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Executive Life Insurance Company (ELIC) was once the largest life insurance company in California. Its financial problems and subsequent insolvency in April 1991 [1] shocked its policyholders and the financial world.

At the time, First Executive was the biggest insurer ever to fail, which resulted primarily from money-losing investments in junk bonds. First Executive through Fred Carr had a strong association with Mike Milken and the brokerage firm Drexel Burnham Lambert, whereby at the end of 1990 the company owned high-yield debt, much of it issued through Drexel, with a carrying value of $9 billion.[2] According to Robert Sobel, First Executive was involved in 90% of Drexel's underwritings, which accounted for about $40 billion in bonds from 1982 to 1987.

After the State of California took over Executive Life, it sold the company's junk-bond portfolio to Altus Finance, a unit of Crédit Lyonnais, in November 1991 for $3.25 billion. Because banks were prohibited under the Glass–Steagall Act from owning insurance companies, Crédit Lyonnais organized an investor group to buy the insurance company operations, with the new company named Aurora National Life Assurance Co. Majority control of Aurora National was sold to Groupe Artémis in 1994.[3] In July 1998, an anonymous French whistle-blower told the California Insurance Department that Crédit Lyonnais was the real buyer of the insurance company and controlled it through secret agreements. In early 1999, the California Insurance Department sued the bank and other parties, alleging fraud and seeking $2 billion in restitution.[4]

In 2003, Crédit Lyonnais and others agreed to pay $771 million in settlements resulting from false statements to bank regulators in connection with the acquisition of junk bonds and the insurance business of the failed Executive Life Insurance Company of California.[5]

In 2001, Swiss Re took control of the Aurora National Life policies; Swiss Re fully acquired Aurora National Life in 2012.[6][7] In 2014, Aurora National Life was sold to Reinsurance Group of America[8]

A subsidiary, Executive Life Insurance Company of New York (ELNY), was seized by the state of New York, who sold the majority of the business to MetLife, retaining the structured settlement book of business. Due to mismanagement, ELNY was ordered to liquidate.[9] Guaranty Association Benefits Company took over the assets of ELNY in 2013.

References[edit]

  1. ^ Executive Life Insurance Company, Insolvencies and Impairments, NOLHGA website
  2. ^ Loomis, Carol J. (May 6, 1991). "What Fred Carr's Fall Means to You". Money (New York). 
  3. ^ "The French Connection - Forbes". Retrieved 2015-01-05. 
  4. ^ Rossant, John (July 29, 2001). "The Sword over Lyonnais". BusinessWeek (New York). 
  5. ^ "Credit Lyonnais and Others to Plead Guilty and Pay $771 Million in Executive Life Affair" (Press release). Washington, D.C.: United States Department of Justice. December 18, 2003. Retrieved 2013-11-24. 
  6. ^ "Swiss Re Affiliate Acquires Policies Of Executive Life Successor". LifeHealthPro. Retrieved 2015-01-05. 
  7. ^ "Aurora National Life deal closed in August". Retrieved 2015-01-05. 
  8. ^ "Reinsurance Group buying Aurora National Life : Business". Retrieved 2015-01-05. 
  9. ^ Coffin, Bill; Festa, Elizabeth; Hersch, Warren S.; Stanley, Michael; Moynihan, Shawn (November 2012). "The Complete ELNY Saga". National Underwriter Life & Health (Centennial, Colorado: Summit Business Media). Retrieved November 24, 2013. 

See also[edit]

External links[edit]



Original courtesy of Wikipedia: http://en.wikipedia.org/wiki/Executive_Life_Insurance_Company — Please support Wikipedia.
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140 news items

 
Business Wire (press release)
Thu, 14 Apr 2016 09:00:34 -0700

... including the reduced payment obligations of Guaranty Association Benefits Company, a not-for-profit captive insurance company formed for making payments to the payees and certificate holders of the liquidated Executive Life Insurance Company of ...
 
San Fernando Valley Business Journal
Fri, 10 Jul 2015 11:45:00 -0700

“This settlement agreement closes the last chapter in the long dispute between the Department of Insurance and Artemis S.A., one of the purchasers of the Executive Life Insurance Company,” Jones said. “As a result…the total recovery in the Executive ...
 
Bisnow
Thu, 09 Apr 2015 09:53:51 -0700

Bisnow is pleased to announce our Fourth Annual BMAC West conference on July 20th. Get ready for a full day packed with hard hitting content from some of the nation's top multifamily and mixed-use executives from across the West Coast. Our panels will ...

NBC 6 South Florida

NBC 6 South Florida
Wed, 15 May 2013 21:51:43 -0700

Many people who were injured years ago gave huge amounts to ELNY – the Executive Life Insurance Company of New York – and were put into annuities that would provide monthly payments. Since ELNY was based in New York, the state's insurance ...
 
Sun-Sentinel
Thu, 14 Feb 2013 07:30:41 -0800

Ironically, the agency that was supposed to protect Culhane has convinced a New York court that he and about 1,500 other annuity recipients must give up a substantial portion of their monthly income because the Executive Life Insurance Company of New ...

LifeHealthPro

LifeHealthPro
Tue, 30 Oct 2012 10:01:32 -0700

The Nassau County Supreme Court under Justice John Galasso approved the initial liquidation order of the now Department of Financial Services. Executive Life Insurance Company of New York was taken into rehabilitation in 1991. On April 16, 2012, the ...

Legal Broadcast Network (blog)

Legal Broadcast Network (blog)
Thu, 18 Dec 2014 06:31:14 -0800

The demise of Executive Life Insurance Company of New York (ELNY) and subsequent related litigation provide several lessons, perhaps most importantly that plaintiffs in structured settlement transactions need to have their own brokers. That takeaway ...

Seeking Alpha

Seeking Alpha
Thu, 29 Aug 2013 11:56:15 -0700

If an insurance company were to go insolvent, as Executive Life Insurance Company and 62 others did in 1991, policy holders would lose big time. In addition, the only protection provided to customers of failed insurers is state-mandated, industry ...
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