Wednesday, December 23, 2020

No. 404: Executive Compensation in the Insurance Industry—2019 Data from the Nebraska Department of Insurance

Background
Beginning in 1975, in many issues of The Insurance Forum, I provided tabulations of executive compensation data in the insurance industry. The final tabulation was in the July 2013 issue, because the Forum ended with the December 2013 issue. From time to time since then, I have posted some executive compensation data on my blog. Recent tabulations include No. 335 (October 3, 2019), where I showed 2018 data from my three sources of information: the Securities and Exchange Commission (SEC), the New York State Department of Financial Services (DFS), and the Nebraska Department of Insurance (NDI). In No. 381 (July 13, 2020), I showed 2019 data from the SEC. In No. 385 (August 7, 2020), I showed 2019 data from the DFS. Here I show 2019 data from the NDI.

NDI Data for 2019
NDI data are in a "Supplemental Compensation Exhibit" (Exhibit) filed by each insurance company doing business in Nebraska. Each Exhibit normally shows figures for the ten top company officials. The figure I show for each individual is the "total." Components of the "total" are "salary," "bonus," "stock awards," "option awards," "sign-on payments," "severance payments," and "all other compensation." NDI provides all the Exhibits on a CD to any member of the public for $80.

In the tabulation below, I show data for individuals who received at least $5 million in 2019. Where two or more individuals in a company are shown, they are listed in descending order of compensation.

The Allocation Problem and a Modification
Where companies are members of a holding company group, some companies show the total amount received by each individual from all companies in the holding company group. Some companies, however, allocate each individual's compensation to each company in the holding company group.

For companies that allocate, the difficulty in locating all companies doing business in Nebraska that are part of a holding company group has become increasingly prohibitive. For that reason, I have modified the tabulation shown below from past years in that this year I did not attempt to assemble the group data. I have instead shown the figures for the company with the largest dollar amounts for each group.

For some individuals listed below, because of the modification, the compensation figure shown is smaller, and in some instances probably much smaller, than the individual's total compensation from all members of the holding company group. Also, because of the modification, some companies probably are not listed because no individual had at least $5 million of compensation from a single company in their group.

NDI Data for 2019
Acuity, A Mutual Ins Co
Benjamin M Salzmann
$16,347,333
Aetna Life Ins Co
Richard M Jelinek
9,658,380
Karen S Lynch
8,673,924
AFLAC Inc
Daniel P Amos
14,744,603
Frederick J Crawford
5,505,399
Allianz Life Ins North America
Walter R White
6,746,838
Allstate Ins Co
Thomas J Wilson
16,261,339
Steven E Shebik
5,915,393
AMBAC Assurance Corp
Claude LeBlanc
5,289,234
American Family Ins Co
Jack C Salzwedel
11,251,032
American General Life Ins Co
Kevin Hogan
9,411,779
American United Life Ins Co
James S Davison
6,064,438
Amguard Ins Co
Sy Foguel
5,299,791
Assured Guaranty Corp
Dominic Frederico
12,736,290
Assurity Life Ins Co
Thomas E Henning
7,814,132
Athene Annuity & Life Assur Co
James Belardi
5,007,098
Atlantic Specialty Ins
Timothy M Miller
5,036,019
AXA Equitable Life Ins Co
Mark Pearson
6,295,387
BCS Ins Co
Howard F Beacham III
21,435,850
Brighthouse Life Ins Co
Eric T Steigerwalt
8,229,713
Care Improvement Plus of Texas
Janice Clayton Zigler
5,428,024
Chicago Title Ins Co
Raymond Randall Quirk
14,579,836
Roger Scott Jewkes
8,729,398
Michael Joseph Nolan
7,157,620
Anthny John Park
5,344,120
Chubb Indemnity Ins Co
John J Lupica
6,030,000
Paul J Krump
5,003,500
Continental Casualty Co
Dina Robusto
9,135,270
Employers Assurance Co
Douglas Dean Dirks
5,315,872
Essent Guaranty Inc
Mark Casale
7,636,915
Everest Reinsurance Co
Dominic J Addesso
10,759,779
Juan C Andrade
10,481,729
Farmers Ins Exchange
Jeffrey J Dailey
7,853,208
First American Title Ins Co
Dennis Gilmore
8,588,389
GEICO Casualty Co
Olza Minor Nicely
15,452,510
William Evan Roberts
7,789,401
Genworth Life Ins Co
Thomas McInerney
9,115,260
Globe Life & Accident Ins Co
Frank M Svoboda
9,359,904
William M Pressley
6,474,615
Bill E Leavell
5,400,498
Great American Ins Co
Carl H Lindner III
10,284,610
Great-West Life Assur Co (US)
Robert Shaw
7,638,745
Andra S Bolotin
5,902,744
Edmund F Murphy
5,215,422
Guardian Life Ins Co of America
Deanna Mulligan
8,606,700
Tracy L Rich
6,418,359
Hartford Fire Ins Co
Christopher Swift
6,175,641
Health Care Service Corp
Paula Steiner
31,013,500
Eric Feldstein
7,471,886
David Lesar
6,038,111
Horace Mann Ins Co
Marita Zuraitis
7,429,404
Humana Ins Co
Bruce D Broussard
24,635,360
Illinois Ins Co
Steven Menzies
10,657,018
Insurance Co of the West
Kevin Prior
13,694,265
Ernest Rady
5,861,143
Jackson National Life Ins Co
Paul C Myers
7,008,073
John Hancock Life Ins Co USA
Daniel Janis III
6,692,374
Emory Sanders Jr
5,765,776
Christopher Conkey
5,264,701
Liberty Mutual Ins Co
David H Long
12,701,326
Timothy Sweeney
5,341,983
Lincoln National Life Ins Co
Dennis R Glass
28,328,586
Randal J Freitag
7,747,826
Wilford H Fuller
7,332,269
Ellen G Cooper
6,073,150
Lisa M Buckingham
5,169,731
Massachusetts Mutual Life Ins Co
Roger Crandall
17,808,738
Elizabeth Chicares
6,933,041
Michael Fanning
6,420,327
Melvin T Corbett
6,337,670
Metropolitan Life Ins Co
Michel Khalaf
6,505,805
Steven J Goulart
6,338,392
Mortgage Guaranty Ins Corp
Patrick Sinks
7,389,088
National Western Life Ins Co
Ross R Moody
6,831,982
National Life Ins Co
Mehran Assadi
7,788,000
New York Life Ins Co
Theodore A Mathas
24,007,290
Craig L DeSanto
5,452,283
Anthony R Malloy
5,246,200
Northwestern Mutual Life Ins Co
John E Schlifske
13,692,772
Ohio National Life Ins Co
Gary Thomas Huffman
8,955,246
Pacific Life Ins Co
James T Morris
8,290,370
Penn Mutual Life Ins Co
Eileen McDonnell
5,596,160
Philadelphia Indemnity Ins Co
Robert D O'Leary
5,146,147
Principal Life Ins Co
Karl W Nolin
7,113,249
Daniel J Houston
7,000,237
Mustafa Sagun
5,232,118
Protective Life Ins Co
John Johns
11,046,696
Richard Bielen
6,749,265
Prudential Ins Co of America
Mark Brown Grier
7,633,867
Charles F Lowrey
6,854,886
Robert Michael Falzon
5,296,179
Stephen Pelletier
5,220,842
QCC Ins Co
Daniel J Hilferty
5,718,026
Radian Guaranty Inc
Richard Thornberry
9,040,149
Sagicor Life Ins Co
Dodridge Miller
12,468,464
Scor Reinsurance Co
Mark Kociancic
6,918,899
Selective Ins Co of America
Gregory Murphy
5,330,094
Standard Ins Co
John Gregory Ness
9,161,498
Starr Indemnity & Liability Co
Maurice R Greenberg
10,802,945
State Farm Mutual
Michael Leon Tipsord
10,271,892
Teachers Ins & Annuity Assn
Ronald Pressman
8,546,026
Roger Ferguson
6,252,325
Thrivent Financial for Lutherans
Bradford L Hewitt
7,013,638
Transatlantic Reinsurance Co
Michael C Sapnar
6,884,413
Kenneth Apfel
5,607,047
Travelers Casualty Co
Alan D Schnitzer
15,303,458
Willaim H Heyman
6,389,000
Avrohom J Kess
6,067,301
Jay S Benet
5,023,442
United of Omaha Life Ins Co
James T Blackledge
5,093,821
United States Liability Ins Co
Thomas P Nemey
21,417,692
Voya Retirement Ins & Annuity
Charles Patrick Nelson
5,427,368
Western & Southern Life Ins Co
John Barrett
9,499,300

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Thursday, December 17, 2020

No. 403: General Electric Enters into a $200 Million Settlement with the Securities and Exchange Commission

In No. 395 (October 26, 2020), I said General Electric Company (GE) had received a Wells notice on September 30, 2020 from the staff of the Securities and Exchange Commission (SEC). The notice related to an SEC investigation of, among other things, GE's inadequate reserves for its legacy long-term care (LTC) insurance business. On December 9, 2020, GE filed an 8-K (significant event) report disclosing that GE and the SEC had entered into a $200 million settlement to end the previously disclosed SEC investigation.

The GE 8-K
In the 8-K, GE said it had reached a settlement in connection with the SEC investigation. GE went on to say (the relevant section of the 8-K is in the complimentary package offered at the end of this post):
Consistent with common SEC practice, GE neither admits nor denies the findings in the administrative order that the SEC issued today. Under the terms of the settlement, GE consented to the entry of an order requiring it to pay a civil penalty of $200 million and to cease and desist from violations of specified provisions of the federal securities laws and rules promulgated thereunder.
The SEC Order
A paragraph near the beginning of the SEC Order Instituting Cease-and-Desist Proceedings reads as follows (the full Order is in the complimentary package offered at the end of this post):
In anticipation of the institution of these proceedings, Respondent [GE] has submitted an Offer of Settlement which the Commission has determined to accept. Solely for the purposes of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission's jurisdiction over it and the subject matter of these proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order, as set forth below.
No Admission of Wrongdoing
The "neither admits nor denies" language is an important part of the GE/SEC settlement. In No. 244 (December 11, 2017), I wrote about an SEC settlement in August 2013 with Philip A. Falcone and companies associated with him. There I quoted at some length from a January 2014 speech by then SEC Chair Mary Jo White. Here is a brief, edited description of what she said:
For many years, the SEC, like virtually every other civil law enforcement agency, typically did not require entities or individuals to admit wrongdoing in order to enter into a settlement. This no admit/no deny settlement protocol makes sense and has served the public interest well. She cited such things as more and quicker settlements and avoidance of litigation risk. So why modify the no admit/no deny protocol? She cited such things as a greater measure of public accountability and the need for public confidence in the strength and credibility of law enforcement. She said that, as a U.S. Attorney, she had required an admission of wrongdoing in a 1994 case, and she brought that mind set when she became SEC Chair in 2013.
General Observations
One knowledgeable reader with whom I spoke about the settlement thought the dollar amount of the settlement was a pittance. However, I am not in a position to express an opinion on that matter.

As for the no admit/no deny protocol, it will be interesting to see what happens when the SEC, the Department of Justice, and other federal law enforcement agencies become part of the Biden administration. I cannot predict what will happen, but I hope the no admit/no deny protocol will receive close attention.

Available Material
I am offering a complimentary 20-page PDF consisting of an excerpt from the GE 8-K (1 page) and the SEC Order (19 pages). Email jmbelth@gmail.com and ask for the December 2020 package about the GE/SEC settlement.

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Friday, December 11, 2020

No. 402: Brian Alfaro, a Former Texas Securities Broker, Goes to Federal Prison

On November 10, 2020, the U.S. Attorney in the Western District of Texas issued a press release announcing that Brian Keith Alfaro, a former Texas securities broker (CRD #4049120), was sentenced to 121 months in federal prison and ordered to pay restitution of almost $10 million for "scheming to defraud investors." I say "former" because Alfaro has been barred from the securities industry. The press release is in the complimentary package offered at the end of this post.

The Federal Indictments
On November 28, 2018, a federal grand jury in San Antonio handed down an eight-count sealed indictment against Alfaro. The indictment was unsealed a few days later, after Alfaro's arrest. He pleaded not guilty.

The case was assigned to U.S. District Judge Samuel F. Biery. President Clinton nominated him in November 1993. The Senate confirmed him in March 1994. He served as Chief Judge from June 2010 to December 2015.

On June 19, 2019, the grand jury handed down a superseding eight-count indictment. The seventh of the eight mail fraud counts in both indictments was later dismissed at the government's request. The superseding indictment is in the complimentary package offered at the end of this post.

The Federal Jury Trial
In early February 2020, the federal jury trial was held. The jury found Alfaro guilty on all seven remaining counts. The jury verdict form is in the complimentary package offered at the end of this post.

On November 20, 2020, the judge sentenced Alfaro to 121 months in federal prison, followed by three years of supervised release, no fine, a $600 special assessment, and restitution of almost $10 million. (See U.S.A. v. Alfaro, U.S. District Court, Western District of Texas, Case No. 5:18-cr-879.)

The Texas Order
On November 9, 2020, Texas Securities Commissioner Travis J. Iles issued an Emergency Cease and Desist Order directed at Alfaro, members of his family, and others associated with him. The order is in the complimentary package offered at the end of this post.

The FINRA Report
"Broker Check" is operated by the Financial Industry Regulatory Authority on its website (finra.org). I reviewed the report on Alfaro. He is described as a "previously registered broker" and as currently "barred." The report shows six "disclosure events" consisting of one "criminal" event, four "customer dispute" events, and one "investigation" event.

Available Material
I am offering a complimentary 32-page PDF consisting of the U.S. Attorney's press release (1 page), the superseding indictment (10 pages), the jury verdict form (3 pages), and the Texas emergency order (18 pages). Email jmbelth@gmail.com and ask for the December 2020 package about Alfaro.

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Friday, December 4, 2020

No. 401: Unum Life of America Takes a $2 Billion Hit to Its Long-Term Care Insurance Reserves

The MBOI Examination of ULA
On June 30, 2020, Eric A. Cioppa, the Superintendent of the Maine Bureau of Insurance (MBOI), accepted and made public the Report of Examination of Unum Life Insurance Company of America (ULA) as of December 30, 2018 (Report). On page 19 of the Report are two paragraphs disclosing that ULA suffered a $2 billion hit to the reserves for its long-term care (LTC) insurance business. Here are the two paragraphs (the full Report is in the complimentary package offered at the end of this post):
As discussed in the Summary of Significant Findings and Note 1 to the Comments on the Financial Statements of this Report, the MBOI found ULA's gross LTC reserves to be deficient by $2,085,740,649 as of December 31, 2018 as a result of this examination. On May 1, 2020, the MBOI approved a permitted practice which allows ULA to delay full recognition of the statutory reserve deficiency identified in connection with this examination that would otherwise be required under Statement of Statutory Accounting Principles (SSAP) 54 Individual and Group Accident and Health Contracts. The request was made subject to the confidential Phase in, Guardrails and Monitoring Plan for Unum Life Insurance Company of America LTC Statutory Reserve Strengthening ("Plan"). The reserve increase will be recognized over a seven-year period beginning with the statutory financial statements for the year-ended December 31, 2020 and continue until the statutory financial statement for the year-ended December 31, 2026 according to a defined schedule, as outlined in the Plan. The permitted accounting practice was approved retroactively to December 31, 2018 and December 31, 2019 such that no additional reserves would be required to be reported until year-end 2020. If this permitted practice had not been granted, it is estimated that ULA's net income and surplus at December 31, 2018 would have been reduced by approximately $2.1 billion due to the need to write off the uncollectible reinsurance recoverable and reverse the cession of the $2.1 billion of reserves to Fairwind. The MBOI will monitor ULA's compliance with the Plan during the reserve phase-in period by continuing the limited scope examination.
[ULA] paid dividends of $492,000,000 to Unum Group during 2019. [ULA] paid a dividend to Unum Group of $234,000,000 in the first quarter of 2020.
Fairwind, referred to above, is Fairwind Insurance Company. It is an affiliated captive insurance company with which ULA had entered into reinsurance arrangements. Those arrangements are discussed in the Report.

The Kansas/GE Parallel
The MBOI bailout of ULA bears a striking resemblance to the 2018 bailout of General Electric Company (GE) by the Kansas Insurance Department. I discussed the Kansas/GE matter in No. 258 (March 19, 2018).

In January 2018, GE disclosed it would contribute $15 billion of capital to Employers Reassurance Corporation (ERAC), a GE subsidiary domiciled in Kansas. ERAC requested and the Kansas department approved an arrangement allowing GE to "spread and delay" contributing the additional reserves over the next seven years.

GE also reported that the Securities and Exchange Commission (SEC) was investigating the matter. In October 2020, GE reported that it received a Wells notice from the SEC staff indicating the staff may recommend enforcement action by the SEC. I discussed the Wells notice in No. 395 (October 26, 2020).

General Observations
I do not know whether the SEC will investigate the MBOI bailout of ULA. However, such an investigation would come as no surprise, given the similarity between the MBOI/ULA bailout and the Kansas/GE bailout. In any case, I plan to report further developments relating to both bailouts.

Available Material
I am offering a complimentary 24-page PDF containing the recent MBOI examination report on ULA. Email jmbelth@gmail.com and ask for the December 2020 package about the MBOI/ULA examination report.

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Tuesday, December 1, 2020

No. 400: Stranger-Originated Life Insurance—A Follow-Up to My Recent Blog Post About the Legislation in New Jersey

In No. 317 (June 13, 2019), I discussed developments that led to recent legislation in New Jersey prohibiting stranger-originated life insurance (STOLI). In No. 396 (November 2, 2020), I discussed the recent legislation in New Jersey, and said I was not aware of any other state in which STOLI is prohibited by law. In response, several readers called my attention to other states with laws prohibiting STOLI. That prompted me to investigate and prepare this further follow-up. The complimentary packages I offered in Nos. 317 and 396 remain available.

The New York State Prohibition
One reader shared with me some information about the New York State prohibition of STOLI. Effective in 2010, what are now sections 7814 and 7815 of the New York Insurance Laws prohibit STOLI. For the purposes of the prohibition, STOLI is defined as
Any act, practice or arrangement, at or prior to policy issuance, to initiate or facilitate the issuance of a policy for the intended benefit of a person who, at the time of policy origination, has no insurable interest in the life of the insured under the laws of this state.
The NAIC and NCOIL Model Laws
Another reader shared with me an article entitled "Deterring STOLI: Two New Model Life Settlement Acts." The article was in the July 2008 issue of the magazine Estate Planning. The authors were Kenneth W. Kingma and Stephan R. Leimberg.

The article discussed the adoption of model laws by the National Association of Insurance Commissioners (NAIC) in 2006, and the National Conference of Insurance Legislators (NCOIL) in 2007. As I went over the article, I had the impression that the NAIC model law frowns upon STOLI but does not include an outright prohibition of the practice. At the same time, I had the impression that the NCOIL model law not only frowns upon STOLI but also includes an outright prohibition of the practice. The article is in the complimentary package offered at the end of this post.

The Minnesota and Nevada Prohibitions
After reading the Kingma-Leimberg article, I wrote to some state insurance departments asking whether they impose statutory prohibitions on STOLI. Spokespersons representing Minnesota and Nevada responded to my inquiry.

The Minnesota spokesperson said the state prohibits STOLI and cited section 60A0783 of the 2012 Minnesota Statutes requiring an insurable interest. The Nevada spokesperson said the state prohibits STOLI and cited section 687B040 of the Nevada Revised Statutes requiring an insurable interest. Neither spokesperson was able to say whether their statutes were enacted in the wake of the NCOIL model law, but I think they were.

The Illinois Consumer Alert
In the course of preparing this follow-up, I stumbled across a "Consumer Alert" that was issued in January 2008 by what is now the Illinois Department of Insurance. The alert advised "consumers to proceed with caution when considering participation in a STOLI arrangement." The Department said that it "does not sanction or approve" such arrangements, and that "These transactions and parties to these transactions may be subject to the Illinois Insurance Code and other applicable laws in the State of Illinois." The alert also described the nature of STOLI arrangements. The alert is in the complimentary package offered at the end of this post.

Available Material
I am offering a complimentary 19-page PDF containing the Kingma-Leimberg article about "Deterring STOLI" (18 pages) and the Illinois Consumer Alert on STOLI (1 page). Email jmbelth@gmail.com and ask for the December 2020 package about STOLI.

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