ALJDEC

00A-207-INS · Department of Insurance · 2000-12-15

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: December 15, 2000 APPEARANCES: Steven R. Henry, Esq. on behalf of Petitioner; Kurt Regner on behalf of the Arizona Department of Insurance ADMINISTRATIVE LAW JUDGE: Lewis D. Kowal _____________________________________________________________________

On December 15, 2000, a hearing took place to consider the application for the acquisition of control of Western Family Insurance Company (the "Insurer"), filed by Abdulla Badani and Anchor Insurance Holdings, Inc. (the "Petitioners"), with the Arizona Department of Insurance (the "Department"), and for approval of Petitioners as controlling persons of the Insurer pursuant to the provisions of A.R.S. §§20-481 through 20- 481.30, and A.A.C. R20-6-1402. Based upon the entire record in this matter the following Findings of Fact, Conclusions of Law and Recommended Order are made: . . . . . . . . . FINDINGS OF FACT 1. The Insurer is a domestic insurer as referred to in A.R.S. §20- 481.02. 2. Petitioners have filed a statement as referred to in A.R.S. §§20- 481.02 and 20-481.03, in the form required by A.A.C. R20-6-1402. 3. The Insurer and its security holder(s) waived the ten (10) day advance notice to be given as required by A.R.S. §20-481.07. 4. Petitioners and Insurer waived the notice requirements set forth in A.R.S. §41-1092.05(D). 5. The evidence produced at the hearing established that the Petitioners’ acquisition of control of the Insurer: a. Is not contrary to law; b. Is not inequitable to the shareholders of any domestic insurer involved; c. Would not substantially reduce the security of and service to be rendered to the policyholders of the Insurer in this State or elsewhere; d. Would not substantially lessen competition in insurance in this state or tend to create a monopoly; and e. Is not likely to be hazardous or prejudicial to the insurance-buying public. 6. The evidence at the hearing further demonstrated that : a. After the change of control, the Insurer would be able to satisfy the requirements for the re-issuance of a certificate of authority to write the line or lines of business for which it is presently licensed; b. The financial condition of the Petitioners would not jeopardize the financial stability of the Insurer or prejudice the interest of its policyholders; c. The plans or proposals that the Petitioners have to liquidate the Insurer, sell its assets or consolidate or merge it with any person, or to make any other material change in its business or corporate structure or management, are fair and reasonable to policyholders of the Insurer and are in the public interest; and d. The competence, experience and integrity of those persons who would control the operation of the Insurer are such that it would be in the public interest of policyholders of the Insurer and of the public to permit the merger or other acquisition of control; 7. Petitioners have furnished completed fingerprint cards and biographical affidavits to the Department to enable the Department to determine if any officers or directors of Anchor Insurance Holdings, Inc. have been charged with or convicted of a felony or misdemeanor other than minor traffic violations. 8. Petitioners requested that the fingerprint cards and biographical affidavits (Exhibit 1, Tab F), the Certification of the Badani Family Trust by the Trustees, the First Amendment to the Badani Family Trust Dated 12/30/96 with an attached Declaration of Trust Dated 10/30/96, the Badani Family Trust Dated 10/23/96 Financial Statement as of 6/30/00 (Exhibit 1, Tab G), the individual tax returns for Mr. and Mrs. Abdulla Badani for the years 1998 and 1999, and the tax returns for Anchor General Insurance Agency, Inc. for the years 1998 and 1999 that Petitioners submitted to the Department remain confidential. The Department had no objection to Petitioners’ request for confidentiality of those documents. 9. Petitioners also requested that the Pro Forma Balance Sheet 2001- 2005 that was submitted to the Department (Exhibit 1, Tab H) remain confidential until the end of year 2005. The Department had no objection to that request. 10. Except as provided above, the interests of policyholders, shareholders or the public will be served by the publication of all information and documents relating to the Insurer and Petitioners, and obtained by or disclosed to the Director, or any other person in the course of a filing, an examination, or investigation made pursuant to A.R.S. §§20- 481.03, 20-481.10 and 20-481.20. . . . . . . . . . 11. Based upon its review of Petitioners’ Form A filing, the Department represented its belief that the Petitioners’ Form A filing is complete and in compliance with Arizona law and recommended approval of this acquisition. CONCLUSIONS OF LAW 1. The evidence of record established that none of the enumerated grounds set forth in A.R.S. §20-481.07(A) exist so as to provide a basis for disapproval or rejection of Petitioners’ acquisition of control of the Insurer. 2. Petitioners presented credible evidence for approval of its acquisition of control of the Insurer and for Petitioners to be controlling persons pursuant to the provisions of A.R.S. §§20-481 through 20-481.30, and A.A.C. R20-6-1402. RECOMMENDED ORDER The acquisition of control of the Insurer by Petitioners shall be approved subject to the express conditions as follows: a. If the completed fingerprint cards furnished to the Department reveal that any officers or directors of Anchor Insurance Holdings, Inc. have been charged with or convicted of a felony or misdemeanor other than minor traffic violations, the individual(s) shall be removed as an officer and/or director of Anchor Insurance Holdings, Inc. and/or Insurer within 30 days after notice to Petitioners by the Department and shall be replaced with an officer or director acceptable to the Director. 2. Except as provided below, all information and documents relating to the Insurer and Petitioners obtained by or disclosed to the Director, or any other person in the course of a filing, an examination or investigation made pursuant to A.R.S. §§20-481.03 and 20-481.20, shall not be given confidential treatment, shall be subject to subpoena and shall be made public documents, subject to inspection, examination or copying by any person. 3. The fingerprint cards and biographical affidavits (Exhibit 1, Tab F), the Certification of the Badani Family Trust by the Trustees, the First Amendment to the Badani Family Trust Dated 12/30/96 with an attached Declaration of Trust dated 10/30/96, the Badani Family Trust Dated 10/23/96 Financial Statement as of 6/30/00 (Exhibit 1, Tab G), the individual tax returns for Mr. and Mrs. Abdulla Badani for the years 1998 and 1999, and the tax returns for Anchor General Insurance Agency, Inc. for the years 1998 and 1999 that Petitioners submitted to the Department shall remain confidential pursuant to A.R.S. §20-481.21. 4. The Pro Forma Balance Sheet 2001-2005 that Petitioners submitted to the Department (Exhibit 1, Tab H) shall remain confidential until the end of year 2005. 5. Petitioners shall advise the Director in writing of the effective date of the change of control. 6. Until further notice from the Department, the Insurer shall file quarterly financial statements following the effective date of the acquisition 7. Upon consummation of this acquisition, the Insurer shall file its registration statement in the form prescribed by A.R.S. §20-481.10 and within the time period prescribed by A.R.S. §20-481.09 or §20-481.13. If the registration statement would duplicate the information previously submitted by the Petitioners in the statement filed with the Department pursuant to A.R.S. §20-481.03 and there have been no material changes since the filing of that statement, then the Insurer shall submit a statement to that effect incorporating by reference the statement previously filed with the Department in lieu of the registration statement. 8. The failure to adhere to one or more of the above terms and conditions shall result without further proceedings in the suspension or the revocation of the Insurer’s certificate of authority. Done this day, December 20, 2000.

______________________________________ Lewis D. Kowal Administrative Law Judge

Original transmitted by fax/mail this ____ day of December, 2000, to:

Charles R. Cohen, Director Department of Insurance ATTN: Curvey Burton 2910 North 44th Street, Ste. 210 Phoenix, AZ 85018

By _______________________________

-----------------------

Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826