IN2006087PEG STATE OF MINNESOTA COMMISSIONER OF COMMERCE In the Matter of Southwestern Life Insurance Company, a Texas corporation not licensed to do business in the State of Minnesota. NAIC No. 91391 CONSENT ORDER To: Southwestern Life Insurance Company c/o Margaret Ashbridge, Vice President 1700 Magnavox Way Fort Wayne, IN 46804 The Commissioner of Commerce Glenn Wilson (hereinafter "Commissioner'') has advised Southwestern Life Insurance Company (Southwestern) that as a result of an examination by the Department of Commerce (Department), pursuant to Minn. Stat. 60A.031 (2002), concerning Southwestern's conduct as a corporation allegedly engaged in the business of insurance in Minnesota, the Commissioner is prepared to commence formal proceedings against Southwestern. The Department conducted a market conduct examination of Southwestern that reviewed Southwestern's operations from January 1, 1989, to December 31, 2000. The Commissioner alleges that acting directly and through its agents that Southwestern, prior to its acquisition by an affiliate of Swiss Re (as defined below), engaged in the following violations of Minnesota insurance law: 1. Transacted the business of insurance in Minnesota without a certificate of authority, in violation of Minn. Stat. 72A.41; 2. Permitted its agents either directly or indirectly to engage in the solicitation negotiation and sale of insurance without being licensed and appointed in Minnesota in violation of Minn. Stat. 72A.02; and,
3. Failed to comply with the laws of Minnesota while engaged in the business of insurance in violation of Minn. Stat. 60A.052, subd. 1 (11). Southwestern has advised the Commissioner that Swiss Re Life & Health America Inc. ("Swiss Re"), Southwestern's sole shareholder, intends to cause the merger of Southwestern into Valley Forge Life Insurance Company ("Valley Forge"), a wholly owned subsidiary of Swiss Re. Valley Forge is authorized to transact life insurance (including variable products) and accident and health insurance in Minnesota and has been so authorized since 1959. Under the terms of the contemplated merger, Valley Forge will be the surviving insurance company, with all of Southwestern's policies, including its policies covering Minnesota residents, becoming direct obligations of Valley Forge. Subject to regulatory approvals, including without limitation the insurance regulatory approvals by California, Indiana and Texas and the approval by the United States Securities and Exchange Commission, the merger is expected to close on or about June 30, 2006 or as soon as all required government approvals have been received (the "Closing Date"). Southwestern acknowledges that it has been advised of its right to a hearing in this matter, to present arguments to the Commissioner, and to appeal from any adverse determination after a hearing, and Southwestern hereby expressly waives those rights. Southwestern further acknowledges that it has been represented by legal counsel throughout these proceedings. Southwestern has agreed to an informal disposition of this matter without a hearing, pursuant to Minn. Stat. 14.59 (2002) and Minn. R. 1400.5900 (2001). In conjunction with the informal disposition of this matter, there have been no findings of fact, conclusions of!aw or hearings conducted. In addition, Valley Forge was not examined by the Commissioner and none of the allegations of the Commissioner relate to or otherwise involve Valley Forge. The following Order is in the public interest. NOW, THEREFORE, IT IS HEREBY ORDERED that effective on the Closing Date, Southwestern shall cease and desist from any violations of Minnesota law set forth above. 3414089.!
FURTHER, IT IS HEREBY ORDERED, that Southwestern shall upon the execution of this Order; A. Immediately comply with all Minnesota laws regarding the issuance, delivery and solicitation of an insurance contract set forth in Minnesota Statutes, 72A.41, subd. 2(a) and (b) (2004) B. Within 15 days, develop policies and procedures to prevent the intentional recurrence of the issuance, delivery and solicitation of insurance to residents of Minnesota, whether directly or by its licensed and appointed insurance producers and shall submit such policies and procedures to the Commissioner for review. Such policies and procedures shall be promptly implemented upon approval thereof by the Commissioner. FURTHER, IT IS HEREBY ORDERED, that Southwestern's successor in interest, Valley Forge, shall within thirty (30) days after the merger of Southwestern into Valley Forge: A. Contact all current Minnesota policyholders holding a policy transacted by Southwestern and provide them with: 1) A merger endorsement for their policy, a copy of which is attached and incorporated herein as Exhibit A; 2) A letter explaining the reason for the issuance of the endorsement. Further the letter shall provide a toll-free customer service telephone number and mailing address such that they may call or write to have any questions answered regarding the merger endorsement; and 3) The Minnesota Life and Health Insurance Guaranty Association notice as described in Minn. Stat. 61B.28, subd. 8. B. In the event that Valley Forge learns that it does not have an accurate mailing address for any such policyholders, Valley Forge shall undertake reasonable efforts, acceptable to the Commissioner, to locate and contact such policyholders. A summary of the above activities shall be submitted for the Commissioner's review. All written contacts with Minnesota policyholders required by this Consent Order shall be by first class mail and shall be in a form and manner acceptable to the Commissioner. 3414089.1
FURTHER, IT IS HEREBY ORDERED, that shall Southwestern not complete the proposed merger described above, Southwestern shall meet with the Commissioner and come to an alternative solution acceptable to the Commissioner. FURTHERMORE, IT IS HEREBY ORDERED, pursuant to Minn. Stat. 45.027, subd. 6 (2004), that Southwestern shall pay to the State of Minnesota a civil penalty in the amount of $150,000. This Order shall be effective upon signature on behalf of the Commissioner. Sf Dated: 1 h. / GLENN WILSON Commissioner By: PATRlCKL. NELSON Deputy Commissioner 85 7 th Place East, Suite 500 St. Paul, Minnesota 55101 Telephone: (651) 296-2488 - 3414089.1
CONSENT TO ENTRY OF ORDER The undersigned, acting on behalf of Southwestern states the foregoing Consent Order has been read; the contents and effects are fully understood; and that Southwestern has been advised of their right to a hearing; that Southwestern has been represented by legal counsel; and that Southwestern consents to entry of this Order by the Commissioner of Commerce. It is further expressly understood that this Order constitutes the entire. settlement agreement between the Commissioner, on behalf of the State of Minnesota and Southwestern, including Southwestern's successor in interest Valley Forge, there being no other promises or agreements, either express or implied. Southwestern STATE OF (1\J'[) /lhja ) COUNTY OF A LL EN ) )SS This instrument was acknowledged before me on. /L 2, 2 fi1tlrgll11jzt!/:j1bc a;rte(s) of person(s)) as l 1 1!Vr. ;,(date) by '(L-1:; (type of authority, e.g., officer, trustee, etc.) of Sau 1(tt)v_.<.fem Ltfc /v1 S. 6'(parne of party on behalf of whom this instrument was executed). 3414089.1 My commission expires: Melissa J. Abel lckes Notary Public, State of Indiana County of Allen My Commission Expires: June 16, 2009