American Life Assurance Corporation (Ala.)

Court Hears Final Petition to Close

As noted in the May 14, 2004, issue of the NOLHGA Wire, the final hearing on the receiver's petition for approval of final settlement of claims and to close the estate was scheduled for June 1. In ongoing efforts to forestall the final hearing, New South Investment Corporation (NSIC), ALAC's former 100 percent shareholder, filed a petition for writ of mandamus and request for stay of proceedings with the Alabama Civil Court of Appeals on May 28 seeking an order staying further proceedings in this case. Upon denial of NSIC's petition, NSIC filed an emergency petition with the Alabama Supreme Court. That petition was also denied, on an expedited basis, and the trial court proceeded with hearing on June 1.

During the course of the proceedings, NSIC pursued its proposal to reacquire the charter and assets of ALAC in exchange for forgoing a proposed distribution of $3,867 on an over-limits annuity policy owned by NSIC's president, R.K. Hunter. The proposal did not provide for payment of any portion of the guaranty association claims of approximately $6 million. NOLHGA has briefed the issues in this case, pointing out to the court that any distribution of assets to shareholders, including ownership rights, is precluded by statute unless and until the guaranty associations are repaid in full for their claims against the estate.

At the hearing, testimony was provided by NOLHGA's Paul Peterson, the receiver, R.K. Hunter, and Nelson Burnett, a former receiver for ALAC. At the close of the testimony, the court took the matter under consideration and instructed both parties to submit proposed orders by June 8. Proposed orders have been filed, and the parties await a ruling from the court.

Based on the receiver's petition and schedules, the task force expects the guaranty associations to receive a final distribution of $745,512. Upon receipt of these funds, the associations will have recovered 100 percent of their $725,076 expense claims and about $548,090 (10 percent) of their total $5.3 million policyholder-level claims.

Task Force Chair - Mike Marchman;   Staff Contact - Joni Forsythe London Pacific Life & Annuity Company (N.C.)

Opt-out Package Reminder

All affected guaranty associations should have received the opt-out package for the exchange agreement with Hartford Life Insurance Company. The opt-out period ends June 30, 2004. As a reminder, 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).

In addition, the notice of hearing and petition for liquidation is expected to be mailed to claimants in the very near future. A copy will be sent to guaranty associations as soon as it is received. The hearing is currently scheduled to be held on July 8 in North Carolina; at that time, it is anticipated that the exchange agreement and plan of liquidation will be approved by the court.

Task Force Chair - Frank Gartland;   Staff Contact - Paul Peterson