Holiday, Florida Ultimate Parent: Jamestown Holdings Corp. LION INSURANCE COMPANY 2739 US Highway 19 North, Suite 601, Holiday, FL 34691 Web: lioninsurancecompany.com Tel: 727-682-0155 Fax: 727-937-1349 AMB#: 012616 NAIC#: 11075 Ultimate Parent#: 051391 FEIN#: 59-3565930 BEST S CREDIT RATING Best s Financial Strength Rating: A- Outlook: Positive Best s Financial Size Category: VII RATING RATIONALE Rating nale: The ratings reflect Lion Insurance Company s (Lion) excellent risk-adjusted capitalization, favorable underwriting and overall operating performance, and prudent reserving practices. These positive rating A- factors are driven by Lion s stringent underwriting and pricing guidelines, disciplined claims practices and conservative investment philosophy, which have generated underwriting and overall operating profitability measures that have significantly outperformed the workers compensation composite in recent years. The positive factors are somewhat offset by the company s product concentration as a workers compensation insurer writing primarily for an affiliated professional employer organization, South East Personnel Leasing, Inc. In addition, the majority of Lion s business is currently produced in Florida and California, which exposes the company to potentially greater legislative, regulatory and economic risks. Also, there is execution risk associated with Lion s significant ongoing expansion of affiliated business in states outside of Florida, particularly in California, over the past five years as part of its strategy to diversify operations. There was sizable non-affiliated business growth that began in late 2009, and ran through mid-2012 when it was discontinued for underwriting reasons. This book of business warrants continued monitoring of the run-off. Despite these concerns, the outlooks are based on Lion s excellent risk-adjusted capital, expectations of sustained profitability, prudent reserving practices and management s intent to maintain capital at levels fully supportive of its growing exposures. 2015 A.M. Best Company, Oldwick, NJ 08858 Printed July 29, 2015 www.ambest.com Page 1 of 8
Factors that could lead to positive rating actions include Lion achieving continued solid underwriting and overall operating performance, favorable reserve development and sustained above-average risk-adjusted capitalization. Negative rating actions could be taken should there be deterioration in the company s operating performance, the reporting of adverse loss reserve development, a material decline in its capitalization or a lack of financial support by its parent, if necessary. FIVE-YEAR RATING HISTORY Date Best s FSR Date Best s FSR 07/23/15 A- 05/31/12 A- 05/13/14 A- 05/04/11 A- 05/09/13 A- KEY FINANCIAL INDICATORS ($000) Statutory Data Direct Premiums Written Premiums Written Pre-tax Operating Income Income Total Admitted Assets Policyholders Surplus 2010 17,398 16,741 1,411 978 260,329 62,030 2011 17,326 20,463 3,447 2,422 229,447 64,622 2012 18,795 21,400 4,606 3,480 210,824 68,032 2013 17,462 21,626 5,772 4,086 192,413 72,405 2014 17,465 23,730 6,796 4,937 208,622 77,551 Profitability Leverage Liquidity Comb. Inv. Yield (%) Pre-tax ROR (%) NA Inv Lev NPW to Overall Liq. (%) Oper. Cash flow (%) 2010 98.9 0.7 10.2 0.3 3.5 131.4 130.7 2011 94.5 0.8 16.0 2.6 0.3 2.9 139.2 182.4 2012 96.8 1.1 18.4 4.3 0.3 2.4 147.6 142.3 2013 84.6 1.2 25.5 4.2 0.3 2.0 160.3 138.2 2014 77.9 0.9 28.6 4.5 0.3 2.0 159.2 137.0 5-Yr 89.3 0.9 20.6 (*) Within several financial tables of this report, this company is compared against the Workers Compensation Composite. (*) Data reflected within all tables of this report has been compiled from the company-filed statutory statement. BUSINESS PROFILE Lion provides workers compensation insurance coverage primarily to an affiliate, South East Personnel Leasing, Inc. (SEPL). SEPL is focused on providing services, such as payroll administration, risk management, record keeping, employee relations and employee benefits to business owners. The current policy with SEPL is a high deductible policy with a $1,000,000 deductible per occurrence. Lion maintains a large deductible collateral fund that is funded by SEPL based on actuarially determined costs of ultimate losses under the deductible. The deductible portion of losses and loss adjustment expenses is paid from this large deductible fund. Under an expense allocation agreement, Lion allocates to SEPL that portion of investment income related to the funds paid by SEPL into the large deductible collateral fund. Lion benefits from its leading position in the construction industry and the ability to write small businesses and accommodate new start-ups. Although construction classes as a portion of its total book has declined over the years due to the adverse impacts of the macroeconomic environment and significant rate reductions in Florida, the company has diversified outside of Florida and into non-construction classes, such as manufacturing and transportation, as well as many service industries. Business is produced through internal sales representatives as well as independent agents. Operations are focused in Florida with a growing amount written in California, Georgia, North Carolina, Illinois, Arizona, Texas, New Jersey, Louisiana, Pennsylvania, Alabama, South Carolina, Maryland and seven other states over the past several years. In the fourth quarter of 2009, Lion started to underwrite workers compensation policies for businesses not affiliated with SEPL. However, this business was discontinued in mid-2012 due to less favorable underwriting results. Its last policy expired at the end of 2014. In the second quarter of 2011, Lion entered into a 100% quota share reinsurance agreement with Tower Insurance Company of New York, Tower National Insurance Company and Castle Point National Insurance Company (Tower). The quota share is in place to reinsure the SEPL business originated, primarily in California. Since 2013, this business has been fronted by State National Insurance Company. TOTAL PREMIUM COMPOSITION & GROWTH ANALYSIS DPW Reinsurance Prem Assumed Reinsurance Prem Ceded ($000) (% Chg) ($000) (% Chg) ($000) (% Chg) 2010 17,398 46.6 656-50.4 2011 17,326-0.4 3,873 736 12.1 2012 18,795 8.5 5,111 32.0 2,506 240.6 2013 17,462-7.1 7,796 52.5 3,632 44.9 2014 17,465 0.0 10,617 36.2 4,352 19.8 5-Yr CAGR 8.0 26.9 NPW NPE ($000) (% Chg) ($000) (% Chg) 2010 16,741 58.8 13,833 81.1 2011 20,463 22.2 21,570 55.9 2012 21,400 4.6 25,034 16.1 2013 21,626 1.1 22,633-9.6 2014 23,730 9.7 23,783 5.1 5-Yr CAGR 17.6 25.5 Territory: The company is licensed in the District of Columbia, AL, AZ, CO, CT, FL, GA, HI, IL, LA, MD, MA, MS, NV, NJ, NM, NC, OK, PA, RI, SC, TN, TX and VA. 2015 A.M. Best Company, Oldwick, NJ 08858 Printed July 29, 2015 www.ambest.com Page 2 of 8
2014 BY-LINE BUSINESS ($000) Reinsurance Reinsurance DPW Prem Assumed Prem Ceded Product Line ($000) (%) ($000) (%) ($000) (%) Workers Comp 17,465 100.0 10,617 100.0 4,352 100.0 Total 17,465 100.0 10,617 100.0 4,352 100.0 Business NPW Retention Product Line ($000) (%) (%) Workers Comp 23,730 100.0 84.5 Total 23,730 100.0 84.5 BY-LINE RESERVES ($000) Product Line 2014 2013 2012 2011 2010 Workers Comp 40,819 38,420 36,463 31,501 23,889 Total 40,819 38,420 36,463 31,501 23,889 GEOGRAPHIC BREAKDOWN BY DIRECT PREMIUM WRITINGS ($000) 2014 2013 2012 2011 2010 Florida 11,303 12,929 10,195 9,833 9,798 Georgia 1,760 1,095 5,216 5,650 6,844 North Carolina 816 513 1,048 Illinois 717 Arizona 453 228 76 185 Texas 440 488 755 817 755 New Jersey 417 640 71 Louisiana 394 150 320 509 Pennsylvania 343 445 108 Alabama 171 62 4 All Other 652 912 1,003 333 Total 17,465 17,462 18,795 17,326 17,398 RISK MANAGEMENT While Lion does not have a formal Enterprise Risk Management program, a senior level officer is responsible for identifying material risks to the company s financial position and whether risk tolerances of these risks are exceeded. The company employs traditional risk management techniques focusing on such areas as underwriting, investments, liquidity, credit, operational and strategic risks. Potential causes and impacts associated with these risks have been identified and quantified where applicable. Action plans are developed to identify and address business execution risks relating to key personnel, information systems, growth, investments, economic / market conditions and the regulatory environment. The company s board and business units are kept appraised of risk metrics and risk management activities. OPERATING PERFORMANCE Operating Results: Over the past five years, Lion has produced strong operating earnings with pretax returns on revenue (ROR) that have substantially outperformed the workers compensation composite, driven by highly favorable underwriting results and sound net investment income, albeit the latter having declined appreciably in 2010 and 2014. Underwriting has been particularly strong as evidenced by the company s five-year average combined ratio significantly outperforming the composite. While net investment income has remained sound, it declined 29.2% in 2014 largely reflecting certificates of deposit that matured late in 2013, that were reinvested in appreciably lower yielding tax exempt municipals and corporate bonds in early 2014. Also, Lion returned a higher portion of its investment income to South East Personnel Leasing, Inc. (SEPL) in 2014 associated with SEPL s prefunding of Lion s large deductible collateral fund, that related to higher realized capital gains, that were offset against Lion s net investment income. As a result of the lower interest rate environment and to compensate for higher yielding securities that have been maturing, Lion s investment strategy has focused on increasing investment grade corporates and tax exempt municipals, while decreasing US treasury and government allocations. Also, an allocation to high dividend equities has been maintained for higher income; portfolio duration has remained relatively consistent. Lion s investment yields remain well below the industry composite in large part because Lion is required by agreement with SEPL to transfer back a portion of investment income related to funds paid by SEPL into the large deductible collateral fund. In 2009, Lion began to underwrite workers compensation policies for businesses not associated with South East Personnel Leasing, Inc., which also has reduced profitability. This non-affiliated business, which grew to account for 43% of direct premiums written in 2011, was discontinued in mid-2012 due to several years of less favorable underwriting results. Largely offsetting the run-off of the company s non-affiliated premium in the second half of 2012 and in 2013 and 2014, was continued substantial expansion of its affiliated business in states other than Florida, particularly in California. A.M. Best will closely monitor the run-off of Lion s non-affiliated business, the profitability of its growing affiliated business, as well as reserve development in the near term, as the company s growth in recent years has been in highly competitive workers compensation markets. Nevertheless, A.M. Best expects that Lion will continue to generate profitable operating results in the near term based on its disciplined underwriting and expertise in its niche market. In 2012, while the company s loss and loss adjustment expense (LAE) ratio declined 8.5 points to 56.4, its expense ratio rose 10.8 points to an above-average level of 40.4. The increase in the expense ratio was largely attributable to the higher commission structure on its California assumed business. In addition, there was a 78% increase in the Workers Compensation Administration Trust Fund rate on increased Florida premiums, which resulted in a doubling of Lion s Florida assessment charges. Management achieved a lower expense ratios of 38.6 in 2013 and 37.6 in 2014 in part due to a change in cost-containment strategies. The company s loss and LAE ratio declined further to 45.9 in 2013 and 40.3 in 2014 largely due to favorable calendar year losses, prior year loss reserve releases, and improved current accident year underwriting. 2015 A.M. Best Company, Oldwick, NJ 08858 Printed July 29, 2015 www.ambest.com Page 3 of 8
PROFITABILITY ANALYSIS ($000) Company Pre-tax After-tax Operating Operating Total Income Income Income Return 2010 1,411 928 978 978 2011 3,447 2,403 2,422 2,517 2012 4,606 3,382 3,480 3,509 2013 5,772 3,828 4,086 4,577 2014 6,796 3,792 4,937 4,930 5-Yr Total 22,031 14,334 15,903 16,511 INVESTMENT GAINS ($000) Company Realized Unrealized Inv Capital Capital Year Income Gains Gains 2010 1,938 50 2011 1,928 19 95 2012 2,331 98 29 2013 2,348 257 491 2014 1,663 1,145-7 5-Yr Total 10,209 1,569 608 Company Industry Composite Company Industry Composite Pre-tax Return Operating Pre-tax Return Operating Pre-tax ROR (%) on (%) (%) ROR (%) on (%) (%) Invest 2010 10.2 1.6 84.9 5.6 7.5 93.6 Inv Inc Inv Return on Total Inv Inc Inv 2011 16.0 4.0 85.5 2.5 1.7 97.1 Growth Yield Inv Assets Return Growth Yield 2012 18.4 5.3 87.5 5.9 7.7 93.3 Year (%) (%) (%) (%) (%) (%) 2013 25.5 6.5 74.2 9.0 10.6 76.9 2010-29.7 0.7 0.7 0.7-2.1 3.9 2014 28.6 6.6 70.9 9.9 8.1 88.5 2011-0.5 0.8 0.8 0.9-5.8 3.7 5-Yr Avg 20.6 4.9 79.8 6.9 7.2 89.3 2012 20.9 1.1 1.2 1.2-5.2 3.4 2013 0.7 1.2 1.3 1.6-12.4 2.9 UNDERWRITING EXPERIENCE 2014-29.2 0.9 1.4 1.4 5.0 2.9 Undrw Loss s Expense s Ind 5-Yr Avg -9.7 0.9 1.1 1.1-4.3 3.4 Income ($000) Pure Loss LAE Loss LAE & Other Comm. Exp. Total Exp. Div. Pol. Comb. Comb. BALANCE SHEET STRENGTH 2010-528 47.1 10.7 57.9 6.2 17.0 23.2 17.8 98.9 118.6 2011 1,518 39.5 25.4 64.9 7.2 22.4 29.6 94.5 120.4 Capitalization: Lion has reported consistent surplus growth in the 4%-to-7% 2012 2,275 39.2 17.2 56.4 14.0 26.4 40.4 96.8 113.6 range in each of the past five years, driven by favorable operating earnings and 2013 3,885 29.0 16.9 45.9 15.2 23.4 38.6 84.6 93.1 a $2.5 million capital contribution from its parent in 2010. The company s 2014 5,271 17.0 23.3 40.3 13.9 23.7 37.6 77.9 103.1 risk-adjusted capitalization, as measured by Best s Capital Adequacy 5-Yr Total/Avg 12,422 33.2 19.3 52.5 11.7 22.9 34.5 2.3 89.3 108.8 (BCAR), is well-supportive of its current rating and reflects its conservative premium leverage, strong operating earnings and conservative investment BY-LINE LOSS RATIO guidelines. Given management s business plan, A.M. Best expects Lion to remain strongly capitalized over the near term. Although the company has Product Line 2014 2013 2012 2011 2010 5-Yr Avg reported favorable calendar year prior year loss reserve development since Workers Comp 17.0 29.0 39.2 39.5 47.1 33.2 2009 (2012 being an exception when it was slightly adverse), accident years Total 17.0 29.0 39.2 39.5 47.1 33.2 have developed somewhat variably since inception in 2003. Given the company s discontinuance of its non-affiliated business in mid-2012 and DIRECT LOSS RATIO BY STATE substantial expansion of its affiliated business in states outside of Florida over 2014 2013 2012 2011 2010 5-Yr Avg the past several years, A.M. Best will be closely monitoring the company s Florida 22.9 70.5-19.6-27.4-64.2 2.2 loss reserve position. Georgia 52.6-11.6 42.5 29.9 126.5 52.2 North Carolina 1.6 6.4 2.6 Current BCAR: 499.8 Arizona -44.9 97.0 62.6 16.1 Texas -41.9-12.3-22.0 75.8 155.2 25.6 Louisiana -48.7 143.3 79.5 14.5 36.6 All Other 29.5-33.2 94.9 48.3 32.6 Total 18.0 50.2 10.7 2.2 0.8 16.9 2015 A.M. Best Company, Oldwick, NJ 08858 Printed July 29, 2015 www.ambest.com Page 4 of 8
CAPITAL GENERATION ANALYSIS ($000) Source of Surplus Growth Pre-tax Realized Unrealized Operating Capital Income Capital Year Income Gains Taxes Gains 2010 1,411 50 482 2011 3,447 19 1,044 95 2012 4,606 98 1,224 29 2013 5,772 257 1,944 491 2014 6,796 1,145 3,003-7 5-Yr Total 22,031 1,569 7,697 608 Source of Surplus Growth Change % Chg Contrib. Other in in Year Capital Changes 2010 2,462-119 3,321 5.7 2011 75 2,592 4.2 2012-99 3,410 5.3 2013-204 4,373 6.4 2014 216 5,146 7.1 5-Yr Total 2,462-131 18,842 5.7 QUALITY OF SURPLUS ($000) Surplus Other Contributed Unassigned Year Notes Debt Capital Surplus 2010 49,062 12,968 2011 49,062 15,560 2012 49,062 18,970 2013 49,062 23,343 2014 49,062 28,489 Year-End Conditional Adjusted Year Reserves 2010 62,030 119 62,149 2011 64,622 64,622 2012 68,032 68,032 2013 72,405 72,405 2014 77,551 77,551 LEVERAGE ANALYSIS Company Industry Composite Res. Res. NPW to to Gross NPW to to Gross 2010 0.3 0.4 3.5 3.6 0.5 2.0 2.8 3.3 2011 0.3 0.5 2.9 3.0 0.5 2.0 2.9 3.4 2012 0.3 0.5 2.4 2.5 0.5 1.8 2.8 3.3 2013 0.3 0.5 2.0 2.2 0.5 1.6 2.6 3.1 2014 0.3 0.5 2.0 2.2 0.5 1.7 2.7 3.2 CEDED REINSURANCE ANALYSIS ($000) Company Bus. Reins. Ceded Ret. Recov. to Reins. to (%) (%) (%) Industry Composite Bus. Reins. Ceded Ret. Recov. to Reins. to (%) (%) (%) Ceded Reins. Total 2010 10,393 96.2 15.7 16.8 70.5 41.0 50.6 2011 7,349 96.5 10.2 11.4 69.3 40.6 50.9 2012 8,578 89.5 8.9 12.6 65.9 37.9 49.5 2013 15,050 85.6 15.8 20.8 65.7 34.1 45.5 2014 18,326 84.5 18.0 23.6 67.9 35.8 49.2 2014 REINSURANCE RECOVERABLES ($000) Paid & Unpaid Losses IBNR Unearned Premiums Other Recov* Total Reins Recov US Insurers... 11 7,831 7,843 Other Non-US... 459 5,673 6,131 Total (ex US Affils)... 470 13,504 13,974 Grand Total... 470 13,504 13,974 * Includes Commissions less Funds Withheld LOSS & ALAE RESERVE DEVELOP.: CALENDAR YEAR ($000) Orig. Developed Develop. Develop. Develop. Unpaid Unpaid Loss Reserves to to to Reserves Res. to Reserves Thru 14 Orig. (%) (%) NPE (%) @12/14 Develop. (%) Calendar Year 2009 20,977 7,162-65.9-23.5 93.8 3,744 52.3 2010 23,288 10,603-54.5-20.4 76.7 6,755 63.7 2011 30,744 23,082-24.9-11.9 107.0 13,870 60.1 2012 35,576 29,188-18.0-9.4 116.6 22,570 77.3 2013 37,227 34,866-6.3-3.3 154.0 31,525 90.4 2014 39,395 39,395 165.6 39,395 100.0 LOSS & ALAE RESERVE DEVELOP.: ACCIDENT YEAR ($000) Accident Year Orig. Loss Reserves Developed Reserves Thru 14 Develop. to Orig. (%) Unpaid Reserves @12/14 Acc. Yr Loss Acc. Yr Comb. 2009 2,321 1,089-53.1 800 45.2 74.9 2010 6,010 5,625-6.4 3,011 59.2 100.3 2011 10,910 14,531 33.2 7,115 87.6 117.2 2012 9,636 10,940 13.5 8,700 57.7 98.1 2013 9,021 10,043 11.3 8,955 61.5 100.2 2014 7,870 7,870 7,870 49.3 86.9 Liquidity: Lion maintains solid balance sheet liquidity with the quick liquidity measure remaining significantly higher than the workers compensation composite, primarily due to the substantial percentage of invested assets held in cash and short-term investments. Overall liquidity has been enhanced over the most recent five-year period by strong underwriting and operating cash flows and is expected to remain solid over the near term. 2015 A.M. Best Company, Oldwick, NJ 08858 Printed July 29, 2015 www.ambest.com Page 5 of 8
LIQUIDITY ANALYSIS Company Industry Composite Gross Gross Quick Current Overall Agents Bal. Quick Current Overall Agents Bal. Liq. (%) Liq. (%) Liq. (%) to (%) Liq. (%) Liq. (%) Liq. (%) to (%) 2010 82.2 126.4 131.4 39.0 122.5 141.7 2011 80.6 133.4 139.2 2.9 38.2 123.7 141.3 5.5 2012 94.6 142.2 147.6 1.2 37.9 124.2 142.8 6.1 2013 95.7 154.9 160.3 3.1 35.9 126.6 145.6 6.5 2014 69.8 157.5 159.2 0.6 35.6 127.5 145.6 6.2 CASH FLOW ANALYSIS ($000) Company Industry Composite Underw Oper Underw Oper Underw Oper Cash Cash Cash Cash Cash Cash Cash Year Flow Flow Flow Flow (%) Flow (%) Flow (%) Flow (%) 2010 2,454 3,797 81,686 121.2 130.7 80.6 101.6 2011 8,978 10,269-36,162 176.8 182.4 84.4 105.0 2012 7,290 8,408-21,945 139.5 142.3 88.3 107.7 2013 5,608 6,531 24,286 136.4 138.2 101.4 113.5 2014 9,132 7,585-20,283 153.9 137.0 119.2 123.4 5-Yr Total 33,461 36,589 27,581 INVESTMENT LEVERAGE ANALYSIS (% OF ) Industry Company Composite Class 3-6 Bonds Real Estate/ Mtg. Other Invested Assets Common Stocks Non-Affil. Inv. Affil. Inv. Class 3-6 Bonds Common Stocks 2010 2011 0.9 1.7 2.6 4.2 23.3 2012 1.1 3.3 4.3 4.3 25.3 2013 4.2 4.2 29.9 2014 4.5 4.5 31.7 INVESTMENTS - SECURITIES Current Year Distribution of Bonds By Maturity Years Yrs-Avg 0-1 1-5 5-10 10-20 20+ Maturity Government 2.9 2.8 0.1 0.1 0.0 2 Gov t Agencies & Muni 4.9 28.0 20.8 5.0 0.8 6 Industrial & Misc 3.5 18.0 12.2 1.0 5 Total 11.3 48.8 33.1 6.1 0.8 5 2014 2013 2012 2011 2010 Bonds (000) 128,221 88,820 131,030 127,043 122,782 US Government 4.8 14.5 16.2 20.7 20.8 Foreign Government 0.6 0.4 0.4 Foreign - All Other 5.2 5.5 4.0 2.1 State/Special Revenue - US 60.8 56.7 30.7 28.9 29.9 Industrial & Misc - US 29.1 22.7 48.7 48.0 49.3 Private Issues 4.3 4.9 35.0 34.6 31.9 Public Issues 95.7 95.1 65.0 65.4 68.1 Bond Quality (%) 2014 2013 2012 2011 2010 Class 1 97.0 98.9 98.7 99.1 99.6 Class 2 3.0 1.1 0.8 0.4 0.4 Class 3 0.5 0.5 INVESTMENTS - EQUITIES 2014 2013 2012 2011 2010 Stocks (000) 3,524 3,072 2,218 1,093 Unaffiliated Common 100.0 100.0 100.0 100.0 INVESTMENTS - OTHER INVESTED ASSETS 2014 2013 2012 2011 2010 Other Inv Assets (000) 73,555 93,339 69,053 90,998 127,160 Cash 24.6 24.4 76.2 3.0 1.2 Short-Term 74.7 75.6 23.8 97.0 98.8 All Other 0.7 HISTORY Gulf Atlantic Insurance Company commenced operations on June 17, 1986. On March 31, 1999, Clarendon National Insurance Company (Clarendon) acquired Gulf Atlantic and changed the name to Lion Insurance Company. Effective April 29, 2003, the State of Florida Office of Insurance Regulation approved the acquisition of 100% ownership of Lion Insurance Company by Jamestown Holdings Corp. pursuant to Section 625.461, Florida Statutes. Clarendon received total consideration of approximately $7.9 million, which consisted of Lion s capital and surplus as of the date of acquisition, plus the value of its six state Certificates of Authority, which totaled $600,000. As a condition of the approval of the acquisition by the Florida Office of Insurance Regulation, workers compensation insurance was added to the company s Certificate of Authority and all other lines of insurance were removed. All liabilities remaining from operations prior to the date of acquisition were 100% ceded to Clarendon. 2015 A.M. Best Company, Oldwick, NJ 08858 Printed July 29, 2015 www.ambest.com Page 6 of 8
MANAGEMENT The company is a wholly owned subsidiary of Jamestown Holdings Corp., a privately held Florida corporation owned 100 percent by John A. Porreca. The company is affiliated with South East Personnel Leasing, Inc., a privately held Florida corporation owned by John A. Porreca and Deborah A. Porreca. Officers: President and Treasurer, John A. Porreca; Secretary, Grant Dalgleish. Directors: Robert B. Bennett, Carol A. Ostapchuk, John A. Porreca, Stephen L. Rohde, Mary Ann Stiles. REGULATORY An examination of the financial condition was made as of December 31, 2011, by the insurance department of Florida. The 2014 annual independent audit of the company was conducted by TaylorChandler, LLC. The annual statement of actuarial opinion is provided by Al Rhodes, SIGMA Actuarial Consulting Group, Inc. REINSURANCE Concurrent with the acquisition of Lion in 2003, a net retained liability reinsurance agreement was entered into between Lion and Lion s former parent, Clarendon National Insurance Company. Under this agreement, Clarendon accepts 100% quota share reinsurance of Lion s net retained liability under all policies of insurance or reinsurance issued or renewed by Lion prior to April 30, 2003. Accordingly, since Lion has ceded all liability for any losses under this agreement and does not have access to any loss data for claims under this agreement, the Florida Office of Insurance Regulation approved the reporting of only Lion s workers compensation losses and loss adjustment expenses on business written since April 30, 2003. Lion maintains excess of loss reinsurance on workers compensation providing coverage of 50% of $9 million in excess of $1 million per occurrence. Additionally, catastrophe reinsurance provides coverage in excess of $10 million up to $25 million. BALANCE SHEET ADMITTED ASSETS ($000) 12/31/14 12/31/13 14% 13% Bonds... 128,221 88,820 61.5 46.2 Common stock... 3,524 3,072 1.7 1.6 Cash & short-term invest... 73,055 93,339 35.0 48.5 Other non-affil inv asset... 500 0.2 Total invested assets... 205,299 185,231 98.4 96.3 Premium balances... -1,058 2,272-0.5 1.2 Accrued interest... 1,172 695 0.6 0.4 All other assets... 3,208 4,216 1.5 2.2 Total assets... 208,622 192,413 100.0 100.0 LIABILITIES & SURPLUS ($000) 12/31/14 12/31/13 14% 13% Loss & LAE reserves... 40,819 38,420 19.6 20.0 Unearned premiums... 11 64 0.0 0.0 All other liabilities... 90,240 81,524 43.3 42.4 Total liabilities... 131,070 120,008 62.8 62.4 Capital & assigned surplus... 49,062 49,062 23.5 25.5 Unassigned surplus... 28,489 23,343 13.7 12.1 Total policyholders surplus... 77,551 72,405 37.2 37.6 Total liabilities & surplus... 208,622 192,413 100.0 100.0 SUMMARY OF 2014 OPERATIONS ($000) Funds Provided from Statement of Income 12/31/14 Operations 12/31/14 Premiums earned... 23,783 Premiums collected... 26,088 Losses incurred... 4,037 Benefit & loss-related pmts 2,630 LAE incurred... 5,553 Undrw expenses incurred 8,922 LAE & undrw expenses paid 14,325 underwriting income 5,271 Undrw cash flow... 9,132 investment income... 1,663 Investment income... 1,993 Other income/expense... -139 Other income/expense... -139 Pre-tax oper income... 6,796 Pre-tax cash operations 10,986 Realized capital gains... 1,145 Income taxes incurred... 3,003 Income taxes pd (recov)... 3,401 income... 4,937 oper cash flow... 7,585 2015 A.M. Best Company, Oldwick, NJ 08858 Printed July 29, 2015 www.ambest.com Page 7 of 8
Why is this Best s Rating Report important to you? A Best s Rating Report from the A.M. Best Company showcases the opinion from the leading provider of insurer ratings of a company s financial strength and ability to meet its obligations to policyholders, as well as its relative credit risk. The A.M. Best Company is the oldest, most experienced rating agency in the world and has been reporting on the financial condition of the insurance companies since 1899. A Best s Financial Strength Rating is an independent opinion of an insurer s financial strength and ability to meet its ongoing insurance policy and contract obligations. The Financial Strength Rating opinion addresses the relative ability of an insurer to meet its ongoing insurance policy and contract obligations. The rating is not assigned to specific insurance policies or contracts and does not address any other risk, including, but not limited to, an insurer s claims-payment policies or procedures; the ability of the insurer to dispute or deny claims payment on grounds of misrepresentation or fraud; or any specific liability contractually borne by the policy or contract holder. The rating is not a recommendation to purchase, hold or terminate any insurance policy, contract or any other financial obligation issued by an insurer, nor does it address the suitability of any particular policy or contract for a specific purpose or purchaser. In arriving at a rating decision, A.M. Best relies on third-party audited financial data and/or other information provided to it. While this information is believed to be reliable, A.M. Best does not independently verify the accuracy or reliability of the information. The company information appearing in this pamphlet is an extract from the complete company report prepared by the A.M. Best Company or A.M. Best Europe Rating Services Limited. For the latest Best s Financial Strength Ratings along with their definitions and A.M. Best s Terms of Use, visit the A.M. Best website at www.ambest.com. You may also obtain AMB Credit Reports by visiting our site or calling our Customer Service department at +1-908-439-2200, ext. 5472. To expedite your request, please provide the company s identification number (AMB#). 2015 A.M. Best Company, Oldwick, NJ 08858 Printed July 29, 2015 www.ambest.com Page 8 of 8