Report of the Examination of
Partners Mutual Insurance Company
Waukesha, Wisconsin
As of December 31, 2020
TABLE OF CONTENTS
Page
I. INTRODUCTION ..................................................................................................................1
II. HISTORY AND PLAN OF OPERATION...............................................................................3
III. MANAGEMENT AND CONTROL.........................................................................................5
IV. AFFILIATED COMPANIES...................................................................................................7
V. REINSURANCE..................................................................................................................11
VI. FINANCIAL DATA ..............................................................................................................16
VII. SUMMARY OF EXAMINATION RESULTS........................................................................26
VIII. CONCLUSION....................................................................................................................28
IX. SUMMARY OF COMMENTS AND RECOMMENDATIONS ..............................................29
X. ACKNOWLEDGMENT........................................................................................................30
Tony Evers, Governor of Wisconsin
Nathan Houdek, Commissioner of Insurance
125 South Webster Street, P.O. Box 7873 | Madison, WI 53707-7873
p: 608-266-3585 | 1-800-236-8517 | f: 608-264-6237
ocifinancial@wisconsin.gov | oci.wi.gov
March 24, 2022
Honorable Nathan Houdek
Commissioner of Insurance
State of Wisconsin
125 South Webster Street
Madison, Wisconsin 53703
Commissioner:
In accordance with your instructions, a compliance examination has been made of the affairs
and financial condition of:
PARTNERS MUTUAL INSURANCE COMPANY
Waukesha, Wisconsin
and this report is respectfully submitted.
I. INTRODUCTION
The previous examination of Partners Mutual Insurance Company (the company or Partners)
was conducted in 2016 as of December 31, 2015. The current examination covered the intervening
period ending December 31, 2020, and included a review of such subsequent transactions as deemed
necessary to complete the examination.
The examination of the company was conducted concurrently with the examination of the
Pennsylvania National Insurance Group. The Pennsylvania Insurance Department acted in the capacity
as the lead state for the coordinated examinations. Work performed by the Pennsylvania Insurance
Department was reviewed and relied on where deemed appropriate.
The examination was conducted using a risk-focused approach in accordance with the
National Association of Insurance Commissioners (NAIC) Financial Condition Examiners Handbook. This
approach sets forth guidance for planning and performing the examination of an insurance company to
evaluate the financial condition, assess corporate governance, identify current and prospective risks
(including those that might materially affect the financial condition, either currently or prospectively), and
evaluate system controls and procedures used to mitigate those risks.
2
All accounts and activities of the company were considered in accordance with the risk-
focused examination process. This may include assessing significant estimates made by management
and evaluating management’s compliance with statutory accounting principles, annual statement
instructions, and Wisconsin laws and regulations. The examination does not attest to the fair
presentation of the financial statements included herein. If during the course of the examination an
adjustment is identified, the impact of such adjustment will be documented separately at the end of the
“Financial Data” section in the area captioned "Reconciliation of Surplus per Examination."
Emphasis was placed on those areas of the company's operations accorded a high priority by
the examiner-in-charge when planning the examination.
The company is annually audited by an independent public accounting firm as prescribed by
s. Ins 50.05, Wis. Adm. Code. An integral part of this compliance examination was the review of the
independent accountant's work papers. Based on the results of the review of these work papers,
alternative or additional examination steps deemed necessary for the completion of this examination were
performed. The examination work papers contain documentation concerning the alternative or additional
examination steps performed during the examination.
Independent Actuary's Review
An independent actuarial firm was engaged under a contract with the Pennsylvania Insurance
Department. The actuary reviewed the adequacy of the group of companies’, The Penn National Group
(Group), losses and loss adjustment expense reserves. The actuary’s results were reported to the
Pennsylvania Insurance Department. As deemed appropriate, reference is made in this report to the
actuary’s conclusion.
3
II. HISTORY AND PLAN OF OPERATION
The company was organized in 1931 as Badger State Casualty Company, Limited Mutual. In
February 1992, with approval of the company’s policyholders, the company changed its name to Partners
Mutual Insurance Company. Effective January 1, 2012, Partners affiliated with Pennsylvania National
Mutual Casualty Insurance Company (Penn National). The affiliation includes a reinsurance pooling
agreement under which Partners became a participant in Penn National’s reinsurance pool, and a
management agreement under which Partners utilizes Penn National’s services. The affiliation
agreement places five representatives of Penn National on the Partners board of directors. Partners
continues to operate as a separate entity writing commercial and personal lines in Wisconsin and Iowa
but pools risks, shares common services, and has common directors with Penn National as described in
this report.
In 2020, the company wrote direct premium in the following states:
Iowa
$9,184,267
19.8%
Wisconsin
37,203,070
80.2
Total
$46,387,337
100.0%
The company is licensed in Wisconsin, Iowa, Michigan, and Pennsylvania, but writes
premium in Wisconsin and Iowa only. It discontinued writing premium in Michigan as of September 2011.
The major products marketed by the company include private passenger auto physical damage, private
passenger auto liability, homeowners multi-peril, and worker’s compensation. The major products are
marketed through 151 independent agents in Iowa and Wisconsin.
The following table is a summary of the net insurance premiums written by the company in
2020. The growth of the company is discussed in the “Financial Data” section of this report.
4
Line of Business
Direct
Premium
Reinsurance
Assumed
Fire
$ 950,014
$ 890,466
Allied lines
71,627
95,528
Homeowners multiple peril
10,503,759
2,129,274
Commercial multiple peril
2,295,797
945,186
Inland marine
1,023,490
375,542
Workers’ compensation
3,645,858
1,355,800
Other liability – occurrence
1,538,208
1,671,318
Products liability –
occurrence
309,737
453,254
Private passenger auto
liability
10,574,263
2,362,498
Commercial auto liability
1,505,966
1,861,481
Auto physical damage
13,968,618
2,747,568
Fidelity
10,409
Surety
137,742
Burglary and theft
15
Total All Lines
$46,387,337
$15,036,081
5
III. MANAGEMENT AND CONTROL
Board of Directors
The board of directors consists of nine members. Three directors are elected every two
years to serve a six-year term. Officers are elected at the board's annual meeting. Members of the
company's board of directors may also be members of other boards of directors in the holding company
group. Pursuant to the affiliation agreement, Penn National obtained control of the board of directors of
Partners by maintaining five representatives of Penn National on the nine-member Partners board. Board
members who are not current employees of the holding company group receive annual compensation in
the amount of $11,000 for serving on the board.
Currently, the board of directors consists of the following persons:
Name and Residence
Principal Occupation
Term
Expires
Jacquelyn M. Anderson
Harrisburg, Pennsylvania
Senior Vice President, Chief Financial Officer,
and Treasurer
2025
Pennsylvania National Mutual Casualty
Insurance Company
Robert B. Brandon
President and Chief Executive Officer
2027
Lewisberry, Pennsylvania
Pennsylvania National Mutual Casualty
Insurance Company
Mark H. Ewert
Executive Vice President and Secretary
2025
Brookfield, Wisconsin
Partners Mutual Insurance Company
John V. Foster IV
Senior Vice President of Insurance Operations
2023
Camp Hill, Pennsylvania
Pennsylvania National Mutual Casualty
Insurance Company
Michael N. Herro
President and Chief Executive Officer
2025
Waukesha, Wisconsin
Nickal, LLC
Richard C. Keith
President
2023
Harrisburg, Pennsylvania
Partners Mutual Insurance Company
Marc A. Lauret
Executive Vice President and Treasurer
2023
Pewaukee, Wisconsin
Duwe Metal Products Inc.
Andrew F. Potalivo
Vice President of Field Operations
2027
Enola, Pennsylvania
Pennsylvania National Mutual Casualty
Insurance Company
Mark F. Roethle
Research Associate
2027
Wauwatosa, Wisconsin
Medical College of Wisconsin
6
Officers of the Company
The officers serving at the time of this examination are as follows:
Name
Office
Richard C. Keith
President and Chief Executive Officer
Mark H. Ewert
Executive Vice President and Secretary
Robert A. Potter
Treasurer
Committees of the Board
The company's bylaws allow for the formation of one or more committees by the board of
directors. The company disbanded all committees of the board (Investment Committee, Nominating
Committee, and Compensation Committee) in August 2018. There are no committees of the board at the
time of the examination.
7
IV. AFFILIATED COMPANIES
Partners Mutual Insurance Company is a member of a holding company system. The
organizational chart below depicts the relationships among the affiliates in the group. A brief description
of the significant affiliates follows the organizational chart.
Organizational Chart
As of December 31, 2020
Pennsylvania National
Mutual Casualty
Insurance Company (PA)
NAIC CoCode #14990
Founders Insurance
Company
(NJ) NAIC CoCode
#10994
Inservco Insurance
Services, Inc.
KeyScripts, LLC
ESL, Inc.
Penn National Realty
Trust
Penn National Holding
Corporation
Penn National Security
Insurance Company
(PA) NAIC CoCode
#32441
Partners Mutual
Insurance Company (WI)
NAIC CoCode #13439
Affiliation Agreement
Pennsylvania National Mutual Casualty Insurance Company
Penn National is a multi-line property and casualty insurance company licensed in 43 states
and the District of Columbia. It is not licensed in the following states: California, Connecticut, Hawaii,
Nevada, New Hampshire, North Dakota, and Wyoming. Through an affiliation agreement, Penn National
maintains control of Partners by placing a majority of Penn National’s representatives on the Partners
board of directors. As of December 31, 2020, the audited financial statements of Penn National reported
assets of $1.4 billion, liabilities of $673.3 million, and surplus as regards policyholders of $704.0 million.
Operations for 2020 produced net income of $25.4 million.
Penn National Security Insurance Company
Penn National Security Insurance Company (Security) is a Pennsylvania stock, property and
casualty insurance company and is an indirectly wholly owned subsidiary of Penn National. Security is
party to a pooling agreement with its ultimate parent, Penn National, and Partners. Security is licensed to
write commercial and personal lines of business in the states of Alabama, Delaware, Maryland, New
Jersey, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia, and the District of Columbia.
As of December 31, 2020, the audited financial statements of Security reported assets of $995.7 million,
50%
8
liabilities of $636.5 million, and surplus as regards policyholders of $359.2 million. Operations for 2020
produced net income of $21.6 million.
Founders Insurance Company
Founders Insurance Company (Founders) is a New Jersey stock insurance company and is a
wholly owned subsidiary of Penn National. Founders is licensed to offer a full line of property and
casualty products in the state of New Jersey. Founders entered into a reinsurance agreement with Penn
National whereby Founders cedes 100% of its direct and assumed insurance business to Penn National,
including all related fees and expenses. As of December 31, 2020, the audited financial statements of
Founders reported assets of $7.0 million, liabilities of $34.7 thousand, and surplus as regards
policyholders of $6.9 million. Operations for 2020 produced a net income of $134.9 thousand.
Inservco Insurance Services, Inc.
Inservco Insurance Services, Inc. (Inservco), a wholly owned subsidiary of Penn National, is
a third-party claims administrator and full-service risk management services company. Inservco provides
claims adjusting services and other insurance-related services to individual and group self-insured
programs, insurance companies, and governmental agencies. As of December 31, 2020, the audited
GAAP financial statements of Inservco reported assets of $35.7 million, liabilities of $11.2 million, and
total common stockholder’s equity of $24.5 million. Operations for 2020 produced a net income of $6.9
million.
KeyScripts, LLC
KeyScripts, LLC (KeyScripts), a Pennsylvania-based pharmacy benefits manager (PBM) and
ancillary services provider provides PBM and home health services along with durable medical equipment
to injured workers. KeyScripts is 50% owned by Inservco. As of December 31, 2020, the audited GAAP
financial statements of KeyScripts reported assets of $6.2 million, liabilities of $650.3 thousand, and total
common stockholder’s equity of $5.5 million. Operations for 2020 produced a net income of $17.3 million.
ESL, Inc.
ESL, Inc. (ESL), a wholly owned subsidiary of Penn National, is a trustee of Penn National
Realty Trust. ESL, currently inactive, was operated as a wholesale insurance brokerage firm and a
Managing General Agent. Effective May 1, 2008, ESL sold the majority of its business to ASL, Inc., and
9
did not renew the retained policies in 2009. As of December 31, 2020, the financial statements of Penn
National reported an adjusted carrying value for ESL of $0.
Penn National Realty Trust
Penn National Realty Trust (Realty Trust), the owner of the Harrisburg home office of Penn
National, serves a property rental function. Penn National pays rent to Realty Trust for the entire home
office and parking garage complex. As of December 31, 2020, the audited GAAP financial statements of
Realty Trust reported assets of $22.4 million, liabilities of $14.9 million, and total common stockholder’s
equity of $7.5 million. Operations for 2020 produced a net loss of $322.8 thousand.
Penn National Holding Corporation
Penn National Holding Corporation (PNHC), a wholly owned subsidiary of Penn National,
owns all of the outstanding common stock of Security. As of December 31, 2020, the unaudited financial
statements of PNHC reported assets of $995.7 million, liabilities of $636.5 million, and total common
stockholder’s equity of $359.2 million. Operations for 2020 produced a net income of $21.6 million.
10
Agreements with Affiliates
Affiliation Agreement
Effective January 1, 2012, Penn National and Partners entered into an Affiliation Agreement.
Per the agreement, both entities agreed to become affiliated, which established the groundwork for all
subsequent agreements including, but not limited to, the reinsurance pooling agreement (refer to the
Reinsurance section for details) and the management agreement (discussed below).
Management Agreement
Effective January 1, 2012, Penn National and Partners entered into a Management
Agreement. Under the agreement, Penn National provides various services to Partners, including
reinsurance pricing and procurement, investment services, actuarial analysis, underwriting, human
resources services and employee benefits administration, policyholder services, legal services, corporate
and tax accounting, record keeping and financial reporting, information technology services, marketing,
compliance and strategic planning, premium collection and refunds, claims management and settlement,
and other services as the parties mutually agree. Within 30 days following the end of each quarter, Penn
National submits an expense statement, and within 15 days after receipt of the statement, Partners pays
the amount due.
11
V. REINSURANCE
The company's reinsurance portfolio and strategy at the time of the examination are
described below. A list of the companies that have a significant amount of reinsurance in force at the
time of the examination follows. The contracts contained proper insolvency provisions.
Reinsurance Pooling Agreement
On January 1, 2012, the company entered into a reinsurance pooling agreement with Penn
National and Security, which provides terms and conditions for the allocation of premiums, losses, loss
adjusting expenses, loss recoveries, and general expenses. According to the terms of this agreement,
Partners cedes 100% of premiums, losses, loss adjusting expenses, loss recoveries, and general
underwriting expenses to the pool and receives a 2% share of the pooled financial results. Penn National
and Security each assume 49% of the pool business. Penn National administers this agreement and
performs all services in connection with the agreement, including purchasing reinsurance from third
parties for the pool business.
Nonaffiliated Ceding Contracts
The company is a party to the following ceding reinsurance agreements administered by Penn
National on behalf of its subsidiaries and affiliates:
1. Type: Multiple Line Excess of Loss
Reinsurer Participation in each layer
Hannover Ruck SE 30.00%
Swiss Reinsurance America Corporation 20.00
General Reinsurance Corporation 50.00
Total 100.00%
Scope: Property: All policies classified by the company as fire, allied lines,
business owners – section I, commercial multiple peril – section I,
homeowners – section I, automobile physical damages, burglary and
theft, and inland marine.
Casualty: All policies classified by the company as general liability,
commercial multiple peril – section II, business owners – section II,
homeowners section – II, automobile liability, and worker’s compensation
and employer’s liability
Retention: Property:
First Multiple Line Excess of Loss – $1.75 million of ultimate net loss
each risk, each loss occurrence
12
Casualty:
First Multiple Line Excess of Loss – $1.75 million of ultimate net loss from
each loss occurrence
Second Clash – $5 million of ultimate net loss from each loss occurrence
Third Clash – $10 million of ultimate net loss from each loss occurrence
Fourth Clash – $15 million of ultimate net loss from each loss occurrence
Coverage: Property:
Multiple Line Excess of Loss – $3.25 million excess of $1.75 million
retention of ultimate net loss each risk, each loss occurrence with
maximum limit of $8.125 million as respects all risks in any one loss
occurrence
Casualty:
Multiple Line Excess of Loss – $3.25 million excess of $1.75 million
retention of each loss occurrence
Second Clash – $5 million excess of $5 million retention of each loss
occurrence with aggregate coverage of $5 million in any one contract
year
Third Clash – $5 million excess of $10 million retention of each loss
occurrence with aggregate coverage of $5 million in any one contract
year
Fourth Clash – $5 million excess of $15 million retention of each loss
occurrence with aggregate coverage of $5 million in any one contract
year
Effective date: January 1, 2021
Termination: Continuous; may be terminated by either party by giving 90 days’ notice
2. Type: Property Catastrophe Excess of Loss
Reinsurer First Layer Second Layer Third Layer
American Agricultural Insurance Company 7.50% 4.50% 2.475%
Ariel Re Bermuda Limited 4.00 2.00 1.750
Axis Reinsurance Company 2.00 3.05 3.500
Chord Reinsurance Limited 1.00 1.25 1.250
Davinci Reinsurance Ltd. 0.50 0.50 0.500
Employers Mutual Casualty Company 1.75 1.75 1.350
Hamilton Re, Ltd. 2.00 4.20 5.000
Hannover Re (Bermuda) Ltd. 2.00 4.50 4.275
Underwriting Members of Lloyds, London 37.50 28.50 30.050
Mapfre Re, Compania De Reaseguros S. A. 4.00 9.00 8.100
MS Amlin AG, Bermuda Branch 4.50 3.75 10.000
Odyssey Reinsurance Company 1.00 - 1.800
Partner Reinsurance Company Ltd. 2.25 2.25 2.250
Qatar Reinsurance Company Limited 0.75 2.00 1.500
QBE Reinsurance Corporation 4.00 3.60 3.600
R+V Versicherung AG 13.75 13.50 12.850
13
Renaissance Reinsurance Ltd. 0.50 0.50 0.500
Shelter Mutual Insurance Company 3.00 3.00 3.000
Swiss Reinsurance America Corporation 3.50 3.00 3.000
Validus Reinsurance, Ltd. 4.50 4.15 3.250
Total 100.00% 95.00% 100.00%
Scope: All policies classified by the company as automobile physical damage,
earthquake, fire, allied lines, inland marine, glass, and the property
portion of multiple peril type business
Retention: First Layer – $20 million each and every loss occurrence
Second Layer – $50 million each and every loss occurrence
Third Layer – $100 million each and every loss occurrence
Coverage: First Layer – $30 million each and every loss occurrence; aggregate $60
million during the contract period
Second Layer – $50 million each and every loss occurrence; aggregate
$100 million during the contract period
Third Layer – $60 million each and every loss occurrence; aggregate
$120 million during the contract period
Effective dates: January 1, 2021, to December 31, 2021, both days inclusive
3. Type: Worker’s Compensation Excess of Loss
Reinsurer Participation
Arch Reinsurance Company 18.00%
Odyssey Reinsurance Company 4.00
Partner Reinsurance Company Ltd. 4.50
Safety National Casualty Corporation 18.00
London: Various Lloyd’s Underwriters 55.50
Total 100.00%
Scope: All policies classified as Worker’s Compensation and Employers’ Liability
Retention: $20 million each and every loss occurrence
Coverage: $11 million excess of $20 million retention each loss occurrence. For
loss occurrences arising out of Acts of Terrorism, coverage is $11 million
for any one event and an aggregate limit of $11 million as respects all
events.
Effective dates: January 1, 2021, to December 31, 2021, both days inclusive
4. Type: Commercial and Personal Umbrella Liability Excess of Loss
Reinsurer: Munich Reinsurance America, Inc.
Scope: Commercial umbrella liability and commercial excess liability policies;
14
Personal umbrella liability policies
Retention: Commercial umbrella liability and commercial excess liability – $1 million
each policy
Personal umbrella liability – $1 million each policy
Coverage: Commercial umbrella liability and commercial excess liability – $9 million
each policy
Personal umbrella liability – $4 million each policy
Effective date: January 1, 2019
Termination: Continuous; may be terminated at the end of any quarter by either party
giving to the other not less than 90 days’ prior written notice
5. Type: Nuclear, Biological, Chemical and Radiological Terrorism Excess of Loss
Reinsurer: Various Lloyd’s Underwriters have 100% participation.
Scope: All loss occurrences arising out of or related to a Nuclear, Biological,
Chemical, and Radiological (NBCR) terrorist activity
Retention: $10 million each and every loss occurrence
Coverage: $21 million excess of $10 million retention of any one loss occurrence
with maximum limit of $21 million all losses occurring during the term of
the contract
Effective dates: January 1, 2021, to December 31, 2021, both days inclusive
6. Type: Cyber Security Coverage Quota Share
Reinsurer: Berkley Insurance Company
Scope: All business classified as Cyber Security Coverage
Retention: 20% of ultimate net loss on each Cyber Security Coverage policy
Coverage: 80% of ultimate net loss on each Cyber Security Coverage policy, subject
to a maximum policy limit of $1 million each occurrence and in the
aggregate
Effective date: November 1, 2015
Termination: Remain in full force until canceled
7. Type: Employment Practices Liability Quota Share
Reinsurer: General Reinsurance Corporation
Scope: Class A – Individually Underwritten Employment Practices Liability Business
Class B – Portfolio Employment Practices Liability Business
15
Retention: Class A – 50% of the first $100,000 of net loss each claim, and 10% of
the next $900 thousand of net loss each claim in excess of the first $100
thousand. The limits of liability of the company with respect to any one
policy shall be deemed not to exceed $1 million each claim/ $1 million
aggregate limit.
Class B – 50% of the policy limit. The limits of liability of the company
with respect to any one policy shall be deemed not to exceed $100
thousand each claim/ $100 thousand aggregate limit.
Coverage: Class A – 50% of the first $100 thousand of net loss each claim, and
90% of the next $900 thousand of net loss each claim in excess of the
first $100 thousand
Class B – 50% of the policy limit
Effective date: July 1, 2011; Partners was added to this contract effective September 1,
2013
Termination: Continuous; may be terminated by either party giving the other 120 days’
prior notice in writing
8. Type: Equipment Breakdown
Reinsurer: Hartford Steam Boiler Inspection and Insurance Company
Scope: Equipment Breakdown Liability
Retention: None
Coverage: $5 million for any one accident, any one policy
Effective date: December 1, 2006; Partners was added to this contract effective
November 1, 2017
Termination: Continue in force until terminated; may be terminated by either party
giving the other six months’ prior notice in writing
9. Type: Property Facultative
Reinsurer: General Reinsurance Corporation
Scope: Property Business classified as fire, allied lines, inland marine,
commercial multiple peril (property coverages), or automobile physical
damage
Retention: $5 million
Coverage: $30 million, but the limit of liability of the reinsurer is $15 million if
earthquake. The reinsurance is liable for an additional 20% of the amount
ceded on certain amounts not to exceed $7 million. Aggregate limit of
$100 million with respect to all net loss and adjustment expenses
combined on all risks involved in one occurrence
Effective date: December 1, 2016
16
Termination: Remain in full force until terminated; may be terminated by either party
giving the other 90 days’ prior notice in writing
17
VI. FINANCIAL DATA
The following financial statements reflect the financial condition of the company as reported
to the Commissioner of Insurance in the December 31, 2020, annual statement. Adjustments made as a
result of the examination are noted at the end of this section in the area captioned "Reconciliation of
Surplus per Examination." Also included in this section are schedules that reflect the growth of the
company, NAIC Insurance Regulatory Information System (IRIS) ratio results for the period under
examination, and the compulsory and security surplus calculation.
18
Partners Mutual Insurance Company
Assets
As of December 31, 2020
Net
Nonadmitted
Admitted
Assets
Assets
Assets
Bonds
$28,323,517
$
$28,323,517
Stocks:
Common stocks
1,828,472
1,828,472
Cash, cash equivalents, and short-term
investments
2,102,228
2,102,228
Investment income due and accrued
186,514
186,514
Premiums and considerations:
Uncollected premiums and agents'
balances in course of collection
3,172,434
100,487
3,071,947
Deferred premiums, agents' balances,
and installments booked but
deferred and not yet due
4,083,832
4,083,832
Reinsurance:
Amounts recoverable from reinsurers
6,839,997
6,839,997
Funds held by or deposited with
reinsured companies
120,643
120,643
Current federal and foreign income tax
recoverable and interest thereon
48,396
48,396
Net deferred tax asset
1,059,852
90,497
969,355
Guaranty funds receivable or on
deposit
22,788
22,788
Electronic data processing equipment
and software
2,009
2,009
Furniture and equipment, including
health care delivery assets
14,638
14,638
Receivable from parent, subsidiaries,
and affiliates
252,347
252,347
Write-ins for other than invested assets:
Equities and Deposits Pooled
36,048
36,048
Prepaid expenses
615,314
615,314
Miscellaneous receivables
500
500
Total Assets
$48,709,529
$821,436
$47,888,093
19
Partners Mutual Insurance Company
Liabilities, Surplus, and Other Funds
As of December 31, 2020
Losses
$10,963,658
Reinsurance payable on paid loss and loss adjustment
expenses
1,979,305
Loss adjustment expenses
3,260,775
Commissions payable, contingent commissions, and other
similar charges
481,960
Other expenses (excluding taxes, licenses, and fees)
72,761
Taxes, licenses, and fees (excluding federal and foreign
income taxes)
104,660
Unearned premiums
6,990,269
Dividends declared and unpaid: Policyholders
18,962
Ceded reinsurance premiums payable (net of ceding
commissions)
9,604,816
Funds held by company under reinsurance treaties
590
Amounts withheld or retained by company for account of
others
28,047
Remittances and items not allocated
266,485
Drafts outstanding
(25,178)
Write-ins for liabilities:
Miscellaneous payables
20,828
Advance Cash Direct Bill
70,088
Total Liabilities
33,838,016
Write-ins for other than special surplus funds:
Guaranty funds
$ 1,000,000
Unassigned funds (surplus)
13,050,077
Surplus as Regards Policyholders
14,050,077
Total Liabilities and Surplus
$47,888,093
20
Partners Mutual Insurance Company
Summary of Operations
For the Year 2020
Underwriting Income
Premiums earned
$14,911,551
Deductions:
Losses incurred
$7,983,279
Loss adjustment expenses incurred
1,608,551
Other underwriting expenses incurred
5,066,714
Total underwriting deductions
14,658,544
Net underwriting gain (loss)
253,007
Investment Income
Net investment income earned
741,045
Net realized capital gains (losses)
74,599
Net investment gain (loss)
815,644
Other Income
Net gain (loss) from agents' or premium balances charged
off
(51,528)
Finance and service charges not included in premiums
87,995
Write-ins for miscellaneous income:
Miscellaneous income
(22,517)
Total other income
13,950
Net income (loss) before dividends to policyholders and
before federal and foreign income taxes
1,082,601
Dividends to policyholders
82,517
Net income (loss) after dividends to policyholders but before
federal and foreign income taxes
Federal and foreign income taxes incurred
1,000,084
Net Income (Loss)
$ 1,000,084
21
Partners Mutual Insurance Company
Cash Flow
For the Year 2020
Premiums collected net of reinsurance
$14,813,651
Net investment income
876,863
Miscellaneous income
25,786
Total
15,716,300
Benefit- and loss-related payments
$11,108,668
Commissions, expenses paid, and
aggregate write-ins for deductions
4,929,723
Dividends paid to policyholders
86,418
Total deductions
16,124,809
Net cash from operations
(408,509)
Proceeds from investments sold,
matured, or repaid:
Bonds
$6,296,467
Stocks
874,062
Total investment proceeds
7,170,529
Cost of investments acquired (long-term
only):
Bonds
6,880,807
Stocks
851,323
Total investments acquired
7,732,130
Net cash from investments
(561,601)
Cash from financing and miscellaneous
sources:
Other cash provided (applied)
713,783
Net cash from financing and
miscellaneous sources
713,783
Reconciliation:
Net Change in Cash, Cash Equivalents,
and Short-Term Investments
(256,327)
Cash, cash equivalents, and short-term
investments:
Beginning of year
2,358,555
End of Year
$ 2,102,228
22
Partners Mutual Insurance Company
Compulsory and Security Surplus Calculation
December 31, 2020
Assets
$47,888,093
Less liabilities
33,838,016
Adjusted surplus
14,050,077
Annual premium:
Lines other than accident and health
$29,617,409
Factor
20%
Compulsory surplus (subject to a minimum of $2 million)
5,923,481
Compulsory Surplus Excess (Deficit)
$ 8,126,596
Adjusted surplus (from above)
$14,050,077
Security surplus (140% of compulsory surplus, factor
reduced 1% for each $33 million in premium written in
excess of $10 million, with a minimum factor of 110%)
8,292,873
Security Surplus Excess (Deficit)
$ 5,757,204
23
Partners Mutual Insurance Company
Analysis of Surplus
For the Five-Year Period Ending December 31, 2020
The following schedule details items affecting surplus during the period under examination as
reported by the company in its filed annual statements:
2020
2019
2018
2017
2016
Surplus, beginning of
year
$13,207,414
$11,133,276
$10,876,941
$11,917,734
$ 9,390,166
Net income
1,000,084
1,026,953
353,739
(1,452,823)
930,745
Change in net unrealized
capital gains/losses
46,503
228,427
(138,885)
165,407
(261)
Change in net deferred
income tax
(161,807)
(264,603)
256,344
(934,964)
(1,246,892)
Change in nonadmitted
assets
(95,086)
773,485
(251,339)
1,095,079
354,117
Write-ins for gains and
(losses) in surplus:
Change in
postretirement
benefits
(3,444)
(2,535)
(828)
9,920
(2,158)
Change in defined
benefit plan
additional minimum
liability
56,413
312,411
37,304
76,588
2,492,017
Surplus, End of Year
$14,050,077
$13,207,414
$11,133,276
$10,876,941
$11,917,734
Partners Mutual Insurance Company
Insurance Regulatory Information System
For the Five-Year Period Ending December 31, 2020
The company’s NAIC Insurance Regulatory Information System (IRIS) results for the period
under examination are summarized below. Unusual IRIS results are denoted with asterisks and
discussed below the table.
Ratio
2020
2019
2018
2017
2016
#1
Gross Premium to Surplus
437%
455%
509%
489%
411%
#2
Net Premium to Surplus
107
114
132
129
115
#3
Change in Net Premiums Written
0
2
4
3
2
#4
Surplus Aid to Surplus
0
0
0
0
0
#5
Two-Year Overall Operating Ratio
94
96
103*
101*
95
#6
Investment Yield
2.3
2.5
2.5
2.3*
2.1*
#7
Gross Change in Surplus
6
19
2
-9
27
#8
Change in Adjusted Surplus
6
19
2
-9
27*
#9
Liabilities to Liquid Assets
92
95
100*
107*
98
#10
Agents’ Balances to Surplus
22
24
28
27
24
#11
One-Year Reserve Development
to Surplus
0
-3
0
20*
0
#12
Two-Year Reserve Development
-4
-4
20*
26*
-5
24
Ratio
2020
2019
2018
2017
2016
to Surplus
#13
Estimated Current Reserve
Deficiency to Surplus
0
7
15
19
-3
Ratio No. 5 measures the company’s profitability over the previous two-year period. The
exceptional result in 2017 was due to the significant increase in losses and LAE incurred. The large
increase in the losses incurred and LAE incurred was primarily due to the re-evaluation of the company’s
portion of the allowance for reinsurance recoverables due to circumstances that arose during 2017. The
exceptional result in 2018 was due to the significant increase in losses and LAE incurred in 2017, which
improved in 2018, but was still higher than the usual trend.
Ratio No. 6 measures the average return on the company’s investments. The low investment
yields in 2016 and 2017 were mainly due to the company’s conservative investment portfolio. The low-
interest-rate environment also contributed to the exceptional results.
Ratio No. 8 measures the improvement or deterioration in the insurer’s financial condition
during the year and concentrates on the effect of operational results. The exceptional result in 2016 was
due primarily to the transfer of Additional Minimum Pension Liability.
Ratio No. 9 measures the company’s ability to meet short-term obligations. The exceptional
results in 2017 and 2018 have improved since 2018.
Ratio No. 11 measures the development of unpaid loss and loss adjustment expenses based
on loss and loss adjustment expenses reported one year prior. The exceptional result in 2017 was
primarily due to re-evaluation of the company’s portion of the allowance for reinsurance recoverables on
lead paint losses, due to circumstances that arose during the year.
Ratio No. 12 measures the development of unpaid loss and loss adjustment expenses based
on loss and loss adjustment expenses reported two years prior. The exceptional results in 2017 and
2018 were primarily due to re-evaluation of the company’s portion of the allowance for reinsurance
recoverables on lead paint losses.
25
Growth of Partners Mutual Insurance Company
Year
Admitted
Assets
Liabilities
Surplus as
Regards
Policyholders
Net
Income
2020
$47,888,093
$33,838,016
$14,050,077
$1,000,084
2019
47,730,496
34,523,082
13,207,414
1,026,953
2018
46,370,176
35,236,900
11,133,276
353,739
2017
46,966,000
36,089,059
10,876,941
(1,452,823)
2016
44,167,643
32,249,909
11,917,734
930,745
2015
42,763,553
33,373,387
9,390,166
376,860
Year
Gross Premium
Written
Net
Premium
Written
Premium
Earned
Loss and
LAE
Ratio
Expense
Ratio
Combined
Ratio
2020
$61,423,458
$14,998,662
$14,911,551
64.3%
33.7%
98.0%
2019
60,092,398
14,992,337
14,840,885
65.5
32.7
98.2
2018
56,686,474
14,682,503
14,326,976
70.4
30.7
101.1
2017
53,216,492
14,064,309
13,806,682
82.6
32.1
114.7
2016
48,938,934
13,718,652
13,688,295
64.2
32.8
97.0
2015
45,633,858
13,507,134
13,367,606
65.0
35.2
100.2
Partners Mutual Insurance Company’s policyholders’ surplus has been increasing each year
under the examination, except 2017. Since its affiliation with the Penn National Group (and participation
in the pooling arrangement) in 2012, the company has been able to generate small (but steady)
underwriting results. The company reported underwriting losses in 2017 and 2018 and net income each
year under the examination except 2017. The unfavorable results for 2017 were primarily due to re-
evaluation of the company’s portion of the allowance for reinsurance recoverables on lead paint losses.
26
Reconciliation of Surplus per Examination
No adjustments were made to surplus as a result of the examination. The amount of surplus
reported by the company as of December 31, 2020, is accepted.
Examination Reclassifications
No reclassifications were made as a result of the examination.
27
VII. SUMMARY OF EXAMINATION RESULTS
Compliance with Prior Examination Report Recommendations
There were no specific comments and recommendations in the previous examination report.
28
Summary of Current Examination Results
This section contains comments and elaboration on those areas where adverse findings were
noted or where unusual situations existed. Comment on the remaining areas of the company's
operations is contained in the examination work papers.
Escheat Procedures
The examination’s review of outstanding checks at year-end 2020 indicated that the company
did not file unclaimed property reports with the State of Wisconsin in 2019 and 2020, and did not escheat
outstanding checks that should have been escheated. Although the company properly escheated the
checks with the 2020 unclaimed property report filing (submitted in 2021), the November 2021 list of
outstanding checks included checks that were escheated in October 2021.
Pursuant to Unclaimed Property Statutes, ch. 177, Wis. Stat., property is presumed
abandoned if it is unclaimed by the apparent owner the earlier of five years after the owner first has a
right to demand the property, or the date on which the obligation to pay or distribute the property arises.
The unclaimed property report shall be filed on or before November 1 of each year and cover the 12
months preceding July 1 of that year. It is recommended that the company review and update its escheat
policies and procedures to ensure compliance with Wisconsin’s statutes pertaining to unclaimed property,
pursuant to ch. 177, Wis. Stat.
29
VIII. CONCLUSION
Partners Mutual Insurance Company’s policyholders’ surplus has increased each year under
the examination, with the exception of 2017. Since its 2012 affiliation with the Pennsylvania National
Group (and participation in the pooling arrangement), the company has been able to generate small (but
steady) underwriting results in most years. The company reported underwriting losses in 2017 and 2018
and net income each year under the examination with the exception of 2017.
The prior examination did not result in any examination recommendations. There was one
recommendation made as a result of the current examination. There were no adjustments made to
surplus and no reclassifications as a result of the examination. The amount of surplus reported by the
company as of December 31, 2020, is accepted.
30
IX. SUMMARY OF COMMENTS AND RECOMMENDATIONS
1. Page 28 - Escheat Procedures – It is recommended that the company review and update its
escheat policies and procedures to ensure compliance with Wisconsin’s statutes
pertaining to unclaimed property, pursuant to ch. 177, Wis. Stat.
31
X. ACKNOWLEDGMENT
The courtesy and cooperation extended during the course of the examination by the officers
and employees of the company are acknowledged.
In addition to the undersigned, the following representatives of the Office of the
Commissioner of Insurance, State of Wisconsin, participated in the examination:
Name Title
Eleanor Lu, CISA
IT Specialist
Nicholas Hartwig
Quality Control Specialist
Jerry DeArmond, CFE
Reserve Specialist
Respectfully submitted,
Kristin L. Forsberg, CFE
Insurance Financial Examiner Chief