EXHIBIT B-1.-Summary of premiums earned and losses incurred EXHIBIT B-2.—Underwriting and investment expenses for the year 1955 ASSOCIATED COMPANIES AND PLAN OF OPERATION The Industrial Insurance Co. is a wholly owned subsidiary of the National Industrial Credit Corp. which in turn is wholly owned by the Morris Plan Corporation of America. The latter company is controlled by the Equity Corp., a holding company, which controls a number of other corporations engaged in insurance, banking, real estate, and industrial operations, through direct and indirect common-stock ownership. At December 31, 1955, the Industrial Insurance Co. owned a 50-percent interest in the Bankers Security Life Insurance Society, of which the National Industrial Credit Corp. owned an additional 17.24 percent. Also, at the date of this examination, the company owned minority interests in three Illinois banks, but these latter holdings have since been disposed of. The insurance underwriting activities of the company are carried on both at its main offices at 103 Park Avenue, New York City, and at 1017 Walnut Street, Des Moines, Iowa, but the books of account are kept in Des Moines. Such activities are under the supervision of thte board of directors. All investment activities are carried on in New York under the supervision of the board of directors or an investment committee comprised of four members of the board. Office space and the services of officers and employees are furnished by the Planning and Service Corp. in New York. This corporation renders similar services to other members of the Equity Corp. group of companies and the charges for such services are made without profit or loss to Planning and Service Corp. At Des Moines, such services are provided by joint use of the facilities of the Hawkeye-Security Insurance Co., the expenses incurred being apportioned in accordance with an agreement effective October 1, 1953. The expense agreement provides for the allocation of expenses between companies in accordance with the uniform accounting regulations adopted by the National Association of Insurance Commissioners. The company is licensed to do business in 30 States and the District of Columbia. Policies issued in connection with the American Installment Credit Corp. plan of installment financing are written through Industrial Agency, Inc., Indistrial Brokers, Inc., both owned by the National Industrial Credit Corp., as well as through agencies not controlled by the Equity Corp. group. Such writing, consisting mainly of automobile physical-damage coverage, constitutes a very large portion of the company's direct business. At December 31, 1955, some of the officers and directors of the company were active in the management of other companies of the Equity group. Director David M. Milton was also president of thte Equity Corp. and a director of the Hawkeye-Security Insurance Co. and the Erie Insurance Company of Iowa. George Olmsted, president and director of the company, was also vice chairman of the board of the Equity Corp., board chairman of the Northeastern Insurance Company of Hartford, board chairman of the Hawkeye-Security Insurance Co., and president and director of the Erie Insurance Company of Iowa and Bankers Security life Insurance Society. Director and Executive Vice President W. L. Cobb held the same positions with the Hawkeye-Security Insurance Co., was the president and a director of the Northeastern Insurance Company of Hartford, a vice president and director of the Erie Insurance Company of Iowa, and executive vice president of the Bankers Security Life Insurance Society. Of the company's 9 directors, 6 were directors of the Hawkeye-Security Insurance Co., 7 were directors of the Erie Insurance Company of Iowa, and 7 were directors of the Northeastern Insurance Company of Hartford at the examination date. Of the company's 18 officers, 13 were officers in from 1 to 3 of the associated insurance companies cited above. A chart showing the Equity Corp.'s degree of ownership of various corporations follows. THE EQUITY GROUP PERCENTAGES OF OWNERSHIP OF VOTING SECURITIES AS OF DECEMBER 31, 1955 The chart is designed to show only the affiliation, direct or indirect, of the named insurance companies with other corporations in the Group. ASSETS The assets of the company at December 31, 1955, are summarized herewith: The company's investment in bonds and stocks at December 31, 1955, was accounted for as follows: By actual count at the vaults of the custodian, the First By letters of verification received from the following: State of Maine, Treasury Department. State of New Jersey, Department of Banking and Commonwealth of Virginia, Treasurer's Office.. Various savings and loan associations. By tracing the receipts of cash to the company's records on sales and redemptions and exchanges between Dec. 31, 1955, and the date the securities were counted... 20, 873. 44 309, 144.96 Total.. 55, 343.75 200,000.00 2,657, 878.99 9, 628, 022. 01 The company's securities are deposited with the First National Bank of Jersey City, Jersey City, N. J., under a custodial agreement dated August 1, 1950, under which the bank agrees to keep, receive, sell, exchange, transfer or deliver any and all securities in accordance with the transactions initiated by the company as depositor and to receive and collect all interest and dividends due the company. Cash expended or received in such transactions is to be charged or credited to the company's checking account in the banking department of the bank. Express permission is given the custodian under the agreement to register "deposited securities in the name of the bank or its registered nominee or nominees." The company's board of directors authorizes certain officers to execute transactions with the bank. The agreement may be terminated on January or July 31st of any year upon 30 days' notice by either party. To fulfill statutory requirements, United States Treasury bonds were on deposit at the date of this report in the par value of $300,000 with the State of New Jersey and in the par value of $200,000 with other States, or a total of $500,000. The company values its investment in bonds and stocks in accordance with the laws of the State of New Jersey and the resolutions adopted by the National Association of Insurance Commissioners on June 2, 1955. Since all of the bonds owned by the company at December 31, 1955, were amply secured and none were in default as to principal or interest, all were eligible for amortization. The company used the pro rata or straight-line method. |