Facing a Monday deadline, insurance officials and regulators were scrambling Friday to muster financial, legal and operating support for a $1-billion industry bid for Executive Life Insurance Co. of California.
Officials at the National Organization of Life and Health Guaranty Assns., the industry group making the bid, were meeting with attorneys and industry executives in a last-ditch effort to resolve unsettled issues that could scuttle the group’s ability to buy Executive Life. If the industry group fails to meet the Monday deadline to fulfill regulatory conditions for its bid, it may lose out to another bidder.
Executive Life, a huge Los Angeles-based insurer, failed last April under the weight of a souring portfolio of junk bonds and a flood of policyholder surrender requests.
Although industry leaders were optimistic about NOLHGA’s chances of completing the deal, they acknowledged that the group would probably scramble until late Monday.
NOLHGA, which represents 47 state-operated guarantee funds, was tentatively chosen last week by California Insurance Commissioner John Garamendi as the winning bidder out of eight groups that had offered to buy the assets of Executive Life.
However, Garamendi said then, the industry group would have to satisfy nine requirements before getting final approval, including giving the commissioner formal assurances that NOLHGA and its backers have the legal and financial wherewithal to complete the buyout.
If the conditions are not met by Monday, Garamendi said, he will chose one of two other potential buyers--a group led by Altus Finance and Mutuelle Assurances Artisanale de France or a group comprised of San Francisco investment bankers Hellman & Friedman, Zell/Chilmark of Chicago and New York-based Fund American Cos.
“Our best reading at this point, based on all the work that’s been done this past week, is that all of Garamendi’s conditions will be satisfied by Monday,” said James Dederer, general counsel at Transamerica Occidental Life, which has taken a role in the NOLHGA buyout.
Among hurdles NOLHGA has to overcome are getting legal opinions from all the state guarantee associations saying they have the ability to go forward with what will be an unprecedented takeover of a private insurer.
Meanwhile, a NOLHGA spokeswoman said, the group had received verbal commitments from “almost all” of the 25 major insurers it had tapped to provide backup financial guarantees that would go into effect if the guarantee associations were unable to provide sufficient capital for Executive Life’s rehabilitation. NOLHGA announced Friday that it had hired Alan Richards, former chairman and chief executive of E. F. Hutton Life Insurance Co., to head the group’s management committee.
The National Assn. of Insurance Commissioners, which sets financial reporting standards for the industry, also said it will support the NOLHGAoffer.
Even if NOLHGA is able to clear Garamendi’s hurdles, it will face the possibility of losing Executive Life to one of the other buyers if another group offers more for the failed insurer.
Garamendi has given Altus and Hellman until Nov. 11 to boost their bids one last time. He promises to make a final recommendation on a buyer Nov. 18. Los Angeles Superior Court Judge Kurt Lewin is expected to approve whichever buyer Garamendi recommends.