MPC Insolvency Task Force Reports

The following are summaries of insolvency task force reports presented during the May 20-21 NOLHGA Members' Participation Council meeting, held in Washington, DC.

American Standard Life (OK)

Task Force Chair Andrea Bowers brought attendees up to date on a petition filed by former ASL owner David Nicholas, seeking to vacate ASL's liquidation order. According to Bowers, Nicholas presented to the court an audit, which purported to demonstrate that ASL was solvent, and requested that the court stay the proceedings until the petition to vacate could be heard by the court. On May 7, at the request of NOLHGA and other parties, the petition to vacate was dismissed. ASL's Receiver is now free to continue liquidating the company's assets, including the Colorado ranch property which is valued at $8.25 million.

Task Force Chair - Andrea Bowers;   Staff Contact - Bill O'Sullivan Centennial Life (KS)

Task Force Chair Mark Femal reported on the status of Centennial claims. As of April 30, home office claims paid totaled 67,000 at a cost of $18 million with an average claim amount of $270. Claims paid by TPAs as of April 30 totaled 13,000, amounting to $7 million, an average of $540 per claim. Funds for TPA-paid claims came from the Aegon Trust. Femal also noted that the claims inventory as of May 10 totaled 13,900, down from 97,000 on August 31, 1998. Additionally, Femal told attendees that the provider of prescription drug card services had ended its servicing of the account effective March 31. The Task Force has approved a new drug claim processing program with a $10 co-pay and 90 percent coinsurance.

Charlie Richardson of Baker & Daniels provided a summary of current litigation issues. Richardson explained that Centennial had settled its claim against AXA for approximately $36 million. The settlement will be submitted to the liquidation court for approval on May 27. Richardson also reported that Centennial litigation with insolvent Universe Life was ongoing, with Universe appealing a procedural decision by the Kansas federal court in Centennial's preference action against Universe.

Consultant Bob Tice of Arthur Andersen brought attendees up to date on outstanding financial issues. Tice noted that the claims administration agreement with American Chambers Life ends at the end of September. However, American Chambers has indicated that it would consider extending that contract.

Task Force Chair;- Mark Femal;   Staff Contact - Confederation Life (CN)

Task Force Chair Chuck LaShelle brought the MPC up to date on the status of the separate account sale. The sale, to Pacific Life, is set for September 1, 1999. If the sale closes on that date, the Liquidator expects to pay all funds due guaranty associations by the end of 1999.

LaShelle also informed attendees that if any funds are available after payment of remaining Canadian policyholder claims, guaranty associations will be able to request reimbursement of unpaid assessments from the Canadian Liquidation Court. LaShelle was confident that some money would be available for unpaid assessments and noted that a standard form would be developed for use by guaranty associations in filing their claims.

Task Force Chair - Chuck LaShelle;   Staff Contact - Executive Life (CA)

Task Force Chair Art Dummer reported that Aurora earnings in 1998 totaled approximately $3 million. Additionally, Dummer noted that lapse rates for Aurora since the moratorium were about 13 percent for life policies and about $20 million per month for annuities.

Task Force Chair - Art Dummer;   Staff Contact - Kentucky Central Life (KY)

Task Force Chair John Colpean noted that the Task Force has begun planning for the Plan termination on May 31, 2000.

Gary Stefani of PricewaterhouseCoopers provided attendees with a breakdown of estate assets and liabilities. Assets total approximately $150 million, the largest component being various parcels of real estate, most of which should be sold by the close of 1999. On the liability side, after class 1 claims are paid, approximately $188 million in liabilities will remain. Additionally, the Deputy Liquidator announced last week that he intends to make a $50 million distribution in June, 1999. Guaranty associations should receive about $40 million of that distribution.

Task Force Chair - John Colpean;   Staff Contact - Joni Forsythe Mid-Continent Life (OK)

Task Force Chair Sonya Ekart reported that the Task Force and representatives of the Oklahoma Insurance Department had agreed to regular meetings for information sharing purposes. Additionally, the Department distributed bid packages for the sale of MCL's business earlier this year. Bid responses are due June 4th.

Task Force Chair - Sonya Ekart;   Staff Contact - Bill O'Sullivan National Heritage Life (DE)

Task Force Chair Dan Orth apprised attendees that Task Force activities were mainly focused on monitoring assets of the NHL Liquidating Trust and estate litigation against third parties. Trustees have notified the Task Force that it is likely that there will be a distribution from the Trust of approximately $43 million. Participating GAs will receive about 94 percent of that distribution.

Task Force Chair - Dan Orth;   Staff Contact - Settlers Life (VA)

A NOLHGA Task Force has been established for Settlers Life, a Virginia-domiciled company licensed in 18 states. Settlers has approximately $200 million in assets. Mike Marchman (GA) will serve as Chair, with Tom Peterson (KY), Phyllis Perron (LA), Lowell Miller (NC), Frank Gartland (OH) and Peggy Parker (VA) also appointed to the Task Force. Task Force consultants and NOLHGA staff contact will be announced shortly.

Task Force Chair - Mike Marchman Thunor Trust Companies

Task Force Chair Chuck LaShelle announced that John Colpean (MI), Dan Elrod (TN), William Falck (FL), Rusty Haydel (MS), Dick Horne (AR), Chuck Renn (MO) and Tad Rhodes (OK) had been named to the Task Force that will manage the insolvencies of the seven insurers controlled by the Thunor Trust. Consultants named to assist the Task Force are: Actuarial - Bruce Winterhof, Milliman & Robertson; Financial - Tim Hart, Arthur Andersen; Legal - Charlie Richardson, Baker & Daniels; Project Manager - Fred Buck, Buck & Associates; and NOLHGA contact - Peter Gallanis. The Task Force will meet with the receivers and/or regulators of states affected by the insolvencies in Nashville on May 25.

Task Force Chair - Chuck LaShelle;   Staff Contact - Universe Life (ID)

Universe Life Task Force Chair Tad Rhodes announced that agreements had been reached on the sale of the blocks of Universe business. MedAmerica, a Pennsylvania-domiciled company, has agreed to assume the long-term care business for the reserves, about $3.9 million. The second block of business, the accident and health block, was sold to Wisconsin-domiciled Madison National Life, which will assume the approximately 300 policies for the reserves, about $500,000.

Task Force Chair - Tad Rhodes;   Staff Contact -