Group to Enhance Executive Life Bid
The French-based investment group that has made a $3-billion bid for failed Executive Life Insurance Co. will revise its offer this week in an effort to make it more attractive to policyholders.
Officials of the group, which includes Altus Finance and Mutuale Assurance Artisanale de France, said Monday that the revisions will allow policyholders greater access to their investment funds and will fix a handful of problems that agents and policyholders had complained about.
“These changes, which we expect to announce tomorrow, will enable us to better address the needs of Executive Life’s existing policyholders and will help to further ensure the company’s stability and long-term success,” said John Hartigan, a Los Angeles attorney who is part of the buying group’s transition team.
The revised offer comes just four days before a court-imposed deadline expires for bids for Executive Life, which was seized by regulators in April after losses from its junk bond portfolio mounted. Three other groups have indicated they would submit competing bids.
The changes do not alter Altus’ treatment of Executive Life’s junk bonds. The other potential investors have said that Altus’ offer places too low a value on junk bonds, which would be spun off from the company.
Altus, a unit of financial giant Credit Lyonnais, and MAAF, a Paris-based mutual life insurance company, have proposed to buy Executive Life in a two-step transaction. Altus will pay $2.7 billion for a portion of Executive Life’s junk bonds that are valued at $5.4 billion. MAAF would kick in another $300 million and promise to pay all policyholders about 81 cents on the dollar. Life insurance guarantee funds operating in most states would make up the difference on the first $100,000 of policy cash value.
However, in the original deal, policyholders who wanted to get the 81 cent payout would need to keep their funds with the company for at least five years. New policy loans would not be permitted. And the rates charged on old loans could rise. Additionally, individuals wishing or needing to surrender their policies would have faced tremendous surrender fees.
Some agents and policyholder groups complained that the deal gave them too little access to their funds. And some said the burden fell hardest on elderly and disabled individuals whose need for the money might be more urgent.
Hartigan said the revised bid would include several changes:
* Policyholders will be able to borrow up to 50% of the cash value in their accounts.
* MAAF will establish a hardship policy, allowing those with medical or financial emergencies to get access to the cash value of their policies without incurring surrender charges.
* Those holding single-premium deferred annuities and single-premium whole life policies will be able to withdraw an amount equal to the net annual earnings without facing surrender charges each year.
* The rates charged on policy loans will be reduced slightly from the rates originally anticipated by the buyout plan.
Some policyholders were encouraged by the revisions. “This is a very responsive answer to the concerns we took to them last week,” said Maureen Marr, a spokeswoman for the Action Network for Victims of Executive Life.
Other bids are expected from: the National Assn. of Life & Health Insurance Guaranty Assns., which represents state guaranty funds nationwide; a partnership headed by the San Francisco investment banking firm of Hellman & Friedman that includes the Zell/Chilmark Fund and Fund American Cos.; and an investment group including record industry mogul David Geffen, Texas financier Richard Rainwater and money manager Bechtel Investments.
