No. 287: Executive Compensation in the Insurance Industry in 2017

The Insurance Forum began with the January 1974 issue. In 1975 I began publishing data on executive compensation in the insurance industry. Chapter 24 of my 2015 book, The Insurance Forum: A Memoir, describes the history of my executive compensation tabulations and the efforts made by the industry and by insurance regulators to block access to the data.

A few years after ending publication of the Forum with the December 2013 issue, I posted on my blog some executive compensation data for 2015. The data from my three sources—the Securities and Exchange Commission (SEC), the New York State Department of Financial Services (DFS), and the Nebraska Department of Insurance (NDI)—are in No. 163 (May 23, 2016), No. 164 (May 31, 2016), and No. 165 (June 8, 2016). I have now assembled some executive compensation data for 2017.

During the final seven years of the Forum, I showed data for individuals who received at least $1 million in the year under study. For example, the final executive compensation tabulation in the Forum, showing data for 2012, was in the July 2013 issue. I am offering that tabulation on a complimentary basis at the end of this post. In the new tabulation in this post I show data for individuals who received at least $5 million in 2017. Where more than one individual in a company is shown, they are listed in descending order of compensation.

SEC Data for 2017

Each figure in the SEC data is the "Total" in the 2017 summary compensation table filed with the SEC by shareholder-owned public companies. The seven components of the "Total" are "Salary," "Stock Awards," "Option Awards," "Non-Equity Incentive Plan Compensation," "Change in Pension Value and Nonqualified Deferred Compensation Earnings," and "All Other Compensation."

The table for most companies is in the definitive proxy statement filed in advance of the company's 2018 annual meeting of shareholders. In a few instances, the table is in a 10-K annual report. For Canadian companies, the figures are in Canadian dollars, and the table is in a 6-K annual report. The documents referred to here are readily available to the public without charge at https://www.sec.gov/edgar/searchedgar/companysearch.html on the SEC website.

SEC Compensation Data for 2017
Aetna Inc
Mark T Bertolini	$18,750,816
Gary W Loveman PhD	9,915,288
Richard M Jelinek	7,917,107
Karen S Lynch	7,666,746
Shawn M Guertin	6,022,155
AFLAC Inc
Daniel P Amos	22,830,984
Frederick J. Crawford	5,528,500
Alleghany Corp
Weston M Hicks	9,647,362
Allstate Corp
Thomas J Wilson	18,757,329
John Dugenske	10,163,895
Matthew E Winter	7,809,707
Steven E Shebik	7,271,292
Don Civgin	5,054,720
American Financial Group Inc
Carl H Lindner III	9,772,850
S Craig Lindner	9,602,149
American International Group Inc
Brian Duperreault	43,086,861
Peter D Hancock	24,208,608
Peter Zaffino	17,692,606
Robert S Schimek	16,454,821
Peter Y Solmssen	14,604,342
Douglas A Dachille	14,295,567
Kevin T Hogan	13,546,670
Siddhartha Sankaran	11,967,388
Ameriprise Financial Inc
James M Cracchiolo	23,900,309
Walter S Berman	8,169,090
William F Truscott	6,656,556
Colin Moore	5,885,105
Anthem Inc
Joseph R Swedish	18,553,317
Gloria M McCarthy	5,816,686
John E Gallina	5,478,983
Peter D Haytaian	5,422,957
Brian T Griffin	5,412,155
Aon plc
Gregory C Case	14,609,682
Stephen P McGill	7,679,793
Christa Davies	7,382,514
Kristi Savacool	7,209,668
Arch Capital Group Ltd
Constantine Iordanou	12,752,096
Nicolas Papadopoulo	8,888,674
Marc Grandisson	7,131,745
Assurant Inc
Alan B Colberg	9,274,743
Gene E Mergelmeyer	5,412,189
Assured Guaranty Ltd
Dominic J Frederico	13,526,784
AXIS Capital Holdings Ltd
Albert A Benchimol	7,045,778
Centene Corp
Michael F Neidorff	25,259,468
Cynthia J Brinkley	6,332,724
Jeffrey A Schwaneke	5,546,562
Chubb Ltd
Evan G Greenberg	19,116,401
John W Keogh	7,864,964
Paul J Krump	7,010,885
John J Lupica	6,163,883
Philip V Bancroft	5,051,966
Cigna Corp
David M Cordani	17,595,792
CNA Financial Corp
Dino E Robusto	10,635,782
Jonathan D Kantor	6,564,950
CNO Financial Group Inc
Edward Bonach	9,962,118
Enstar Group Ltd
Dominic F Silvester	16,871,090
Paul J O'Shea	10,288,997
Orla M Gregory	7,537,184
Everest Re Group Ltd
Dominic J Addesso	8,829,222
Fidelity National Financial Inc
William P Foley II	29,382,455
Raymond R Quirk	8,961,216
Brent B Bickett	7,303,777
First American Financial Corp
Dennis J Gilmore	8,330,344
Genworth Financial Inc
Thomas J McInerney	8,965,211
Kevin D Schneider	6,798,621
Daniel J Sheehan IV	6,576,254
Hartford Financial Services Group
Christopher Swift	13,115,285
Douglas Elliot	8,973,264
Humana Inc
Bruce D Broussard	19,768,525
Brian A Kane	5,658,476
Lincoln National Corp
Dennis R Glass	14,963,035
Loews Corp
James S Tisch	6,527,773
David B Edelson	5,583,273
Jonathan M Tisch	5,543,334
Andrew H Tisch	5,384,285
Kenneth I Siegel	5,110,749
Manulife Financial Corp
Roy Gori	12,756,342
Donald Guloien	12,188,265
Warren Thomson	7,155,985
Steve Roder	6,906,681
Marianne Harrison	5,962,698
Marsh & McLennan Companies Inc
Daniel S Glaser	17,011,341
Julio A Portalatin	7,401,281
John Q Doyle	6,929,455
Peter J Beshar	5,210,829
MetLife Inc
Steven A Kandarian	14,726,721
Michel Khalaf	6,325,447
John C R Hele	5,339,029
Martin J Lippert	5,899,896
MGIC Investment Corp
Patrick Sinks	7,033,794
Molina Healthcare Inc
Joseph M Zubretsky	19,739,108
J Mario Molina MD	16,998,004
John C Molina	8,013,953
National Western Life Group Inc
Ross R Moody	6,756,680
Principal Financial Group Inc
Daniel J Houston	11,958,736
James P McCaughan	6,033,877
Progressive Corp
Susan Patricia Griffith	9,274,439
Protective Life Corp
John D Johns	13,127,403
Richard J Bielen	8,002,361
Carl S Thigpen	5,548,577
Prudential Financial Inc
John R Strangfeld	27,111,399
Mark B Grier	17,561,490
Stephen Pelletier	15,973,459
Charles F Lowrey	11,799,322
Robert M Falzon	9,149,071
Radian Group Inc
Richard G. Thornberry	6,876,816
Sanford A Ibrahim	6,769,740
Reinsurance Group of America Inc
Anna Manning	7,041,523
RenaissanceRe Holdings Ltd
Kevin J O'Donnell	7,810,052
Sun Life Financial Inc
Dean A Connor	9,146,847
Stephen C Peacher	6,753,607
Torchmark Corp
Gary L Coleman	8,366,856
Larry M Hutchison	8,311,946
Travelers Companies Inc
Alan D Schnitzer	15,233,759
Brian W MacLean	8,088,067
William H Heyman	6,644,766
Jay S Benet	6,391,045
Avrohom J Kess	5,921,446
UnitedHealth Group Inc
Stephen J Hemsley	18,454,153
David S Wichmann	17,389,976
Larry C Renfro	14,236,877
John F Rex	7,930,845
Steven H Nelson	7,580,444
Marianne D Short	6,494,869
Universal Insurance Holdings Inc
Sean P Downes	19,252,897
Jon W Springer	8,469,821
Unum Group
Richard P McKenney	9,683,946
Voya Financial Inc
Rodney O Martin Jr	10,989,072
Alain M Karaoglan	5,621,947
Christine Hurtsellers	5,365,268
W R Berkley Corp
William R Berkley	12,214,097
W Robert Berkley Jr	10,279,539
WellCare Health Plans Inc
Kenneth A Burdick	11,327,735
White Mountains Insurance Group
Raymond Barrette	21,560,378
David T Foy	8,872,702
G Manning Rountree	6,633,124
Reid T Campbell	6,433,936
T Michael Miller	6,272,832

New York Data for 2017
The 2017 New York data are filed with DFS by life insurance companies doing business in New York, and by health insurance companies doing business there. The data are from a statutory annual statement exhibit called "Schedule G." The schedule for life companies differs from the schedule for health companies. Because the schedules are not readily available to the public, I obtained them through a public records request pursuant to the New York State Freedom of Information Law. The Life Bureau of DFS sent me the schedules for life companies, and the Health Bureau sent me the schedules for health companies.

The schedule for life companies shows one figure for each individual. The schedule for health companies shows four figures for each individual: (1) "Salary Paid by Company and All Other Companies in Holding Company System," (2) "Bonus & all other Compensation Deferred or Paid by Company and All Other Companies in Holding Company System," (3) "Total Amount Paid by Company and All Other Companies in Holding Company System," and (4) "Amount Paid by or Amount Allocated by Company." The figure I show in this tabulation is the third of the four figures. When I obtained the 2017 data, each bureau charged a fee of $1 for sending the schedules on a CD by regular mail.

New York Compensation Data for 2017
Life Insurance Companies
Aetna Life Ins Co
Mark T Bertolini	$57,828,429
Shawn M Guertin	9,239,174
Jean LaTorre	6,231,385
Thomas J Sabatino	5,588,469
Globe Life Ins Co of NY
Ben Walter Lutek	8,553,779
Guardian Life Ins Co of America
Deanna Mulligan	8,014,882
Lincoln Life & Annuity Co of NY
Dennis R Glass	34,666,432
Randal J Freitag	8,163,992
Massachusetts Mutual Life Ins Co
Roger Crandall	6,269,018
Paul Blanco	5,228,315
Metropolitan Life Ins Co
Steven A Kandarian	10,453,756
New York Life Ins Co
Theodore A Mathas	20,594,949
John Y Kim	12,868,332
Christopher O Blunt	9,394,343
John T Fleurant	5,022,387
Northwestern Mutual Life Ins Co
John E Schlifske	12,204,273
Penn Mutual Life Ins Co
Eileen McDonnell	5,337,340
Phoenix Life Ins Co
James D Wehr	6,749,750
Principal Life Ins Co
James P McCaughan	14,059,569
Daniel J Houston	10,667,049
Karen Elizabeth Shaff	7,362,154
Karl W Nolin	5,601,332
Luis E Valdes	5,351,845
Prudential Ins Co of America
John R Strangfeld	11,064,539
Charles F Lowrey	9,891,275
Mark B Grier	6,494,780
Stephen Pelletier	5,058,979
Teachers Ins & Annuity Assn
Roger Ferguson	6,685,814
Ronald R Pressman	5,372,878
Health Insurance Companies
Anthem Group
Joseph R Swedish	17,098,146
Peter D Haytaian	5,054,085
Brian T Griffin	5,043,082
Gloria M McCarthy	5,006,223
Eastern Vision Service Plan Inc
James M McGrann	5,024,315
HIP Ins Co of New York
William C Lamoreaux	5,496,012
Humana Ins Co of New York
Brian A Kane	7,678,628
UnitedHealth Group
Robert W Oberrender	7,705,596
WellCare Health Ins of New York
Kenneth A Burdick	8,688,648
Andrew L Asher	5,583,010

Nebraska Data for 2017
The 2017 Nebraska data are on a "Supplemental Compensation Exhibit" filed by all insurance companies doing business in Nebraska. The figure I show is the "Total" for each individual. Components of the "Total" are "Salary," "Bonus," "Stock Awards," "Option Awards," "Sign-on Payments," "Severance Payments," and "All Other Compensation." When I obtained the 2017 data, NDI charged a fee of $80 for sending the exhibits on a CD by regular mail.

Nebraska Compensation Data for 2017
Accident Fund Ins Co of America
Elizabeth Haar	$6,642,686
ACE American Ins Co
John J Lupica	6,100,000
Paul J Crump	5,050,000
Acuity, A Mutual Ins Co
Benjamin M Salzmann	15,512,444
Aetna Life Ins Co
Mark T Bertolini	18,750,816
Gary W Loveman PhD	9,815,288
Richard M Jelinek	7,917,107
Karen S Lynch	7,666,746
Thomas J Sabatino Jr	7,321,633
Shawn M Guertin	6,022,155
Allied World National Assur Co
Scott A Carmilani	23,880,597
Wesley Dupont	5,309,124
Allstate Ins Co
Thomas J Wilson	54,184,408
Matthew E Winter	17,455,607
Judith P Greffin	8,152,152
Sanjay Gupta	7,513,203
Surender Gupta	7,033,822
Steven E Shebik	6,659,653
Steven P Sorenson	6,634,968
Susan L Lees	6,582,780
American Family Life of Columbus
Daniel P Amos	15,280,454
Paul S Amos II	6,184,321
Frederick J Crawford	5,279,845
American Family Mutual Ins Co
Jack C Salzwedel	9,617,184
American General Life Ins Co
Kevin Hogan	6,109,879
Jay S Wintrob	5,717,513
American Income Life Ins Co
Roger C Smith	14,343,009
Ben W Lutek	8,553,780
Assured Guaranty Corp
Dominic Frederico	13,596,579
Atlantic Specialty Ins Co
Timothy M Miller	9,295,572
Chicago Title Ins Co
Raymond R Quirk	8,959,129
Anthony J Park	6,097,163
Michael J Nolan	5,858,912
Peter T Sadowski	5,853,519
Clearwater Select Ins Co
Brian D Young	5,669,432
Doctors Co Interinsurance Exchange
Richard Anderson MD	11,726,099
Essent Guaranty Inc
Mark Casale	6,890,474
Everest Reinsurance Co
Dominic J Addesso	6,223,278
Fidelity & Guaranty Life Ins Co
Christopher J Littlefield	5,777,721
First American Title Ins Co
Dennis Gilmore	9,080,461
GEICO Indemnity Co
Olza Minor Nicely	14,541,402
Great American Ins Co
S Craig Lindner	9,726,202
Carl H Lindner III	9,673,500
Guardian Life Ins Co of America
Deanna Mulligan	8,772,047
Hanover Ins Co
Joseph Zubretsky	5,148,547
Health Care Service Corp
Paula A Steiner	10,179,367
Patricia A Hemingway Hall	6,487,164
Colleen Foley Reitan	5,876,344
Humana Ins Co
Bruce D Broussard	33,361,110
Brian A Kane	7,678,628
Insurance Co of the West
Kevin Prior	27,486,175
Ernest Rady	7,460,080
Jackson National Life Ins Co
Barry Stowe	7,568,499
James R Sopha	6,339,538
Paul C Myers	6,227,860
Liberty Mutual Ins Co
David H Long	21,026,728
Timothy Sweeney	8,287,284
Neeti Bhalla	7,155,742
J Paul Condin III	6,968,884
Christopher L Peirce	5,819,868
Dennis J Langwell	5,329,184
Lincoln National Life Ins Co
Dennis R Glass	34,666,432
Randal J Freitag	8,163,992
Wilford H Fuller	6,261,016
Magellan Behavioral Health
Jeffrey West	7,678,675
Dan Gregorie	5,999,522
Massachusetts Mutual Life Ins Co
Roger Crandall	14,460,939
Paul Blanco	5,277,246
Michael Fanning	5,147,443
Medical Protective Co
Timothy Kenesey	5,324,898
MEMIC Indemnity Co
John T Leonard	11,340,488
Metropolitan Life Ins Co
Steven A Kandarian	10,453,756
Mortgage Guaranty Ins Corp
Patrick Sinks	6,315,629
National Indemnity Co
Ajit Jain	15,986,250
New York Life Ins Co
Theodore A Mathas	20,594,949
John Y Kim	12,868,332
Christopher O Blunt	9,394,343
John T Fleurant	5,022,387
Northwestern Mutual Life Ins Co
John E Schlifske	12,204,273
Pacific Life Ins Co
James T Morris	7,722,736
Pan-American Life Ins Co
Jose Suarez Suquet	5,542,464
Penn Mutual Life Ins Co
Eileen McDonnell	5,337,340
Thomas E Daley	5,099,635
Pennsylvania Ins Co
Sidney Ferenc	9,247,661
Steven Menzies	9,211,854
Phoenix Life Ins Co
James D Wehr	6,749,750
Principal Life Ins Co
James P McCaughan	14,059,569
Daniel J Houston	10,667,049
Karen E Shaff	7,362,154
Karl W Nolin	5,601,332
Luis E Valdes	5,351,845
Prudential Ins Co of America
John R Strangfeld Jr	8,727,787
Mark B Grier	7,198,970
Charles F Lowrey	5,070,897
Radian Mortgage Guaranty Inc
Sanford A Ibrahim	9,412,799
Richard Thornberry	6,144,254
RGA Reinsurance Co
Albert Greig Woodring	15,608,544
RiverSource Life Ins Co
Lynn Ann Hopton	17,335,404
Yvonne E Stevens	15,366,727
Steven B Staver	12,341,420
John R Woerner	7,596,970
David K Stewart	5,067,199
SCOR Reinsurance Co
Mark Kociancic	5,570,891
Security Benefit Life Ins Co
Michael Patrick Kiley	7,221,603
Standard Ins Co
John Gregory Ness	6,548,581
State Farm Group
Michael Leon Tipsord	8,502,235
Michael Steven Wey	5,005,858
Teachers Ins & Annuity Assn
Roger Ferguson	18,674,135
Justin Kelly	16,361,982
William Adams	12,695,571
Jon Bosse	11,796,431
Clark Winslow	10,507,082
Robert Doll	9,302,014
Ronald Pressman	8,182,928
James Boothe	7,320,974
Gunther Stein	7,058,340
Virginia Wilson	5,138,972
Transatlantic Reinsurance Co
Michael C Sapnar	8,517,759
Javier E Vijil	8,060,576
Travelers Casualty & Surety Co
Alan D Schnitzer	15,262,488
Brian MacLean	7,923,164
Willaim H Heyman	6,531,523
Jay S Benet	6,256,725
United States Liability Ins Co
Thomas P Nerney	19,652,848
Western & Southern Life Ins Co
John Barrett	7,678,251

General Observations

There can be no assurance the data shown here are complete and accurate, for at least four reasons. First, with regard to the SEC data, I did not have a complete list of shareholder-owned public companies in the insurance business, and some therefore may have been omitted.

Second, with regard to DFS data, the Schedule G for life companies may show compensation attributable only to that one company. In other words, on the schedule for a company that is a member of a group of companies, the figure shown for an individual may be compensation from only that one company rather than from the entire group of companies.

Third, with regard to NDI data, some groups of companies allocate the compensation for individuals among the members of the group. Thus the figures for individuals need to be added. There can be no assurance that I found all the members of those groups. Indeed, in some instances members of the group may not be licensed in Nebraska and therefore do not file the exhibits.

Fourth, an individual's compensation may differ among my three sources. Aside from the third problem mentioned above, the three sources have differing rules about precisely what must be included in an individual's compensation. For example, see the differences between DFS data and NDI data for Teachers Insurance & Annuity Association. I asked DFS to comment on the differences, but received no reply.

Available Material

To provide a frame of reference beyond the three posts showing executive compensation data for 2015, I am offering a complimentary 10-page PDF containing the final executive compensation tabulation in the Forum. It appeared in the July 2013 issue and showed data for 2012. Email jmbelth@gmail.com and ask for the executive compensation tabulation in the July 2013 issue of the Forum.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 286: Stephen R. Leimberg Speaks Out

Stephen R. Leimberg is a professional fine art, portrait, and wildlife photographer in Amelia Island, Florida. He previously taught law at Temple and Villanova University Schools of Law in their Tax Masters programs. He is a good friend of mine. He shared with me an item he had prepared in July for possible publication in his local newspaper. I thought the item deserved wider circulation. I requested, and he granted, permission for me to provide it to my readers. I edited it lightly.

VIEWPOINT: REPUBLICANS UNITE!

   

by Stephen R. Leimberg

Take It Back
Republicans—Take back the Grand in your Old Party—before it is unrecognizable. Recover Abraham Lincoln's honesty and integrity and Theodore Roosevelt's care for our land. Retake the principles that the federal government should not play a big role in people's lives, that there should be less government intervention in business and the economy, that the deficit should be kept as small as possible, that good government is based on the individual, and that each person's ability, dignity, freedom, and responsibility must be honored and recognized. Demand equal rights, equal justice, and equal opportunity for all, regardless of race, creed, age, gender, or national origin. Restore tolerance and inclusiveness and respect for different points of view. All those noble Republican principles are in great and imminent danger—not from others but from within.

The Environment
Car fuel economy and power plant emissions standards and research have been cut back. We no longer have a role in the Paris Agreement. The EPA has been emasculated—all but abandoning its stated purpose of protecting our air, water, and peoples' health and preventing toxic pollution. Sweeping cuts to research on renewable energy are proposed. What is most dangerous in all of this is the tampering with, denying, or ignoring of scientific evidence and data. The current administration continues to deny climate change—even in the face of extreme weather such as hurricanes, wildfires, rising seas, and poor air quality events. FEMA has stricken climate change from its strategic plan. The EPA's web content on the topic has been removed. Climate change is no longer listed by our government as a national threat—even though catastrophic events and their costs continue.

Consumer Protection
The Consumer Financial Protection Bureau isn't. It is dropping payday lending protections and suits against online loansharking—thus encouraging unfair, deceptive, and abusive business practices. Key consumer rules and regulations dealing with everything from credit access to car loans to baby crib safety and big bank abuses and student loan frauds by for-profit colleges have been delayed. Enforcement actions against shady financial practices have been dropped or dismantled. Labor Department protections for mom and pop investors have been gutted or delayed. It is almost as if the Great Recession had not occurred; the oversight to protect the most vulnerable is being stripped and our watchdogs deliberately defanged.

Tax Law
George Will, long-time staunch defender of conservatism, said of House Speaker Paul Ryan, "He sold his soul for a tax cut." And as most economists predicted, this huge tax cut (mainly enjoyed by our most affluent individuals and big businesses) resulted in stock buybacks making the richest richer. But it has not unleashed promised post cost-of-living increase wage growth for most people. To the contrary, the massive corporate tax breaks, coupled with multi-million-dollar estate tax exemptions for the ultrarich, have racked up almost $2 trillion—in national debt! Add this to the indirect tax the tariff war will impose on consumer goods, $12 billion in emergency bail-out relief for farmers (with taxpayer dollars), and income/wealth inequality continues to rise even as real wage growth stagnates, health care costs rise, and safety-net cuts accelerate.

Immigration
Regardless of one's position on admission of new individuals to citizenship in our country, separating parents from children in the heartless and incompetent way this current administration did and failure to work toward immigration legislation resulted in a shame we will all long have to carry.

Divisiveness
Astoundingly, even the far-right Koch brothers slammed the current administration's protectionism as causing long-term damage to our country. "When in order to win on an issue somebody else has to lose, it makes it very difficult to unite people." Other Republicans vented frustration at Republican leaders who voted for a whopping $1.3 trillion spending bill, calling it "crazy." Rather than bringing the country together, the head of the current administration acts as the prince of polarization, the ally of animosity, "the apostle of anger," the Arctic bear of bullies, the deacon of divisiveness, the denunciator of the press and "elites" (people who read and write?), and the comforter and encourager of supremacists and others who promote hatred, prejudice, and discrimination. Russia's Putin has been defended but fights have been picked with our allies Canada, England, France, and Germany. Our own intelligence, diplomatic, justice department, and FBI communities have been ignored, insulted, and alienated.

Faustian Compact?
Have wealthy Republicans—as George Will said—sold their souls for tax cuts? Have we abandoned environmental safety for the sake of higher corporate profits? Has the segment of our population who fear pluralism made a deal with the devil to gain a president who will state—from the Oval Office—that it is okay to be bigoted? Has the religious right closed their eyes to moral and ethical debasement and corruption to further their goals?

Now Or Never
Republicans, take back the Grand in the Old Party. Repudiate the ugliness. Protect civil liberties and the rule of law! Silence is complicity. If inaction is your choice, the GOP's future is bleak. Choose your legacy. Stand up and demand a leadership with spine and integrity who will in turn insist upon what George Herbert Walker Bush called for, "A kinder, gentler America," and what Ronald Reagan wanted, "a shining city on a hill."

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 285: The Public Citizen/Corporate Research Project Joint Report

In July 2018 two nonprofit organizations based in Washington, DC released a major joint report. It is entitled Corporate Impunity: "Tough on Crime" Trump Is Weak on Corporate Wrongdoing.

The Executive Summary

The one-page Executive Summary consists of two extraordinary tables. They compare, for twelve federal agencies, the aggregate dollar amounts of financial penalties imposed for wrongdoing and the number of enforcement actions taken during President Obama's last year and President Trump's first year. As examples, the three agencies where the aggregate dollar amounts of financial penalties declined by the largest percentages were the Environmental Protection Agency, the Department of Justice, and the Federal Communications Commission. Aggregate financial penalties imposed by EPA declined from $23.870 billion to $1.460 billion (minus 94 percent), by DOJ from $51.506 billion to $4.898 billion (minus 90 percent), and by FCC from $257.034 million to $39.631 million (minus 85 percent). [Blogger's note: I question whether it is fair to compare the first year of a new administration with the final year of an established administration. In other words, it might have been better to compare the first year of the Trump administration with the first year of the Obama administration.]

The Introduction

The Introduction consists of six pages. Here, without footnotes, are the second and third paragraphs:

Americans are virtually united in support for regulatory enforcement. Polling shows Americans favoring tough regulatory enforcement by an 87-12 margin. Democrats (89), Republicans (85), Independents (87) all agree, as do Americans from all parts of the country: Northeast (86), Midwest (88), South (88), West (84). In focus groups, Americans connect proper and fair enforcement of the rules to concerns about a rigged political and economic system. They favor enforcement to ensure that everyone has a fair shot in society. They want assurances that weak regulatory enforcement does not enable corporations and the rich to play by a different set of rules—with everyday people held to account, but the powerful able to disregard the rules because they know they won't be enforced against them. These views are durable, and withstand counter-messaging. Indeed, Americans express overwhelming support for stronger regulatory enforcement.

Americans' overwhelming support for tough law-and-order against corporate wrongdoers reflects three interconnected understandings. First, basic standards of justice require that the rules be enforced equally against powerful corporations as they are against vulnerable individuals. Americans of all political stripes perceive that the system is rigged, creating both a crisis of political legitimacy and a pervasive sense of injustice. Second, justice requires that wrongdoers be punished—and corporate violators, who can inflict damage on a scale vastly greater than street criminals, must be punished commensurate with the scale of the harms they impose. Americans of all income brackets, for example, expressed strong support for prosecuting and seeking jail terms for high-level Wall Street executives in connection with the 2008 financial crash. Third, strong enforcement is needed to ensure compliance with the laws and regulations that protect Americans' quality of life, from clean air safeguards to protections against predatory lenders.

Body of the Report

The body of the report consists of four major sections. They are Law Enforcement, Consumer and Worker Protection, Environmental Protection, and Financial Regulation. I think the report is well worth reading. The full report is offered at the end of this post.

The Two Organizations

Public Citizen is a national nonprofit organization with more than 400,000 members and supporters. It represents consumer interests through lobbying, litigation, administrative advocacy, research, and public education on a broad range of issues including consumer rights in the marketplace, product safety, financial regulation, worker safety, safe and affordable health care, campaign reform and government ethics, fair trade, climate change, and corporate and government accountability. [Blogger's note: In the interest of full disclosure, Public Citizen Litigation Group, a unit of Public Citizen, represented me pro bono several times over the years.]

Corporate Research Project is a nonprofit center that provides research assistance to organizations working on a wide range of corporate responsibility issues. It produces public resources such as a guide to online corporate research; Corporate Rap Sheet profiles of more than 70 large and controversial companies; and Violation Tracker, a database containing more than 300,000 entries relating to corporate regulatory violations and other forms of misconduct. Corporate Research Project is an affiliate of Good Jobs First, a national resource center on economic development accountability.

Availability of the Report

I am offering a complimentary 104-page PDF containing the full joint report prepared by Public Citizen and Corporate Research Project. Email jmbelth@gmail.com and ask for the July 2018 report on Corporate Impunity.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 284: The Financial Accounting Standards Board Announces New Accounting Guidance for Life Insurance Companies

On August 15, 2018, the Financial Accounting Standards Board (FASB) issued a press release entitled "FASB Improves Accounting Standards for Insurance Companies that Issue Long-Duration Contracts." The new Accounting Standards Update (ASU) has five major components: (1) it requires assumptions for liability management to be updated at least annually, with the effect recorded in net income; (2) it standardizes the liability discount rate; (3) it provides greater consistency in measurement of market risk benefits; (4) it simplifies the amortization of deferred acquisition costs; and (5) it requires enhanced disclosures. The press release is in the package offered at the end of this post.

The Effective Date

The ASU is so detailed that implementation clearly will require extensive work by the affected companies. Here is what the ASU says about the effective date:

For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early application of the amendments is permitted.

The ACLI Response

I sought the views of the American Council of Life Insurers (ACLI), the most prominent of the life insurance company trade groups. A spokesperson sent me an ACLI General Bulletin dated August 16, 2018, and ACLI's most recent comment letter to FASB. The letter, dated June 20, 2018, was over the signature of Mike Monahan, ACLI's senior director of accounting policy. The letter dealt for the most part with the effective date of the ASU. Here is the second paragraph of the letter:

We are writing to express our significant concern with the effective date decision made at the June 6, 2018, meeting, which gives public companies just over 2 years to implement. We do not believe this date is realistic and strongly urge the Board to reconsider their decision prior to the issuance of a final standard by extending the effective date for at least one additional year. We do not believe it is advisable for the Board to "wait" and see if preparers will be able to implement by this date and "later" consider potentially extending the effective date.

I have not seen the effective date decision made in June 2018. However, I believe that FASB denied the ACLI's request to extend the effective date for at least one additional year. I asked the ACLI whether my belief is correct. The spokesperson confirmed my belief. The August 2018 ACLI general bulletin and the June 2018 ACLI comment letter are in the package offered at the end of this post.

The NAIC Response

I also sought the views of the National Association of Insurance Commissioners (NAIC). In response, a spokesperson said:

The NAIC is aware of the recent news release from FASB. Much of the guidance is consistent with previous exposure drafts on the same topic. The NAIC, through its Statutory Accounting Principles (E) Working Group, will be reviewing it more closely in the near future to begin considering it for statutory accounting, consistent with what is described in the introductory paragraph of our most recent comment letter to FASB on the topic.

The spokesperson also sent me the most recent NAIC comment letter. The letter, dated December 12, 2016, was over the signature of Dale Braggeman. He is a staff person in the Ohio Department of Insurance and chairs the NAIC's Statutory Accounting Principles (E) Working Group. The NAIC's 2016 comment letter is in the package offered at the end of this post. Here is the introductory paragraph:

The Statutory Accounting Principles (E) Working Group of the NAIC is responsible for the development and enhancement of Statements of Statutory Accounting Principles (SSAPs) used by U.S. insurers in their statutory filings. Statutory Accounting Principles (SAP) presents an effective, comprehensive and understood approach, which has been built using the framework established by U.S. GAAP [Generally Accepted Accounting Principles]. Under the SAP process, all new GAAP issuances are considered and ultimately adopted, adopted with modification, or rejected. Although SAP may make some modifications, it is preferred to have minimal differences in accounting methodologies between SAP and GAAP, with as limited variations as possible to meet regulatory objectives. Consequently, proposals that significantly revise GAAP standards are a vital matter for U.S. regulators.

The Long-Term Care Insurance Connection

The regulatory implications of developments in the long-term care (LTC) insurance market have been well known for a long time. The departure of major companies from the LTC insurance market has been going on for many years. The problems at Penn Treaty festered for many years before the company was finally placed in liquidation last year. The problems at Genworth have been well known for a long time, and we still await final word on the proposed takeover of the company by a Chinese conglomerate. And then there was the General Electric fiasco in January 2018, when the company shocked the market by announcing it had to take a whopping $15 billion charge after ignoring for many years its growing liabilities on a legacy block of LTC insurance business.

We already know that the problems associated with LTC insurance are likely to cause major changes in the entire system of state guaranty associations. Now I wonder about the extent to which the problems associated with LTC insurance prompted FASB to move more rapidly with its long-planned ASU than it might otherwise have moved. After all, the first of the five major requirements in the ASU is that the companies must update, at least annually, the assumptions used in calculating their liabilities.

General Observations

I am not sufficiently familiar with life insurance accounting practices to comment on the full implications of the ASU. However, I believe that the changes will improve financial statements significantly and will be of great benefit to users of the statements. I also believe that the changes are so extensive that they will require enormous compliance efforts by the affected companies. It remains to be seen whether the companies will be ready to comply fully by the effective date.

Available Material

I am offering a complimentary 10-page PDF consisting of the FASB press release (2 pages), the ACLI general bulletin (1 page), the ACLI comment letter (3 pages), and the NAIC comment letter (4 pages). Email jmbelth@gmail.com and ask for the August 2018 FASB/ASU package.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 283: Jesse Eisinger's Superb 2017 Book

I am embarrassed to say I did not read Jesse Eisinger's July 2017 book until this summer. It is entitled The Chickenshit Club: Why the Justice Department Fails to Prosecute Executives.

Eisinger currently is an investigative reporter for ProPublica. Previously he worked for The Wall Street Journal Europe. He once worked at Conde Nast Portfolio, where he wrote a story in November 2007 that predicted the collapse of Bear Stearns and Lehman Brothers. In 2009 he began work on a series of stories co-authored with Jake Bernstein, for which they received a 2011 Pulitzer Prize for National Reporting.

In the introductory section of his book, Eisinger explains that James Comey was the source of the book's main title. Early in 2002, shortly after Comey was appointed by President George W. Bush to head the powerful Office of the U.S. Attorney for the Southern District of New York, Comey gave a talk to his prosecutors. He asked them: "Who here has never had an acquittal or a hung jury?" According to Eisinger, "Hands shot up," because they considered themselves the best in the country. Comey then said: "You are members of what we like to call the Chickenshit Club." Eisinger then said: "Hands went down faster than they had gone up." Comey then added: "If it's a good case and the evidence supports it, you must bring it." According to Eisinger, Comey then explained that government lawyers "should seek to right the biggest injustices, not go after the easiest targets."

The greatest hero in the book is Jed Rakoff, the famous senior judge in the U.S. District Court for the Southern District of New York. His name appears in the titles of two chapters of the 16-chapter book. Eisinger describes Rakoff's early life and career in detail. In April 2002 he handed down a decision against the death penalty.  He made the decision, which he knew would be reversed on appeal, with the full realization that it would prevent him from ever being nominated for an appellate court position. Another of his famous decisions was his initial refusal to approve the October 2011 "neither admit nor deny" $285 million settlement between the Securities and Exchange Commission and Citigroup. Although the ruling was reversed by the business-friendly Second Circuit, Rakoff's efforts on the case won the hearts of many court watchers and had a powerful impact on many other judges.

Another hero in the book is Paul Pelletier, a long-time prosecutor in the Department of Justice. As examples of his work, he was heavily involved in the PNC Bank case and in the trial of the Hartford Five in the AIG/GenRe case. According to Eisinger, when Pelletier left the Justice Department, the going-away party was attended by about 200 people who overflowed the restaurant and into an adjacent atrium.

Yet another hero in the book is Benjamin Lawsky, who was present at the 2002 Comey speech to prosecutors, and who had lost his first trial as a prosecutor. He later served as New York State Superintendent of Financial Services. According to Eisinger, Lawsky, after leaving his New York position, was blackballed by the New York bar, could not land a position at a major law firm, and instead became a consultant and attorney.

One of the leading villains in the book is Joseph Cassano, who eventually was forced to retire from his position at AIG Financial Products. That was the infamous unit that may have been most responsible for the collapse of AIG. Cassano was never indicted.

The first major case discussed in detail in the book is the Enron/Arthur Andersen case. Eisinger argues throughout the book that the destruction of Andersen—and the consequences for all the innocent employees of Andersen—was a major factor in later decisions on how far to carry prosecutions. Other cases Eisinger describes in detail are the Bank of America acquisition of Merrill Lynch, the BP Deepwater Horizon disaster, the PNC Bank case, the WorldCom case, the Tyco case, and the United Brands case. The latter case included the suicide of Eli Black.

I was startled to learn that the expression "white-collar crime" is generally attributed to Edwin Sutherland, an Indiana University sociology professor who came up with the phrase in the 1930s. Sutherland's classic work entitled White Collar Crime was published in 1949, a year before his death at the age of 67, and was censored until 1983.

Eisinger goes into considerable detail on why so few strong legal actions were taken against executives in the wake of the 2008 crash. Among the reasons he discusses is the major growth in the size and power of white-collar defense firms. He also describes the "revolving door," which is the manner in which attorneys associated with major defense firms move into government service for a time and then return to their defense firms.

Eisinger's superb book is a great read. I think it is required reading for anyone interested in the welfare of our financial system.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 282: Cost-of-Insurance Increases—John Hancock Settles an Unusual Type of Lawsuit

In No. 145 (February 22, 2016) I wrote about an unusual type of cost-of-insurance (COI) class action lawsuit against John Hancock Life Insurance Company (U.S.A.). The plaintiff originally filed the lawsuit in December 2015. The case was unusual because, rather than alleging unlawful COI increases, the plaintiff alleged an unlawful failure to decrease COIs in response to decreasing mortality rates. The plaintiff also alleged unlawful charges for a rider. (See 37 Besen Parkway v. John Hancock, U.S. District Court, Southern District of New York, Case No. 1:15-cv-9924.)

Recent Developments

On March 30, 2018, an attorney for the plaintiff filed a class certification motion. On July 20 he filed a motion for preliminary approval of a proposed settlement. Accompanying the latter motion were four documents in support of the proposed settlement—a memorandum of law and the declarations of three individuals. The three-paragraph "Introduction" in the memorandum of law (without citations) reads:

The Settlement reached after more than two-and-a-half years of hard-fought litigation provides the Class with a $91.25 million cash payment. The money will be distributed directly to Class members, with no need for claims forms and no funds reverting to John Hancock.

On preliminary approval, the question is whether the Settlement's substantive terms fall within the range of "possible" approval, such that notice should be sent to the Class and a full fairness hearing should be held. The substantial recovery obtained for the Class in light of the risks of continued litigation easily meets that test. Class Counsel researched and discovered this alleged breach of contract on their own, without any governmental investigation, and filed the first suit alleging that John Hancock failed to decrease its cost of insurance rates. At the initial conference in this case, the Court expressed concern regarding whether Plaintiff can sustain a breach of contract claim in light of a "fundamental issue about the language in the policy that could be dispositive," questioned whether the key contractual terms at the heart of this litigation were even "enforceable," and invited John Hancock to file "a dispositive motion addressing" whether Plaintiff can even "get[] at the issue of [John Hancock's] expectations of future mortality experience." After persuading John Hancock not to file a proposed motion for judgment on the pleadings, Class Counsel reviewed and analyzed over 340,000 pages of documents (including over 2000 spreadsheets), had its experts spend 23 days onsite at John Hancock's offices in Boston, Massachusetts extracting reams of data about tens of thousands of Class policies and working with and investigating John Hancock's policy administration systems, took and defended 16 highly technical depositions (some over multiple days) involving subjects such as insurance financial reporting, statutory accounting, mortality tables, and actuarial science, and prepared a motion for class certification and supporting expert reports that totaled over eleven thousand pages. These efforts ultimately culminated in a mediation on May 24, 2018, which took place before Judge Theodore Katz (Ret.), a retired magistrate judge in this District, and resulted in an extraordinary amount of cash relief for the Class. The $91.25 million settlement fund will be used to compensate tens of thousands of elderly insureds, and is a remarkable result for an alleged breach of a contractual promise that this Court had preliminary concerns about being "awfully vague" and "almost sounds illusory."

At the final approval hearing, the Court will have before it more extensive submissions in support of the Settlement and will be asked to make a determination as to whether the Settlement is fair, reasonable, and adequate in light of all of the relevant factors. At this time, Plaintiff requests only that the Court grant preliminary approval of the Settlement so that Class members can receive notice of the Settlement and the final approval hearing.

The "Background" section of the memorandum of law describes the litigation, the settlement negotiations, and the proposed settlement. The proposed settlement provides that up to $1 million of the $91.25 million settlement fund may be used on a nonrefundable basis for "notice and administration costs." It also provides that class counsel may seek reimbursement of expenses and an award of up to one-third of the settlement fund, and may request incentive awards of up to $40,000 each for the two class representatives who testified on behalf of the class.

The "Argument" section of the memorandum of law explains why the class should be certified and why the proposed settlement should be approved. The full memorandum of law is in the package offered at the end of this post.

Other Recent Documents

On July 20 Theodore H. Katz, a retired federal magistrate judge who presided at the settlement conference, filed a declaration in support of the motion for preliminary approval of the settlement. His declaration is in the package offered at the end of this post.

Also on July 20 an attorney for the plaintiff filed a declaration that included, among other things, the proposed notice to the members of the class and the proposed plan of allocation of the settlement fund. Those two items are in the package offered at the end of this post.

General Observations

At this writing (early August 2018) nothing further has happened. Presumably the next two important developments will be the judge's approval of the proposed settlement, and some months later the judge's final approval of the proposed settlement after the fairness hearing. I plan to report significant further developments.

Available Material

The complimentary 66-page package I offered in No. 145 is still available. Email jmbelth@gmail.com and ask for the February 2016 COI/John Hancock package.

I now offer a complimentary 45-page PDF consisting of the plaintiff's memorandum of law (32 pages), Judge Katz's declaration (4 pages), the proposed notice to class members (7 pages), and the proposed plan of allocation (2 pages). Email jmbelth@gmail.com and ask for the August 2018 COI/John Hancock package.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com