ALJDEC

97A-201-INS · Department of Insurance · 1997-12-24

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: December 16, 1997 APPEARANCES: Steven R. Henry, Esq. For the Petitioner; Kurt Regner for the Arizona Department of Insurance ADMINISTRATIVE LAW JUDGE: Lewis D. Kowal _____________________________________________________________________

On December 16, 1997, a hearing took place to consider the application for the acquisition of control of Republic-Vanguard Insurance Company and Chapparal Life Insurance Company (the "Insurers"), filed by Credit Suisse Group (the "Petitioner"), with the Arizona Department of Insurance (the "Department"), and for approval of Petitioner as the controlling person of the Insurers pursuant to the provisions of A.R.S. §§20-481 through 20- 481.23, 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 AND CONCLUSIONS OF LAW The Insurers are domestic insurers as referred to in A.R.S. §20- 481.02. 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. The Insurers and their security holders waived the ten (10) day advance notice to be given as required by A.R.S. §20-481.07. No evidence has been produced at the hearing that would indicate or form the basis for a finding that the Petitioner's acquisition of control of the Insurers: a. Is contrary to law; b. Is inequitable to the shareholders of any domestic insurer involved; c. Would substantially reduce the security of and service to be rendered to the policyholders of the Insurers in this state or elsewhere; d. After the change of control the Insurers would not be able to satisfy the requirements for the reissuance of a certificate of authority to write the line or lines of insurance for which they are presently licensed; e. The effect of the acquisition of control would be to substantially lessen competition in insurance in this state or tend to create a monopoly; f. The financial condition of any acquiring party might jeopardize the financial stability of the Insurers or prejudice the interest of their policyholders; g. The plans or proposals that the acquiring party has to liquidate the Insurers, sell their assets or consolidate or merge them with any person, or to make any other material change in their business or corporate structure or management, are unfair and unreasonable to policyholders of the Insurers and are not in the public interest; h. The competence, experience and integrity of those persons who would control the operation of the Insurers are such that it would not be in the public interest of policyholders of the Insurers and of the public to permit the merger or other acquisition of control; or i. The acquisition is likely to be hazardous or prejudicial to the insurance-buying public. The Petitioner represented that it will furnish completed fingerprint cards to the Department on or before January 31, 1998, 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. The Petitioner requested that the fingerprint cards and biographical affidavits to be submitted by Petitioner to the Department remain confidential. The Department had no objection to Petitioner's request for confidentiality of those records. Except as provided above, the interests of policyholders, shareholders or the public will be served by the publication of all information, documents and copies, relating to the Insurers 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. 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. RECOMMENDED ORDER The undersigned Administrative Law Judge recommends that: The acquisition of control of the Insurers by the Petitioner be approved subject to the express conditions as follows: a. If the completed fingerprint cards Petitioner furnishes to the Department reveals 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 within 30 days after notice to Petitioner by the Department and shall be replaced with an officer or director acceptable to the Director. If Petitioner fails to take the prescribed action within 30 days, this failure will constitute an immediate danger to the public and the Director immediately may suspend or revoke each of the Insurer’s certificate of authority without further proceedings. 2. Except as provided below, all information, documents, and copies 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, not be given confidential treatment, be subject to subpoena and shall be made public documents, subject to inspection, examination or copying by any person. The Petitioner advise the Director in writing of the effective date of the change of control. Until further notice from the Department, the Insurers shall file quarterly financial statements following the effective date of the acquisition. The fingerprint cards and biographical affidavits to be submitted by Petitioner to the Department remain confidential pursuant to A.R.S. §20- 481.21. Upon consummation of this acquisition, the Insurers shall file itheir 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 Insurers shall submit a statement to that effect incorporating by reference the statement previously filed with the Department in lieu of the registration statement. 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 each of the Insurer’s certificate of authority. Done this day, December 23, 1997.

_________________________________ LEWIS D. KOWAL Administrative Law Judge

Original transmitted by mail this ____ day of December, 1997, to:

Mr. John A. Greene, Director Department of Insurance ATTN: Curvey Burton 2910 North 44th Street, #210 Phoenix, AZ 85018-7256

By _______________________________

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Office of Administrative Hearings 1700 West Washington, Suite 602 Phoenix, Arizona 85007 (602) 542-9826