ALJDEC

01A-183-INS · Department of Insurance · 2001-08-06

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 2, 2001 APPEARANCES: David Childers, Esq. and Steven R. Henry, Esq. for Petitioner; Kurt Regner for the Arizona Department of Insurance ADMINISTRATIVE LAW JUDGE: Lewis D. Kowal _____________________________________________________________________ PROCEDURAL HISTORY On August 2, 2001, a hearing took place to consider the application for the acquisition of control of USLife Credit Life Insurance Company of Arizona (the "Insurer"), filed by American International Group, Inc. (the "Petitioner"), with the Arizona Department of Insurance (the "Department"), and for approval of Petitioner as the controlling person of the Insurer pursuant to the provisions of A.R.S. §§20-481 through 20-481.30, and A.A.C. R20-6-1402. Inner City Press/Community on the Move (“ICP”) submitted a request to :a) participate in the hearing of this matter; b) to depose Petitioner’s witness; c) to conduct discovery; d) and to keep the record open to accept comment on Petitioner’s responses, Petitioner’s exhibits, and matters that arise at the hearing. The Administrative Law judge reviewed the filings made by ICP, Petitioner’s response, and entertained oral argument of ICP’s/Matthew Lee’s (“Mr. Lee”) request.[1] At the commencement of the hearing, the Administrative Law Judge entertained oral argument from ICP/Mr. Lee and the parties as to whether ICP or Mr. Lee are affected persons within the meaning of A.R.S. §20-481.07 and §20-164 so as to be permitted an opportunity to participate in the hearing. The Administrative Law Judge determined as a preliminary matter that neither ICP nor Mr. Lee presented sufficient facts showing them to be a person affected by the instant acquisition of control within the meaning of A.R.S. §20-481.07. Therefore, the Administrative Law judge denied ICP’s/Mr. Lee’s request to participate at the hearing but because Mr. Lee made his appearance telephonically, he was permitted to listen to the hearing. 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. The Petitioner has 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. Petitioner 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 Petitioner's 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 Petitioner would not jeopardize the financial stability of the Insurer or prejudice the interest of its policyholders; c. The plans or proposals that the Petitioner has 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. The Petitioner has furnished completed fingerprint cards and biographical affidavits to the Department to enable the Department to determine if any of Petitioner's officers or directors have been charged with or convicted of a felony or misdemeanor other than minor traffic violations. 8. The Petitioner requested that the fingerprint cards and biographical affidavits Petitioner submitted to the Department with its Form A filing and with submissions made on July 13 and 19, 2001 (the Form A submissions comprise Tab I of Exhibit 4), the Company and Parent Disclosure Letters submitted to the Department by Ernest Patrikis on July 13, 2001, and an organizational chart submitted by Mr. Patrikis to the Department on July 19, 2001, remain confidential. The Department had no objection to Petitioner's request for confidentiality of those records. 9. 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 Petitioner, 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. 10. Based upon its review of the Petitioner's Form A filing, the Department represented its belief that the Petitioner's 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 Petitioner’s acquisition of control of the Insurer. 2. Petitioner presented credible evidence for approval of its acquisition of control of the Insurer and for Petitioner to be a controlling person 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 the Petitioner shall be approved subject to the express conditions as follows: a. If the completed fingerprint cards furnished to the Department reveal that any of Petitioner's officers or directors 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 the Petitioner and/or Insurer within 30 days after notice to Petitioner 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 Petitioner 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 Petitioner submitted to the Department with its Form A filing and with submissions made on July 13 and 19, 2001 (the Form A submissions comprise Tab I of Exhibit 4), the Company and Parent Disclosure Letters submitted to the Department by Ernest Patrikis on July 13, 2001, and an organizational chart submitted by Mr. Patrikis to the Department on July 19, 2001. shall remain confidential pursuant to A.R.S. §20-481.21. 4. The Petitioner shall advise the Director in writing of the effective date of the change of control. 5. Until further notice from the Department, the Insurer shall file quarterly financial statements following the effective date of the acquisition. 6. 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 Petitioner 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. 7. 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, August 6, 2001.

______________________________________ Lewis D. Kowal Administrative Law Judge

Original transmitted by fax/mail this ____ day of ____________, 2001, to:

Department of Insurance Charles R. Cohen 2910 North 44th Street, Ste. 210 Phoenix, AZ 85018

ATTN: Curvey Burton

By ___________________________

----------------------- [1] At the outset of the hearing, Mr. Lee represented that he was filing a request to participate at the hearing on his own behalf and as the Executive Director of ICP.

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