Mutual Benefit Life

  • Mutual Benefit Life → MBL Life Assurance Corporation → SunAmerica → American International Group (AIG)
  • Alan J. Bowers
  • Palmieri and Company
    • John A. Koskinen, Deputy Director of the Office of Management and Budget - [link]
      • ... successfully restructured Baldwin-United Corporation, a large diversified financial services company; 
      • ... rehabilitated Mutual Benefit Life Insurance Company, the largest failed life insurance company in U.S. history.
  • - LC - In re Rehabilitation of Mutual Benefit Life
  • MBL Life Assurance Corporation
  • MBL Life Assurance Corporation in Liquidation
  • nolhga.com/companies/public/main.cfm?NAICCode=66362
  • (p16) - Willis B. Howard, Jr., NOLHGA - National Organization of Life and Health Insurance Guaranty Associations:
    • I'd like to respond briefly to my honorable friend, Commissioner Bartlett.
    • Dwight, the guarantee association system works, and it works well.
  • Dwight K. Bartlett III, Maryland Insurance Commissioner:
    • Are you going to tell me, Bill, in all honesty that you really believe that the policyholders of Executive Life and Mutual Benefit Life have been well-served?
    • For example, with Mutual Benefit, if you opted out of that rehabilitation plan you get, as I recall, 55 cents on the dollar of your account value.
      • If you opt into the plan, you agreed to subject yourself to a moratorium period, which means you do not get full access to the cash values of your policy until the next century.
    • Are you going to say that's meaningful coverage for those policyholders?
    • ⇒  I think that's ridiculous.

1994 - SOA - Valuation Actuary - Symposium Proceedings - Session 1 - Introduction and Overview, Society of Actuaries - 110p

  •  Before throwing in the towel to avert a full-fledged run, The Mutual Benefit Life Insurance Company made the usual protests to those who dared question its solvency.
    • On June 27, in a letter to agents, the company called reports of its weakened financial condition "rumors and misinformation."
    • Mutual Benefit asserted it was in a "strong financial position," had "limited exposure to high risk investments," and was not experiencing a liquidity problem.
  • Court papers later showed that at least two of these statements were untrue.
  • Mutual Benefit also asserted that it was no more undercapitalized than (perhaps they meant to say as well capitalized as) Mass Mutual, Metropolitan, Minnesota Mutual, MONY, New England, and UNUM.
  • Just eighteen days after these bold pronouncements, New Jersey's insurance regulators took control of Mutual Benefit, the largest seizure of an insurance company in history.

1991 09 - Schiff's Observer - Q: How Does an Insurance Company Go Bust? A: Slowly at First, Then Suddenly - 18p

  • 1991 1106 - The American Banker - Breeden says SEC is considering new rules to help avert problems like Mutual Benefit's - [link-Not the Complete Article]  ---  <WishList-Complete Article>
    • The chairman of the Securities and Exchange Commission last week told Congress that new rules are being contemplated to help head off problems similar to those resulting from the seizure of Mutual Benefit Life Insurance Co. 
    • In a letter to House Energy and Commerce Committee Chairman Rep. John Dingell, D-Mich., SEC Chairman Richard Breeden said the agency had adopted rules in February that were aimed at improving the credit quality of securities purchased for taxable money market funds and that the SEC is studying extending the rules to tax-exempt funds. - <WishList- Letter>
  • Media - Mutual Benefit Life
    • 1991 0521 - NYT - Mutual Benefit Life And Cigna Ratings - [link]
    • 1991 0714 - The Washington Post - N.J. Officials Ready to Seize Major Insurer, By Albert B. Crenshaw - [link]
    • 1991 0716 - Los Angeles Times - Mutual Benefit Insurance Fails After Run on Assets: Economy: It is the largest such collapse in U.S. The New Jersey company cites bad real estate investments. - [link]
    • 1991 0716 - Tampa Bay Times - Mutual Benefit Asks State Control - [Helen Huntley] - [link]
    • 1991 0716 - The Index-Journal - Customers Try To Cash In After Insurance Takeover - [Mutual Benefit Life Insurance Co.]  ---  [BonkNote]
      • Worried customers rushed to redeem their policies with Mutual Benefit Life Insurance Co. after learning would ask the state to take it over.
        • But they were sent away empty-handed.

    • 1993 0124 - Sun The Kansas City Star - Tips on Mutual Benefit Policies  ---  [BonkNote]

      • Failure of life insurance company has left 700,000 policyholders wondering about rights.

    • 1993 0418 - NYT - New Jersey Q & A: Alan J. Bowers; The Expanding World of the Accountant, By Charles Jacobs - [link]
      • Alan J. Bowers, who was named the managing partner for the New Jersey metropolitan region of Coopers & Lybrand last October, during an interview at his office here.
      • Mr. Bowers, 38, received a bachelor's degree in accounting from Montclair State College and a master's degree in finance and economics from St. John's University. He has spent all but one of his 16 years in public accounting with Coopers & Lybrand and recently completed three years of directing the firm's central and southern New Jersey office.
    • 1995 0415 - NYT - Mutual Life Set to Name New Chief, By Michael Quint - [link]
    • 1997 0915 - WSJ - MBL Life Is Putting Itself Up for Sale in Better Shape, By Leslie Scism - [link]
    • 1999 0627 - NYT - New Jersey & Co.; Closing Down an Empire, Gracefully, By Ronald Smothers - [link]
      • As a managing partner at a major accounting firm in the early 90's, Alan J. Bowers had done his share of swimming with the sharks of leveraged buyouts and arbitrage on behalf of corporate clients. He usually watched from a safe distance and was never part of the food chain himself.
      • That changed in 1995 when he became president of Mutual Benefit Life Insurance Company with the goal of rehabilitating this former stalwart of the insurance industry under the watchful eye of state regulators, courts, policyholders and creditors.
      • ''While some of these men were doing the right thing, others didn't know what the right thing was,'' Mr. Bowers said as he strolled down the gantlet of portraits.
        • ''Much of what was done was done in the interest of empire building and ego gratification. It was an ugly past.''
  • After a rush by policyholders to withdraw their cash, New Jersey insurance officials said yesterday they expect to take over Mutual Benefit Life Insurance Co., the nation's 18th-largest insurer, possibly as early as tomorrow.
  • With more than $13.5 billion in assets and 400,000 policyholders, Newark-based Mutual Benefit would be the largest insurer in the nation's history to be taken over by regulators, underscoring the impact of the recent recession on the investments that are the economic underpinnings of most life insurance companies.
  • Mutual Benefit's problems highlight two of the most important problems facing the insurance industry today -- real estate values and policyholder runs.
  • About 45,000 of Mutual Benefit's policyholders live in New Jersey, one of the few states that does not have a fund to protect customers of failed insurance companies.
  • Mutual Benefit is considerably larger than Executive Life Insurance Co. of California, which was the biggest insurance failure in history when it collapsed in April.
  • Mutual Benefit had been hoping to ride out its problems, but reports in northern New Jersey newspapers last week about its problems sent panicky policyholders flocking to the company to try to get their money. After a report in the Record in Hackensack, N.J., on Friday, lines formed at the company's headquarters. Its plight became page one news in the New York Times yesterday as well.

washingtonpost.com/archive/politics/1991/07/14/nj-officials-ready-to-seize-major-insurer/53016696-b959-4c85-a5fd-8299309a6623/

  • 1991 0716 - Los Angeles Times - Mutual Benefit Insurance Fails After Run on Assets: Economy: It is the largest such collapse in U.S. The New Jersey company cites bad real estate investments. - [link]
    • In what amounts to the largest U.S. life insurance company failure in history, Mutual Benefit Life Insurance Co. on Monday asked New Jersey regulators to take control of the company because of its sagging real estate investments and a run by its policyholders.
    • The collapse of Mutual Benefit is the latest blow to the nation’s life insurance industry and follows the failures of Executive Life Insurance Co. and First Capital Life Co., the Los Angeles-based companies that were brought down by junk-bond investments earlier this year.
  • 1991 0521 - NYT - Mutual Benefit Life And Cigna Ratings - [link]
    • Moody's, meanwhile, lowered the insurance financial strength rating of the Mutual Benefit Life Insurance Company to A-3, from Aa-3.
    • The rating agency said the action reflected the recent recognition by Mutual Benefit's management of substantially larger asset quality problems than were previously disclosed. Significant losses from Mutual Benefit's mortgage and real estate investments have hurt the life insurer's capital position.
  • They are looking, in particular, at the Mutual Benefit and saying, “Yes, Mutual Benefit had a run on the bank.”
    • They also had illiquid assets and were not able to respond to that run.
  • There is some type of measure or factor applied in looking at the liquidity of assets, the business you’re writing, the probability of a run on the bank, or all these other factors that build, either independently or as part of the risk based capital formula, into a liquidity factor.
  • [Bonk: They = Regulators]

--  Barbara L. Snyder,  General American Life

1996 - SOA - Investment under the Risk-Based Capital (RBC) and Rating Agencies Requirements, Society of Actuaries - 16p

  • (p588) - The first person to testify was Commissioner Dwight K. Bartlett III (Md.).
  • Commissioner Bartlett told the working group that guaranty associations were developed during a time when "life insurers sold life insurance."
    • He cited the recent rehabilitation of Mutual Benefit Life Insurance Company as an example of the shortcomings of the present guaranty association system.
      • The receiver and guaranty associations did the best job possible within the current framework, but policyholders were forced to bear a disproportionate share of the costs involved, he said.
    • Commissioner Bartlett characterized his proposal as representing a middle ground between the current system and a system like the Federal Deposit Insurance Corporation (FDIC) advocated by some.

1995-1, NAIC Proceedings - Guaranty Fund Issues Working Group B of the Insolvency (EX5) Subcommittee - September 11, 1995

  • 1998 - LR - The Law and Finance of Bank and Insurance Insolvency Regulation, by David A. Skeel Jr - 59p
    • 41. When Mutual Benefit Life Insurance Company became insolvent, for instance, the insurance commissioner's office began a lengthy rehabilitation process that ultimately included the enactment by New Jersey of a retroactive modification of its insurance insolvency provisions to provide for policyholder priority.
      • See In re Rehabilitation of Mutual Benefit Life Ins. Co ., 609 A.2d 768 (N.J. Super. Ct. App. Div. 1992) (affirming the rehabilitation plan).
      • The rehabilitation of large insurers bears an obvious resemblance to the "too big to fail" doctrine in the banking context, and its use to justify open bank assistance in cases such as Continental Illinois

16 Jul 1991, Tue The Herald (Jasper, Indiana) Newspapers.com

  • I'm now going to move on to the Mutual Benefit case that occurred in July 1991.
    • The primary cause of default in Mutual Benefit's case was excessive investment in commercial mortgages and real estate in an environment of a weakening economy, corporate downsizing, empty office spaces, and all the other things with which you're probably familiar.
  • It was exacerbated by a lack of diversification.
    • Mutual Benefit had four jumbo real estate investments and all four went sour.
    • Of course, the capital ratio was insufficient to support the risks on the assets side.

-- Murray L. Becker

1999 - SOA - Insurance Company Failures of the Early 1990s-Have We Learned Anything?, Society of Actuaries - 25p

  • 1995 0726 and 0727 - GOV (House) - Debt Issuance and Investment Practices of State and Local Governments, Richard Baker (R-LA) - [PDF-968p-archive.org]
    • (p150 / 509) An interesting question arising in third-party guaranteed defaults is what happens when the guarantor collapses.
    • When the letter-of-credit bank or insurance company goes under, or the corporate guarantor goes bankrupt, there is no more credit enhancement or guarantee on the bond issue.
    • In these instances bondholders usually lose.
      • Such was the case with the $1.6 billion of munis backed by Executive Life and the $600 million of housing issues backed by Mutual Benefit Life Insurance Company.  (p150)

    • House - Committee on Banking and Financial Services - Subcommittee on Capital Markets, Securities, and Government Sponsored Enterprises