Posted on 10/19/2006 7:48:02 PM PDT by NormsRevenge
LOS ANGELES
California's Department of Insurance has recovered roughly $988 million, after legal costs, for Executive Life policyholders and guaranty associations since taking over the failed insurance company in 1991, according to a state report released Thursday.
In the report, state Auditor Elaine Howle looked at how state insurance officials have managed funds recouped through litigation finalized last year. The department has received more than $1.1 billion from litigation, while racking up $165 million in legal costs, according to the report.
The review could not ascertain how much of the money has been distributed to policyholders or the guaranty associations, which stepped in to cover policyholders' claims after the insurance company became insolvent.
Howle plans to issue another report, analyzing data from Aurora National Life Assurance Co., which now owns Executive Life's policies, that will include those details.
Howle also examined expenses incurred by the Insurance Department, including hiring lawyers, expert witnesses and other costs, and didn't find "anything that was of concern to us," she said.
State insurance officials anticipate receiving between $131 million to $700 million in additional funds from litigation, depending on the outcome of legal appeals, the report said.
The state took over a bankrupt Executive Life in 1991. A year later, Insurance Commissioner John Garamendi sold its junk bond portfolio for $3.25 billion to an investor group financed by French bank Credit Lyonnais. The junk bonds later jumped in value and were worth billions of dollars more.
In 1999, the state Department of Insurance sued the French investors. Most of the original parties named as civil defendants, including Credit Lyonnais, settled out of court in February 2005.
In May of that year, jurors cleared Artemis' owner, billionaire Francois Pinault, of any wrongdoing but found his company misled regulators when it purchased Executive Life's junk bonds.
Through June 30, Garamendi's office recovered $730.3 million from civil and criminal lawsuits over the French companies' takeover of Executive Life assets, according to the report.
The department also recovered more than $346.7 million, plus $45.3 million in interest, from claims over the failure of Executive Life's parent, the First Executive Corp., the report said.
The state of CA essentially forced Executive Life into bankruptcy, then mishandled the bankrupt companies assets.
Instead of insurance and annuity holders receiving a nice return on their investments, the state of CA busted their chops.
Private industry is too important to be left to state regulators.
A lot of people got hurt needlessly.
"Instead of insurance and annuity holders receiving a nice return on their investments, the state of CA busted their chops."
Sadly, First Exec products were sold by stock brokers as "investments". Life insurance isn't an "investment" any more than ones home -- yeah, it's supposed to appreciate in value, but you buy a home to LIVE IN, and you buy life insurance for WHEN YOU DIE.
First Exec was also sold due to huge commissions as I recall.
That era was brought about by the boom times in the stock market, when life insurance companies like First Exec (and Jackson National here in Michigan) insured anyone with a pulse so they could get money to invest in the overheated junk bond market.
Several points:
If you're buying life insurance without considering the financial aspect, the decision is being made without all the pertinent facts. How much are the premiums? What is the death benefit? how much, if any, is the future cash value expected to be? A smart buyer won't buy any life insurance without making some calculation based on those considerations.
I never sold any Executive life, but I did help some annuity policy holders get their money back. I was quite successful at that. The ones who really got hurt where those who were receiving annuitized payouts. The state forced them to reduce their payouts to 87% of what was promised. I imagine they still aren't getting what they were promised, and could have received, from Executive Life.
The regulators should have left everything alone.
Just any FYI, there ARE life policies that have a significant returns on cash values. I just reviewed a 23 year old policy, many grand into the policy each year, well into 6 figures total. Average annual return for those 23 years? Over 19% per year on the cash value
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