1
2
IN THE STARK COUNTY COURT OF COMMON PLEAS
3
STARK COUNTY, OHIO
4 ----------------------------------------------
x
5 DAVID E. JAY,
6
Plaintiff,
Index No.
7
-against-
2004-CV-00843
8 CENTRE LIFE
INSURANCE COMPANY, et al.,
9
Defendants.
10
---------------------------------------------- x
11
12 DEPOSITION of the
Defendant, CENTRE LIFE
13 INSURANCE COMPANY, by RICHARD
GRILLI, taken by the
14 Plaintiff pursuant to
Notice, held at the offices
15 of Barrister
Reporting Service, Inc., 120
16 Broadway, New York,
New York, on November 3, 2005,
17 at 10:15 a.m., before
a Notary Public of the State
18 of New York.
19
20
21
22
*********************************************
23
BARRISTER REPORTING SERVICE, INC.
120 Broadway
24
New York, New York 10271
212-732-8066
25
2
1
2 A P P E A R A N
C E S:
3
GRAYDON HEAD & RITCHEY, LLP
Attorneys for Plaintiffs
4
1900 Fifth Third Center
511 Walnut Street
5
Cincinnati, Ohio 45202
6
BY: MICHAEL ROBERTS, ESQ.
7
8
9
WOOD LAMPING, LLP
Attorneys for Defendants
10
600 Vine Street
Cincinnati, Ohio 45802
11
BY: WILLIAM R. ELLIS, ESQ.
12
13
14 ALSO PRESENT:
15
ANDREW J. COHEN, ESQ.
Disability Management Services
16
1350 Main Street
Springfield, Massachusetts 01103
17
18
J.D. MARTINEZ
19
Videographer
Digital Media Productions
20
21
xxxxx
22
23
24
25
3
1
2
THE VIDEO OPERATOR: We are on
3
the record.
4
This is the videotape
5
deposition of Mr. Richard Grilli taken
6
in the case of David E. Jay versus
7
Centre Life Insurance Company, et al.,
8
filed in the
Stark County Court of
9
Common Pleas,
State of Ohio.
10
Today's date is November 3,
11
2005.
The time on the videotape
12
record is 10:15 a.m. This deposition
13
is being held at 120 Broadway, Suite
14
111, New York, New York City.
15
My name is J.D. Martinez
16
representing Digital Media Productions
17
of 120 Broadway, New York, New York.
18
Would everyone please introduce
19
yourselves for the record.
20
MR. ROBERTS: On behalf of the
21
plaintiff, Mr. Jay, this is Mike
22
Roberts.
23
MR. ELLIS: On behalf of the
24
defendant, Bill Ellis.
25
THE
WITNESS: Richard Grilli,
4
1
2
president of
Centre Life Insurance
3
Company.
4
5 R I C H A R
D G R I L L I,
6
having been first duly sworn before a
7
Notary Public of the State of New York,
8
was examined and testified as follows:
9
10 EXAMINATION BY
11 MR. ROBERTS:
12 Q
Good morning. I was a little late
13 getting here this
morning, so I appreciate
14 your patience with
me.
15
I'm Mike Roberts. I have the
16 privilege of
representing David Jay in this
17 action, David Jay versus Centre Life
18 Insurance Company and Disability
Management
19 Services.
20
Could you introduce yourself, please,
21 to the jury?
22 A
Sure. Richard Grilli, president of
23 Centre Life Insurance
Company.
24 Q
Mr. Grilli, do you have a business
25 card on you?
5
1
GRILLI
2 A
Yes.
3 Q
Do you hold any other positions -- the
4 business card
says, "Centre," at the top and
5 it has you as
president of Centre Life
6 Insurance Company with an e-mail address at
7 CentreSolutions.com. At
the bottom it says,
8 "A member of the Zurich
Financial Services
9 Group." Did I
read that correctly?
10 A
Yes.
11 Q
Do you have any other positions that
12 you hold within the
Zurich Financial Services
13 Group?
14 A
Yes, I am a senior vice
president of
15 the Centre Group of companies,
and here is a
16 business card as well of that.
17 Q
Anything else?
18 A
No. That's it.
19 Q
Do you coach a children's basketball
20 team or anything?
21 A
No.
22 Q
What is the Centre Group?
23 A The Centre
Group is a group of
24 companies that were organized in
the late
25 1980's to conduct insurance and
reinsurance
6
1
GRILLI
2
transactions. It is
a subsidiary -- our
3 parent is the Zurich Financial
Services
4 Group, the Zurich Company.
5 Q
I suspect that you and I are probably
6 peers, so I'm
hoping I'm guessing correctly
7 that you weren't
affiliated with Centre back
8 in the late
'80s, were you?
9 A
No.
10 Q
I asked a negative question. I want
11 to make sure we're
communicating well. I
12 sometimes do that and
it's not meant to trick
13 you. It's just
when you get a negative
14 response to your
negative question, if you
15 were down on the
street I would know what
16 you're talking about.
17
Were you affiliated with the Centre
18 Group companies back
in the late '80s?
19 A
No, I was not. I joined Centre in
20 2003.
21 Q
Being the president of Centre Life
22 Insurance Company, I
suspect that you've done
23 some institutional
research to bring yourself
24 up to speed with what
the history of the
25 company has been; is
that accurate?
7
1
GRILLI
2 A
No, not really. I've been in the
3 insurance
industry for many years and I have
4 been -- my prior
job at Centre was -- we did
5 a few transactions
with Centre, so I was on
6 the other side
of transactions with Centre,
7 the recipient.
8 Q
So Centre Life Insurance Company is a
9 corporation; is
that right?
10 A
Yes.
11 Q
It's not a company that the Centre
12 Group formed back in
the late '80s, right?
13 A
That is correct, yes. It's a company
14 that they bought in
1996, 1997.
15 Q The company that
"they" -- who is
16 "they"?
17 A Centre
Solutions U.S., Limited, a
18 company within the Centre Group
bought Mass
19 Casualty Insurance Company and has
20 subsequently renamed it Centre
Life Insurance
21 Company.
22 Q
You may or may not know; this is six
23 years, five years
predating you. Why did
24 Centre Solutions U.S.
Limited, why didn't
25 they just take,
purchase the assets of Mass
8
1
GRILLI
2 Casualty and
bring them in-house? Why was
3 there a distinct
Centre Life Insurance
4 Company entity?
5 A
Well, this was before my time. As I
6 said, I joined
in 2003. Mass Casualty
7 Insurance
Company had various state licenses,
8 and that is
generally the reason an entity
9 buys an
insurance company is to obtain their
10 licenses.
Otherwise you need to apply to the
11 various state insurance
departments. It
12 takes a lot of time
and effort.
13 Q How many
Centre companies are in this
14 Centre Group? Do you know?
15 A
No, I don't really know that answer.
16 There is a number of
them.
17 Q More than
a dozen?
18 A Yes.
19 Q
Do you hold any officer or director
20 positions with any
other Centre Group
21 companies or
subsidiaries other than Centre
22 Life Insurance
Company?
23 A
Can you repeat the question?
24 Q
Do you hold any other officer or
25 director positions
with any of the other
9
1
GRILLI
2 entities,
however many there are, that are
3 within this
thing called Centre Group?
4 A Yes, I
believe I'm a senior vice
5 president of Centre Insurance
Company. I am
6 also on the board of directors
of an
7 affiliate of Centre Disability
Management
8 Services.
9 Q
You said you think you're a senior
10 vice president of
Centre Insurance Company.
11 You don't know one
way or the other?
12 A
No. I am a senior vice president and
13 I believe I'm an officer of Centre
Insurance
14 Company.
15
Centre
Insurance Company is our main
16 insurance company that has a
service
17 agreement with other various
Centre entities
18 to provide services to
them. Those services
19 are accounting, actuarial, tax,
legal,
20 treasury.
21
I'm an employee of Centre Insurance
22 Company as well. My paycheck comes from
23 Centre Insurance Company. All the Centre
24 employees in New York are employed by Centre
25 Insurance Company, and then we are time -- we
10
1
GRILLI
2 do work on behalf of other Centre companies,
3 and there is a service agreement between
4 Centre Insurance Company, CICO, as it's
5 called, and the other Centre companies that
6 when we do work for them, our time and our
7 costs are allocated to them.
8 Q So Centre
Life Insurance Company, the
9 defendant in
this case, are there any
10 employees that get paid checks
from that
11 entity?
12 A No, there
are no employees that get
13 paid, but that is consistent with
all the
14 other Centre
companies within the Centre
15 Group.
16
As I said, Centre Insurance Company is
17 the employer of everybody and then various
18 individuals, a substantial amount of people
19 work on behalf of Centre Life Insurance
20 Company. We have many accountants, the tax
21 people who file tax returns, our treasury
22 people who invest Centre Life's money, who
23 handle the banking relations on behalf of
24 Centre Life. The actuarial department at
25 Centre does work on behalf of Centre Life.
11
1
GRILLI
2 So there's many
people who are involved on a
3 day-to-day basis
with the operations of
4 Centre Life
Insurance Company.
5 Q
Does Centre Life Insurance Company
6 file its own
independent tax returns with the
7 Internal Revenue
Service or is its tax return
8 consolidated
with other Centre Group
9 companies?
10 A
Prior to 2004 I believe it filed its
11 own tax return
because it was considered a
12 live company for tax
purposes. After 2004 I
13 believe it is now
filing a consolidated
14 return with other Centre
companies.
15 Q
Can you explain to the jury what that
16 means, to go from
filing our own tax return
17 to filing a
consolidated tax return with
18 other corporations?
19
I haven't gone into educational
20 background, but you
look like a guy that is
21 smart enough to tell
the jury what that
22 means.
23 A
When a corporation files its own
24 individual tax
return, its results and only
25 its results -- when I
say "results," its
12
1
GRILLI
2 income
statement, its revenues, expenses --
3 that gets
reflected on a 1120 form for the
4 IRS for
corporations.
5
When a corporation is part of a
6 consolidated
group, all the entities within
7 that
consolidated group are added together to
8 one tax return,
and then those compiled
9 numbers are then
filed as one tax return.
10 Usually there is an
agreement amongst the
11 parties when they
file a consolidated tax
12 return to share in
the tax benefits within
13 the whole group.
14 Q
So if you have three entities that
15 decide we're going to
go in and file
16 consolidated tax
returns together and one of
17 the entities has net
taxable income -- I'm
18 not a tax lawyer; I
might be using the wrong
19 word -- one entity
would have net taxable
20 income of $120
million but the other two have
21 business losses that
equal that exact same
22 amount, does that
mean that none of the
23 entities end up
paying tax? That's really
24 simplistic, right?
25 A
Right. The consolidated tax return
13
1
GRILLI
2 would show
pretax income or taxable income of
3 zero under your
example. However, yes, that
4 is correct.
5 Q
What was the reason that the company,
6 Centre Life
Insurance Company, has changed
7 the way it's
going to report its earnings or
8 income to the
government?
9 A
It hasn't changed its reporting of its
10 income. It
changed its classification from a
11 live company to a
general insurance company.
12
The specific rules by the IRS that
13 allow a company to
file as an insurance
14 company, those rules
trigger off of loss
15 reserves held by a life
insurance company,
16 and in the case of
Centre Life Insurance
17 Company, since all
the business -- since all
18 of its health
business has been ceded to
19 another Centre
company, they do not have any
20 life reserves and,
therefore, they could not
21 continue to file as a
life insurance company
22 for tax purposes.
23 Q
Was it beneficial to be able to file
24 as a life insurance
company or is it just a
25 category?
14
1
GRILLI
2 A
I don't think it makes a difference;
3 however, I'm not
a tax expert.
4 Q
Fair enough. I'm not going to say
5 anything about
tax, either, because neither
6 am I.
7
I didn't ask you to do this, but do
8 you have before
you the 2004 annual statement
9 for the company?
10 A
Yes, I do.
11 Q
That actually is marked as plaintiff's
12 Exhibit 35 in the
case, and since you brought
13 it with you and it
sits in front of you, I
14 didn't intend to
start there but why don't
15 we.
16
There is a schedule in here that names
17 all the companies
that are affiliated with
18 Centre Life Insurance
Company. Are you
19 familiar with that
schedule?
20
MR. ELLIS: Do you have a copy
21
I can work with?
22
MR. ROBERTS: It may be
23
Schedule Y.
24 A
Yes, I'm somewhat familiar with
25 Schedule Y
15
1
GRILLI
2 Q Schedule Y
for the Centre Life
3 Insurance Company 2004 annual
statement,
4 Exhibit 35, is titled,
"Information
5 Concerning The Activities of
Insurer Members
6 of A Holding Company
Group," "Information
7 Concerning Activities of Insurer
Members of
8 The Holding Company Group."
9
What is a holding company group?
10 A
Let me first explain who is on this
11 list, if I
could. There are companies on
12 this list that have
nothing to do with
13 Centre.
14
What is on this list are companies
15 that are subsidiaries
of Zurich America which
16 is a subsidiary of
the Zurich Financial
17 Group. These
are all U.S. companies. They
18 are mainly
brother/sister company,
19 brother/sister being
third brother, sister of
20 Centre Group.
21
For instance, there is the Farmers
22 Group here, and that
is a California company.
23 That is related to
the Zurich. It has
24 nothing to do with
Centre.
25
So a holding company group -- going
16
1
GRILLI
2 back to your
question, holding company group
3 is a group of
companies all under the
4 ownership,
either direct or indirect, of one
5 holding company
being the Zurich Holding
6 Company in the
U.S., and I believe that
7 Zurich Holding
Company in the U.S. is like
8 Zurich North
America is probably what it's
9 titled.
10 Q
Sir, was I mistaken? This is the
11 Centre Life Insurance
Company 2004 annual
12 statement, right?
13 A
Yes.
14 Q And this
schedule appears in the
15 Centre Life Insurance Company
annual
16 statement, right?
17 A
Yes, it does.
18 Q There must
be some law or regulation
19 that requires Centre to include
its
20 affiliated entities in its
annual statement;
21 is that correct?
22 A From my
understanding, yes.
23 Q
I counted while you were testifying
24 there, sir, page 63,
63.1, 63.2, 63.3 and
25 63.4 contain the
schedule, right?
17
1
GRILLI
2 A
Yes.
3 Q
Your copy doesn't have these numbers,
4 but they were
Bates numbered by someone
5 working on
behalf of your company for
6 production in
this case as AS00527 through
7 AS00531. I'll let you count them, but
while
8 you were testifying I counted
how many
9 entities are on the first three
pages of this
10 schedule and there is a
hundred. In the
11 second two pages has 62.
12
Do you trust by looking at it that
13 those are the right
numbers?
14 A
It seems reasonable.
15 Q
It's broken into two parts because I
16 guess one is Farmers
Insurance Company
17 affiliates. Is
that a different arm of the
18 Zurich entity?
You see there are two
19 alphabetical
listings; why would there be two
20 different
alphabetical listings?
21 A
I don't know for sure. I can
22 conjecture, but I
don't know.
23 Q
I don't desire for you to conjecture.
24 Let's take a look at
this first Schedule Y.
25
First page, AS00527, which is also
18
1
GRILLI
2 just plain 63
without any decimal, about
3 twelve companies
down in the list, first one
4 I can't even
pronounce. How do you pronounce
5 that first
company name?
6 A
I don't speak German.
7 Q
Something domiciled in Switzerland.
8 About twelve
down it says, "Centre Life
9 Insurance
Company." Do you see that?
10 A
Yes.
11 Q
It shows that Centre Life
Insurance
12 Company is domiciled in
Massachusetts?
13 A Yes.
14 Q Then it
shows what the ownership is.
15 Do you see that?
16 A Well, ownership means its parent.
17 Q
I understand.
18
According to
this schedule, Centre
19 Solutions U.S. Limited, is that
an American
20 company or a Bermuda company?
21 A
That is a U.S. company.
22 Q
You figured that out because you went
23 to Centre Solutions
on this form and found
24 out where it's
domiciled? Strike that
25 question.
19
1
GRILLI
2
I can take this form and I see Centre
3 Life Insurance Company, and then
I go to the
4 fifth column and I see who its
owners is. I
5 can then look that entity up and
I will -- it
6 says, "Centre Solutions
U.S. Limited," a
7 little ways down. Then it
says that entity
8 is owned by Centre Group
Holdings U.S.
9 Limited, right?
10 A
I've lost you. Where are you now?
11 Q I took the
owner of Centre Life
12 Insurance Company, Centre
Solutions U.S.
13 Limited.
14 A
Right.
15 Q I went to
Centre Solutions U.S.
16 Limited on this schedule, and I
went across
17 the column and I find that it's
owned by
18 Centre Group Holdings U.S.
Limited, right?
19 A
Yes.
20 Q
I can look that entity up on the list,
21 and I find Centre Group Holdings
U.S. Limited
22 is owned by Centre Reinsurance
Limited,
23 right?
24 A
Yes.
25 Q Is that
the entity that owns
20
1
GRILLI
2 40 percent of DMS?
3 A
I believe it is, yes.
4 Q So Centre
Reinsurance Limited is then
5 owned by Centre Solutions
Bermuda Limited?
6 A
Yes.
7 Q Centre
Solutions Bermuda Limited is
8 owned by Centre Group Holdings
Limited?
9 A
Yes.
10 Q And Centre
Group Holdings Limited is
11 owned by CMSH Limited?
12 A
Yes.
13 Q And CMSH
Limited is owned 64 percent
14 by Zurich Insurance Company and
a decimal and
15 36 percent by Zurich
International Bermuda
16 Limited, right?
17 A
That is correct.
18 Q
If you try to continue to follow this
19 tree, Zurich Insurance Company is
owned by
20 Zurich Group Holding, right?
21 A
Correct.
22 Q And Zurich
Group Holding is owned
23 by -- 57 percent by Zurich
Financial Services
24 domiciled in Switzerland.
Is that the mother
25 ship?
21
1
GRILLI
2 A
I believe it is, yes.
3 Q And the other part of Zurich
Group
4 Holding is owned by Allied
Zurich, PLC?
5 A
That is correct.
6 Q We look at
Allied Zurich, PLC. It's
7 owned by Zurich Financial
Services?
8 A
Correct.
9 Q And Zurich Financial Services isn't
10 owned by anybody.
11 A That's the parent company.
12 Q
We've run out of names.
13
Is that what you refer to as the
14 Centre Group, those
companies?
15 A
No.
16 Q
Some of those companies we talked
17 about are in the
Centre Group?
18 A
Yes.
19 Q
There is a whole bunch of other
20 companies we didn't
talk about that are in
21 the Centre Group?
22 A
Generally, no. Most of the companies
23 on this list are part
of the Zurich group,
24 not the Centre Group.
25 Q
When I said -- went through this tree,
22
1
GRILLI
2 when I gave the
name of a corporation that
3 had Centre in
it, does that signify that it's
4 part of the
Centre Group?
5 A
Yes.
6 Q
But we didn't name every entity that
7 has the name
Centre in it, did we?
8 A
No, we did not, but we named most of
9 them.
10 Q
But there's others?
11 A
There are a few others.
12 Q
So that first three pages list a
13 hundred companies
that I guess fall under
14 this large Zurich
Financial Services
15 umbrella, and that is
what your business card
16 says? It says
the company that you're the
17 president of is a
member of the Zurich
18 Financial Services
group, right?
19 A
Yes.
20 Q
I think I already asked you this
21 question. You
said you would have to
22 conjecture or
speculate as to why they're
23 listed separately in
alphabetical order. Did
24 I recall that
correctly?
25 A
Yes.
23
1
GRILLI
2 Q
But in its annual statement there must
3 be some law or
some regulation that requires
4 Centre Life
Insurance Company to disclose its
5 affiliations
some way, somehow, maybe third
6 cousins to 160
different other corporations;
7 is that right?
8 A
I don't know. It would appear that
9 the second page
of Schedule Y deals with the
10 Farmers Insurance
Group structure, but I'm
11 not an expert here so
we have to ask somebody
12 who knows.
13 Q
Farmers I've heard of before. It must
14 be related somehow or
else it wouldn't be
15 contemplated within
whatever law requires its
16 disclosure, right?
17 A
I don't know.
18 Q Is
Disability Management Services on
19 this affiliation list?
20 A
Yes, it is.
21 Q Who owns
Disability Management
22 Services?
23 A Centre
Reinsurance Limited owns
24 40 percent of DMS.
I believe the balance is
25 owned -- 60 percent of the
balance is owned
24
1
GRILLI
2 by management.
3 Q
That 40 percent ownership --
4
MR. ROBERTS: I'd like to make
5
a comment on the record.
6
Mr. Ellis is filming me without
7
telling me, without disclosing it to
8
me, which I think might be some
9
violation of an ethical code or code
10
of professional responsibility to
11
record a lawyer without telling him,
12
but there is the videotape of the
13
witness going on and there is also a
14
separate videotape of Mr. Ellis of me.
15
Mr. Ellis, why is this?
16
MR. ELLIS: I'm trying to avoid
17
the antics that you exposed during
18
Mr. Bonsall's deposition or at least
19
record them if they reoccur.
20
MR. ROBERTS: Would you mind
21
turning that off, sir?
22
MR. ELLIS: Yes, I would.
23
MR. ROBERTS: Very well.
24
Mr. Grilli, did you know I was
25
being recorded by Mr. Ellis?
25
1
GRILLI
2
THE WITNESS: Well, when I sat
3
down here, I noticed the camera was on
4
and it was pointed to you so, yes, I
5
happened to notice it.
6
MR. ROBERTS: I just noticed
7
it. I'm quite shocked that a lawyer
8
would do that, but -- let's get back
9
to your testimony.
10
I should have worn a tie.
11 Q
I have attempted to graph out the
12 corporate structure
which I believe is
13 represented in that
2004 annual statement.
14 Could you take a look
at this?
15
MR. ROBERTS: And we'll mark
16
this as Plaintiff's Exhibit 37.
17
Actually, Plaintiff's Exhibit 37 will
18
be that page -- we'll just make it
19
that page.
20
MR. ELLIS: Do you have a copy
21
for me?
22
Thank you.
23 Q
Does that look like the right
24 corporate structure?
25 A
I would have to spend some time going
26
1
GRILLI
2 back.
3
(Whereupon a chart was marked
4
as Plaintiff's Exhibit 37 for
5
identification, as of this date.)
6
MR. ROBERTS: Why don't we go
7
off the record and allow the witness
8
to do that. I don't want you to
9
guess.
10
THE VIDEO OPERATOR: Going off
11
the record, 10:47.
12
(Whereupon, a brief recess was
13
taken.)
14
THE VIDEO OPERATOR: Returning
15
to the record, 11:01.
16 Q
Mr. Grilli, I think I frustrated you.
17 My chart apparently
was not a very good
18 portrayal of the
Centre Group line of
19 companies up from
Centre Life Insurance
20 Company. You've
made some attempts to
21 correct it, and I
think you've thrown your
22 hands up.
23 A
No, I haven't thrown my hands up
24 totally. There
was an error made down below
25 sort of at the bottom
where you put in or
27
1
GRILLI
2 somebody put in
Centre Reinsurance Limited
3 U.S. when the
company is Centre Reinsurance
4 Limited, so
therefore with that error,
5 everything above
it or most of what is above
6 that, by putting
in that U.S. Company and not
7 the Centre
Reinsurance Limited which is a
8 Bermuda company
and above it is wrong.
9 Q
You made some notes on Exhibit 37.
10 Can you write your
name at the bottom and
11 date it?
12
MR. ELLIS: Just so the record
13
is clear, is that intended to be some
14
accurate depiction or is that just
15
some notes you made on it?
16
THE WITNESS: It was my notes
17
of some corrections, but I wouldn't
18
verify that it's totally accurate. I
19
only had a few minutes to do this. In
20
my view, it is accurate.
21
MR. ROBERTS: I think the
22
record will reflect we were off the
23
record for fifteen minutes while you
24
worked on it.
25 Q
There are, I think, in every annual
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2 statement notes
to the financial statements.
3 Are you mindful
of that?
4 A
Yes.
5 Q
Can you turn to that section for me?
6 Page 19.2, which
is Bates numbered AS 00481.
7 Are you there,
sir?
8 A
Yes.
9 Q
There is some kind of Excel
10 spreadsheet table at
the top. At the bottom
11 it's regular
text. It starts with
number 10,
12 or section 10 is entitled,
"Information
13 Concerning Parent Subsidiary and
Affiliates."
14
Do you see that?
15 A
Yes.
16 Q In
subsection G there, there is a
17 narrative description of Centre
Life
18 Insurance Company and who owns
it and who
19 owns that and so on and so on,
right? Is
20 that description accurate?
21 A
Well, I would need to go back to an
22 organizational chart
to check it out, but as
23 far as I know, I
would assume it is correct.
24 Q It says all of the issued and
25 outstanding shares of the
company's voting
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2 common stock are owned by Centre
Solutions
3 U.S. Limited, an insurance and
reinsurance
4 company domiciled in Bermuda.
5
Centre
Solutions U.S. Limited is
6 controlled by Centre Group
Holdings U.S.
7 Limited, a holding company
domiciled in
8 Delaware which is, in turn,
controlled by
9 Centre Reinsurance Limited, an
insurance and
10 reinsurance company domiciled in
Bermuda
11 which is in turn controlled by
Centre
12 Solutions Bermuda Limited, an
insurance and
13 reinsurance company domiciled in
Bermuda,
14 which is in turn controlled by
Centre Group
15 Holdings Limited, a holding
company domiciled
16 in Bermuda which in turn is
controlled by
17 CMSH Limited, a holding company
domiciled in
18 Bermuda which is ultimately
owned by Zurich
19 Financial Services, a financial
services
20 company domiciled in
Switzerland.
21
Did I read that correctly?
22 A
Yes.
23 Q One of
those corporations in the
24 lineage is the 40 percent owner
of DMS?
25 A That is
correct. It's Centre
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2 Reinsurance Limited, and that is
mentioned
3 here.
4 Q
What are the
functions of Centre Life
5 Insurance Company? Or tell
me if I'm right:
6 The company doesn't sell
disability insurance
7 policies anymore, right?
8 A That is
correct.
9 Q Have you
ever seen the disability
10 insurance policies they used to sell?
11 A No.
12 Q
Are you mindful that there is a couple
13 of different
numbers? There is a NOVUS 3000
14 and then there was a
new generation called
15 NOVUS 4000 policy?
16 A
Yes, I am mindful of that.
17 Q
Are you mindful that the NOVUS 4000
18 policy kind of
tightened up the contract
19 language and limited
the -- you couldn't have
20 lifetime occupation
benefits anymore; it was
21 limited to a more
specific term, in this case
22 24 months. Are
you mindful of that?
23 A
No.
24 Q
Have you seen the NOVUS 4000 policy
25 before?
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2 A
No.
3 Q
You just know that there is one out
4 there?
5 A
There is -- those policies that you
6 mentioned are
reflected or some financial
7 information is
reflected on this schedule
8 here of accident
and health policyholder
9 experience
exhibits for year. Those are
10 filed every year.
11 Q
So you're mindful from an accounting
12 standpoint that there
are some people out
13 there that have a
NOVUS 3000 policy because
14 you quantify how many
people in America have
15 that, and then you're
also mindful -- you can
16 track their premiums,
right, the number of
17 policyholders and how
much premium they pay,
18 right?
19 A
The information on that schedule, and
20 maybe we should go
look at that schedule, but
21 it tracks more than
just premiums. It also
22 tracks losses.
23 Q
I didn't mean to limit it to that.
24 You do an accounting
function and so you need
25 to know how many
NOVUS 3000's there are out
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2 there.
That is the great bulk of the
3 business, the
NOVUS 3000, right?
4 A
Well, there is other business in
5 Centre Life
Insurance Company besides what we
6 call the MCIC
block of business or close
7 block of
business, so some of the other
8 business in
Centre Life actually dwarfs the
9 amounts
reflected -- that are associated with
10 the MCIC block.
11 Q
You're right. We'll get to that in a
12 second.
13
As far as the MCIC and the types of
14 policies that entity
was selling before it
15 was acquired or it
was purchased, you
16 understand that the
great majority of the
17 policies historically
sold by Mass Casualty
18 was the NOVUS 3000?
19 A
That was before my time and,
20 therefore, I'm not
familiar with that.
21 Q
If you look at the accounting records,
22 these forms we'll get
to in a second, that
23 will reflect?
We'll get there in a second.
24 A
Not necessarily. You can have a few
25 policies that have
large premium dollars so
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2 the premium
dollars can be greater, but in
3 absolute number
of policies it could be less.
4 Just because the
premium dollars are greater,
5 it doesn't mean
the amount of policies are
6 greater.
7 Q
But you're mindful, at least, that
8 there are two
different policies of NOVUS
9 3000 and a NOVUS
4000?
10 A
Yes. There is also I think a NOVUS
11 1000 and 2000.
12 Q
You're exactly right.
13
Are you mindful that when they go up
14 higher, the number,
it is a new generation?
15 A
No.
16 Q
You're not mindful of that.
17
Let's talk about what Centre Life
18 Insurance Company
does as it relates to the
19 Mass Casualty line of
business. First of
20 all, after the Centre
Group, did they
21 purchase the assets
of Mass Casualty from Sun
22 Life?
23 A
They purchased the stock.
24 Q
So it's a stock purchase. After they
25 purchased the stock
from Sun Life a year or
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2 two later, they
also entered some business
3 relationship or
some acquisition or some
4 transaction with
some entity related to
5 Equitable; is
that right?
6 A I believe
they bought MCIC. Centre
7 bought MCIC in '96. There
was an Equitable
8 transaction July 1, 2000.
The Equitable
9 transaction was an acquisition
of a closed
10 block of individual disability
income
11 policies.
12 Q
Was it the same kind of transaction
13 that was entered with
the Mass Casualty
14 block, essentially?
15 A No.
The Mass Casualty transaction was
16 a purchase of stock.
You're acquiring a
17 corporation, all the assets and
liabilities.