STATE OF WASHINGTON
Phone: (360) 725-7000 MIKE KREIDLER
www. nsurance wa gov STATE INSURANCE COMMISSIONER
OFFICE OF
INSURANCE COMMISSIONER
In the Matter of the Change in ) No. 12-0338
Control of ) ORDER GRANTING EXEMPTION
Commonwealth Insurance Company ) TO RCW 48.318.015
of America )
An Authorized Insurance Company ) )
TO: Stewart J. Woo, President & CFO Donald M. Parry, Secretary
Commonwealth Insurance Company Commonwealth Insurance Company
of America of America
1700 Seventh Avenue, Suite 1850 1700 Seventh Avenue, Suite 1850
Seattle, Washington 98101-1397 Seattle, Washington 98101-1397
NATURE OF PROCEEDING
Fairfax Financial Holdings Limited is the ultimate controlling person within its holding company system and the ultimate parent of Commonwealth Insurance Company of America. On December 10, 2012, Fairfax Financial Holdings Limited filed a proposed reorganization within the holding company system, and requested an order granting an exemption from the requirements of RCW 48.31 B.015 related to its proposed reorganization.
FINDINGS OF FACT
Having read the documentary evidence on file, the Insurance Commissioner finds as follows: (1) Commonwealth Insurance Company of America is a wholly owned subsidiary of Northbridge Indemnity Insurance Corporation, a Canadian insurance company. Northbridge Indemnity Insurance Corporation is a wholly owned subsidiary of Northbridge Financial Corporation, a Canadian corporation. Northbridge Financial Corporation is a wholly owned subsidiary of Fairfax Financial Holdings Limited, a Canadian pUblicly traded corporation.
(2) Before the proposed reorganization by virtue of its direct and indirect ownership through its subsidiaries, Fairfax Financial Holdings Limited controls 100 percent of the common stock shares of Commonwealth Insurance Company of America.
Attached Exhibit A includes an organizational chart, submitted with the reorganization transaction proposal, which demonstrates the current structure of the Fairfax Financial Holdings Limited holding company system before the proposed reorganization.
(3) Fairfax Financial Holdings Limited is also the ultimate controlling person of TIG Insurance Company, a California insurance company. TIG Insurance Company is a wholly owned subsidiary of TIG Insurance Group, Inc. TIG Insurance Group, Inc. is a wholly owned
Mailing Address: POBox 40255· Olympia. WA 98504-0255 Street Address: 5000 Capitol Blvd. • Tumwater WA 98501
Order No. 12-0338 December 19, 2012 Page Two
subsidiary of TIG Holdings, Inc. TIG Holdings, Inc. is a wholly owned subsidiary of Fairfax (US) Inc. Fairfax (US) Inc. is a wholly owned subsidiary of FFHL Group Limited. FFHL Group Limited is a wholly owned subsidiary of Fairfax Financial Holdings Limited.
(4) The proposed reorganization involves a proposed transaction within the Fairfax Financial Holdings Limited holding company system. The proposed transaction will occur when TIG Insurance Company acquires 100 percent of the 300,000 common stock shares issued and outstanding of Commonwealth Insurance Company of America.
The December 10, 2012, reorganization filing includes a proposed stock purchase agreement between Northbridge Indemnity Insurance Corporation and TIG Insurance Company whereby Northbridge Indemnity Insurance Corporation would sell 300,000 shares of issued and outstanding common stock of Commonwealth Insurance Company of America to TIG Insurance Company for the purchase price of approximately $19 million US dollars. The effective date of that sale and purchase transaction would be on January 1, 2013.
(5) Upon completion of the transaction, the management and board oversight of Commonwealth Insurance Company of America will change from its existing directors and officers under Northbridge Indemnity Insurance Corporation to the existing directors and officers of TIG Insurance Company. TIG Insurance Company will wholly own all of the 300,000 issued and outstanding common stock shares of Commonwealth Insurance Company of America for consideration of approximately $19 million US dollars.
Attached Exhibit B includes an organizational chart, submitted with the reorganization transaction proposal, which demonstrates the proposed structure of the Fairfax Financial Holdings Limited holding company system after the proposed reorganization.
(6) RCW 48.31 B.015 requires that any person acquiring control of a Washington domestic insurance company obtain prior approval of the Insurance Commissioner.
(7) RCW 48.31 B.015(5) authorizes the Insurance Commissioner to grant an exemption from the requirements of RCW 48.31 B.015 if the transaction is: (a) not having been made or entered into for the purpose and not having the effect of changing or influencing the control of a domestic insurer; or (b) otherwise not comprehended within the purposes of RCW 48.31B.015.
CONCLUSIONS OF LAW
(1) Fairfax Financial Holdings Limited is currently the ultimate controlling person of Commonwealth Insurance Company of America, Fairfax (US) Inc., FFHL Group Limited, Northbridge Indemnity Insurance Corporation, Northbridge Financial Corporation, TIG Holdings, Inc., TIG Insurance Company, and TIG Insurance Group, Inc.
(2) Pursuant to RCW 48.31 B.015(5), the Insurance Commissioner may grant an exemption from the requirements of RCW 48.31 B.015 if the transaction is: (a) not having been made or entered into for the purpose and not having the effect of changing or influencing the control of a domestic insurer; or (b) otherwise not comprehended within the purposes of RCW 48.31 B.015.
Order No. 12-0338 December 19, 2012 Page Three
(3) Fairfax Financial Holdings Limited, Commonwealth Insurance Company of America, Northbridge Indemnity Insurance Corporation, and TIG Insurance Company are currently affiliates of the Fairfax Financial Holdings Limited holding company system. After completion of the proposed transaction by virtue of their ownership, Fairfax Financial Holdings Limited, Commonwealth Insurance Company of America, Northbridge Indemnity Insurance Corporation, and TIG Insurance Company will continue to be affiliates of the Fairfax Financial Holdings Limited holding company system.
(4) The proposed transaction is not being made or entered into for the purpose of and does not have the effect of changing or influencing the ultimate control of Commonwealth Insurance Company of America.
(5) Fairfax Financial Holdings Limited is currently the ultimate controlling person and indirectly owns 100 percent of the common stock shares of Northbridge Indemnity Insurance Corporation, TIG Insurance Company and Commonwealth Insurance Company of America. Northbridge Indemnity Insurance Corporation directly owns 100 percent of the common stock shares of Commonwealth Insurance Company of America. After the completion of the proposed transaction, TIG Insurance Company will directly own 100 percent of the common stock shares of Commonwealth Insurance Company of America.
(6) After the proposed transaction, Fairfax Financial Holdings Limited will continue to be the ultimate controlling person within its holding company system.
ORDER
Consistent with the foregoing Findings of Fact and Conclusions of Law, it is hereby ORDERED: The proposed transaction, as set forth in the filing received by the Commissioner on December 10, 2012, in which Fairfax Financial Holdings Limited proposes to reorganize its holding company structure by its proposed sale and purchase of Commonwealth Insurance Company of America within its holding company structure, is exempt from the requirements of RCW 48.318.015.
ENTERED AT OLYMPIA, WASHINGTON, this 19th day of December, 2012. MIKE KREIDLER
Insurance Commis
J ST. ODIORNE, CPA, JD Deputy Insurance Commissioner Company Supervision Division
Current Ownership Structure
(1)Commonwealth Insurance Company of America
"EXHIBITA
l fFairfax Financial Holdings Limited
Northbridge Financial Corporation
Northbridge General Insurance orporation Northbridge Commercial Insurance Corporation Northbridge Indemnity Insurance Corporation Commonwealth Insurance Company of America Federated Insurance Company of Canada
Post-Transaction Ownership Structure Commonwealth Insurance Company of America1
EXHIBIT "B"
Fairfax Financial Holdings Limited
FFHL Group Ltd.
Fairfax (US) Inc.
TIG Holdings, Inc.
TIG Insu rance Group, Inc. TIG Insurance Company
