senior Vice President, Chief Financial Officer
Frank L. Lettera
Senior Vice President, Corporate Secretary
Jeanne M. Clarke*
Senior Vice President, Chief Administrative Officer
Simone E. Davis
Senior Vice President, Chief Actuary and Chief Risk Officer
Richard S. Relf
Senior Vice President, Sales and Marketing
Lesley A. Frey
Vice President, Chief Human Resources and
Diversity Officer
Gregory J. Sim
Vice President, Chief Information Officer
Todd M. Swenson
Vice President, Special Markets and Product Research and
Development
Xianmei Tang
Vice President, Corporate Actuary
Dale A. Spencer
Vice President, Investments and Chief Investment Officer
Steven D. Szubert
Vice President, Controller
*Designated consumer services officer per Section 216.4(c) of 11 NYCRR 216 (Insurance
Regulation 64)
13
4. TERRITORY AND PLAN OF OPERATIONS
The Company is authorized to write life insurance, annuities and accident and health
insurance as defined in paragraphs 1, 2 and 3 of Section 1113(a) of the New York Insurance Law.
The Company is licensed to transact business in 50 states, the District of Columbia and the
U.S. Virgin Islands. In 2020, approximately 69% of life insurance premiums, accident and health
premiums, and annuity considerations were received from New York. Policies are written on a
participating and non-participating basis.
The following tables show the percentage of direct premiums received, by state, and by
major lines of business for the year 2020:
Life Insurance Premiums
New York
69.6%
New Jersey
4.1%
Pennsylvania
3.8%
Michigan
3.5%
North Carolina
3.3%
Subtotal
84.3%
All others
15.7%
Total
100.0%
A. Statutory and Special Deposits
As of December 31, 2020, the Company had $3,000,000 (par value) of United States
Treasury Bonds and Notes on deposit with the State of New York, its domiciliary state, for the
benefit of all policyholders, claimants, and creditors of the Company. As reported in Schedule E
of the 2020 filed annual statement an additional $3,250,211 was being held by the states of
Arkansas, Florida, Georgia, Nevada, New Hampshire, New Mexico, North Carolina, Virginia, and
U.S. Virgin Islands, collectively.
B. Direct Operations
The Company’s primary business is life insurance sold by independent agents. The
majority of these policies have low face amounts and are sold by an agent in the consumer’s home.
14
The Company maintains a home service life insurance product, in which the agent may collect the
ongoing premiums directly or via mail each month and provide service related to policies in force.
During the “stay at home” restrictions due to the COVID-19 pandemic, the Company developed
tele-sales processes to permit the agents to sell to consumers remotely.
The Company’s agency operations are conducted on a general agency basis.
The Group’s core business is through three divisions: Special Markets, Family Solutions,
and Preneed Insurance (not marketed in New York). The Special Markets division markets and
services final expense, simplified issue term, and whole life products through independent
marketing organizations. Sales in this sector are heavily generated through leads. The Family
Solutions division markets and services final expense, simplified issue term, and whole life
products through general agents. The Preneed Insurance division markets and services prefunded
funeral expense products via funeral homes and independent marketing organizations that are
associated with funeral homes.
C. Reinsurance
As of December 31, 2020, the Company had reinsurance treaties in effect with 23
companies, of which 13 were authorized or accredited. The Company’s life, annuity, and accident
and health business is reinsured on a coinsurance, modified-coinsurance, and yearly renewable
term basis. Reinsurance is provided on an automatic and facultative basis.
The maximum retention limit for individual life contracts is $250,000. The total face
amount of life insurance ceded as of December 31, 2020, was $1,558,397,968, which represents
27.83% of the total face amount of life insurance in force. Reserve credit taken for reinsurance
ceded to unauthorized companies and reinsurance recoverables from authorized companies,
totaling $135,723,360 was partly supported by letters of credit, trust agreements and other
miscellaneous credits. A provision for reinsurance in authorized companies was recorded for
$110,251.
The total face amount of life insurance assumed as of December 31, 2020, was
$2,873,820,913.
15
5. FINANCIAL STATEMENTS
The following statements show the assets, liabilities, capital and surplus as of
December 31, 2020, as contained in the Company’s 2020 filed annual statement, a condensed
summary of operations and a reconciliation of the capital and surplus account for each of the years
under review. The examiner’s review of a sample of transactions did not reveal any differences
which materially affected the Company’s financial condition as presented in its financial
statements contained in the December 31, 2020 filed annual statement.
A. Independent Accountants
The firm of RSM was retained by the Company to audit the Company’s statutory basis
statements of financial position of the Company as of December 31
st
of each year in the
examination period, and the related statutory-basis statements of operations, capital and surplus,
and cash flows for the year then ended.
RSM concluded that the statutory financial statements presented fairly, in all material
respects, the financial position of the Company at the respective audit dates. Balances reported in
these audited financial statements were reconciled to the corresponding years’ annual statements
with no discrepancies noted.
16
B. Net Admitted Assets
Bonds
$1,096,306,986
Stocks:
Preferred stocks
885,008
Common stocks
42,817,342
Mortgage loans on real estate:
First liens
193,728,831
Real estate:
Properties occupied by the company
2,816,936
Cash, cash equivalents and short-term investments
4,345,396
Contract loans
58,404,711
Other invested assets
10,834,961
Investment income due and accrued
13,029,795
Premiums and considerations:
Uncollected premiums and agents’ balances in the course of collection
1,872,199
Deferred premiums, agents’ balances and installments booked but
deferred and not yet due
37,427,560
Reinsurance:
Amounts recoverable from reinsurers
1,071,846
Other amounts receivable under reinsurance contracts
2,847,061
Current federal and foreign income tax recoverable and interest thereon
772,954
Net deferred tax asset
7,554,616
Electronic data processing equipment and software
2,639,131
Receivables from parent, subsidiaries and affiliates
3,068,684
Accounts receivable
1,469,235
Deferred premium asset
318,537
Fixed asset
270,883
Summary of remaining write-ins for Line 25 from overflow page
37,499
Total admitted assets
$1,482,520,179
17
C. Liabilities and Surplus
Aggregate reserve for life policies and contracts
$1,267,767,694
Aggregate reserve for accident and health contracts
309,280
Liability for deposit-type contracts
30,247,493
Contract claims:
Life
30,685,973
Accident and health
17,766
Policyholders’ dividends and coupons due and unpaid
3,519
Premiums and annuity considerations for life and accident and health
contracts received in advance
318,108
Other amounts payable on reinsurance
382,389
Interest maintenance reserve
20,980,193
Commissions to agents due or accrued
1,986
Commissions and expense allowances payable on reinsurance assumed
2,114,639
General expenses due or accrued
504,562
Taxes, licenses and fees due or accrued, excluding federal income taxes
1,241,862
Unearned investment income
244,836
Amounts withheld or retained by company as agent or trustee
24,533,785
Amounts held for agents’ account
141,038
Remittances and items not allocated
572,770
Miscellaneous liabilities:
Asset valuation reserve
11,160,926
Reinsurance in unauthorized companies
110,251
Funds held under reinsurance treaties with unauthorized reinsurers
47,701
Payable for Securities
11,260,000
Pension liability
6,986,717
Unclaimed funds
3,991,421
Interest unpaid on policy or contract funds
3,330,008
Estimated loss contingency liability
2,700,000
Post Retirement benefit obligation
1,658,412
Sales conference
440,442
Other contingent liabilities
190,033
Ceded supp contract with life contingencies
18,523
Total liabilities
$1,421,962,322
Guaranty fund - State of Colorado
400,000
Unassigned funds (surplus)
60,157,856
Total surplus
$ 60,557,856
Total liabilities and surplus
$1,482,520,179
18
D. Condensed Summary of Operations
2016
2017
2018
2019
2020
Premiums and considerations
$183,231,018
$180,607,639
$179,674,146
$178,419,805
$168,272,805
Investment income
60,509,995
61,051,452
59,903,992
59,429,333
59,676,733
Commissions and reserve
adjustments on reinsurance ceded
(2,128,230)
(5,267,269)
(7,257,758)
(16,577,316)
(3,472,643)
Miscellaneous income
5,911,150
7,214,472
5,934,800
8,332,082
4,707,105
Total income
$247,523,933
$243,606,294
$238,255,180
$229,603,904
$229,184,000
Benefit payments
$119,200,312
$117,817,111
$126,504,993
$125,360,754
$159,877,922
Increase in reserves
37,585,295
36,033,554
27,604,696
14,948,777
12,616,681
Commissions
55,831,114
55,558,445
54,341,563
53,232,606
47,390,096
General expenses and taxes
28,256,006
27,602,593
24,509,706
27,048,531
22,355,823
Increase in loading on deferred and
uncollected premiums
(586,014)
(2,926,347)
(583,076)
(1,359,573)
(1,392,304)
Miscellaneous deductions
2,550
946
118,348
(3,203)
2,697,390
Total deductions
$240,289,263
$234,086,302
$232,496,230
$219,227,892
$243,545,608
Net gain (loss)
$ 7,234,670
$ 9,519,992
$ 5,758,950
$ 10,376,012
$ (14,361,608)
Dividends
1,877,775
1,166,564
1,401,709
1,228,139
(8,771)
Federal and foreign income taxes
Incurred
(3,992,450)
1,183,318
709,180
(756,588)
(2,719,191)
Net gain (loss) from operations
before net realized capital gains
$ 9,349,345
$ 7,170,110
$ 3,648,061
$ 9,904,461
$ (11,633,646)
Net realized capital gains (losses)
(167,227)
1,872,458
(492,227)
627,773
829,341
Net income
$ 9,182,117
$ 9,042,568
$ 3,155,831
$ 10,532,234
$ (10,804,305)
19
E. Surplus Account
2016
2017
2018
2019
2020
Capital and surplus, December 31, prior year
$80,681,475
$ 96,213,055
$106,730,789
$95,917,973
$ 87,127,308
Net income
$ 9,182,117
$ 9,042,568
$ 3,155,831
$10,532,234
$(10,804,305)
Change in net unrealized capital gains (losses)
(2,795,255)
(160,607)
(4,343,713)
(4,659,829)
(65,107)
Change in net unrealized foreign
exchange capital gain (loss)
0
0
0
0
0
Change in net deferred income tax
(3,158,666)
(12,837,914)
153,820
202,877
(3,416,381)
Change in non-admitted assets and related items
5,740,178
16,770,277
(6,074,975)
(4,689,727)
(586,805)
Change in liability for reinsurance in
unauthorized companies
12,218
131
7,022
5,022
8,014
Change in asset valuation reserve
(779,182)
273,082
(423,410)
(1,490,074)
(727,336)
Change in surplus as a result of reinsurance
0
0
0
7,900,000
(3,995,641)
Prior period reserve adjustment
0
0
2,534,852
0
0
Change in post-retirement
(14,252)
306,338
160,873
89,093
(27,351)
Vanguard deferred comp
(330,549)
(1,057,437)
349,457
(1,113,045)
(1,062,972)
Prior year income tax adjustment
0
0
0
(9,688,279)
(1,548,732)
Change in pension liability
7,674,971
(1,818,703)
(6,332,572)
(5,878,939)
(4,342,836)
Net change in surplus for the year
15,531,580
10,517,734
(10,812,816)
(8,790,666)
(26,569,452)
Surplus, December 31, current year
$96,213,055
$106,730,789
$ 95,917,973
$87,127,308
$ 60,557,856
20
6. RESERVES
The Department conducted a review of the reserves as of December 31, 2020. This
review included an examination of the asset adequacy analysis in accordance with 11
NYCRR 95 (Insurance Regulation 126). During the review of asset adequacy analysis,
concerns were raised regarding the potential lack of conservatism in both the Company's
methodology and assumptions used. In particular, the methodology used to develop
expenses allocated to in force policies – especially the treatment of non-recurring and
acquisition expenses; and the development of the experience assumptions – including a
review of the experience study process and the inclusion of the policies identified as part
of the unclaimed property review. Concerns were also raised regarding the allocation of
expenses between affiliated companies. In response, the Company committed to refine its
expense development methodology, update experience studies and assumptions, and
enhance its model validation as discussed with the Department. The Department will
continue to review these refinements as they are completed and at this juncture, the
certificate of reserve valuation is being held and is not expected to be issued until the
Department’s concerns are resolved.
21
7. SUBSEQUENT EVENTS
On June 29, 2021, the Company’s board of directors approved a strategic
transaction with Constellation. This strategic transaction includes the conversion of the
Company to a stock company and the issuance of all its newly issued stock to Constellation
pursuant to a sponsored demutualization. Upon closing, Constellation will invest up to
$100 million to fund cash payment of eligible policyholders and to significantly strengthen
capitalization of the Company and CLIC.
22
8. PRIOR REPORT SUMMARY AND CONCLUSIONS
Following is the violation contained in the prior report on financial condition
examination and the subsequent actions taken by the Company in response to the citation:
Item
Description
A
The Company violated Section 1712(a) of the New York Insurance Law by
providing Administrative Services to its affiliate Securitas Financial Life
Insurance Company without allocating and receiving payment for the appropriate
fees as outlined in its service agreement.
The examination revealed that the Company complied with the prior examination
comments by allocating expenses to SFLIC for the year ending 2016. However,
the Company failed to allocate expenses when it received payments from SFLIC
for the three-month period ending April 1, 2017 until the SFLIC was sold to an
unrelated company. This is a repeat violation.
23
9. SUMMARY AND CONCLUSIONS
Following are the violations and comment contained in this report:
Item
Description
Page No(s).
A
The Company violated Section 1712(b)(4) of the New York
Insurance Law by changing the billing terms of its Administrative
and Management Agreement without notifying the superintendent
in writing of its intention at least thirty days prior thereto.
9
B
The Company violated Section 1712(b)(4) of the New York
Insurance Law by including affiliated companies in its 2016
through 2020 consolidated federal tax returns that were not part of
its filed and approved Federal Income Tax Allocation Agreement
without notifying the superintendent in writing of its intention at
least thirty days prior thereto.
10
C
The Company violated Section 1712(a) of the New York Insurance
Law by providing administrative services to an affiliate without
allocating and receiving payment for the appropriate fees as
outlined in its service agreement. This is a repeat violation.
10
D
The Department conducted a review of the reserves as of
December 31, 2020. This review included an examination of the
asset adequacy analysis in accordance with 11 NYCRR 95
(Insurance Regulation 126). During the review of asset adequacy
analysis, concerns were raised regarding the potential lack of
conservatism in both the Company's methodology and
assumptions used. In particular, the methodology used to develop
expenses allocated to in force policies – especially the treatment of
non-recurring and acquisition expenses; and the development of
the experience assumptions – including a review of the experience
study process and the inclusion of the policies identified as part of
the unclaimed property review. Concerns were also raised
regarding the allocation of expenses between affiliated companies.
In response, the Company committed to refine its expense
development methodology, update experience studies and
assumptions, and enhance its model validation as discussed with
the Department. The Department will continue to review these
refinements as they are completed and at this juncture, the
certificate of reserve valuation is being held and is not expected to
be issued until the Department’s concerns are resolved.
20
Respectfully submitted,
/s/
Vincent Targia
Principal Insurance Examiner
STATE OF NEW YORK )
)SS:
COUNTY OF NEW YORK )
Vincent Targia, being duly sworn, deposes and says that the foregoing report, subscribed by
him, is true to the best of his knowledge and belief.
/s/
Vincent Targia
Subscribed and sworn to before me
this day of
APPOINTMENT NO. 32261
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:
JAN PIERRE SANTIAGO
(INS REGULATORY INSURANCE SERVICES, INC.)
as a proper person to examine the affairs of the
COLUMBIAN MUTUAL LIFE INSURANCE COMPANY
and to make a report to me in writing of the condition of said
COMPANY
with such other information as she shall deem requisite.
In Witness Whereof, I have hereunto subscribed my name
and affixed the official Seal of the Department
at the City of New York
this 17th day of June, 2021
LINDA A. LACEWELL
Superintendent of Financial Services
By:
MARK MCLEOD
DEPUTY CHIEF - LIFE BUREAU
