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TABLE OF CONTENTS
SALUTATION .............................................................................................................................. 1
SCOPE OF EXAMINATION ...................................................................................................... 1
SUMMARY OF SIGNIFICANT FINDINGS ............................................................................ 3
COMPANY HISTORY ................................................................................................................ 3
GENERAL ................................................................................................................................. 3
CAPITALIZATION ..................................................................................................................... 4
DIVIDENDS ............................................................................................................................... 5
MANAGEMENT AND CONTROL ........................................................................................... 5
DIRECTORS .............................................................................................................................. 5
OFFICERS ................................................................................................................................. 6
CORPORATE RECORDS ............................................................................................................ 6
INSURANCE HOLDING COMPANY SYSTEM ............................................................................. 7
AFFILIATED AGREEMENTS ..................................................................................................... 7
TERRITORY AND PLAN OF OPERATION ........................................................................... 8
REINSURANCE ........................................................................................................................... 9
FINANCIAL STATEMENTS.................................................................................................... 10
STATEMENT OF ASSETS ......................................................................................................... 11
STATEMENT OF LIABILITIES, CAPITAL AND SURPLUS ......................................................... 12
STATEMENT OF OPERATIONS ............................................................................................... 13
RECONCILIATION OF CAPITAL AND SURPLUS FOR THE PERIOD FROM THE PRIOR
EXAMINATION ....................................................................................................................... 14
ANALYSIS OF CHANGES IN FINANCIAL STATEMENTS RESULTING FROM THE EXAMINATION ......................................................................................................................... 15
COMMENTS ON FINANCIAL STATEMENT ITEMS ........................................................ 15
SUBSEQUENT EVENTS ........................................................................................................... 17
COMPLIANCE WITH PRIOR EXAMINATION RECOMMENDATIONS ...................... 17
SUMMARY OF RECOMMENDATIONS ............................................................................... 17
CONCLUSION ........................................................................................................................... 18
SALUTATION May 19, 2017
Honorable Trinidad Navarro Commissioner of Insurance Delaware Department of Insurance Rodney Building 841 Silver Lake Boulevard Dover, Delaware 19904
Commissioner:
In compliance with instructions and pursuant to statutory provisions contained in
Certificate of Authority No. 16.028, dated March 30, 2016, an examination has been made of the
affairs, financial condition and management of
PARK AVENUE LIFE INSURANCE COMPANY
with its statutory home office located at 2711 Centerville Road, Suite 400, Wilmington,
Delaware 19808. The examination was conducted at the principal administrative offices of The
Guardian Life Insurance Company of America located at 7 Hanover Square, New York, New
York 10004. The report of examination thereon is respectfully submitted.
SCOPE OF EXAMINATION
We have performed our multi-state examination of Park Avenue Life Insurance Company
(the “Company”). The last examination of the Company covered the period of January 1, 2008
through December 31, 2011. This examination of the Company covers the period of January 1,
PARK AVENUE LIFE INSURANCE COMPANY
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2012 through December 31, 2015. Our examination was conducted concurrently with our
examination of the Company’s affiliate, The Guardian Insurance & Annuity Company, Inc.
We conducted our examination in accordance with the National Association of
Insurance Commissioners (NAIC) Financial Condition Examiners Handbook (Handbook).
The NAIC Handbook requires that we plan and perform the examination to evaluate the
financial condition, assess corporate governance, identify current and prospective risks of the
company and evaluate system controls and procedures used to mitigate those risks. An
examination also includes identifying and evaluating significant risks that could cause an
insurer’s surplus to be materially misstated both currently and prospectively.
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.
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 following the Company’s financial statements.
This examination report includes significant findings of fact, along with general
information about the insurer and its financial condition. There may be other items identified
during the examination that, due to their nature (e.g., subjective conclusions, proprietary
information, etc.), are not included within the examination report but separately communicated
to other regulators and/or the Company.
During the course of this examination, consideration was given to work performed by the
Company’s external accounting firm, PricewaterhouseCoopers, LLP. Certain auditor work
papers have been incorporated into the examination work papers.
PARK AVENUE LIFE INSURANCE COMPANY
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SUMMARY OF SIGNIFICANT FINDINGS
There were no significant findings or material changes to the Company’s financial
statements as a result of this examination.
COMPANY HISTORY
General
The Company was incorporated as AM Life Insurance Company (“AM Life”) under the
laws of the Commonwealth of Massachusetts on November 19, 1964, and commenced business
on April 9, 1965. It was chartered as a stock company to issue policies for life, annuities and
accident and health insurance.
The Company was ultimately controlled by American Mutual Liability Insurance
Company (“AMLICO”) until January 5, 1987, when ultimate control was transferred to The
Cooperants Mutual Life Insurance Society (“Cooperants Mutual”) as a result of an acquisition of
the Company’s direct parent by Cooperants Mutual and its affiliates. On June 1, 1988, the
Company’s name was changed to First International Life Insurance Company as part of a
structural reorganization within Cooperants Mutual. The Company was sold in 1992 as a result
of the bankruptcy of Cooperants Mutual. Effective April 17, 1992, ultimate control of the
Company was transferred to Standard Management Corporation (“Standard Management”) as
result of an acquisition of the Company’s direct parent by Standard Management.
On March 18, 1996, the Company was purchased by The Guardian Insurance and
Annuity Company, Inc. (“GIAC”), a wholly owned subsidiary of The Guardian Life Insurance
Company of America (“The Guardian”). On December 23, 1996, The Guardian purchased the
Company from GIAC and re-domesticated it from Massachusetts to Delaware. In conjunction
PARK AVENUE LIFE INSURANCE COMPANY
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with the re-domestication, the name of the Company was changed to Park Avenue Life Insurance
Company.
The Guardian and its subsidiaries provide financial services throughout the United States
including a full range of insurance, investment, securities brokerage, and other financial products
and services. Principal products and services include individual life and disability insurance;
group life and health insurance; annuities; mutual funds; pension and retirement related
investments and administration; and asset management and securities brokerage. The Company
was acquired by The Guardian as part of a growth strategy that included the acquisition of
several entities and blocks of business within its ‘Reinsurance Profit Center’. The Reinsurance
Profit Center stopped acquiring blocks of business in the early 2000’s. As a result, the
Reinsurance Profit Center business and related entities, including the Company, were placed in
run-off.
Capitalization
The Company’s Certificate of Incorporation authorizes the issuance of 100 thousand
shares of common stock with a par value of $25 per share. As of December 31, 2015, the
Company had 100 thousand common shares issued and outstanding totaling $2.5 million in
common capital stock. All outstanding shares of the Company are owned by The Guardian. As
of December 31, 2015, the Company reported gross paid-in and contributed surplus of $169.9
million. The following chart summarizes the Company’s reported capital stock and gross paid-in
and contributed surplus from the prior examination date to December 31, 2015.
Capital StockGross Paid-in &
Contributed Surplus
Total Capital Stock and Gross Paid-in & Contributed Surplus
December 31, 2011 2,500,000$ 169,941,332$ 172,441,332$ Activity - - -
December 31, 2015 $ 2,500,000 $ 169,941,332 $ 172,441,332
PARK AVENUE LIFE INSURANCE COMPANY
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Dividends
The Company paid an extraordinary dividend in the amount of $25 million to The
Guardian on December 23, 2015. The dividend was approved by the Delaware Department of
Insurance. No other dividends were paid during the examination period.
MANAGEMENT AND CONTROL
Directors
Pursuant to the general Corporation Laws of the State of Delaware, as implemented by
the Company’s Certificate of Incorporation and bylaws, the business and affairs of the Company
must be exercised by, or under the authority of, its Board of Directors. The Company’s bylaws
require its Board of Directors consist of not less than five members. Directors are elected
annually by the stockholders for a term of one year. Directors duly elected and serving as of
December 31, 2015, were as follows:
Name Business Affiliation
Dean Anthony Del Vecchio Executive Vice President, Chief Information Officer Head of Enterprise Shared Services The Guardian Life Insurance Company of America
Michael Nicholas Ferik Senior Vice President of Individual Markets Guardian Life Insurance Company of America & Guardian Investor Services LLC
John Hunter Flannigan Senior Vice President and Corporate Controller The Guardian Life Insurance Company of America
Sean David Quinn Vice President Law and Corporate Secretary The Guardian Life Insurance Company of America
PARK AVENUE LIFE INSURANCE COMPANY
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Michael Slipowitz Senior Vice President, Corporate Chief Actuary and Chief Risk Officer
The Guardian Life Insurance Company of America
Officers
Officers were appointed in accordance with the Company’s bylaws during the period
under examination. The bylaws require appointment of the following executive officers: a
President, a Vice President, a Secretary and a Treasurer. The Board may appoint other officers
and agents at its discretion. Any number of offices may be held by the same person. The
primary officers of the Company serving as of December 31, 2015, were as follows:
Name Title
Michael Slipowitz President & Chief Executive Officer
Alphonsus Lawrence Padavano Assistant Vice President and Controller
Sonya Lee-Anne Crosswell Director, Corporate Secretary
Walter Robert Skinner Vice President, Treasurer
Jeffrey Joseph Butscher Second Vice President and Chief Compliance Officer
Karen Ladd Farnsworth-Einsidler Vice President, Investment and Real Estate Counsel
Roland Raymond Rose Associate Actuary
Thomas George Sorell Executive Vice President and Chief Investment Officer
Corporate Records
The recorded minutes of the sole shareholder and Board of Directors were reviewed for
the period under examination. The minutes adequately documented and approved Company
transactions and events, including approval of investment transactions in accordance with 18
Del. C. §1304.
PARK AVENUE LIFE INSURANCE COMPANY
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Insurance Holding Company System
The Company is a member of an insurance holding company system as defined under 18
Del. C. §5001 of the Delaware Insurance Code. The Company is a wholly owned subsidiary of
The Guardian, which is a mutual insurance company that is wholly owned by its policyholders.
The following is an abbreviated organizational chart depicting the Company’s primary
relationships with affiliated entities within the holding company system as of December 31,
2015:
Company Domicile % Own The Guardian Life Insurance Company of America New York Park Avenue Life Insurance Company Delaware 100% Family Service Life Insurance Company Texas 100% Sentinel American Life Insurance Company Texas 100%
Family Service Life Insurance Company (“FSLIC”) and Sentinel American Life
Insurance Company (“SALIC”) were both acquired by the Company in 1998 from Liberty
National Life Insurance Company. FSLIC is licensed in forty-three states, the District of
Columbia and the U.S. Virgin Islands. SALIC is licensed in twelve states. Prior to being placed
into run-off, both companies were direct writers of preneed and final expense insurance. No new
policies have been written by either FSLIC or SALIC since the mid-1990s.
Affiliated Agreements
Tax Allocation Agreement - Effective July 19, 2001, and covering all tax years after
December 31, 1982, the Company became party to a ‘Tax Sharing Agreement’ between
The Guardian and its specified subsidiaries. In accordance with the agreement, each
qualifying member of the group computes its tax provision and liability on a separate
return basis, but may, where applicable, recognize benefits of net operating losses and
PARK AVENUE LIFE INSURANCE COMPANY
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capital losses utilized in the consolidated group. Subsidiary tax liabilities/benefits are
settled subsequent to the filing of the federal income tax return.
General Operating Expense Agreement – Effective December 31, 2007, the Company
entered into an ‘Amended and Restated Agreement for Services and Reimbursement
Agreement’ with The Guardian and its subsidiaries. The agreement supersedes all prior
agreements for the provision of services and reimbursement between The Guardian and
all other parties to the agreement. In accordance with the agreement, The Guardian
provides office space, furniture, equipment, building utilities, clerical staff, employee
benefits and any other services including but not limited to policy services, consulting
services and advisory services. The agreement authorizes The Guardian to enter into
other agreements to provide assets or services on behalf of all parties. Expenses are
allocated to the parties based on a direct basis or through an allocation system developed
by The Guardian's cost accounting department utilizing assets, head count or overhead
information. The agreement requires settlement within forty-five days following the end
of each quarter and permits payment by offset.
TERRITORY AND PLAN OF OPERATION
As of December 31, 2015, the Company was licensed to write life insurance; accident &
health insurance; disability insurance; and fixed and variable annuities in forty-eight states and
the District of Columbia. The Company is not licensed in Hawaii or New York. The
Company’s book of business consists of direct written insurance, reinsurance assumed and
reinsurance ceded that is in run-off. The following is a summary of the Company’s direct
premium and annuity considerations on a gross and net basis by line of business for the year-
PARK AVENUE LIFE INSURANCE COMPANY
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ended December 31, 2015:
Line of Business Direct Assumed Ceded Total % of TotalOrdinary life insurance 579,492$ 1,817,195$ 58,627$ 2,338,060$ 99.8%Group life insurance 2,889 - - 2,889 0.1%Ordinary individual annuities 564 1,547 - 2,111 0.1%
582,945$ 1,818,742$ 58,627$ 2,343,060$ 100%
The Company’s policy administration is outsourced to either a third-party administrator
or reinsurance entities that perform the same functions. As of December 31, 2015, the majority
of the Company’s policies, based on consolidated reserves, were administered by Concentrix
Insurance Administration Solutions Corporation (“CIS”) in accordance with a third-party
insurance administrative services agreement. CIS provides transactional and record keeping
services related to: premiums, commissions, policy loans and surrenders, claims and reinsurance.
REINSURANCE
The Company’s ceded reinsurance program utilizes various modified coinsurance
agreements, coinsurance agreements, and combinations thereof, and yearly renewable term
agreements to provide for reinsurance of selected individual life policies and group life and
group health contracts in accordance with the specified coverage and limitations of each
agreement. The following is a summary of the Company’s gross and net premium for the year-
ended 2015 and gross and net reserves as of December 31, 2015:
Direct premium and annuity considerations 582,945$ Direct contract reserves 11,718,631$ Assumed premium and annuity considerations 1,818,742 Assumed contract reserves 173,968,739
Total gross premium 2,401,687$ Total gross reserves 185,687,370$ Ceded to affiliates - Ceded to affiliates - Ceded to non-affiliates 58,627 Ceded to non-affiliates 96,911
Total ceded 58,627$ Total ceded 96,911$ Net premium and annuity considerations 2,343,060$ Net contract reserves 185,590,459$
Gross and Net Premium Summary Gross and Net Reserve Summary
PARK AVENUE LIFE INSURANCE COMPANY
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FINANCIAL STATEMENTS
The following financial statements are based on the statutory financial statements filed by
the Company with the Delaware Department of Insurance and present the financial condition of
the Company for the period ending December 31, 2015:
Statement of Assets Statement of Liabilities, Capital and Surplus Statement of Operations Reconciliation of Capital and Surplus
PARK AVENUE LIFE INSURANCE COMPANY
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Statement of Assets As of December 31, 2015
Ledger Assets
Assets Not
Admitted
Net Admitted
Assets Notes
Bonds 223,972,662$ -$ 223,972,662$ 1Common stocks 27,461,227 - 27,461,227 2Cash 703,835 - 703,835 Cash equivalents 7,499,282 - 7,499,282 1Contract loans 2,788,883 - 2,788,883 Investment income due and accrued 3,850,454 - 3,850,454 Uncollected premiums and agents' balances 96,231 85,292 10,939 Deferred premiums 775,118 - 775,118 Net deferred tax asset 4,074,084 2,664,473 1,409,611 Receivables from parent; subsidiaries and affiliates 325,976 - 325,976
Total assets 271,547,752$ 2,749,765$ 268,797,987$
PARK AVENUE LIFE INSURANCE COMPANY
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Statement of Liabilities, Capital and Surplus As of December 31, 2015
NotesAggregate reserve for life and contracts 185,590,459$ 3Liability for deposit-type contracts 3,276,680 Life contract claims 10,181,943 Premiums and annuity considerations received in advance 30,741 Interest maintenance reserve 10,322,289 Commissions to agents due or accrued 79,098 Commissions and expense allowances payable on reinsurance assumed 16,128 General expenses due or accrued 82,356 Taxes, licenses and fees due or accrued, excluding federal income taxes 405,943 Current federal and foreign income taxes 138,050 Unearned investment income 13,805 Amounts withheld or retained by company as agent or trustee 7,871 Amounts held for agents' account; including $17,296 agents' credit balances 4,919 Remittances and items not allocated 627,471 Asset valuation reserve 1,823,507 Payable to parent; subsidiaries and affiliates 1,932,393 Aggregate write-ins for liabilities 3,589,998
Total liabilities 218,123,651$
Common capital stock 2,500,000$ Gross paid in and contributed surplus 169,941,332 Unassigned funds (surplus) (121,766,996)
Total capital and surplus 50,674,336$
Total liabilities, capital and surplus 268,797,987$
PARK AVENUE LIFE INSURANCE COMPANY
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Statement of Operations For the Year Ended December 31, 2015
Premium and Other Revenue:
Premiums and annuity considerations 2,343,060$ Net investment income 15,338,845 Amortization of Interest Maintenance Reserve 1,043,306 Commissions and expense allowances on reinsurance ceded 13,680 Aggregate write-ins for miscellaneous income 140,770
Total premium and other revenue 18,879,661$
Benefits:
Death benefits 15,481,929$ Annuity benefits 22,386 Disability benefits and benefits under accident and health contracts 3,187,634 Surrender benefits and withdrawals 1,732,084 Interest and adjustments on contract or deposit-type contract funds 110,945 Payments on supplementary contracts with life contingencies 13,335 Increase (decrease) in aggregate reserves (10,493,275)
Total benefits 10,055,038$
Other ExpensesCommissions on premiums, annuity considerations and deposit-type contracts 11,923$ Commissions and expense allowances on reinsurance assumed 1,132,960 General insurance expenses 1,113,613 Insurance taxes; licenses and fees; excluding federal income taxes 272,221 Increase in loading on deferred and uncollected premiums (7,987) Aggregate write-ins for deductions 43,627
Total other expenses 2,566,357$
6,258,266$
Federal and foreign income taxes incurred (benefit) 1,334,771 Net realized capital gains (losses) (109)
4,923,386$
Net gain from operations before federal income tax and capital gains (losses)
Net income (loss)
PARK AVENUE LIFE INSURANCE COMPANY
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Reconciliation of Capital and Surplus for the Period from the Prior Examination as of December 31, 2011 to December 31, 2015
(In Thousands)
Common Capital Stock
Gross Paid-in & Contributed
Surplus
Unassigned Funds
Surplus TotalDecember 31, 2011 2,500$ 169,941$ (117,018)$ 55,423$ 2012 Net income (loss) - - 5,256 5,256 2012 Changes in capital & surplus (1) - - (3,004) (3,004) December 31, 2012 2,500$ 169,941$ (114,765)$ 57,676$
2013 Net income (loss) - - 6,659 6,659 2013 Changes in capital & surplus (1) - - 3,507 3,507 December 31, 2013 2,500$ 169,941$ (104,599)$ 67,842$
2014 Net income (loss) - - 2,170 2,170 2014 Changes in capital & surplus (1) - - 5,678 5,678 December 31, 2014 2,500$ 169,941$ (96,752)$ 75,690$
2015 Net income (loss) - - 4,923 4,923 2015 Changes in capital & surplus (1) - - (4,939) (4,939) 2015 Dividends (2) - - (25,000) (25,000) December 31, 2015 2,500$ 169,941$ (121,767)$ 50,674$
(1): Changes in capital & surplus for each year may include: change in net unrealized capital gains/losses, change in net deferred income tax, changes in non-admitted assets, and change in asset valuation reserve. (2): The Company paid an extraordinary dividend to The Guardian on December 23, 2015.
PARK AVENUE LIFE INSURANCE COMPANY
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ANALYSIS OF CHANGES IN FINANCIAL STATEMENTS RESULTING FROM THE EXAMINATION
There were no adjustments to the Company’s financial statements as a result of this
examination.
COMMENTS ON FINANCIAL STATEMENT ITEMS
Note 1: Schedule D – Bonds Schedule E – Cash Equivalents
$ 223,972,662 7,499,282
Total Bonds $ 231,471,944 As of December 31, 2015, the Company reported total bond investments on Schedule D –
Part 1 with book adjusted carrying values in the amount of $223.9 million, which was $38.7
million less than the total fair market value of $262.6 million. The Company reported an
additional $7.5 million in United States Treasury bills on Schedule E – Part 2 – Cash
Equivalents. As of December 31, 2015, bonds were comprised of the following classes:
Schedule D - Bonds: Book Value % of Book Value Fair ValueIndustrial and Miscellaneous - Issuer Obligations 206,910,365$ 89.4% 240,386,723$ U.S. Government Bonds - Issuer Obligations 10,337,748 4.5% 12,934,375 All Other Governments - Issuer Obligations 5,696,386 2.5% 8,190,666 Industrial and Miscellaneous - Other 1,028,163 0.4% 1,123,763
Total Schedule D - Bonds 223,972,662$ 96.8% 262,635,527$
Schedule E - Cash Equivalents:
United States Treasury Bills 7,499,282$ 3.2% 5,499,671$
Total Bonds 231,471,944$ 100% 268,135,198$
Of the Company’s total bond holdings, $126.6 million or 54.7% were categorized as
Class 1 with respect to NAIC credit quality standards. NAIC Class 2 bonds totaled $99.3 million
and represented 42.9% of total bonds. NAIC Class 3 bonds totaled $2.5 million and 1.1% of
PARK AVENUE LIFE INSURANCE COMPANY
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total bonds. The remaining holdings were NAIC Class 5 bonds totaling $3.1 million and
accounted for 1.3% of total bonds. Of the total bond holdings, 98.3% were publicly traded
securities and 1.7% were private placements. The Company segments its portfolios as part of its
asset and liability matching program. As of December 31, 2015, bond maturities were structured
with 6.8%, 20.9%, 17.8%, 47.3% and 7.2% maturing in less than one year, one to five years, five
to ten years, ten to twenty years and over twenty years, respectively.
Note 2: Schedule D – Part 2 – Section 2 – Common Stock
$ 27,461,227
As of December 31, 2015, the Company reported total common stock investments on
Schedule D – Part 2 – Section 2 with book/fair market value in the amount of $27.5 million. The
Company’s common stock holdings consist entirely of its wholly owned subsidiary, Family
Service Life Insurance Company. FSLIC owns common stock with a book value of $4.2 million
in its wholly owned subsidiary, Sentinel American Life Insurance Company.
Note 3: Aggregate Reserves for Life and Annuity Contracts
$ 185,590,459
As of December 31, 2015, the Company reported total gross, ceded and net reserves by
product class as follows:
Reserve Segment Gross Reserves
% of Total Gross
ReservesReinsurance
Ceded
% of Total Reinsurance
Ceded Net ReservesLife insurance 142,982,589$ 77.0% 74,904$ 77.3% 142,907,685$ Annuities 42,447,689 22.9% - 0.0% 42,447,689 Other 257,092 0.1% 22,007 22.7% 235,085
Total 185,687,370$ 100% 96,911$ 100% 185,590,459$
INS Consultants, Inc. (“Consulting Actuary”) assisted in the review of the inherent risks,
management oversight and other mitigating controls over the Company’s actuarial processes and
procedures. The Consulting Actuary performed an independent reserve analysis including an
PARK AVENUE LIFE INSURANCE COMPANY
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assessment of the Company’s reserves for compliance with standard valuation laws and
applicable NAIC Actuarial Guidelines and Model Regulations. The Consulting Actuary also
reviewed the Company’s asset adequacy analysis filed in accordance with the Actuarial Opinion
Memorandum Regulation for the year ended December 31, 2015. The Consulting Actuary
determined the Company complied with all requirements and the Company’s reported reserves
were sufficient on both a gross and net basis as of December 31, 2015.
SUBSEQUENT EVENTS
No significant events occurred subsequent to the examination date of December 31, 2015.
COMPLIANCE WITH PRIOR EXAMINATION RECOMMENDATIONS
There were no prior examination findings or recommendations.
SUMMARY OF RECOMMENDATIONS
There were no examination findings or recommendations as a result of the examination.
PARK AVENUE LIFE INSURANCE COMPANY
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CONCLUSION
The assistance of Delaware’s consulting actuarial firm, INS Consultants, Inc. is
acknowledged. In addition, the assistance and cooperation of the Company’s external audit firm,
PricewaterhouseCoopers, LLP, and the Company’s management and staff is appreciated and
acknowledged.
Respectfully submitted,
______________________________ Richard E. Palmatary, CPA, CFE Examiner In-Charge Delaware Department of Insurance
______________________________ Steve Guest, CFE, CPA, ACI Examination Supervisor Delaware Department of Insurance