ZAIC2012-1 - Zurich Producer Compensation

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ANNUAL STATEMENT FOR THE YEAR 2012 OF THE ZURICH AMERICAN INSURANCE COMPANY D. Uncollectible balances per SSAP No. 6, SSAP No. 47 and SSAP No. 66. The Company has analyzed Premiums and Considerations receivable (Pg 2, Lines 15.1-15.3) to determine balances that are reasonably possible to be uncollectible. Based on past experiences and circumstances specific to insureds/reinsurers, the Company has non-admitted $70.5 million of its premiums and considerations receivable. This amount is less than 0.5% of the Company’s premiums and considerations balance. E. Business Interruption Insurance Recoveries None F. State Transferable and Non-transferable Tax Credits None G. Subprime Mortgage Related Risk Exposure (1) A review was performed of the investment portfolio at December 31, 2012 to determine whether the Company has exposure to subprime mortgage risk. The Company defines subprime mortgages as transactions/securitizations backed primarily by mortgage loans to borrowers with a) a tarnished credit history as evidenced by a Fair Isaac Company (FICO) score of 660 or lower, or b) a debt-to-income ratio of 40% or more or c) a loan margin of 4% or higher. The Company does not have direct exposure to subprime risk through investments in subprime mortgage loans. (2) Direct Exposure - Subprime Mortgage Loans None (3) Direct Exposure - Other Investments Type Book/Adjusted Other-than-temporary Actual Cost Carrying Value Fair Value impairment losses reocognized Residential mortgage backed securities $ 29,414,135 $ 26,427,998 $ 25,041,164 $ (15,147,732) $ 29,414,135 $ 26,427,998 $ 25,041,164 $ (15,147,732) (4) Underwriting Exposure to subprime mortgage loans None 22. EVENTS SUBSEQUENT The Company has evaluated subsequent events through February 28, 2013, the date these financial statements were issued. 23. REINSURANCE A. Unsecured Reinsurance Recoverables The Company has unsecured aggregate recoverables from outside reinsurers as of December 31, 2012 for losses paid, losses unpaid, loss adjustment expenses, and unearned premium that exceed 3% of the Company’s policyholder surplus with the following reinsurers (and related group members): NAIC Group Reinsurer FEIN Number NAIC Code Unsecured Aggregate Recoverable Sw iss Reinsurance America Corp. 13-1675535 0181 25364 $ 563,646,354 Westport Insurance Corp. 48-0921045 0181 39845 60,601,678 Sw iss Re Life & Health America Inc. 06-0839705 0181 82627 4,963,507 Total Sw iss Reinsurance Group 0181 629,211,539 Truck Insurance Exchange 95-2575892 0212 21709 737,812,823 Centre Insurance Company 13-2653231 0212 34649 9,932,171 Farmers Insurance Exchange 95-2575893 0212 21652 2,919,411 Total <strong>Zurich</strong> Insurance Group 0212 750,664,405 Munich Reinsurance America Inc. 13-4924125 0361 10227 276,432,846 American Alternative Insurance Corp. 52-2048110 0361 19720 1,815,776 Hartford Steam and Boiler Inspection Insurance Company 06-0384680 0361 11452 311,514 Munich American Reassurance Company 58-0828824 0361 66346 1 Total Munich Reinsurance Group 0361 278,560,137 Total $ 1,658,436,081 B. Reinsurance Recoverables in Dispute The Company has no reinsurance recoverables in dispute which exceed 5% of surplus nor does the aggregate of all disputed items exceed 10% of surplus. 14.20
ANNUAL STATEMENT FOR THE YEAR 2012 OF THE ZURICH AMERICAN INSURANCE COMPANY C. Reinsurance Assumed and Ceded (1) The estimated maximum amount of return commission due reinsurers if all of the Company’s reinsurance was canceled as of December 31, 2012, is shown below: Premium Reserve Assumed Commission Equity Premium Reserve Commission Equity Premium Reserve Commission Equity Affiliates $ 2,364,123,783 $ 219,831,981 $ 74,484,593 $ 17,511,404 $ 2,289,639,190 $ 202,320,577 All other 96,275,273 8,952,316 277,779,587 65,306,267 (181,504,314) (56,353,951) Total $ 2,460,399,056 $ 228,784,297 $ 352,264,180 $ 82,817,671 $ 2,108,134,876 $ 145,966,626 Ceded Net Direct Unearned Premium Reserve: $ 1,826,559,105 (2) Additional or return commission, predicated on loss experience or on any other form of profit sharing arrangements as a result of existing contractual arrangements are accrued as follows: Reinsurance Direct Assumed Ceded Contingent commission $ 55,498,056 $ (1,600,000) $ $ 53,898,056 Sliding scale adjustments - - - - Other profit commission arrangements - - - - Total $ 55,498,056 $ (1,600,000) $ - $ 53,898,056 Net (3) Protected Cells None D. Uncollectible Reinsurance During 2012, the Company has written off in the current year reinsurance balances due (from the companies listed below) in the amount of $17,860,860, which is reflected as: Amount Losses incurred $ 15,632,128 Loss adjustment expenses incurred 2,228,732 Premium earned - Other - Total $ 17,860,860 Company Excess & Casualty Reinsurance $ Amount 6,280,197 Hannover Bermuda Ltd. 1,905,853 Lloyds Syndicate #4472 1,816,064 Mission Insurance Company 1,090,972 QBE Reinsurance 726,894 Lloyds Syndicate #1084 722,081 Lloyds Syndicate #2001 721,993 Dominion Insurance Company 617,632 Walbrook Insurance Company 580,227 PXRE Reinsurance Limited 425,521 Dominion Insurance Company (UK) 416,475 Reliance Insurance Company 406,707 Lloyds Syndicate #33 359,086 American Agricultural Insurance 269,096 Home Insurance Company 265,452 Mutual Reinsurance Company Ltd. 265,041 Axis Specialty Ltd. 221,735 Slater Walker Insurance Company 207,324 Fremont Indemnity Company 172,676 Midland Insurance Company 163,585 <strong>Zurich</strong> International Bermuda 120,637 City Insurance Company (UK) Ltd. 105,612 Total $ 17,860,860 14.21
Page 1 and 2: PROPERTY AND CASUALTY COMPANIES - A
Page 3 and 4: ANNUAL STATEMENT FOR THE YEAR 2012
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