London Pacific Life & Annuity Company (N.C.)
Opt-out Packages Mailed to Affected Guaranty Associations
On May 28, 2004, NOLHGA (on behalf of affected guaranty associations), the receiver for London Pacific Life & Annuity Company, and Hartford Life Insurance Company executed an exchange agreement that will allow for the transfer of nearly all deferred annuity policies to Hartford Life. The exchange program will impact approximately 41,000 policies with account values, net of policy loans, of $1.665 billion. All affected guaranty associations should have received an opt-out package via e-mail from Paul Peterson on Friday, May 28.
The exchange agreement allows for a 1035 tax-free exchange to occur from London Pacific to Hartford Life. In addition, almost all covered deferred annuity policyholders have the option of either surrendering their policy or continuing their original London Pacific policy subject to application of guaranty association limitations. It is anticipated that policyholders will have a 30-day period beginning in August to make their elections. A closing is expected to occur in mid-October. The current cost estimate for guaranty association participation in the exchange program is approximately $114 million.
The e-mail package included a general overview of the agreement and plan to transfer business to Hartford, a copy of the exchange and early access agreements, a file containing state-specific policy-level information, the plan of liquidation, and a memo describing general practices used in determining guaranty association coverage and ongoing administration guidelines for deferred annuity policyholders who decline the exchange to Hartford. Guaranty associations should be aware that:
- Associations must notify NOLHGA by June 18 of any changes to the ongoing administration guidelines to be used for those covered policyholders electing to continue their London Pacific policies (subject to applicable guaranty association limitations)
- For associations electing to participate in the exchange agreement, a completed participation certificate must be received by NOLHGA by June 30. Failure to submit a certificate will result in the guaranty association being treated as a non-participating association, and all policies covered by that association will be excluded from the exchange program
- Associations must provide NOLHGA with any changes in the guidelines used to determine guaranty association coverage no later than June 30
- For associations electing to opt out of the early access agreement, written notice must be sent to NOLHGA no later than June 30
In addition to the exchange program, London Pacific and Hartford Life have entered into an assumption agreement for annuity contracts that are either supplemental contracts or in payout status (with a reserve total of approximately $190 million); both parties anticipate entering into an assumption agreement for universal life contracts in the near future. Guaranty association involvement in either agreement is not expected to be necessary at this time.
Task Force Chair - Frank Gartland; Staff Contact - Paul Peterson