Tuesday, June 28, 2016

No. 169: Cost-of-Insurance Increases—A Federal Judge Denies AXA Equitable Life's Outrageous Request for Secrecy

In No. 143 (posted February 15, 2016) I discussed a cost-of-insurance (COI) class action lawsuit filed February 1, 2016 against AXA Equitable Life Insurance Company. The original complaint, which I offered to my readers in No. 143, alleged breach of contract relating to AXA's singling out of certain policyholders for substantial COI increases. The case was assigned to U.S. District Judge Jesse M. Furman. In this follow-up I discuss important subsequent developments in the case. (See Brach Family Foundation v. AXA Equitable Life, U.S. District Court, Southern District of New York, Case No. 1:16-cv-740.)

The Amended Complaint
On May 2 the attorneys for Plaintiff Brach filed an amended complaint containing redacted (blacked out) sentences or parts of sentences in 12 of the 80 paragraphs. The same day a Brach attorney sent a letter to Judge Furman explaining that, pending the entry of a protective order, the parties had agreed to comply with a protective order AXA had drafted. A provision of the draft protective order required that all material designated as confidential discovery material be redacted. However, the Brach attorney said Brach's compliance with the draft protective order is not a stipulation to the terms of the draft protective order, and Brach believes that nothing in the amended complaint warrants redaction.

On May 3 Judge Furman issued an order temporarily allowing the unredacted version of the amended complaint to be filed under seal. He also ordered AXA to submit a letter by May 10 explaining why the proposed redactions are consistent with the presumption in favor of public access to judicial documents. He said he was inclined to allow some but not all the information to remain redacted. He also ordered the parties to appear for a May 16 telephone conference to address the issues.

On May 10 an AXA attorney submitted a letter to Judge Furman and attached a version of the amended complaint with fewer redactions. (That version of the amended complaint has not been made public, and I have not seen it.) The AXA attorney said the remaining redactions are "highly confidential business information, the public disclosure of which would place AXA at a competitive disadvantage."

On May 13 a Brach attorney submitted a letter to Judge Furman in advance of the May 16 telephone conference. The Brach attorney said "the Court should let putative class members and the interested public view and evaluate the Amended Complaint in its entirety."

On May 16, after the conference, Judge Furman issued an order denying altogether AXA's effort to seal the unredacted version of the amended complaint. He ordered Brach's attorney to place an unredacted version of the amended complaint in the public court file. He also attached to the order, thus placing in the public court file, the May 10 letter from the AXA attorney (but not the version of the amended complaint with fewer redactions) and the May 13 letter from the Brach attorney.

Later Developments
On May 27 AXA filed a motion to dismiss the amended complaint, together with documents in support of the motion. Presumably Brach will file a response to the motion, and AXA will file an answer to the response. Further developments, such as Judge Furman's ruling on the motion to dismiss, and perhaps rulings on class certification, remain to be seen.

The Redactions
By comparing the redacted and unredacted versions of the amended complaint, it is possible to see exactly what AXA wanted to keep secret. Here are four of the paragraphs that contained redactions. I show in boldface type the sentences and parts of sentences that AXA wanted to keep secret. My insertions are in brackets.

Paragraph 4: The size of the COI increase is extraordinary. AXA projects that the rate hike will increase its projected profits by approximately $500 million. The AXA COI increases range from approximately 25% to 70% as compared to prior COI charges. In its most recent SEC filing, AXA states that the COI increase will be larger than the increase it previously had anticipated, resulting in a $46 million increase to its net earnings—a figure that is in addition to the profits that management had initially assumed for the COI increase. [The "recent SEC filing" referred to is the 2015 10-K report filed March 18, 2016. The statement referred to is on page 39 of the report.]

Paragraph 26: First, there is no actuarially acceptable justification for increasing the COI rates on the selected group of policies—those with issue ages 70 and above and current face value amount of $1 million and above. Prior to the COI increase, AXA's mortality rate assumptions for any given insured were equal for a $900,000 and a $1 million face value policy. The COI increase, however, was not graded (i.e., gradually imposed across face-amount ranges) but applied in a step (i.e., those with [a] $1 million policy got a full increase, and those with a $900,000 policy got no increase), and thus the COI increase results in a $1 million policy becoming significantly more profitable to AXA (and more expensive to the COI rate hike victim) than a $900,000 policy, resulting in inequitable treatment of all policyholders of a given class.

Paragraph 50: AXA also claims that the increase was based on a change to its expectations of future "investment experience." The truth, however, is that the sensitivity of profits from investment income of the cash flows to AXA generated by these policies hit with the COI rate increase is trivial compared to the scale of the COI increases, such that alleged changes in mortality rates are clearly the dominant factor in the COI increase, and changes in investment income, if any, are a minor factor which on their own, would not justify the size and scale of the COI increase.

Paragraph 74: Prior to the COI increase, AXA alleges that it had a $500 million shortfall in future best estimate cash flows. AXA, however, claims that it repriced the program five times between 2004 and 2013, updating their internal mortality assumptions, with the first reset in 2007, without ever disclosing any shortfall to policy owners in the annual illustrations or to regulators. An alleged $500 million shortfall does not appear overnight. AXA has regularly updated its mortality assumptions and AXA knew about this alleged profitability shortfall for years, but unlawfully continued to use the original pricing through March 2016, and continued to provide illustrations and annual statements that were materially misleading and unlawfully more favorable than AXA's best estimate of pricing. [Italics in original.]

General Observations
It is outrageous for AXA to have tried to redact the amended complaint. With such redactions of sentences and parts of sentences it would have been impossible for a reader to understand what is being alleged in the amended complaint. Fortunately Judge Furman reached the correct conclusion by disallowing all AXA's proposed redactions.

Because of the significance of the developments in this case, I am offering readers the redacted version of the amended complaint and the unredacted version filed later. Only by comparing the two versions is it possible for readers to understand what AXA tried to keep secret and the significance of the redactions.

AXA has not yet filed a protective order for possible approval by Judge Furman. It remains to be seen whether AXA will make such a filing.

Those interested in the developments reported here might wish to look at No. 26 (posted January 29, 2014). There I described the unsealing of numerous documents in lawsuits against Phoenix Companies, Inc. The lawsuits involved COI increases, and a judge in the same court as the current case issued the order unsealing the documents.

Available Material
I am offering a complimentary 70-page PDF consisting of the 29-page redacted version of the amended complaint filed May 2, the 29-page unredacted version of the amended complaint filed May 16, the two-page letter submitted to Judge Furman by one of Brach's attorneys on May 2, the one-page order issued by the judge on May 3, and the nine-page order issued by the judge on May 16. The May 16 order includes the May 10 letter from an AXA attorney (but not the version of the amended complaint with fewer redactions) and the May 13 letter from a Brach attorney. Email jmbelth@gmail.com and ask for the June 2016 Brach/AXA package.


Friday, June 24, 2016

No. 168: Byron K. Smith—A Memorial Tribute

Byron K. Smith
Byron K. Smith, a native and lifelong resident of Bloomington, Indiana, died May 29, 2016, at age 71. The obituary in our local newspaper included this sentence: "It was important to Byron that his total blindness be only a minor issue for his family and friends." He is survived by his beloved wife Patsy, three stepchildren, an adopted son, and seven grandchildren.

Byron attended the Indiana School for the Blind. He also attended local elementary schools, and junior and senior high schools. He earned a Bachelor of Arts degree from Indiana University, where he majored in radio and television. He worked for many years at Indiana University as a writer, radio reporter, tape editor, program producer, and radio host. He was also active with the student-run radio station on the Indiana University campus. I will forever cherish the memory of the time he interviewed me on tape for his radio show.

According to the obituary, Byron listened faithfully to radio broadcasts of Indianapolis Colts football games and Indiana University men's basketball games. My wife and I attended those basketball games for about 50 years, and we often saw Byron sitting several rows behind us. When I walked by his row on the way to our seats, I would say, "Hello Byron." He would instantly respond, "Hi Joe." His ability to identify people by their voices was always a source of amazement.

Byron worked hard to improve accessibility in Bloomington for people with handicaps. He was a founding member of the Council for Community Accessibility. He was a member, deacon, and elder of the First Presbyterian Church. After his retirement from the University, he served with Volunteers in Medicine and Southern Care Hospice. His favorite charities were the Indiana School for the Blind, the National Braille Press, and the First Presbyterian Church.

Byron was an extraordinary human being. He was a source of inspiration to me and to everyone who had the good fortune to know him. 


Monday, June 20, 2016

No. 167: STOLI Fraud and Daniel Carpenter—A Federal Judge Hands Down a Verdict of Guilty on 57 Criminal Counts

On June 6, 2016, after a bench trial, U.S. District Judge Robert N. Chatigny found Daniel E. Carpenter guilty on all 57 counts of an indictment charging him with criminal activity in connection with stranger-originated life insurance (STOLI). The judge scheduled sentencing for August 26, 2016. (See U.S.A. v. Carpenter, U.S. District Court, District of Connecticut, Case No. 3:13-cr-226.)

The STOLI Case
In December 2013 the U.S. Attorney in Connecticut filed a 33-count grand jury indictment charging Carpenter and his brother-in-law, Wayne Bursey, with conspiracy, mail fraud, wire fraud, illegal monetary transactions, and money laundering in connection with STOLI transactions. The defendants pleaded not guilty on all counts. Carpenter was already in prison as the result of another case, which I discuss below, and he remained in custody. Bursey was released on bail.

In May 2014 the U.S. Attorney filed a 57-count superseding indictment. The defendants pleaded not guilty on all counts. In May 2015 the charges against Bursey were dismissed following his death.

Carpenter waived his right to a jury trial. On February 16, 2016, the trial began. On March 21, after 19 trial days, the trial ended. On June 6 Judge Chatigny handed down a 91-page "Verdicts and Special Findings." Here is the introduction, with footnotes and citations omitted:
This criminal case is before the Court for decision following a bench trial. Defendant Daniel Carpenter is charged with devising and executing a scheme to defraud life insurance companies by using misrepresentations to induce them to issue high-value universal life insurance policies to straw insureds, which the companies would not have issued had they known the policies constituted "stranger-originated life insurance" ("STOLI") policies. This document sets forth the Court's verdicts and special findings in accordance with Federal Rule of Criminal Procedure 23(c).
A STOLI policy differs from a regular policy in that it is obtained not for estate planning purposes but for transfer to an investor with no insurable interest in the life of the insured. "[E]ssentially, it is a bet on a stranger's life." Life insurance providers are opposed to STOLI business and have taken steps to ensure that STOLI policies will not be issued. But STOLI policies can be obtained through misrepresentations concerning the insured's intent to resell the policy, the existence of third-party funding of premiums, and other matters, which are characteristic of "stealth STOLI" or "STOLI in disguise."
Schemes to defraud life insurance providers by causing them to issue STOLI policies based on misrepresentations have recently been the subject of federal prosecutions. In this case, the 57-count superseding indictment charges Mr. Carpenter with mail and wire fraud, conspiracy to commit mail and wire fraud, illegal monetary transactions, money laundering, conspiracy to commit money laundering and aiding and abetting the foregoing substantive offenses. The indictment alleges that the fraudulent scheme involved several steps. Insurance agents recruited older persons to act as straw insureds, often with the promise of free insurance for two years and a share of the profits from the sale of the policy. The agents then completed life insurance applications that contained misrepresentations concerning the insured's motivation for procuring the policy, along with false denials concerning the possibility of a policy sale, third-party funding of premiums and the performance of life expectancy reports. The indictment alleges that the applications were submitted and caused to be submitted to the life insurance providers by Mr. Carpenter and others.
At the trial, Mr. Carpenter testified that he was aware of the "evils of STOLI" when the applications underlying the indictment were submitted to providers. He did not dispute that the applications contained STOLI-related misrepresentations. He testified, rather, that he was deceived concerning the nature of the policies by people he trusted.
The evidence establishes beyond a reasonable doubt that from the outset of the conspiracy charged in the indictment, Mr. Carpenter knew the policies were being procured for resale to investors after the two-year contestability period expired. It also establishes that at his direction and on his behalf, misrepresentations were made in applications in order to thwart the providers' attempts to ensure that STOLI policies would not be issued. For these and other reasons explained below, I conclude that the government has sustained its burden of proving Mr. Carpenter's guilt beyond a reasonable doubt as to each count in the indictment.
Other Cases Involving Carpenter
Carpenter has been involved in several other criminal cases relating to his activities. In No. 54 (posted June 23, 2014) I wrote about the STOLI case and three other Carpenter-related cases. Here I provide an update on those other cases.

The Section 1031 Case
Carpenter owned and operated Benistar, Ltd. and its subsidiaries. One Benistar function was to act as an intermediary in Section 1031 property exchanges. That section of the Internal Revenue Code allows the owner of investment property to defer capital gains taxes on the sale of the property by rolling the proceeds of the sale into the purchase of replacement property. However, the tax deferral is lost if the owner ("exchangor") takes possession of the sale proceeds. Therefore, companies such as Benistar offer to act as an intermediary by holding the proceeds in escrow until the exchangor is ready to close on the replacement property.

Carpenter promoted the services of Benistar by offering to hold the funds safely, pay a small amount of interest, and provide the funds when needed. However, without the knowledge or consent of the exchangors, Carpenter embarked on a speculative program of options trading in the hope of generating large gains for himself.

Initially his plan worked well, but early in 2000 he began suffering large trading losses. In February 2004 a federal grand jury in Massachusetts returned a 19-count indictment charging Carpenter with mail fraud and wire fraud, and identifying seven exchangors who had lost a total of about $9 million. Carpenter pleaded not guilty on all counts. In September 2004 the grand jury returned a 19-count superseding indictment. Carpenter pleaded not guilty on all counts.

In July 2005 the jury trial ended with Carpenter's conviction on all counts. He filed a motion for a new trial, and the district court granted his motion. The government appealed the ruling to the U.S. Court of Appeals for the First Circuit, which, in a split decision, affirmed the district court ruling. The government appealed to the U.S. Supreme Court, which declined to review the case.

In June 2008 the new jury trial ended with Carpenter's conviction on all counts. He again filed a motion for a new trial. After a long delay, the district court again granted his motion. This time, however, after the government appealed the district court ruling, the First Circuit reversed the district court ruling, reinstated the conviction, and sent the case back to the district court for immediate sentencing. Carpenter appealed to the Supreme Court, which declined to review the case.

In February 2014 the judge sentenced Carpenter to 36 months in federal prison on each count, with the terms to run concurrently, followed by 36 months of supervised release. The judge also ordered Carpenter to pay restitution of about $310,000, and fined him $100,000. In May 2014 the judge denied Carpenter's motion for a stay of imprisonment pending appeal. Carpenter's appeals went nowhere. In June 2014 Carpenter began serving his prison term. (See U.S.A. v. Carpenter, U.S. District Court, District of Massachusetts, Case No. 1:04-cr-10029.)

The Section 419 Case
Carpenter marketed multi-employer welfare benefit plans. For many years the Internal Revenue Service (IRS) has been investigating such plans, through which participants may qualify for favorable federal income tax treatment under Section 419 of the Internal Revenue Code. Contributions to Section 419 plans may be deductible for federal income tax purposes. The IRS considers some of the plans to be abusive tax shelters.

Since 2004 the IRS has been trying to obtain from Carpenter detailed information about his Section 419 plans. He provided some documents, but has fought hard against releasing all the requested documents. In 2008 the IRS filed a lawsuit in an effort to obtain the documents. The case was assigned to Judge Chatigny.

On March 18, 2016, the government filed a stipulation of dismissal without prejudice (subject to possible reprosecution). On March 21 the judge approved the dismissal. (See U.S.A. v. Carpenter, U.S. District Court, District of Connecticut, Case No. 3:08-mc-111.)

The Waesche Case
Joseph Edward Waesche IV was an insurance agent who worked with Carpenter. In December 2013 the U.S. Attorney in Connecticut filed an "Information" charging Waesche with one count of conspiracy and describing the false answers Waesche and others gave in five applications submitted to life insurance companies. Waesche pleaded guilty. After a hearing, a magistrate judge ruled the guilty plea should be accepted. Waesche has not yet been sentenced. In response to my inquiry, a spokesman for the U.S. Attorney said Waesche will be sentenced after Carpenter is sentenced in the STOLI case. (See U.S.A. v. Waesche, U.S. District Court, District of Connecticut, Case No. 3:13-cr-224.)

General Observations
The decision by Judge Chatigny in the STOLI case is interesting in at least two ways. First, the judge seems to have a thorough understanding of STOLI transactions and the tactics employed by participants in those transactions. In other words, I think he "gets it." Consequently, I believe that his decision is strong.

Second, the judge does not use initials to represent the "straw insureds" and other individuals mentioned in the decision. Instead he identifies everyone involved in the case.

My only reservation stems from my belief that, during the STOLI heyday from 2004 to 2007, senior officials at some major life insurance companies encouraged the massive growth of STOLI through lax underwriting. In other words, I think the companies knew what was happening and therefore were responsible for the STOLI disaster.

Available Material
I am offering a complimentary 91-page PDF containing Judge Chatigny's decision in the STOLI criminal case against Carpenter. Email jmbelth@gmail.com and ask for Judge Chatigny's June 6, 2016 decision in the Carpenter STOLI case.


Wednesday, June 15, 2016

No. 166: STOLI—A Five-Year Federal Criminal Investigation of Imperial Holdings Ends with No Prison Time for the Defendants

On September 27, 2011, federal agents raided the headquarters of Imperial Holdings, Inc. (Boca Raton, FL), a company engaged in premium financing of stranger-originated life insurance (STOLI) transactions. On April 30, 2012, Imperial and the U.S. Attorney in New Hampshire entered into a non-prosecution agreement under which the company terminated its life insurance premium financing business, terminated its employees involved in that business, admitted to and accepted responsibility for improper conduct, and paid an $8 million fine. Also, Jonathan Neuman, the company's president and chief operating officer, resigned.

Criminal Charges
On October 31, 2012, the U.S. Attorney charged Robert Wertheim with criminal activity. He was one of two co-founders of a premium finance company in New York. On February 26, 2013, Wertheim pleaded guilty and entered into a plea agreement with the U.S. Attorney. Wertheim said that he worked with Imperial, and that he recruited Abraham Kirschenbaum and Maurice Kirschenbaum—brothers who were tax advisers in New York—to identify prospects for the STOLI scheme. Wertheim also said that life insurance applications he and the Kirschenbaums submitted contained false information.

On February 20, 2013, the U.S. Attorney charged the Kirschenbaums with criminal activity. On March 7, 2013, they pleaded guilty and entered into plea agreements with the U.S. Attorney. They described how prospective insureds had been coached to answer questions falsely in the event of calls from insurance companies checking on statements made in policy applications. Sentencing of Wertheim and the Kirschenbaums was postponed repeatedly. (See U.S.A. v. Wertheim, U.S. District Court, District of New Hampshire, Case No. 1:12-cr-136.)

Deferred Prosecution of Maurice Kirschenbaum
On May 22, 2015, the U.S. Attorney filed a motion to dismiss the charges against Maurice Kirschenbaum, who was seriously ill. Attached to the motion was a deferred prosecution agreement under which the U.S. Attorney reserved the right to refile the charges within five years. The judge granted the motion.

Sentencing of Wertheim and Abraham Kirschenbaum
The U.S. Attorney sought probation rather than prison time for Wertheim and Abraham Kirschenbaum in part because of their remorse, and in part because of their past and anticipated future cooperation in the ongoing criminal investigation of Neuman and others at Imperial. On May 27, 2015, the judge deviated downward from the sentencing guidelines and sentenced Wertheim and Abraham Kirschenbaum to serve 18 months in a minimum-security federal prison, followed by two years of supervised release. They were each fined $7,500, and Abraham Kirschenbaum forfeited $1 million to the government. However, the judge delayed for one year—until May 27, 2016—the date for them to report to prison. The judge left open the possibility that prison time might be avoided.

Forfeiture by Former Imperial Employees
As for the ongoing investigation of former Imperial employees, the U.S. Attorney, instead of filing criminal charges, sought forfeiture to the government of a total of $6.5 million—$5 million from Neuman and $750,000 each from Jonathan Moulton and James Purdy. Forfeiture is akin to restitution, and technically is not a fine. 

On January 8, 2016, the judge issued final forfeiture orders against Neuman and Purdy. On March 8, 2016, the judge issued a final forfeiture order against Moulton. The three individuals did not admit wrongdoing. [See U.S.A. v. $5,000,000 (Neuman), U.S.A. v. $750,000 (Moulton), and U.S.A. v. $750,000 (Purdy), U.S. District Court, District of New Hampshire, Case Nos. 1:15-cv-526, 527, and 528.]

Moulton is now president and managing member of Edison Risk (Delray Beach, FL), a brokerage consulting company. Biographical information on the company's website (edisonrisk.com) mentions his relationships with American United, Safeco, Transamerica, ING, and Gerber Life, but does not mention his relationship with Imperial.

Probation for Wertheim and Abraham Kirschenbaum
On May 16, 2016, the judge filed perfunctory amended judgments relating to Wertheim and Abraham Kirschenbaum. I have not found in the court filings any motions, any mention of hearings, or any rulings by the judge to explain the reasoning behind the amended judgments. The judge imposed three years of probation instead of the previously imposed 18 months of imprisonment. Thus ended a five-year investigation of STOLI-related activity by Imperial and those associated with the company.

General Observations
The Imperial case is not the only STOLI criminal case that resulted in no one serving prison time. For example, in No. 162 (May 16, 2016) I discussed the unexplained dismissal without prejudice (subject to possible reprosecution) of another lengthy STOLI criminal case. It is hard to believe that the brazen nature of the alleged criminal activity in such cases does not warrant prison time for the defendants.

I wrote about the investigation of Imperial in the May 2012, July 2012, and October 2013 issues of The Insurance Forum. An interesting item in the October 2013 article is a lengthy excerpt from Abraham Kirschenbaum's plea agreement with the U.S. Attorney. I also wrote about the Imperial investigation on my blog in No. 132 (December 11, 2015) and No. 142 (February 8, 2016).

Available Material
I am offering a complimentary 24-page PDF containing the three articles in The Insurance Forum about the Imperial investigation, the forfeiture orders directed at Neuman, Moulton, and Purdy, and the amended judgments relating to Wertheim and Abraham Kirschenbaum. Send an email to jmbelth@gmail.com and ask for the June 2016 package about the Imperial and Wertheim cases.


Wednesday, June 8, 2016

No. 165: Executive Compensation in the Insurance Industry—2015 Data Filed with the Nebraska Department of Insurance

In Nos. 163 and 164 (posted May 23 and May 31, 2016), I showed tabulations of 2015 executive compensation in the insurance industry from filings with the Securities and Exchange Commission (SEC) and the New York Department of Financial Services (DFS). They were my first major tabulations of executive compensation data since I ended publication of The Insurance Forum after the December 2013 issue.

Another Tabulation
Here I present another tabulation of 2015 data, this time from filings with the Nebraska Department of Insurance. In the final seven years of the Forum, I listed individuals who received $1 million or more each year. In No. 163, I listed individuals who received $5 million or more in 2015 according to SEC data. In No. 164, I listed individuals who received $3 million or more in 2015 according to DFS data. Here I list individuals who received $3 million or more in 2015 according to Nebraska data. The tabulation is at the bottom of this blog post.

The Supplemental Compensation Exhibit
The Nebraska data are from a "Supplemental Compensation Exhibit" developed in 1984 by the National Association of Insurance Commissioners (NAIC). The exhibit is used in a few states that require executive compensation data from their domestic companies; in some of those states the data are confidential. Nebraska has an insurance company executive compensation disclosure statute that was enacted in 1913 as part of the reforms that grew out of the Hughes-Armstrong investigation in New York in 1905. The statute requires all insurance companies doing business in Nebraska to file executive compensation data with the Department.

The exhibit has ten columns: name and principal position, year, salary, bonus, stock awards, option awards, sign-on payments, severance payments, all other compensation, and totals. Data are shown for the current year and the two preceding years, and include data for the ten highest compensated individuals. Instructions for completing the exhibit were prepared by the NAIC. I used the "totals" column to prepare this tabulation. Where more than one individual is shown for a company, they are listed in descending order of compensation.

How To Obtain the Nebraska Data
For many years I obtained copies of the exhibits through a public records request filed with the Department. In recent years the Department prepared a CD containing the exhibits. Anyone desiring exhibits for one or a few companies should indicate the name or names. The CD containing all the exhibits may be obtained from the Nebraska Department of Insurance, 941 "O" Street, Suite 400, Lincoln, NE 68508. The cost is $80.

A Major Problem with the Exhibit
I have long been troubled by a major problem with the exhibit. In the case of a group of related companies, the exhibit allows a company to use either of two methods of disclosure: (1) the aggregate amount paid to each individual by all companies in the group, or (2) only the amount allocated to the company named on the exhibit. Most companies show the aggregate figures. However, companies who allocate create a serious problem for persons assembling the data.

For example, consider the Progressive group, which allocates. Glenn Renwick is the principal executive officer. I found exhibits for nine Progressive companies showing these amounts of compensation for him adding up to $3,909,234, the figure shown in my tabulation:

Progressive Direct Ins Co $1,132,773
Progressive Casualty Ins Co 601,629
Progressive Specialty Ins Co 552,281
Progressive Advanced Ins Co 511,239
Progressive Universal Ins Co 350,755
Progressive Preferred Ins Co 326,123
Progressive Northwestern Ins Co 226,439
Progressive Classic Ins Co 115,528
Progressive Max Ins Co 92,467

There are two serious problems in addition to the effort needed to assemble the data. First, in addition to the companies listed above, the group may have other companies that are licensed in Nebraska. Second, in addition to the companies listed above, the group may have other companies that are not licensed in Nebraska. Therefore, when a company allocates, some individuals' total compensation may be understated.

In assembling the data below, I did not make what would have been a Herculean effort to identify all the companies in each group that allocates. For that reason, some data in the tabulation may understate an individual's total compensation. Also, some individuals who received more than $3 million of total compensation may be omitted from the tabulation.

Consider another dimension of the problem. The Liberty Mutual group allocates, but indicates the percentage allocated to the company whose data are in the exhibit. For example, Liberty Mutual Insurance Company's exhibit says: "Effective January 1, 2014, allocation to the reporting insurer is 50% consistent with its governing intercompany pooling arrangements." Therefore, I doubled each total in the exhibit to calculate each individual's total compensation from all companies in the group.

There are two simple solutions to the problem. One is for the Department to instruct companies to show the total compensation paid to each individual by all companies in the group. Another solution is for the Department to add one more column to the exhibit to show the total compensation paid to each individual by all companies in the group.

My Recent Correspondence with the Department
I have written to the Department previously on this matter, but my concern has not been addressed. On May 16, 2016, I wrote to the Department again. On May 31, the Department denied my request. On June 3, I wrote to the Department accepting the decision, albeit with disappointment, and requesting a revision of the CD next year to address the problems associated with company groups that allocate.

Available Material
I am offering a 27-page complimentary PDF consisting of the NAIC's instructions for completing the supplementary compensation exhibit, six sample exhibits (Guardian Life, Liberty Mutual, Massachusetts Mutual, New York Life, Northwestern Mutual, and Progressive Direct), and three letters (my May 16 letter, the Department's May 31 letter, and my June 3 letter). Email jmbelth@gmail.com and ask for the June 2016 package relating to executive compensation disclosure in Nebraska.

Compensation Data for 2015 from Nebraska
Ace Property & Casualty Ins Co
John J Lupica $5,500,000
Acuity, A Mutual Ins Co
Benjamin M Salzmann 7,966,944
Aetna Life Ins Co
Mark T Bertolini 17,261,900
Gary W Loveman PhD 8,005,714
Karen S Lynch 7,758,787
Shawn M Guertin 6,414,029
Francis S Soistman Jr 5,219,831
Margaret M McCarthy 4,286,948
William J Casazza 3,391,462
Steven B Kelmar 3,044,200
Allianz Global Risks US Ins Co
Arthur Moossmann 3,261,660
Allied World Ins Co
John R Bender 3,157,833
Allied World National Assurance Co
Scott A Carmilani 16,096,208
Wesley D Dupont 5,785,271
W Gordon Knight 3,203,374
Allstate Ins Group
Thomas J Wilson 27,020,510
Don Civgin 16,571,629
Matthew E Winter 8,523,727
James DeVries 8,433,799
Judith P Greffin 8,133,223
Katherine A Mabe 5,850,830
Steven P Sorenson 5,627,705
Sanjay Gupta 5,205,825
Michael Roche 4,851,690
Suren Gupta 4,669,552
Steven E Shebik 4,435,082
Alterra America Ins Co
Francis Michael Crowley 3,674,828
Richard R Whitt III 3,130,512
Ambac Assurance Corp
Diana Newman Adams 3,461,184
American Bankers Ins Co of Florida
Gene Edward Mergelmeyer 4,297,746
Steven Craig Lemasters 3,232,383
American Family Ins Co
Jack C Salzwedel 7,677,663
American Family Life Assurance Co
Daniel P Amos 11,302,436
Kriss Cloninger III 6,317,098
John S Amos 5,954,082
Paul S Amos II 4,355,478
Eric M Kirsch 3,696,963
American Fidelity Assurance Co
David R Carpenter 4,311,128
American General Life Ins Co
Jay S Wintrob 4,120,000
Jana W Greer 3,193,854
American National Ins Co
Robert Lee Moody 8,266,699
American United Life Ins Co
James S Davison 3,017,501
Ameritrust Ins Corp
Robert Samuel Cubbin 3,205,159
Aspen American Ins Co
Mario Vitale 3,708,036
Assured Guaranty Corp
Dominic Frederico 12,172,263
James Michener 4,293,430
Robert Bailenson 3,368,468
Russell Brewer 3,068,032
Atlantic Specialty Ins Co
Timothy M Miller 4,773,465
Austin Mutual Ins Co
T Van Berkel 3,169,874
Auto Club Ins Assn Group
Charles Podowski 9,068,320
Steven Monahan 4,411,337
AXA Equitable Life Group
Mark Pearson 5,083,187
Chicago Title Ins Group
Raymond Randall Quirk 14,378,793
Peter Tadeusz Sadowski 8,422,950
Michael Louis Gravelle 5,828,544
Roger Scott Jewkes 3,262,636
Michael Joseph Nolan 3,103,853
Anthony John Park 3,094,933
Erika Meinhardt 3,091,795
Richard Lynn Cox 3,046,482
Cigna Health & Life Ins Co
Matthew Glenn Manders 3,978,547
CNA Financial Group
Thomas F Motamed 10,175,047
D Craig Mense 4,299,991
Jonathan D Kantor 3,716,504
Doctors Co an Interinsurance Exchange
Richard Elliott Anderson MD 8,745,532
Esurance Ins Co of NJ
Gary C Tolman 3,147,125
Everest Reinsurance Group
Dominic James Addesso 8,165,830
Barry Howland Smith 6,356,174
Frank Nicholas Lopapa 3,580,850
John Paul Doucette 3,444,096
Mark Stuart de Saram 3,165,446
Ronald David Diaz 3,162,513
Factory Mutual Ins Co
Thomas A Lawson 5,058,398
Jonathan W Hall 3,891,769
Farmers Ins Exchange
Jeffrey J Dailey 4,156,791
Federated Mutual Ins Co Group
Jeffrey E Fetters 4,971,881
Fidelity & Guaranty Life Ins Co
Christopher J Littlefield 3,010,770
First American Title Ins Co
Dennis J Gilmore 4,903,136
Stephen R Farber 3,778,697
James W McIntosh 3,512,360
Philip Salomon 3,297,063
Jeffrey S Mitzner 3,158,422
GEICO Ins Group
Olza Minor Nicely 14,641,954
William Evan Roberts 4,326,350
General Reinsurance Corp
Franklin Montross IV 6,411,286
Genworth Mortgage Ins Corp
Kevin Douglas Schneider 5,334,224
Daniel Joseph Sheehan IV 5,027,680
Great American Ins Group
Carl H Lindner III 7,844,281
S Craig Lindner 7,365,218
Stephen R Rosenthal 4,162,282
Great-West Life Assurance Co
Robert L Reynolds 3,424,039
Guardian Life Ins Co of America
Deanna Mulligan 5,508,527
Douglas Dolfi 3,090,653
Hanover Ins Co
Frederick Eppinger 5,014,308
Hartford Financial Services Group
Douglas G Elliot 4,442,211
Jonathan R Bennett 3,067,133
Health Care Service Corp
Patricia A Hemingway Hall 16,572,097
Colleen Foley Reitan 7,880,513
Paula A Steiner 5,654,068
Kenneth S Avner 4,652,391
Deborah Dorman-Rodriguez 4,538,952
John Cannon III 4,424,919
Austin J Waldron 3,471,211
Karen M Atwood 3,419,406
Bert E Marshall 3,078,084
Jimmy D Rodgers 3,009,492
Homesite Ins Co
Fabian John Fondriest 3,653,512
Humana Ins Co
Bruce D Broussard 6,263,682
Brian P LeClaire 3,417,341
James E Murray 3,327,387
Insurance Co of the West
Ernest Rady 7,956,444
Kevin Prior 4,454,879
Jackson National Life Ins Co
Michael A Wells 10,304,656
James R Sopha 8,097,116
Paul C Myers 6,964,194
Clifford J Jack 5,775,378
Kenneth H Stewart 4,352,581
Thomas J Meyer 3,431,363
Gregory P Cicotte 3,404,357
John Hancock Life Ins Co (USA)
Craig Bromley 4,088,568
Liberty Mutual Ins Group
David H Long 16,632,928
Timothy Sweeney 6,295,032
A Alexander Fontanes 6,200,578
J Paul Condrin III 6,047,350
Christopher L Peirce 4,035,076
Dennis J Langwell 3,919,476
Luis Bonell Goytisolo 3,011,310
Liberty National Life Ins Co
Michael W Pressley 6,843,502
Roger C Smith 6,666,032
Lincoln National Life Ins Co
Dennis R Glass 41,665,850
Mark E Konen 8,206,770
Randal J Freitag 6,980,528
Wilford H Fuller 6,762,676
Ellen G Cooper 5,201,295
Charles C Cornelio 5,120,505
Massachusetts Mutual Life Ins Co
Roger Crandall 12,056,510
Elaine Sarsynski 4,968,484
Michael Fanning 4,724,503
Michael Rollings 3,771,586
Melvin Corbett 3,532,761
Elizabeth Chicares 3,258,039
Andrew Moore 3,196,694
MBIA Ins Corp
Joseph W Brown 7,837,078
C Edward Chaplin 4,562,875
William Fallon 4,562,875
Medical Protective Co
Timothy Kenesey 6,403,446
Metropolitan Life Ins Group
Steven A Kandarian 13,986,781
John C Hele 4,939,644
Maria R Morris 4,225,396
Martin J Lippert 3,970,838
Paul Blanco 3,343,419
Steven J Goulart 3,296,913
Mortgage Guaranty Ins Corp
Curt Culver 10,707,386
Patrick Sinks 5,336,067
Jeffrey H Lane 3,138,079
Mount Vernon Specialty Ins Co
Thomas P Nerney 13,099,236
Munich Reinsurance America Inc
Anthony J Kuczinski 4,263,158
Mutual of America Life Ins Co
Thomas J Moran 5,005,453
Mutual of Omaha Group
Daniel P Neary 31,656,942
National Fire & Marine Ins Co
David N Fields 3,330,885
National Indemnity Co
Ajit Jain 11,785,006
National Life Ins Co (VT)
Mehran Assadi 4,620,347
National Western Life Ins Co
Robert L Moody 5,697,364
Nationwide Ins Group
Steve Rasmussen 7,976,240
Navigators Ins Co
Stanley A Galanski 3,086,067
New York Life Ins Co
Theodore A Mathas 19,723,078
John Y Kim 9,670,600
Christopher O Blunt 6,670,600
Mark W Pfaff 5,290,450
Sheila K Davidson 4,396,353
Peter J McAvinn 3,941,692
John P Curry 3,392,886
John T Fleurant 3,309,062
Northwestern Mutual Life Ins Co
John E Schlifske 13,359,233
Gregory C Oberland 4,932,626
Ronald P Joelson 3,443,932
Odyssey Reinsurance Co
Brian D Young 5,234,282
Philippe E Mallier 3,026,305
Pacific Life Ins Co Group
James T Morris 8,274,893
Khanh T Tran 3,910,035
Pan-American Life Ins Co
Jose Suarez Suquet 5,914,688
Carlos Fernando Mickan 3,107,233
Partner Reinsurance Co of the US
Theodore Walker 3,066,875
Penn Mutual Life Ins Co
Eileen McDonnell 4,820,694
Pennsylvania Ins Co
Sidney Ferenc 9,026,258
Steven Menzies 8,993,837
Pennsylvania Natl Mut Cas Ins Co
Kenneth R Shutts 5,433,541
Permanent General Assurance Corp
Randy P Parker 4,470,243
Primerica Life Ins Co
Richard D Williams 5,147,906
John A Addison 5,146,545
Principal Life Ins Co
Larry D Zimpleman 7,953,746
James P McCaughan 6,348,503
Terrance J Lillis 3,888,109
Daniel J Houston 3,826,609
Proassurance Casualty Co
William Stancil Starnes 3,859,482
Progressive Ins Group
Glenn M Renwick 3,909,234
Protective Life Ins Co
John Dixon Johns 42,529,073
Carl Sitter Thigpen 9,074,528
Richard Joseph Bielen 8,190,998
Deborah Joyce Long 6,371,658
David Adams 5,234,714
Michael Gus Temple 4,340,230
Steven Glen Walker 3,867,768
John Robert Sawyer 3,715,538
Prudential Ins Group 
John Robert Strangfeld Jr 19,849,598
Mark Brown Grier 16,461,512
James J Sullivan 12,432,146
Charles Frederick Lowrey 12,329,632
Stephen Pelletier 8,603,581
Michael K Lillard 8,321,172
David A Hunt 7,434,483
Robert Michael Falzon 6,977,184
Garrett Sleyster 4,866,710
David H Bessey 4,618,476
Lori Dickerson Fouche 3,764,038
Christine Cannon Marcks 3,701,503
QCC Ins Co
I Steven Udvarhelyi MD 8,067,070
Daniel J Hilferty 4,361,976
Radian Guaranty Inc
Sanford A Ibrahim  6,309,913
Renaissance Reinsurance US Inc
H Elizabeth Mitchell 6,630,756
RGA Reinsurance Co
Albert Greig Woodring 7,215,798
Melville Jay Young 5,958,744
Jack Brien Lay 4,518,348
Paul Arthur Schuster 3,337,106
RiverSource Life Ins Co
Lynn Ann Hopton 14,795,047
Yvonne E Stevens 11,875,348
Steven B Staver 5,331,621
Bridget M Sperl 4,900,623
John R Woerner 4,543,077
Gumer C Alvero 4,324,124
RLI Ins Co
Jonathan E Michael 13,533,411
Michael J Stone 4,688,557
Craig W Kliethermes 4,558,001
RSUI Indemnity Co
David Leonard 3,361,193
Phillip McCrorie 3,016,926
Scor Reinsurance Co
Mark Kociancic 3,699,727
Selective Ins Co of America
Gregory E Murphy 4,518,164
John J Marchioni 3,119,570
Sentry Ins Group
Peter McPartland 5,812,178
Standard Ins Co (OR)
Floyd Fitz-Hubert Chadee 6,854,960
John Gregory Ness 4,241,832
Daniel J McMillan 4,036,026
State Farm Group
Edward Barry Rust Jr 13,339,940
Michael Leon Tipsord 7,069,474
Symetra Life Ins Co
Thomas M Marra 5,098,099
Teachers Ins & Annuity Assn
Roger Ferguson 17,850,547
William Riegel 6,112,266
Edward Van Dolsen 5,978,219
Thomas Garbutt 4,920,950
Edward Grzybowski 4,824,808
Ronald Pressman 4,711,739
Thomas Franks 4,678,149
Saira Malik 4,662,672
Stephen Gruppo 4,121,869
Thrivent Financial for Lutherans
Bradford L Hewitt 3,666,541
TIG Ins Co
Nicholas Bentley 3,192,746
Transamerica Life Ins Co
Mark W Mullin 3,467,017
Transatlantic Reinsurance Co
Michael C Sapnar 9,949,629
Steven S Skalicky 8,331,494
Paul A Bonny 3,406,126
Kenneth Apfel 3,018,387
Travelers Ins Group
Jay S Fishman 19,596,443
Brian W MacLean 8,176,212
William H Heyman 6,881,003
Jay S Benet 6,581,003
Alan D Schnitzer 6,507,322
Doreen Spadorcia 6,387,231
Gregory C Toczydlowski 3,834,757
Maria Olivo 3,236,213
Michael F Klein 3,039,299
Trustgard Ins Co
Thomas Howard Welch 3,681,323
Union Security Ins Co
John Steven Roberts 7,077,456
United Automobile Ins Co
Richard P Parrillo Sr 3,000,000
United States Fire Ins Co
Douglas Mendel Libby 13,615,153
Marc James Adee 5,074,145
Unum Group
Richard Paul McKenney 3,081,910
USAA Group
Steven A Bennett 5,470,340
Wesco Ins Co Group
Barry Zyskind 5,524,034
West Bend Mutual Ins Co
Kevin Alan Steiner 3,546,809
Western & Southern Life Ins Co
John Barrett 6,252,420
Wilton Reassurance Co
Chris Stroup 3,788,845
XL Life Ins & Annuity Co
Sarah Elizabeth Street 3,607,538
Zenith Ins Co
Kari L Van Gundy 3,633,988
Zurich American Ins Co
Michael Thomas Foley 4,352,109