Bail-Out Plan Rivals Metropolitan Life’s : K&B; Seeks Baldwin’s Annuity Business
Kaufman & Broad, a Los Angeles-based home builder and life insurance company, has proposed a plan to bail out the 165,000 holders of $4.4 billion in annuities sold by Baldwin-United Corp., which filed for bankruptcy protection in 1983.
Kaufman & Broad’s plan to take over Baldwin-United’s annuity business, which was requested by insurance regulators in Arkansas and Indiana, would rival a plan proposed nearly 1 1/2 years ago by an insurance industry group headed by Metropolitan Life Insurance of New York.
However, the Arkansas and Indiana insurance commissioners told Associated Press that a Friday deadline included in the Kaufman & Broad proposal probably would not allow enough time for the plan to be accepted. Kaufman & Broad spokeswoman Jana Waring Greer said the company hasn’t been notified by the commissioners of any problems.
In a letter sent to the two insurance commissioners Aug. 6, Kaufman & Broad said it would pay annuity holders a 9.26% annual rate until October, 1987, assuming payment of $143 million from a recent settlement between annuity holders and brokers and a $170-million contribution from Baldwin-United.
Under the Metropolitan Life group’s plan, annuity holders would receive a 7.56% annual rate until October, 1987, Kaufman & Broad said in the letter to regulators, who took over Baldwin-United’s insurance operations in 1983.
Negotiations Under Way
After October, 1987, Kaufman & Broad would guarantee a 9.75% rate for three years, whereas the Metropolitan Life plan would not provide any guaranteed rate.
A Metropolitan Life spokeswoman said the company couldn’t comment on its plan or on the rival Kaufman & Broad proposal because “delicate negotiations” are being conducted.
“The good news is we’re still at the table talking,” she said.
Spokesmen for Arkansas’ and Indiana’s insurance departments could not be reached for comment on why they solicited another proposal, but they were reportedly unhappy over how long it was taking the Metropolitan Life group to develop its proposal.
Kaufman & Broad and its insurance subsidiary, Sun Life Group, proposed forming a new reinsurance company, capitalized with $100 million in cash, which would exchange old Baldwin-United policies for those of the new company.
The company would advance $25 million interest-free over five years to Arkansas and Indiana insurance regulators to pursue claims on behalf of annuity holders and to defend lawsuits.
Since May, 1984, Baldwin-United annuity holders have been paid 5.5% a year. Baldwin-United had guaranteed that rates would never fall below 7.5% and at one time had paid annual rates as high as 15% a year.
