MPC Insolvency Task Force Reports

The following are summaries of insolvency task force reports presented during the October 20 NOLHGA Members' Participation Council meeting, held in Indian Wells, California.

  Staff Contact - Sean McKenna Centennial Life (KS)

Financial consultant Bob Tice told attendees that, according to June 30 data, he expects a $10 million shortfall for class 3 claims, with estimated net guaranty association costs associated with the medical block totaling approximately $3.5 million and $4.5 million for the LTD block.

Task Force Chair Mark Femal brought attendees up to date on the status of litigation associated with the Centennial insolvency. On September 14, a settlement was conditionally reached between Centennial and Universe, although terms had not yet been disclosed. Femal also reported that the task force had received on firm bid and one tentative bid for the "Other" block. The MPC voted to authorize the task force to recommend to affected associations one of those two offers and to authorize a guaranty association payment to the winning bidder.

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

Task Force Chair Chuck LaShelle reported that the Confederation estate was virtually closed. Remaining issues include a December 20 bar date for unpaid assessment claims against the Canadian estate. LaShelle also noted that guaranty associations should be aware that cash returned may exceed assessments and that if this occurs, guaranty associations should consider the possible tax implications, if any.

Task Force Chair - Chuck LaShelle;   Staff Contact - Kentucky Central Life (KY)

Task Force Chair John Colpean noted that the task force has begun dealing with a number of end of plan issues. Colpean apprised attendees that the task force was working with Jefferson Pilot to resolve issues related to minimum guaranteed crediting rates after the end of the plan. States should consider whether the crediting rates on policies that may be applied by Jefferson Pilot will fulfill their respective coverage requirements. The task force will be working with the receiver on this issue.

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

Task Force Chair Sonya Ekart reported that a letter of intent for the assumption of Mid- Continent's business had been signed by the receiver and Life Investors Company of America, a wholly owned subsidiary of Aegon. The letter of intent provides that Mid-Continent's assets would be transferred to Investors Life with no ceding fees and guaranteed premium for 10 years. It is anticipated that the agreement will be closed by the end of the year.

Ms. Ekart also reported that the task force will provide amicus support to the receiver on an issue related to Oklahoma's Open Records Act.

Task Force Chair - Sonya Ekart;   Staff Contact - Bill O'Sullivan National Affiliated Investors Life (LA)

Task Force Chair Chuck Gullickson provided attendees with background on the newest insolvency, National Affiliated Investors Life, a Louisiana-domiciled company with an "eclectic" mix of products, of which about 72 percent are comprised of life policies and annuities. About 70 percent of those life policies are located in Kansas, Louisiana and South Carolina.

Gullickson noted that NOLHGA and the guaranty associations will be working with the rehabilitator to arrange for the transfer of National Affiliated's business to as assuming carrier. The task force sent a limited solicitation to 26 companies and received four responses. The task force hopes to conclude an agreement by February, 2000. Gullickson estimated that the cost of the insolvency to affected states would be in the $1 million to $1.5 million range.

Finally, the MPC voted to allow the task force to recommend to guaranty associations a winning bidder and to negotiate an assumption reinsurance agreement for the National Affiliated business.

Task Force Chair - Chuck Gullickson;   Staff Contact - Paul Peterson National Heritage Life (DE)

Task Force Chair Dan Orth provided participants with an overview of the case. NHL Trustee Fred Buck reported on the status and history of the liquidating trust. Buck told attendees that the current value of trust assets are approximately $30 million greater than their initial valuation. Buck also reported that trust beneficiaries could expect a distribution of approximately $20 million on December 1.

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

Task Force Chair Mike Marchman apprised attendees that National Guardian Life, a Wisconsin-domiciled company signed a letter of intent to acquire Settlers Life. According to the terms of the agreement, National Guardian will recapitalize Settlers, purchase outstanding Settlers stock, and agree to keep the operations of Settlers in Bristol, VA. Marchman predicted that there would not be any formal guaranty association participation in the sale.

Task Force Chair - Mike Marchman;   Staff Contact - Statesman National Life

The MPC voted to approve a claims agreement consistent with the liquidation and also voted to approve a confidentiality agreement with the receiver on future litigation.

Task Force Chair - Neil Rucksdashel;   Staff Contact - Unison Life (OK)

Task Force Chair Bart Boles brought attendees up to date on several outstanding issues related to the insolvency. First, Boles told attendees that an early access distribution from the estate in late 1998 was being held in escrow, pending resolution of certain claim valuation issues. Boles noted that GAs could request distribution of their pro rata share at any time, with the stipulation that there could be a callback of some of those funds if a revised claim valuation shows an overpayment.

On another issue, Boles noted that Unison owns stock in the insolvent Bonneville Life Company and is also a surplus noteholder. Bonneville has paid all policyholder claims and general creditors and has approximately $400,000 left. The Bonneville receiver has indicated that he is willing to distribute those funds to Unison, and within 48 hours, Unison will distribute those funds to guaranty associations. Bonneville will retain the right to call those funds back for 18 months.

The MPC authorized NOLHGA to enter into two agreements with the Unison Receiver. One agreement is a claims stipulation agreement under which participating guaranty associations and the receiver would stipulate to the administrative claim amounts and the benefit claim amounts. The second agreement provides for the distribution of Bonneville assets to guaranty associations. Both agreements will be distributed to affected association for the normal 30-day opt-out period.

Task Force Chair - Bart Boles;   Staff Contact - Bill O'Sullivan Universe Life (ID)

Universe Life Task Force Chair Tad Rhodes announced that the task force had agreed to sell the individual medical and disability block to Madison National, with an expected closing date in late November. Rhodes also announced that there has been a settlement of the litigation between Universe and Centennial, although terms were not known. Finally, Rhodes told attendees that the task force would focus on working with the receiver to resolve issues related to side accounts on certain policies and to begin its work associated with final accounting of the assumption reinsurance agreements.

Task Force Chair - Tad Rhodes;   Staff Contact - Paul Peterson

Other News

The MPC met in closed session for reports on the Executive Life and Fidelity Bankers insolvencies, and also was provided with an update on the Thunor Trust insolvencies.

  Staff Contact - Sean McKenna