REPORT ON EXAMINATION AS TO THE CONDITION OF

AMERICAN MILLENNIUM INSURANCE COMPANY

BRIDGEWATER, NEW JERSEY 08807

AT DECEMBER 31, 2014

NAIC COMPANY CODE 26140

Filed

June 2, 2016

Commissioner

Department of Banking &

Insurance

Table of Contents

Salutation…..…. ................................................................................................................................................................................1

Scope of Examination ......................................................................................................................................................................2

Compliance With Prior Examination Report Recommendations ....................................................................................................3

Company History .............................................................................................................................................................................3

Territory and Plan of Operation .......................................................................................................................................................4

Management and Control.................................................................................................................................................................5

Stockholders ................................................................................................................................................................................5

Board of Directors .......................................................................................................................................................................5

Officers ........................................................................................................................................................................................6

Corporate Records .......................................................................................................................................................................7

Affiliated Parties ..........................................................................................................................................................................7

Inter-Company Agreements .........................................................................................................................................................8

Continuity of Operations ............................................................................................................................................................... 10

Financial Statements ...................................................................................................................................................................... 10

Exhibit-A: Statement of Financial Position ............................................................................................................................... 11

Exhibit-B: Statement of Operating Results ................................................................................................................................ 12

Exhibit-C: Capital and Surplus Account .................................................................................................................................... 13

Notes to the Financial Statements .................................................................................................................................................. 14

Note 1 - Bonds and Stocks ......................................................................................................................................................... 14

Note 2 - Losses and Loss Adjustment Expenses ........................................................................................................................ 14

Note 3 - Capital and Surplus ...................................................................................................................................................... 14

Summary of Recommendations ..................................................................................................................................................... 15

Conclusion….… .............................................................................................................................................................................. 15

Notarization…................................................................................................................................................................................. 16

Salutation

CHRIS CHRISTIE Governor

KIM GUADAGNO Lt. Governor

State of New Jersey DEPARTMENT OF BANKING AND INSURANCE

OFFICE OF SOLVENCY REGULATION

PO BOX 325 TRENTON, NJ 08625-0325

TEL (609) 292-5350 FAX (609) 292-6765

RICHARD J. BADOLATO Acting Commissioner

PETER L. HARTT Director

April 12, 2016

Honorable Richard J. Badolato

Acting Commissioner of Banking and Insurance

State of New Jersey

20 West State Street

Trenton, New Jersey 08625

Commissioner:

In accordance with the authority vested in you by the provisions of N.J.S.A. 17:23-22, a financial examination

has been made of the assets and liabilities, methods of conducting business and all other affairs of the:

American Millennium Insurance Company

1101 Route 22 West

Bridgewater, New Jersey 08807

NAIC Company Code 26140

a property and liability insurance organization authorized to transact business in the State of New Jersey, and

hereinafter referred to in this report as "AMIC," "American Millennium," or "Company."

2

SCOPE OF EXAMINATION

This comprehensive financial condition examination was called by the Commissioner of the New Jersey

Department of Banking and Insurance (hereafter "NJDOBI" or "the Department") pursuant to the

authority granted by Section 17:23-22 of the New Jersey Annotated Revised Statutes.

The examination was conducted using the risk-focused examination approach and addressed the three-

year period from December 31, 2011, the date of the last examination, including material transactions

and/or significant events occurring subsequent to the examination date. The examination followed

procedures formulated by the National Association of Insurance Commissioners ("NAIC") as permitted

by the Department.

The scope of this examination was framed around specific key risk areas as determined by a risk

assessment analysis, which attempted to measure the impact of these risks upon the Company's financial

condition and future viability. This entailed an evaluation of the Company's management, corporate

governance, information systems, accounting methods, system of internal control, and the annual audit

work performed by the Company's certified public accountants, encompassing the following overall

objectives:

Analysis of business risk activities deemed to have a great impact on the Company's overall

operations, including deviations from statutory accounting practices that affect solvency

assessment.

Identification of significant deviations from New Jersey insurance laws, regulations and

directives.

Compliance with the guidelines outlined in the revised NAIC Financial Condition Examiners

Handbook ("NAIC Handbook"), NAIC accreditation/codification standards, and with NJDOBI

Departmental policies and procedures.

Identification and reporting of significant operational and internal control deficiencies and

assessment of the Company's risk management processes.

Assessment of the quality and reliability of corporate governance to identify and manage the risk

environment facing the insurer in order to identify current and prospective risk areas.

Assessment of the risks that the Company's surplus is materially misstated.

Provision of a foundation for a profile of the Company's operations, risks and results to be

utilized by regulatory authorities.

Substantive procedures were completed on certain risks based upon the adequacy of controls, risk

mitigation strategies and materiality of the risks.

During the three-year exam period, the Company's assets increased $6,604,335 from $13,209,701 to

$19,814,036; liabilities increased $2,497,892 from $10,084,701 to $12,582,593 and total surplus

increased $4,106,444 from $3,125,000 to $7,231,444.

3

COMPLIANCE WITH PRIOR EXAMINATION REPORT RECOMMENDATIONS

In the prior examination report dated December 31, 2011, the following recommendations were made:

Management and Control

1. It was recommended that the Audit Committee be comprised solely of outside directors in accordance

with N.J.S.A. 17:27A-4d.

Continuity of Operations

2. It was recommended that the Company conduct and document regular Business Continuity tests,

including full restoration of its computer systems and files.

Loss and Loss Adjustment Expenses

3. It was recommended that the Company better estimate reserves in all its future financial filings.

Reinsurance

4. It was recommended that the Company record the retroactive reinsurance transactions in accordance

with SSAP No. 62R, paragraphs 28 through 30.

The Company is in compliance with all of the above recommendations.

COMPANY HISTORY

The Company was incorporated on March 6, 1986, under the name "Motor Club Fire and Casualty

Company" and commenced business operations on September 1, 1986. The original Certificate of

Incorporation of the Company dated January 24, 1986, was verified and approved by the Commissioner

of Banking and Insurance on the 6th day of March 1986. It was filed with the Somerset County Clerk and

the Department on February 14, 1986.

On May 1988, the Company changed its name to "MCA Fire and Casualty Company" (MCA) and again

to "Property Casualty Co. of MCA" (PCC of MCA) in September 1988. On February 11, 1999, Martin

Beitler, acquired PCC of MCA, and contributed $750,000 in capital. On July 1, 1999, a Certificate of

Amendment was executed to revise the First, Second, Third and Fifth articles of incorporation. The

Certificate was filed by NJDOBI on August 25, 1999, and contained the following modifications:

The first article changed the Company name to American Millennium Insurance Company.

The second article changed the Company's principal office to 1050 Wall Street West, Suite 610, in

the City of Lyndhurst, County of Bergen and State of New Jersey.

The third article enabled the Company to write insurance as specified in paragraphs "b" and "e" of

N.J.S.A. 17:17-1 et seq., i.e. property and casualty. See Consent Order below for AMIC's

authority in writing various lines of business.

The fifth article states the total authorized capital stock of the Company is $1,200,000, consisting

of 120,000 shares of common stock at a par value of $10.00 each.

4

On February 29, 2000, the Company changed its statutory address to 5 Marine View Plaza, Suite 201,

Hoboken, New Jersey 07030.

A filing was made on February 16, 2011 to increase the capital stock to $2,000,000 and add paragraphs

"a" "j" "k" and "l" of N.J.S.A. 17:17-1 to the Company’s line of business. However, these changes were

reversed on September 22, 2011, returning the Company back to the original conditions previous to the

revision.

On August 25, 2011, Citadel Risk Holdings, Inc., a holding company headquartered in the State of

Delaware, submitted paperwork to the Department, through its parent, Citadel Reinsurance Company

Ltd., to begin the process of purchasing the capital stock of the Company pursuant to the provisions of

N.J.S.A. 17:27A-1 et seq. Based on the findings of a public hearing held on October 14, 2011, the

transaction was approved by the Department on October 20, 2011. In connection with the acquisition, an

amendment to the Certificate of Incorporation dated January 9, 2012, was filed with the Department on

January 25, 2012, to change the Company’s home office to 1011 US Highway 22 West, Bridgewater,

New Jersey. American Millennium or "THE COMPANY" is identified as the registered agent upon

whom process may be served.

On September 25, 2013, the Company executed a Certificate of Amendment to effect a revision of the

Fifth article of incorporation, authorizing an increase in the number of shares of common stock from

120,000 to 250,000 at a par value of $10.00 each, thereby raising the amount of capital stock from

$1,200,000 to $2,500,000. The amendment was approved by the New Jersey Deputy Attorney General on

December 17, 2013.

TERRITORY AND PLAN OF OPERATION

American Millennium is a stock insurance company that underwrites, manages, and markets primary

property and casualty insurance and reinsurance programs aimed at small niche, underserved markets

ignored by most of the larger program writers. The Company's business consists mainly of commercial

auto liability, with an emphasis on commercial truck liability, authorized taxi auto liability, limousine,

and mobile assistance vehicles (ambulettes).

The Company has a long-term business plan with a marketing strategy focused on providing coverage to

selected small businesses. Products are marketed through approximately eighty-seven (87) independent

retail agents, except in certain select cases where wholesalers are used. The Company is also seeking to

assist agencies, in a few selected cases, with the development of captive insurance through CIRCL, its

segregated cell reinsurer. Agents and brokers are vetted and selected throughout various geographical

areas based on the composition of their book of business, and the likelihood that the Company’s products

will be marketed effectively to the targeted clients.

During the examination period, the Company began writing E-cigarette policies under the General

Liability line of business. The Company only offers policies to retail and wholesalers and covers liability

risks connected with the use of the product and premises of the insured

The Company is also generating business through a fronting arrangement with a captive agent (via

Intrepid Risk Partners, Inc., headquartered in Jamaica, NY) writing trucking policies in Pennsylvania. All

losses are transferred to the ultimate parent (Citadel Reinsurance Company, Ltd.) through a 100% quota

share reinsurance agreement.

5

The Company used Willson Reinsurance Intermediaries, Inc. ("Willson") as the reinsurance intermediary

for placing contracts with Ferguson Re (formerly Tiberius Re) and Coastal Re. A review of the

intermediary indicated it is authorized to transact business in the State of New Jersey under N.J.S.A.

17:22E-2a.

Direct premiums written during the examination period were as follows:

2012 - $10,176,067

2013 - $16,431,113

2014 - $22,132,271

As of December 31, 2014, the Company is licensed in the States of New Jersey, Pennsylvania, District of

Columbia, Maine, South Carolina and Texas.

The Company’s main administrative office, headquartered in Bridgewater, New Jersey, operates as a full

service center providing underwriting, claims, customer service and management functions. The

Company does not have employees but has engaged its affiliate, Citadel Risk Management, Inc., for

services through an Expense Reimbursement Agreement, effective November 23, 2011, which is further

discussed under the caption 'Holding Company System' of this report. These services include but are not

limited to accounting, marketing, compliance, underwriting, policy servicing, billing and collection.

The Company has various agreements in effect with several service providers that offer assistance to

AMIC in the conduct of its business. There is an agreement with Midway Insurance Management International, Inc., which is responsible for providing claim administration for a portion of the

Company’s truck cargo and truck physical damage policies, and an agreement with York Risk Services Group, Inc., for the management of claims produced under the fronting arrangement discussed above.

The Company also has an investment advisory agreement with Maple Capital Management, Inc., and an

investment management agreement with Taylor Investment Counselors, both granting full discretionary

authority to the providers with respect to AMIC’s investment assets.

MANAGEMENT AND CONTROL

Stockholders

The by-laws of the Company state that the shareholders are to meet annually for the election of directors

and to transact such other business coming before the meeting. Quorum is established by the presence of

a shareholder in person or through a proxy. The President shall preside at all shareholder meetings unless

another person is designated by the Board of Directors (hereafter "the Board").

Board of Directors

The Company’s by-laws specify that the Board shall consist of variable members. One-third of

the directorate is to be elected by the shareholders at each annual meeting. The office is held for three

years until the election and qualification of a successor. The Board is to be divided into three classes with

each class containing as nearly equal whole numbers as may be possible.

6

The duly elected members of the Board serving at December 31, 2014, were as follows:

Name and Address

Principal Occupation

Anthony B. Weller (Chairman)

London, UK SW151QR

Chief Executive Officer

Citadel Reinsurance Company, Ltd.

Arthur P. Coleman

Monroe, CT 06468

President

Citadel Risk Management, Inc.

John M. Ignatowitz

New Hope, PA 18938

Executive Vice President

Citadel Risk Management, Inc.

Richard A. Kissel

Eastchester, NY 10709

Attorney

Kissel, Hirsch & Wilmer, LLP

James E. Clemons

East Montpelier, VT 05651

Retired Attorney

The Board's composition meets the prerequisites of N.J.S.A. 17:27A-4d, paragraph 3, which requires that

at least one-third of the membership (exclusive of the Audit Committee) be made up of outside directors.

The by-laws provide for the appointment of committees, each to consist of one or more directors. The by-

laws also call for the formation of one committee made up exclusively of outside directors. The Board

established the following committee to serve this purpose, with members serving at December 31, 2014:

Audit Committee

James Clemons (Chairman)

Richard Kissel

The Audit Committee satisfies the statutory provisions of N.J.S.A. 17:27A-4d, paragraph 4, which

requires the establishment of at least one committee to be composed entirely of outside directors who are

not officers, employees, or beneficial owners of a controlling interest in the voting securities of the

Company.

This committee is responsible for recommending to the Board the selection of independent certified

accountants, the review of the Company’s financial condition and the scope and results of the independent

audit, and the nomination of candidates for election by shareholders to serve in the Board.

The Board’s location for all correspondence and meetings is the AMIC home office, 1011 Route 22 West,

Bridgewater, New Jersey 08807.

Officers

The by-laws stipulate that during its regular meeting following the annual meeting of shareholders, the

Board shall elect a president, a treasurer, a secretary and such other officers, including one or more vice

presidents, as it shall deem necessary. One person may hold two or more offices. Officers are subject to

removal at any time, with or without cause.

7

The elected officers of the Company serving at December 31, 2014, were as follows:

Name

Office

Anthony B. Weller Chairman

Arthur P. Coleman President

John M. Ignatowitz Executive Vice President, Secretary

Stephen T. List Vice President, Chief Financial Officer

Corporate Records

The by-laws stipulate that the Board shall meet immediately following and at the same place as the annual

shareholders' meeting for the purpose of electing officers and conducting any other business that may

come before the meeting. A quorum is reached when a majority of directors are present. A review of the

corporate minutes indicated that directors held their regular meetings in accordance with the Company's

by-laws, for the purpose of nominating officers and transacting business. Altogether, fourteen (14)

meetings were held during the period. Attendance at the meetings of the Board during the period of this

examination was at least 60% at all times. The Board's review and approval of key investment

transactions, conflict of interest statements, and other strategically relevant and important matters were

duly noted and documented in its minutes.

Affiliated Parties

The Company is a wholly owned subsidiary of Citadel Risk Holdings, Inc. ("CRH"), which in turn is

100% owned by Citadel Reinsurance Company, Ltd ("Citadel"). Citadel, domiciled and doing business in

Hamilton, Bermuda as of January 4, 1984, specializes in the underwriting of insurance and reinsurance.

CRH was incorporated in August 15, 2011 to serve as Citadel’s United States holding company

subsidiary for purposes of acquiring and owning the capital stock of AMIC. The Company, as a member

of a holding company system defined under N.J.S.A. 17:27A-1, has filed a registration statement in the

name of its ultimate parent in accordance with N.J.S.A. 17:27A-3.

The following chart illustrates the interrelationship of the particular companies within the holding

company system as of December 31, 2014:

8

The following is a summary of the operations of some of the members of the holding company system:

CRMI provides office support to members of the combined group of the holding company system,

including but not limited to accounting, audits, inspections, and collections.

ORP provides premium financing to policyholders of member insurance companies.

GFIC underwrites Workers’ Compensation insurance in and for residents of the State of Maine.

Inter-Company Agreements

The Company is a party to the following inter-company agreements in force at December 31, 2014:

Cash Settlement Agreement

This agreement is between AMIC and ORP and endows each of the parties with the ability to collect cash

on behalf of the other. Settlements are made on a weekly basis and are contingent upon submittal of

statements showing amounts owed. The basis for payment and reasonableness of charges are subject to

periodic review by either party. The agreement is effective as of October 28, 2008, and continues

annually until either party terminates.

Line of Credit Lending Agreement

The agreement establishes a Promissory Note between AMIC and ORP whereby the latter is provided

with a maximum $500,000 line of credit, payable on demand. Interest rate is equal to zero point twenty-

five percentage points (0.25) above the prime rate. The prime rate is defined as the variable per annum

rate of interest designated from time to time by the Bank of America. During the examination period, the

Company advanced a total of $270,000 in loans, which is outstanding as of December 31, 2011. The

agreement, effective as of June 15, 2009, was approved on June 9, 2009, and continues indefinitely until

either party terminates.

Expense Reimbursement Agreement

This agreement, dated November 23, 2011, is between the Company and CRMI and governs the

apportionment of costs incurred by CRMI in connection with its business activities in rendering services

to the Company, including but not limited to accounting, marketing, compliance, underwriting, policy

servicing, and billing and collection. Office expenses are allocated on an actual cost basis. Labor and

travel expenses for services provided by CRMI personnel are allocated on actual service

performed. AMIC is solely responsible for all its direct expenses such as allocated LAEs, premium taxes,

third party professional fees, and litigation fees, costs, and expenses. Unallocated LAEs, including

supervision of outside independent third party workers' compensation claims administrators is to be

included as part of the services provided by CRMI. The agreement was approved on the same date of its

execution, which is the date on the face of the agreement, and continues on an annual basis unless

appropriately terminated.

Affiliated Reinsurance Agreements

The Company has entered into two reinsurance agreements with Citadel, its ultimate parent. The first is

an Excess of Loss contract with an effective date of December 19, 2011. The second is a variable Quota

Share contract with an original effective date of April 1, 2012. Both of these agreements were approved

on December 15, 2011 and March 27, 2012, respectively, and are further covered under the report section

'Reinsurance.'

9

REINSURANCE

The Company had the following reinsurance in effect at December 31, 2014:

The General Liability business related to the E-Cigarette Program is ceded on a 90% quota share basis to

the Citadel Reinsurance Company, Ltd. (Citadel). In addition, the trucking business written by Intrepid is

ceded on a 100% quota share basis to Citadel.

The business written for Taxi, Trucking, Physical Damage, Other General liability and Limo is ceded as

shown in the table below. Policies written January 1, 2014 to September 30, 2014 with losses reported

September 30, 2014 and prior are ceded to Citadel as follows:

Line of Business Policy Limit Quota Share Percentage Company Retention

Taxi, Trucking, PD and Other

General Liability

1,000,000

90%

$100,000

Limo $1,500,000 91.667% $125,000

Limo $1,500,000 93.33 $100,000

Effective October 1, 2014 the Company entered into a quota share agreement with Tiberius Reinsurance

Company Ltd. and Coastal Reinsurance Company, Ltd (Facility). At that time the quota share agreement

with Citadel was amended. Based on these transactions the following changes to the reinsurance program

occurred.

For policies with effective dates January 1, 2014 to September 30, 2014 with losses reported October 1,

2014 and subsequent the business is ceded as per the following:

Line of Business Policy Limit Facility % Citadel % Company Retention

Taxi $1,000,000 75% 15% $100,000

Limo $1,500,000 86.667% 6.67% $100,000

Physical Damage $100,000 75% 15% $10,000

Trucking and other

General Liability

$1,000,000

80%

10%

$100,000

Effective October 1, 2014, all new and renewal business (except the General Liability on the E-Cigarette

program and the fronting business) is ceded to the Facility as follows:

Line of Business Limit Quota Share Percentage Company Retention

Taxi $500,000 75% $125,000

Limo $1,500,000 86.66% $200,000

Physical Damage $100,000 75% $25,000

Trucking and Other GL $1,000,000 80% $200,000

10

CONTINUITY OF OPERATIONS

FiTech Consultants, LLC ("Fitech") is responsible for maintaining, updating and testing the Company's

business continuity and disaster recovery plans. Data is backed up daily using encrypted tunnels between

Fitech's Data Centers. Physical records are retained for seven years. The Company uses the vendor, Iron

Mountain, for offsite storage needs.

Due to the changes in management of the Company and the environment in which the servers are housed

(currently in Pine Brook, NJ at FiTech’s location) the Company's Business Continuity and Disaster

Plan were revised in 2012. The Company is in the process of replacing Fitech with a new vendor. A new

plan will be developed as soon as the new vendor is able to take over the day to day operations of the

AMIC’s IT structure.

FINANCIAL STATEMENTS

The following financial statements are based on the statutory financial statements filed by American

Millennium with the Department and present the financial condition of the Company for the three year

period ending December 31, 2014. The accompanying comments on financial statements reflect any

examination adjustments to the amounts reported in the annual statement and should be considered an

integral part of the financial statements.

Exhibit-A Statement of Financial Position

as of December 31, 2014

Exhibit-B Statement of Operating Results

for the Three-Year Period ended December 31, 2014

Exhibit-C Capital and Surplus Account

for the Three-Year Period ended December 31, 2014

11

Balance Balance

per Examination per Company Examination

ASSETS @ 12/31/14 @ 12/31/14 Change Note

Bonds 3,138,283$ 3,138,283$ -$ 1

Preferred Stocks 2,185,539 2,185,539 1

Common Stocks 470,089 470,089 1

Cash and Short-term Investments 11,456,304 11,456,304

Investment Income Due and Accrued 22,771 22,771

Uncollected Premiums 992,110 992,110

Reinsurance: Amounts Recoverable 513,907 513,907

Reinsurance: Other Amounts Receivable 202,857 202,857

Net Deferred Tax Asset 191,921 191,921

Receivable from Parent, Subsidiaries and Affiliates 640,255 640,255

Total Admitted Assets 19,814,036$ 19,814,036$ -$

LIABILITIES

Losses 2,585,143$ 2,585,143$ -$ 2

Loss Adjustment Expenses 1,393,491 1,393,491 2

Commissions Payable 247,109 247,109

Other Expenses (excluding federal/foreign taxes) 235,300 235,300

Taxes, Licenses, and Fees 88,701 88,701

Unearned Premiums 1,628,774 1,628,774

Ceded Reinsurance Premiums Payable 6,570,215 6,570,215

Amounts Withheld for Account of Others 232,682 232,682

Aggregate Write-ins for Liabilities (398,822) (398,822)

Total Liabilities 12,582,593$ 12,582,593$ -$

CAPITAL AND SURPLUS

Common Capital Stock 2,500,000$ 2,500,000$ -$

Gross Paid-in and Contributed Surplus 12,666,981 12,666,981

Less: Aggr. Write-ins for Special Surplus Funds (998,788) (998,788)

Unassigned Funds (surplus) (6,936,749) (6,936,749) 3

Surplus as Regards Policyholders 7,231,444$ 7,231,444$ -$ 3

Total Liabilities, Capital and Surplus 19,814,036$ 19,814,036$ -$

EXHIBIT-A: Statement of Financial Position

As of December 31, 2014

12

EXHIBIT-B: Statement of Operating Results

For the Three-Year Period Ended December 31, 2014

2014 2013 2012

UNDERWRITING INCOME

Premiums Earned 1,856,072$ 1,372,734$ 2,336,781$

Deductions:

Losses Incurred 1,024,040 946,208 2,723,117

Loss Adjustment Expenses Incurred 1,555,423 1,006,405 668,466

Other Underwriting Expenses Incurred (539,142) (340,905) 55,844

Total Deductions 2,040,321 1,611,708 3,447,427

Net Underwriting Gain or (Loss) (184,249)$ (238,974)$ (1,110,646)$

INVESTMENT INCOME

Net Investment Income Earned 202,190 249,377 368,210

Net Realized Capital Gains or (Losses) 186,811 105,558 456,802

Net Investment Gain or (Loss) 389,001$ 354,935$ 825,012$

OTHER INCOME

Net Gain from Agents' Balances Charged Off 4,159 (43,819) (30,290)

Aggregate Write-ins for Misc. Income 368,803 (11,773) 339,490

Total Other Income 372,962$ (55,592)$ 309,200$

Dividends to Stockholders - - -

Federal and Foreign Income Taxes Incurred - - -

Net Income 577,714$ 60,369$ 23,566$

13

2014 2013 2012

Surplus as Regards Policyholders

December 31, Previous Year 5,004,972$ 3,161,711$ 3,125,000$

Net Income 577,714 60,369 23,566

Change in Net Unrealized Cap Gains/(Losses) (80,513) 92,176 67,118

Change in Net Deferred Income Tax 59,271 7,161 (53,973)

Change in Non-admitted Assets - - 459,101

Capital Changes: Paid-in 1,670,000 1,300,000 -

Surplus Adjustments: Paid-in - 383,555 -

Aggregate Write-ins for Surplus Gains/(Losses) - - (459,101)

Total Adjustments 1,648,758$ 1,782,892$ 13,145$

Change in Surplus for the Year 2,226,472 1,843,261 36,711

Surplus as Regards Policyholders

Decemebr 31, Current Year 7,231,444$ 5,004,972$ 3,161,711$

EXHIBIT-C: Capital and Surplus Account

For the Three-Year Period Ended December 31, 2014

14

NOTES TO THE FINANCIAL STATEMENTS

Note 1 - Bonds and Stocks

A review of AMIC’s custodial agreement with Charles Schwab & Co. (“Schwab”) revealed that it does

not meet the indemnification and safeguarding requirements as provided in the 2015 Financial Condition

Examiners Handbook. It is further noted that Schwab is not found in the New Jersey list of qualified

banks.

It is therefore recommended that the Company amend its custodial agreement with Schwab to include

proper protective language specifying that the Company will be indemnified for the acts of negligence or

dishonesty on the part of the custodian, and guaranteeing the prompt replacement of securities should this

occur, in accordance with the requirements of Section 1, Part III, F (Outsourcing of Critical Functions) of

the 2015 NAIC Financial Condition Handbook.

Note 2 - Losses and Loss Adjustment Expenses

The reserves for losses and loss adjustment expenses as reported by the Company at December 31, 2014

were $2,585,143 and $1,393,491, respectively. A review of these reserves by the actuarial staff from the

New Jersey Department of Banking and Insurance - Solvency Regulation Division was completed and the

review indicated that no reserve adjustment was necessary.

Data supplied to the actuaries was reconciled to the Company’s annual statement and other supporting

records without exception. Samples of outstanding reserves at December 31, 2014 as well as loss and

loss adjustment expense payments made in 2014 were verified to individual claim files and reconciled to

supporting records without material exception.

Note 3 - Capital and Surplus

Unassigned Funds

Total Unassigned Funds, as per the current examination review, amounted to a negative figure of

$(6,936,749), which is $451,677 less than the amount reported in the last examination, reflecting a 6.1%

decrease.

Surplus as Regards Policyholders

The cumulative changes in surplus and other funds during the three-year examination period is reflected

and summarized below:

Policyholder Surplus, December 31, 2011 ……...……..... $ 3,125,000

Net Cumulative Income or (Loss) ………………………. 661,649

Change in Net Unrealized Cap Gains/(Losses) …………. 78,781

Change in Net Deferred Income Tax ………………….... 12,459

Change in Non-Admitted Assets ………………………... 459,101

Dividends to Stockholders ……………….…………….... -0-

Capital Changes: Paid-in ………………………………... 2,970,000

Surplus Adjustments: Paid-in …………………………… 385,555

Agg. Write-ins for Surplus Losses ……………………… (459,101)

Surplus Adjustments: Examination Change ……………. -0-

Net Adjustments During Three-Year Period ……...…..… 4,106,444

Policyholder Surplus, December 31, 2014 …………… $ 7,231,444

15

The Company meets the statutorily required minimum capital and surplus benchmark of $2,700,000, an

excess of $4,531,444.

SUMMARY OF RECOMMENDATIONS

Bonds and Common Stocks

p.16 It is recommended that the Company amend its custodial agreement with Schwab to include

proper protective language specifying that the Company will be indemnified for the acts of

negligence or dishonesty on the part of the custodian, and guaranteeing the prompt replacement

of securities should this occur, in accordance with the requirements of Section 1, Part III, F

(Outsourcing of Critical Functions) of the 2015 NAIC Financial Condition Handbook.

CONCLUSION

The statutory condition examination was conducted by the undersigned with the support of the NJDOBI

field and office staff, at the Company's home office.

The courteous cooperation and assistance extended during the course of this examination by the Officers

of the Company and members of the office staff are hereby acknowledged.

Respectfully submitted,

/S/

_______________________________________

Robert Redden

CFE Reviewer

Representing the NJDOBI

16

NOTARIZATION

I, Robert Redden, do solemnly swear that the foregoing report of examination is hereby represented to

be a full and true statement of the condition and affairs of American Millennium Insurance Company as

of December 31, 2014, to the best of my information, knowledge and belief.

Respectfully submitted,

/S/

____________________________________

Robert Redden

CFE Reviewer

State of New Jersey

County of Mercer

Subscribed and sworn to before me, __________________________________,

on this ____1st_______ day of ______June__________, 2016.

/S/ _____________________________________

Sheila K. Tkacs

Notary Public of the State of New Jersey

My commission expires July,2020____