French Group Hops on Bandwagon : Investing: The partners buying Executive Life are the latest to see a good deal and profits in the long term in the United States.


The French investors that announced Wednesday that they are bailing out ailing life insurer Executive Life are following in the footsteps of other foreign investors who see value in the huge American market, analysts said.

The $3-billion cash infusion by a group led by French insurer MAAF and a subsidiary of banking giant Credit Lyonnais follows a $1-billion investment last month in troubled Equitable Life Assurance Society by the Axa Group of France.

In another high-profile foreign investment, the British conglomerate BAT bought Los Angeles-based Farmer’s Insurance Group in 1989 and subsequently fought off a takeover bid by Axa.


As the U.S. insurance industry reels from bad real estate and junk bond investments of the 1980s, European and Japanese investors are coming in to pick up good deals, analysts said.

“They’re seeing it as an opportunity to buy into a very profitable market at a very discounted price,” said Gregory Ochalek, a life insurance consultant at accounting firm Arthur Anderson. The investments, however, may take some time to bear fruit, analysts said.

“Investors expecting a fast and high rate of return couldn’t handle this kind of deal. It looks like a strategic rather than a financial investment,” said Michael Morrissey, chairman of the Firemark Group, an insurance research firm.

“The Europeans have a longer time horizon. If you look at the shifting priorities of baby boomers, they’re moving from a consumption mode to savings and investment. European and Japanese managers can see that. American managers are focusing on quarter-to-quarter results,” he said.

The French are following Dutch investors in life insurance and British investors in property and casualty insurance in the U.S. market, Morrissey said. Japanese investors have also been active but have usually preferred minority stakes to keep a low profile.

MAAF (Mutuelle Assurance Artisanale de France), one of France’s largest mutual insurance firms, is leading a group of French investors to take over Executive Life. The group is made up of privately held holding companies including Pallas, Euris, SDI Vendome, Marceau Investissements, Eurofinac and the public firm Omnium Geneve. Spokesmen for MAAF declined to comment on how the investment, which includes a $300,000 capital infusion, would be divided among the investors.


Like the ambitious Axa Group, MAAF has expanded outside France into neighboring countries in recent years, taking advantage of Europe’s move toward a unified market in 1992. Analysts said Europeans see entering the large U.S. market as a way to diversify their risk.

Altus Finance, which is 60% owned by Credit Lyonnais, is buying 70% to 75% of Executive Life’s junk bond portfolio for $2.7 billion. Analysts said the portfolio could take a while to show a profit. But a spokesman for Credit Lyonnais said that with a broad base of more than 500 different issues, the portfolio had good prospects, and that with assets of $287 billion, the giant bank could afford to be patient.

Some observers saw the French deal as a coup for state regulators.

“I’m stunned. I thought with the complexity and size of the problem it would take six to eight more months to conclude a deal,” Morrissey said. “In terms of the credibility of the investors and the return to policyholders, this is an outstanding solution, better than I expected.”

But Ochalek of Arthur Anderson was wary of foreign ownership. “You shouldn’t take it for granted that overseas assets of these companies will back up policies,” he said. Mary Sue Maurer, a spokeswoman for the California insurance commissioner’s office, said the financial strength of the French firms would help them meet reserve requirements of the restructured Executive Life but that U.S. authorities could not seize overseas assets of the French holding companies in case the insurer failed.

The MAAF Investor Group MAAF: The lead investor that is taking an equity interest through its MAAF Vie insurance unit.

Pallas: A holding company with investments in various financial service operations in Europe.


Euris: An investment company with assets in France, Great Britain, Morocco, Spain and the United States.

SDI Vendome: A holding company controlled by Alain Mallart, who has investments in logistical services, real estate services, specialized packaging and distribution.

Maceau Investissements: A diversified investment company with holdings in industrial services, technology, food and banking.

Eurofinac: A Paris-based holding company with investments in a variety of industrial sectors.

Omnium Geneve: A Geneva-based international investment firm with operations in Great Britain, France, Germany, the Netherlands and Switzerland.

Source: California Department of Insurance and MAAF