CERTIFICATE OF ADOPTION
Notice of the proposed report for the financial examination of
RADNOR SPECIALTY INSURANCE COMPANY
10330 REGENCY PARKWAY DRIVE, STE. 100
OMAHA, NEBRASKA 68114
dated as of December 31, 2018 verified under oath by the examiner-in-charge on
June 1, 2020 and received by the company on June 9, 2020, has been adopted
without modification as the final report pursuant to Neb. Rev. Stat. § 44-5906(3) (a).
Dated this 12
th
day of June 2020.
STATE OF NEBRASKA
DEPARTMENT OF INSURANCE
Justin C. Schrader, CFE
Chief Financial Examiner
STATE OF NEBRASKA
Department of Insurance
EXAMINATION REPORT
OF
RADNOR SPECIALTY INSURANCE COMPANY
as of
December 31, 2018
TABLE OF CONTENTS
Item Page
Salutation ...................................................................................................................................................... 1
Introduction ................................................................................................................................................... 1
Scope of Examination ................................................................................................................................... 2
Description of Company:
History .................................................................................................................................................... 4
Management and Control:
Holding Company ............................................................................................................................ 5
Shareholder ...................................................................................................................................... 5
Board of Directors............................................................................................................................ 6
Officers ............................................................................................................................................ 7
Transactions with Affiliates:
Capital and Surplus Maintenance Agreement (PA) ......................................................................... 7
Capital and Surplus Maintenance Agreement (NE) ......................................................................... 8
Unconditional Financial Guaranty ................................................................................................... 8
Expense Sharing Agreement (Devon Park) ..................................................................................... 9
Joint Tax Return Agreement .......................................................................................................... 10
Investment Services Agreement .................................................................................................... 10
Intercompany Affiliate Service Agreement ................................................................................... 10
Memorandum of Agreement .......................................................................................................... 11
Territory and Plan of Operation ........................................................................................................... 11
Reinsurance:
Ceded ............................................................................................................................................. 12
Property Per Occurrence Excess of Loss Contract .................................................................... 12
Multiple Line Quota Share Reinsurance Contract ..................................................................... 13
General ........................................................................................................................................... 14
Body of Report:
Growth .................................................................................................................................................. 14
Financial Statements ............................................................................................................................. 15
Examination Changes in Financial Statements .................................................................................... 18
Compliance with Previous Recommendations ..................................................................................... 18
Commentary on Current Examination Findings:
Custodial Agreements .................................................................................................................... 18
Conflict of Interest ......................................................................................................................... 18
Summary of Comments and Recommendations ......................................................................................... 18
Acknowledgment ........................................................................................................................................ 19
Addendum ................................................................................................................................................... 20
Wayne, Pennsylvania
May 8, 2020
Honorable Bruce R. Ramge
Director of Insurance
Nebraska Department of Insurance
1135 M Street, Suite 300
Lincoln, Nebraska 68508
Dear Sir:
Pursuant to your instruction and authorizations, and in accordance with statutory
requirements, an examination has been conducted of the financial condition and business affairs of:
RADNOR SPECIALTY INSURANCE COMPANY
which has its Statutory Home Office located at
10330 Regency Parkway Drive, Ste. 100
Omaha, Nebraska 68114
with its Principal Executive Office located at
1170 Devon Park Drive
Wayne, Pennsylvania, 19087
(hereinafter also referred to as the “Company”) and the report of such examination is respectfully
presented herein.
INTRODUCTION
The Company was last examined as of April 30, 2015 by the State of Nebraska. The
current financial condition examination covers the intervening period to, and including, the close
of business on December 31, 2018, and includes such subsequent events and transactions as were
considered pertinent to this report. The States of Nebraska, Pennsylvania, and North Dakota
participated in this examination and assisted in the preparation of this report.
2
The same examination staff conducted concurrent financial condition examinations of the
Company’s affiliates, Mount Vernon Specialty Insurance Company (MVS), United States
Liability Insurance Company (USLI), Mount Vernon Fire Insurance Company (MVF), and U.S.
Underwriters Insurance Company (USU).
SCOPE OF EXAMINATION
This examination was conducted pursuant to and in accordance with both the NAIC
Financial Condition Examiners Handbook (Handbook) and Section §44-5904(1) of the Nebraska
Insurance Statutes. The Handbook requires that examiners plan and perform the examination to
evaluate the financial condition and identify prospective risks of the Company by obtaining
information about the Company including, but not limited to: corporate governance, identifying
and assessing inherent risks within the Company, and evaluating system controls and procedures
used to mitigate those risks. The examination also includes assessing the principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation and management’s compliance with Statutory Accounting Principles and Annual
Statement Instructions, when applicable to domestic state regulations.
The examination was completed under coordination of the holding company group
approach with the Pennsylvania Insurance Department as the coordinating state and the Nebraska
Department of Insurance and North Dakota Insurance Department. The companies examined
under this approach benefit to a large degree from common management, systems and processes,
and internal control and risk management functions that are administered at the consolidated or
business unit level.
The coordinated examination applies procedures sufficient to comprise a full scope
financial examination of each of the companies in accordance with the examination procedures
3
and standards promulgated by the NAIC and by the respective state insurance departments where
the companies are domiciled. The objective is to enable each domestic state to report on their
respective companies’ financial condition and to summarize key results of examination
procedures.
A general review was made of the Company’s operations and the manner in which its
business has been conducted in order to determine compliance with statutory and charter
provisions. The Company’s history was traced and has been set out in this report under the
caption “Description of Company”. All items pertaining to management and control were
reviewed, including provisions for disclosure of conflicts of interest to the Board of Directors
and the departmental organization of the Company. The Articles of Incorporation and By-Laws
were reviewed, including appropriate filings of any changes or amendments thereto. The
minutes of the meetings of the Shareholder, Board of Directors and committees, held during the
examination period, were read and noted. Attendance at meetings, proxy information, election
of Directors and Officers, and approval of investment transactions were also noted.
The fidelity bond protecting the Company’s property and interests was reviewed.
Certificates of Authority to conduct the business of insurance in the various states were inspected
and a survey was made of the Company’s general plan of operation.
Data reflecting the Company's growth during the period under review, as developed from
the Company's filed annual statements, is reflected in the financial section of this report under
the caption “Body of Report”.
The Company's reinsurance facilities were ascertained and noted, and have been
commented upon in this report under the caption "Reinsurance". Accounting records and
procedures were tested to the extent deemed necessary through the risk-focused examination
4
process. The Company’s method of claims handling and procedures pertaining to the adjustment
and payment of incurred losses were also noted.
All accounts and activities of the Company were considered in accordance with the risk-
focused examination process. This included a review of workpapers prepared by Mazars USA
LLP, the Company’s external auditors, during their audit of the Company’s accounts for the
years ended December 31, 2018. Portions of the auditor’s workpapers have been incorporated
into the workpapers of the examiners and have been utilized in determining the scope and areas
of emphasis in conducting the examination. This utilization was performed pursuant to Title 210
(Rules of the Nebraska Department of Insurance), Chapter 56, Section 013.
Any failure of items to add to the totals shown in schedules and exhibits appearing
throughout this report is due to rounding.
DESCRIPTION OF COMPANY
HISTORY
The Company is a stock property and casualty insurance company that was organized on
November 19, 2014, and commenced business on January 1, 2015, and domiciled in the State of
Nebraska.
The Articles of Incorporation and By-Laws were approved by the Nebraska
Department of Insurance on November 26, 2014. On January 15, 2015, MVS purchased all
outstanding stock of the Company. On November 26, 2016, U.S. Investment Corporation contributed all
stock of MVS to USLI, making the Company’s ultimate parent USLI.
As of December 31, 2018, the
Company was authorized to write in excess & surplus (non-admitted) in four (4) states, and was
licensed to write (admitted) business in 42 states.
The USLI Group, made up of the Company, MVS, USU, MVF, and USLI, has created
two (2) distinct brands. “Devon Park Specialty” serves as the brand for the Company and MVS,
and the “USLI” brand which serves as the brand for USLI, MVF, and USU.
5
MANAGEMENT AND CONTROL
Holding Company
The Company is a member of an insurance holding company system as defined by
Nebraska Statute. An organizational listing flowing from the ‘Ultimate Controlling Person”, as
reported in the 2018 Annual Statement is attached as an addendum to this report. A summary of
the organizational chart is included below, (subsidiaries are denoted through the use of
indentations, and unless otherwise indicated, all subsidiaries are 100% owned). The listing
includes only direct and indirect parents, subsidiaries, and affiliates of the Company.
Berskhire Hathaway Inc.
U.S. Investment Corporation
United States Liability Insurance Company
Mount Vernon Fire Insurance Company
U.S. Underwriters Insurance Company
Mount Vernon Specialty Insurance Company
Radnor Specialty Insurance Company
Shareholder
Article V of the Articles of Incorporation provides that, “the aggregate number of shares
the Company shall have authority to issue is 840,000 shares of common stock with a par value of
$5.00 per share”
As of December 31, 2018, Company records indicated that all 840,000 shares of common
stock were issued and outstanding and owned by MVS. There were no changes made to
common capital stock during the years under review.
Gross paid-in and contributed surplus in 2015 was $22,000,000, and increased to
$47,000,000 in 2016. No contributions were made in 2017 and 2018. The total change in Gross
paid-in and contributed surplus during the years under review was $25,000,000. The Company
did not pay any cash dividends during the examination period.
6
Per the By-Laws, “the annual meeting of the Shareholders for the election of Directors,
and for the transaction of such other business as may properly come before the meeting, shall be
held at such place, date, and hour as shall be fixed by the Board of Directors and designated in
the notice or waiver of notice thereof.”
Board of Directors
The Company’s By-Laws, Article II, Section 2.02 provides that, “…the number of
Directors which shall constitute the Whole Board shall initially be six (6), but may be changed
from time to time by a vote of a majority of the Whole Board… Each Director shall hold office
until his or her successor is elected and qualified, or until his or her earlier death or resignation or
removal… Each Director shall qualify as a Director of the Corporation under the applicable
insurance laws of the State of Nebraska and at least one Director shall be resident of the State of
Nebraska.”
The following persons were serving as Directors at December 31, 2018:
Name and Residence Principal Occupation
Dorinda Kauffman Culp President of the Company
Wayne, Pennsylvania
Marc David Hamburg Senior Vice President and Chief Financial Officer
Omaha, Nebraska of Berkshire Hathaway Inc.
Robert Man Cheung Ling Executive Vice President of the Company
Wayne, Pennsylvania
Thomas Patrick Nerney Chief Executive Officer of the Company
Wayne, Pennsylvania
Lauren Anne Reiley Second Vice President, Secretary of the Company
Wayne, Pennsylvania
Steven John Rivituso Executive Vice President, Treasurer of the Company
Wayne, Pennsylvania
7
Name and Residence Principal Occupation
Lisa Kathleen Kuesel Traynor Chief Operating Officer, Executive Vice President
Wayne, Pennsylvania of the Company
Officers
The Company’s By-Laws, Article IV, Section 4.01 provides that, “the Executive Officers
of the Corporation may include a President, a Secretary, a Treasurer, one or more Vice
Presidents, one or more Assistant Secretaries or Assistant Treasurers and any other offices the
Board deems advisable.”
The following is a partial listing of Senior Officers elected and serving the Company at
December 31, 2018:
Name Office
Dorinda Kauffman Culp President
Thomas Patrick Nerney Chief Executive Officer
Lauren Anne Reiley Second Vice President, Secretary
Steven John Rivistuso Executive Vice President, Treasurer
During the review of the Board of Director meeting minutes, it was noted that the Board
of Directors only review the investment transactions formally on an annual basis and was not in
compliance with Nebraska Revised Statute 44-5105(3) – Quarterly Approval of Investment
Transactions. It is recommended that the Company provide the Board of Directors with a listing
of all quarterly transactions for review and approval. Approval by the Board of Directors should
be maintained via the Board of Director meeting minutes.
TRANSACTIONS WITH AFFILIATES
Capital and Surplus Maintenance Agreement (PA)
The Company entered into a Capital and Surplus Maintenance Agreement (PA) as of
September 17th, 2015, and is effective until terminated by either party. The agreement is
between U.S. Investment Corporation, referred to as the "Parent", and the Company and MVS,
8
referred to as the "Beneficiaries". This agreement states that the Parent directly and indirectly
owns 100% of the issued and outstanding common stock of the Beneficiaries. The Parent also
recognizes the importance of obtaining the highest possible ratings for financial strength for the
Beneficiaries. During the agreement, the Beneficiaries will have capital and surplus of $16M in
MVS and $6M in the Company at all times. Also, during the term of the agreement, the Parent
shall cause the Beneficiaries to have the liquidity necessary to enable it to meet its current
obligations on a timely basis. The Parent will maintain oversight of, and monitor, the
Beneficiaries for the purpose of capital, surplus, and liquidity.
Capital and Surplus Maintenance Agreement (NE)
The Company entered into a Capital and Surplus Maintenance Agreement (NE) as of
September 14th, 2015, and is effective until terminated by either party. The agreement is
between U.S. Investment Corporation, referred to as the "Parent", and the Company and MVS,
referred to as the "Beneficiaries". This agreements states that the Parent directly and indirectly
owns 100% of the issued and outstanding common stock of the Beneficiaries. The Parent also
recognizes the importance of obtaining the highest possible ratings for financial strength for the
Beneficiaries. During the agreement, the Beneficiaries will have capital and surplus of $16M in
MVS and $6M in the Company at all times. Also, during the term of the agreement, the Parent
shall cause the Beneficiaries to have the liquidity necessary to enable it to meet its current
obligations on a timely basis. The Parent will maintain oversight of, and monitor, the
Beneficiaries for the purpose of capital, surplus, and liquidity.
Unconditional Financial Guaranty
The Company entered into an Unconditional Financial Guaranty as of September 28th,
2016, and is effective until terminated by the Superintendent based upon submission of
9
satisfactory evidence that policy obligations of the Primary Obligor respective of Maine resident
risks underwritten are satisfied. The guarantor in this agreement is MVF, the primary obligor is
the Company, and the Superintendent is Maine Insurance Superintendent. This agreement states
that the primary obligor has not met the requirements to do business in the state of Maine or
established certain standards and criteria but that the guarantor desires to provide financial
guaranty. Upon granted approval, the primary obligor and guarantor conditioned upon the
submission of satisfactory evidentiary filings sufficient to demonstrate the continuing financial
ability of the primary obligor and guarantor to perform on obligations on risks incurred in the
state of Maine. To secure the Superintendent's conditional approval and licensing of the primary
obligor to enter into the insurance business in the state of Maine, the Guarantor absolutely and
unconditionally guarantees to the Superintendent and the Superintendent's successors and
assigns, that if the primary obligor at any time fails to maintain capital surplus at a level no less
than the greater of regulatory action level risk-based capital or the minimum requirements for
capital and surplus each in the amount of $2.5M the guarantor shall automatically pay such
sums.
Expense Sharing Agreement (Devon Park)
MVS entered into an Expense Sharing Agreement with the Company on September 1,
2015. The agreement states that the Companies are affiliated and share the same offices,
facilities, equipment, and staff. Under the terms of agreement, all parties agree to allocate the
general expenses incurred by the companies on a pro-rated basis based on the net premiums
written for each company with the balances under the agreement being settled quarterly.
10
Joint Tax Return Agreement
On November 17
th
, 2003, USLI entered into a Joint Tax Return Agreement with U.S.
Investment Corporation, MVF, USU, and Berkshire Hathaway, Inc. The agreement states that
the Treasurer of Berkshire Hathaway, Inc. is authorized to file a joint tax return on behalf of the
Companies based upon the taxable profit and loss of each Company. The amendment on
November 9th, 2012, added MVS to the agreement. The amendment on January 31st, 2015
added the Company to the agreement.
Investment Services Agreement
On December 4th, 2006, USLI entered into an Investment Service Agreement with
National Indemnity Company (NICO), USU, and MVF, and is effective until terminated. The
agreement appoints NICO to be the investment manager for the Companies, and has full
authority to buy, sell and effect investment transaction on behalf of the Companies. The
Investment Services Agreement was amended on November 9th, 2012 to add MVS to the
agreement. The Investment Services Agreement was amended again on October 14th, 2015 to
add the Company to the agreement.
Intercompany Affiliate Service Agreement
On September 1
st
, 2015, USLI entered into an Intercompany Affiliate Service Agreement
with, and to provide services for, Devon Park Specialty, including the Company and MVS. The
agreement states that USLI is to perform certain administrative and special services, and to share
day-to-day operations of certain property, equipment, and facilities of the Companies locations.
The services of this agreement are to provide accounting, tax and auditing services including, but
not limited to: managements of accounts receivable and premiums; underwriting services
including monitoring and auditing business and underwriting on behalf of the Companies;
11
advising management as needed on reinsurance assumed and retroceded, claims services
including review of claims; functional support services including actuarial services,
telecommunications, IT, legal and compliance, payroll and purchasing, policy issuance, and sales
and marketing; executive services including input, guidance and strategic direction for the
Companies business plan; and personal development services including certain HR services for
employee relations, trainings, benefit plans administration and related services.
Memorandum of Agreement
On January 1
st
, 2015 USLI entered into a Memorandum of Agreement with the Company
and MVS, and is effective until terminated. The agreement states that the Companies entered into
an Intercompany Affiliate Service Agreement (discussed above) where USLI has agreed to
provide certain functional, operational, and administrative services in support of Devon Park’s
business, which includes the Company and MVS.
TERRITORY AND PLAN OF OPERATION
As evidenced by current or continuous Certificates of Authority, the Company is licensed to
transact admitted business in all states, with the exception of Alabama, California, Delaware,
Hawaii, Louisiana, Minnesota, New York, Pennsylvania, and West Virginia. The Company is also
authorized to write surplus lines (non-admitted) insurance in Pennsylvania, New York, Delaware,
and California.
The Company primarily writes property and casualty insurance, mostly within the surplus
lines market, even though the Company mainly holds licenses to write admitted business. As of
December 31, 2018, about 77% ($3.108 million) of the Company’s $4.025 million Direct
Written Premium underwritten was written as surplus lines insurance. The Company distributes
100% of the business through their agents/producers, of which all are also agents/producers for
12
the Company’s ultimate parent company, USLI. The business underwritten mimics the products
sold by USLI, with the exception that the Company has the ability to write larger risks. As of
December 31, 2018, the Company’s three (3) major products included Executive Viewpoint,
Vacant Building and Land, and Lessors Risk Only.
REINSURANCE
Ceded
Property Per Occurrence Excess of Loss Contract
Effective January 1, 2018, USLI, MVF, USU, MVS, and the Company entered into a
one-year Property per occurrence excess of loss Reinsurance Contract with a termination date of
January 1, 2019. The Company’s reinsurance limits and retention are:
1st Layer - $6 million excess of $4 Million [Company retention of $4M]
2nd Layer - $10 million excess of $10 million [Company retention of $10M]
3
rd
Layer - $20 Million excess of $20 Million [Company retention of $20M]
This treaty is underwritten by multiple reinsurers through JLT Re. A brief synopsis of
this treaty is shown below:
13
Reinsurers
Share percentage
Business Covered
Axis Specialty Limited
First layer = 16%
Second layer = 17%
Third layer = 17%
Policies becoming
effective on or after
1/1/18 and classified by
the Company as
Property
Davinci Reinsurance LTD
First layer = 1.2%
Second layer = 1.2%
Third layer = 1.2%
Hannover Rueck SE
First layer = 20%
Second layer = 20%
Third layer = 20%
MAPFRE RE, Compania de
Reaseguros, S.A.
First layer = 5%
Second layer = 5%
Third layer = 5%
Markel Bermuda Limited
First layer = 10%
Second layer = 10%
Third layer = 10%
Partner Re LTD
First layer = 7%
Second layer = 7%
Third layer = 7%
Renaissance Reinsurance LTD
First layer = 1.8%
Second layer = 1.8%
Third layer = 1.8%
The Underwriters at Lloyd’s
First layer = 39%
Second layer = 38%
Third layer = 38%
Multiple Line Quota Share Reinsurance Contract
Effective April 1, 2018, the Company and MVS entered into a multiple line quota share
reinsurance contract with Hannover Ruck SE, Partner Reinsurance Company of the U.S., the
TOA Reinsurance Company of America, and NICO. The contract applies to all property and
casualty business underwritten by the companies whether written on an occurrence basis or
claims made basis during the term of the contract. The contract is effective April 1, 2018 until
March 31, 2019. A brief synopsis of this treaty is shown below:
14
Reinsurance Coverage Property Business Casualty Business
Section A – losses up to $1
Million
Cedes 80% of $1 Million and
retains 20% of the Net Liability
for each and every risk.
Cedes 80% of $1 Million and
retains 20% of the Net
Liability for each and every
policy.
Section B – losses in excess
of $1 Million
Cedes 100% of the Net Liability
for each and every risk.
Up to $9 Million
Cedes 100% of the Net
Liability for each and every
risk. Up to $5 Million
Section A & B business
Per occurrence limit of $15 Million
Section C – Terrorism
Same basis as Section A and B but limited to $10 Million of Net
Liability in the aggregate.
Section D – Extra
Contractual Obligations and
Loss Excess of Policy
Limits
The reinsurers shall be liable to, indemnify and reinsure the
Company for 90% of any extra-contractual obligations and loss
excess of policy limits up to $10 Million.
The contract was endorsed, effective October 1, 2018, to add Cyber Liability to the
insurance covered for Section A, which ceded the reinsurers 90% of the Company’s net liability,
up and including $1 million. Section B, which included losses in Excess of $1 million, up to and
including, $5 million shall cede 100% of the liability for each risk. With both reinsurance
coverages, the examination team notes the company’s net liability is $100,000 or 10%.
General
All contracts reviewed contained standard insolvency, arbitration, errors and omissions, and
termination clauses where applicable. All contracts contained the clauses necessary to assure
reinsurance credits could be taken.
BODY OF REPORT
GROWTH
The following comparative data reflects the growth of the Company during the period
covered by this examination:
15
2015 2016 2017 2018
Bonds $10,021,922 39,954,355 11,020,556 10,942,999
Admitted assets 26,362,930 51,742,740 53,958,263 49,176,713
Loss reserves 0 2,708 82,200 226,529
Total liabilities 44,917 187,190 1,127,870 1,891,031
Capital and surplus 26,318,013 51,555,550 52,830,392 47,285,682
Premiums earned 0 8,433 94,946 351,402
Other underwriting expenses
incurred 6,915 220,707 907,826 2,398,492
Net investment income 87,152 314,252 630,339 845,391
Losses incurred 0 2,708 79,492 242,923
Net income 55,903 72,621 (189,515) (1,294,136)
FINANCIAL STATEMENTS
The following financial statements are based on the statutory financial statements filed by
the Company with the State of Nebraska Department of Insurance and present the financial
condition of the Company for the period ending December 31, 2018. The accompanying
comments on financial statements reflect any examination adjustments to the amounts reported
in the annual statements and should be considered an integral part of the financial statements. A
reconciliation of the capital and surplus account for the period under review is also included.
16
FINANCIAL STATEMENT
December 31, 2018
Assets Net
Assets Not Admitted
Assets Admitted Assets
Bonds $10,942,999 $10,942,999
Common stocks 31,375,290 31,375,290
Cash, cash equivalents, and short
term investments 5,643,933 5,643,933
Subtotal, cash and invested assets $47,962,222 $47,962,222
Investment income due and accrued 60,398 60,398
Uncollected premiums and agents’
balances in the course of collection 780,219 $ 24,098 756,121
Amounts recoverable from reinsurers 185,936 185,936
Current federal income tax 212,036 212,036
Net deferred tax asset 571,287 571,287 __________
Totals $49,772,098 $595,385 $49,176,713
Liabilities, Surplus, and Other Funds
Losses $ 226,529
Loss adjustment expenses 121,493
Commissions payable, contingent commissions, and
other similar charges 120
Taxes, licenses, and fees 61,579
Unearned premiums 304,992
Ceded reinsurance premiums payables (net of ceding
commissions) 710,978
Payable to parent, subsidiaries and affiliates 465,340
Total liabilities $ 1,891,031
Common capital stock $ 4,200,000
Gross paid in and contributed surplus $47,000,000
Unassigned funds (surplus) (3,914,318)
Total capital and surplus $47,285,682
Totals $49,176,713
17
STATEMENT OF INCOME – 2018
Underwriting Income
Premiums earned $ 351,402
Losses incurred 242,923
Loss adjustment expenses incurred 198,665
Other underwriting expenses incurred 2,398,492
Total underwriting deductions $ 2,840,080
Net underwriting gain $(2,488,678)
Investment Income
Net investment income earned $ 844,540
Net realized capital gains 851
Net investment gain $ 845,391
Net income before federal income taxes $(1,643,287)
Federal income taxes incurred (349,151)
Net income $(1,294,136)
CAPITAL AND SURPLUS ACCOUNT
2015 2016 2017 2018
Capital and surplus, beginning $ 0 $26,318,013 $51,555,550 $ 52,830,392
Net income $ 55,903 $ 72,621 $ (189,515) $ (1,294,136)
Change in net unrealized
capital gains 62,110 159,138 1,462,707 (3,686,667)
Change in net deferred income tax 5,858 7,508 25,552
Change in nonadmitted assets (80) (5,858) (589,447)
Capital adjustment – Paid-In 4,200,000
Surplus adjustment – Paid-In 22,000,000 25,000,000 _
Net change for the year $26,318,013 $25,237,537 $ 1,274,842 $ (5,544,708)
Capital and surplus, ending $26,318,013 $51,555,550 $52,830,392 $47,285,684
18
EXAMINATION CHANGES IN FINANCIAL STATEMENTS
Unassigned funds (surplus) in the amount of $(3,914,318), as reported in the Company's
2018 Annual Statement, has been accepted for examination purposes. Examination findings, in
the aggregate, were considered to have no material effect on the Company’s financial condition.
COMPLIANCE WITH PREVIOUS RECOMMENDATIONS
No recommendations were made as a result of the previous examination.
COMMENTARY ON CURRENT EXAMINATION FINDINGS
Custodial Agreements
During the review of the custodial agreements, it was noted that the custodial agreement
with U.S. Bank was not in compliance with provisions of Title 210, Chapter 81 of the Nebraska
Department of Insurance Rules and Regulations. The Company remediated the non-compliance
prior to the end of the exam, and is now in compliance with Title 210, Chapter 81.
Conflict of Interest
During the review of the 2018 conflict of interest statements that are required to be
completed by all Officers of the Company, it was noted that one (1) Officer did not complete a
conflict of interest in 2018. The Company remediated the non-compliance prior to the end of the
exam.
SUMMARY OF COMMENTS AND RECOMMENDATIONS
The following comments and recommendations have been made as a result of this
examination:
Board of Directors – Quarterly Approval of Investment Transactions – It is
recommended that the Company provide the Board of Directors with a listing of all
quarterly transactions for review and approval. Approval by the Board of Directors
should be maintained via the Board of Director meeting minutes.
19
ACKNOWLEDGMENT
The courteous cooperation extended by the Officers and employees of the Company
during this examination is hereby acknowledged.
In addition to the undersigned, Financial Examiners, Information Systems Specialists,
and Actuarial Specialists with or contracted by the Pennsylvania Insurance Department and the
North Dakota Insurance Department; participated in this examination and assisted in the
preparation of this report.
Respectfully submitted,
_____________________________
Rachel Schmoyer, CISA, CPA
Examiner-In-Charge
Baker Tilly Virchow Krause, LLP
Representing the Department of Insurance
State of Nebraska
_____________________________
Andrea Johnson, CFE
Assistant Chief Examiner - Field
Department of Insurance
State of Nebraska
20
ADDENDUM
ORGANIZATIONAL CHART
Note: The following chart includes all affiliates related to insurance operations. Affiliates of
selected non-insurance operations have been omitted. The omissions are replaced with the
phrase “and owned affiliate(s).”
Berkshire Hathaway Inc. (31.17559% owned by Warren E. Buffett)
Acme Building Brands, Inc. and owned affiliates
Affordable Housing Partners, Inc. and owned affiliates
Albecca Inc. and owned affiliates
AU Holding Company, Inc.
Applied Group Insurance Holdings, Inc.
Commercial General Indemnity, Inc.
Applied Underwriters, Inc.
AEG Processing Center No. 35, Inc.
AEG Processing Center No. 58, Inc.
American Employers Group., Inc.
Applied Investigations, Inc.
Applied Logistics, Inc.
Applied Premium Finance, Inc.
Applied Processing Center No. 60, Inc.
Applied Risk Services of New York, Inc.
Applied Risk Services, Inc.
Applied Underwriters Captive Risk Assurance Company
AUI Employer Group No. 42, Inc.
BH, LLC.
Berkshire Indemnity Group, Inc.
Combined Claim Services, Inc.
Coverage Dynamics, Inc.
Employers Insurance Services, Inc.
Maximum Subrogation and Recovery Services, L.L.C.
New West Farm Holding, LLC
North American Casualty Co.
Applied Underwriters Captive Risk Assurance Company, Inc.
California Insurance Company
Continental Indemnity Company
Illinois Insurance Company
Pennsylvania Insurance Company
Texas Insurance Company
Promesa Health Inc.
South Farm, LLC
Strategic Staff Management, Inc.
Ben Bridge Corporation and owned affiliate
Benjamin Moore & Co. and owned affiliates
Berkshire Hathaway Automotive Inc. and owned affiliates
21
Berkshire Hathaway Credit Corporation and owned affiliates
Berkshire Hathaway Energy Company and owned affiliates
Berkshire Hathaway Finance Corporation
BH Columbia Inc.
Columbia Insurance Company
American All Risk Insurance Services, Inc.
American Commercial Claims Administrators Inc.
Berkadia Commercial Mortgage Holding LLC
Berkadia Commercial Mortgage LLC
Berkadia Commercial Mortgage Partners LLC
Berkshire Hathaway Assurance Corporation
Berkshire Hathaway Direct Insurance Company
BH Finance LLC
BHG Structured Settlements, Inc.
Berkshire Hathaway Services India Private Limited
Berkshire India Limited
Resolute Management Inc.
Resolute Management Limited
Resolute Management Services Limited
Tonicstar Limited
BIFCO, LLC
British Insurance Company of Cayman
Farnam Management Services, LLC
Hawthorn Life International, Ltd.
Hawthorn Life Designated Activity Company
MedPro Group Inc
Atlanta International Insurance Company
AttPro RRG Reciprocal Risk Retention Group
Commercial Casualty Insurance Company
Medical Protective Finance Corporation
MedPro Risk Retention Services, Inc.
MedPro RRG Risk Retention Group
PLICO, Inc.
PLICO Financial, Inc
Princeton Insurance Company
Princeton Risk Protection, Inc
The Medical Protective Company
C&R Insurance Services, Inc.
C&R Legal Insurance Agency, LLC
CHP Insurance Agency, LLC
MedPro Insurance Service, LLC
Somerset Services, Inc.
Wellfleet Group, LLC
Nederlandse Reassurantie Groep N.V.
NRG America Holding Company
NRG Victory Holdings Limited
22
NRG Victory Reinsurance Limited
NetJets IP, LLC
Ringwalt & Liesche Co.
BHHC Specialty Risk, LLC
Brilliant National Services, Inc.
L. A. Terminals, Inc.
Soco West, Inc.
Whittaker Clark & Daniels, Inc.
The Duracell Company
Duracell Canada, Inc.
Duracell Comercial e Importadora do Brazil Ltda.
Duracell Industrial Operations, Inc.
Duracell (Jiangxi) Technologies Co., Ltd.
Duracell U.S. Holding LLC
Duracell Australia Pty. Ltd.
Duracell Austria GmbH.
Duracell Batteries BVBA
Duracell Belgium Distribution BVBA
Duracell Dutch Holding B.V.
Duracell (China) Limited
China Guangzhou Branch
Duracell Solutions BVBA
Duracell France SAS
Duracell Germany GmbH
Duracell Sweden AB
Duracell Global Services Nigeria Limited
Duracell Hong Kong Limited
Duracell International Operations Sàrl
DDI Batteries Mexico S.de R.L. de C.V.
DDI Batteries Mexico Services S. de R.L. de C.V
Duracell Panama, S. de R.L.
Duracell Singapore Pte. Ltd.
Duracell Enterprise Development (Shanghai) Co. Ltd.
Duracell Italy S.r.l.
Duracell Japan Godo Kaisha
Duracell Korea Ltd.
Duracell Middle East DMCC
Duracell Netherlands B.V.
Duracell Pilas Limitada
Duracell Poland Sp. z.o.o
Duracell Ukraine
Duracell Portugal, Sociedade Unipessoal Lda.
Duracell Russia OOO
DURACELL SATIS VE DAGITIM LIMITED SIRKETI
Duracell Services, S.L.
Duracell South Africa Proprietary Limited
23
Duracell Spain S.L.
Duracell UK Limited
Taiwan Duracell Enterprised Limited
Duracell U.S. Operations, Inc.
Duracell Distributing, Inc.
Duracell Manufacturing, Inc.
BH Housing LLC
BH Shoe Holdings, Inc. and owned affiliates
BHSF, Inc. and owned affiliates
Blue Chip Stamps, Inc.
Borsheim Jewelry Company, Inc.
Brooks Sports, Inc. and owned affiliates
Business Wire, Inc. and owned affiliates
Central States of Omaha Companies, Inc.
Central States Indemnity Co. of Omaha
CSI Life Insurance Company
CSI Processing, LLC
Charter Brokerage Holdings Corp. and owned affiliates
Clayton Homes, Inc. and owned affiliates
CORT Business Services Corporation and owned affiliates
CTB International Corp. ("CTBI") and owned affiliates
Detlev Louis Motorrad-Vertriebsgesellschaft GmbH and owned affiliates
Forest River, Inc. and owned affiliates
Fruit of the Loom, Inc. and owned affiliates
Gateway Underwriters Agency, Inc.
General Re Corporation
Faraday Holdings Limited
Faraday Capital Limited
Faraday MGA Limited
Faraday Underwriting Limited
GRF Services Limited
Gen Re Intermediaries Corporation
Gen Re Long Ridge, LLC
General Reinsurance Corporation
Elm Street Corporation
General Re Japan Service Company Limited
General Re Compania de Reaseguros, S.A.
General Re Life Corporation
Idealife Insurance Company
General Reinsurance AG
Gen Re Beirut s.a.l. offshore
Gen Re Support Services Mumbai Private Limited
General Reinsurance Africa Ltd.
General Reinsurance AG Escritório de Representação no Brasil Ltda.
General Reinsurance Life Australia Ltd.
General Reinsurance México, S.A.
24
General Reinsurance Australia Ltd
General Star Indemnity Company
General Star Management Company
General Star National Insurance Company
Genesis Insurance Company
Genesis Management and Insurance Services Corporation
GRC Realty Corporation
Railsplitter Holdings Corporation
New England Asset Management, Inc.
New England Asset Management Limited
GRD Holdings Corporation
General Re Financial Products Corporation
United States Aviation Underwriters, Inc.
Canadian Aviation Insurance Managers Ltd.
Helzberg's Diamond Shops, Inc.
International Dairy Queen, Inc. and owned affiliates
Johns Manville Corporation and owned affiliates
Jordan's Furniture, Inc.
LiquidPower Specialty Products Inc. and owned affiliates
Marmon Holdings, Inc. and owned affiliates
McLane Company, Inc. and owned affiliates
MiTek Industries, Inc. and owned affiliates
MS Property Company and owned affiliate
National Fire & Marine Insurance Company
National Indemnity Company
Affiliated Agency Operations Company
biBerk Insurance Services, Inc.
BDTI-A Plum Corp.
Berkshire Hathaway Homestate Insurance Company
Berkshire Hathaway International Insurance Limited
Berkshire Hathaway European Insurance Designated Activity Company
Berkshire Hathaway Life Insurance Company of Nebraska
BHA Real Estate Holdings, LLC
BHG Life Insurance Company
Financial Credit Investment III (Cayman), L.P.
Financial Credit Investment III SPV-B (Cayman). L.P.
First Berkshire Hathaway Life Insurance Company
Flight Safety International Inc. and owned affiliates
Garan, Incorporated and owned affiliates
Berkshire Hathaway Specialty Insurance Company and owned affiliates
Brookwood Insurance Company
Burlington Northern Santa Fe, LLC and owned affiliates
Santa Fe Pacific Insurance Company
Continental Divide Insurance Company
Cypress Insurance Company
Douglas Building, LLC
25
Finial Holdings, Inc.
Finial Reinsurance Company
GEICO Corporation
Boat America Corporation and owned affiliates
GEICO Marine Insurance Company
GEICO Advantage Insurance Company
GEICO Choice Insurance Company
GEICO County Mutual Insurance Company
GEICO Financial Services, Gmbh
GEICO Indemnity Company
Criterion Insurance Agency
GEICO Casualty Company
GEICO Products, Inc.
GEICO Secure Insurance Company
Government Employees Insurance Company and owned affiliates
GEICO General Insurance Company
GEICO Insurance Agency, Inc.
Government Employees Financial Corporation
PIS QOZ Fund 2018-A, LP
Plaza Financial Services Company
International Insurance Underwriters, Inc.
Maryland Ventures, Inc.
Plaza Resources Company
Top Five Club, Inc.
MLMIC Insurance Company
HUM Marketing Group, Inc.
MLMIC Services, Inc.
National Indemnity Company of Mid-America
National Indemnity Company of the South
Oak River Insurance Company
Redwood Fire and Casualty Insurance Company
SLI Holding Limited and owned affiliates
Tenecom Limited and owned affiliate
Kyoei Fire & Marine Insurance Co. Limited
The British Aviation Insurance Company Limited
Transfercom Limited
USG Corp
VT Insurance Acquisition Sub Inc.
Van Enterprises, Inc.
MPP Co., Inc.
Old United Casualty Company
Old United Life Insurance Company
Vantage Reinsurance, LLC
WestGUARD Insurance Company
AmGUARD Insurance Company
AZGUARD Insurance Company
26
EastGUARD Insurance Company
GUARDco, Inc.
NorGUARD Insurance Company
National Liability & Fire Insurance Company
Nebraska Furniture Mart, Inc. and owned affiliates
NetJets Inc. and owned affiliates
Northern States Agency, Inc.
Global Aerospace Underwriting Managers Limited
Associated Aviation Underwriters Limited
BAIG Limited
British Aviation Insurance Group (Technical Services) Limited
British Aviation Insurance Group (Underwriting Services) Limited
GAUM Holdings Inc.
Fireside Partners, Inc.
Global Aerospace, Inc.
Global Aerospace Underwriters Limited
Global Aerospace Underwriting Managers (Canada) Limited
Global Limited
OTC Worldwide Holdings, Inc. and owned affiliates
Precision Castparts Corp. and owned affiliates
Precision Steel Warehouse, Inc. and owned affiliates
R. C. Willey Home Furnishings
Richline Group, Inc. and owned affiliates
See's Candy Shops, Inc. and owned affiliate
Shaw Industries Group, Inc. and owned affiliates
Star Furniture Company
The Buffalo News, Inc.
The Fechheimer Brothers Company and owned affiliate
The Lubrizol Corporation and owned affiliates
The Pampered Chef, Ltd. and owned affiliates
TTI, Inc. and owned affiliates
U.S. Investment Corporation
United States Liability Insurance Company
Mount Vernon Fire Insurance Company
U.S. Underwriters Insurance Company
Mount Vernon Specialty Insurance Company
Radnor Specialty Insurance Company
XTRA Corporation and owned affiliates
State of Pennsylvania
County of Philadelphia,
Rachel Schmoyer
, being duly sworn, states as follows:
1. I have authority to represent the Department of Insurance of the State of Nebraska in the examination of Radnor
Specialty Insurance Company and Mount Vernon Specialty Insurance Company.
2. The Department of Insurance of the State of Nebraska is accredited under the National Association of Insurance
Commissioners Financial Regulation Standards and Accreditation.
3. I have reviewed the examination work papers and examination report, and the examination of Radnor Specialty
Insurance Company and Mount Vernon Specialty Insurance Company was performed in a manner consistent with
the standards and procedures required by the Department of Insurance of the State of Nebraska.
The affiant says nothing further.
____________________________________
Examiner-in-Charge’s Signature
Subscribed and sworn before me by ______________________ on this 1
st
day of June, 2020
(SEAL)
____________________________________
Notary Public
My commission expires ________________________ [date].
Rachel E Schmoyer
Rachel Schmoyer
Commonwealth of Virginia
Notarized online using audio-video communication
01/31/2023
