No. 381: Executive Compensation in the Insurance Industry—2019 Data from 2020 SEC Filings

Background
The Insurance Forum, my monthly newsletter, began with the January 1974 issue and ended with the December 2013 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 of the insurance industry and insurance regulators to block my access to the data.

Most of the efforts to block access involved two organizations. One was the New York Department of Insurance, which is now the New York State Department of Financial Services (NYDFS). The other was the National Association of Insurance Commissioners (NAIC). Some of those efforts were successful and some were not. However, I never encountered problems with access to data filed by shareholder-owned insurance companies with the Securities and Exchange Commission (SEC).

Since ending publication of the Forum, I have from time to time published executive compensation data through blog posts. The most recent post was No. 335 (October 3, 2019), in which I published data for 2018 from my three major sources—SEC, NYDFS, and the Nebraska Department of Insurance (NDOI). Here I show 2019 data from the SEC. I plan to show 2019 data from NYDFS and NDOI later.

The SEC Data
During the final seven years of the Forum, I showed data for individuals who received at least $1 million in the year covered. In the current tabulation, which is at the end of this post, I show data for individuals who received at least $5 million in 2019. Each figure in the tabulation is the "Total" shown in the 2019 "summary compensation table."

The 2019 summary compensation tables for most companies are in the proxy statement filed in advance of the 2020 annual meeting of shareholders. For the two Canadian companies—Manulife Financial and Sun Life Financial—the tables are in 6-K annual reports and the figures shown are in Canadian dollars. Where more than one individual in a company is shown, they are listed in descending order of compensation.

How to Access the SEC Tables
For readers who want to access the SEC summary compensation tables, go to:

http://www.sec.gov/edgar/searchedgar/companysearch.html

In the "Company and Personal Lookup" box, enter the ticker symbol if you know it, and click "Search." Examples of ticker symbols are AIG for American International Group, GNW for Genworth Financial, MET for MetLife, PRU for Prudential Financial, and PRI for Primerica. If you do not know the ticker symbol, enter the company name (or a portion of it) and click "Search." If your search produces a list of companies with similar names, you will need to click on the one you want. When you make your selection, a list of documents in reverse chronological order by filing date will appear. Select the most recent "DEF 14A" definitive proxy statement. The proxy's table of contents may contain a link to the summary compensation table. If it does not, you will need to search for it, but it is usually not hard to find.

A Note on Women
I believe that the above 2019 list includes only twelve women. I checked back in the above mentioned No. 335, and I believe that the 2018 SEC list there included only nine women. I do not know when the top ranks of insurance companies will include a large number of women.

Available Material
The Insurance Forum: A Memoir and back issues of the Forum containing executive compensation tabulations are available for purchase from us. The final tabulation in the Forum was in the July 2013 issue. Ordering instructions are on our website at theinsuranceforum.com.

SEC Data for 2019
AFLAC Inc
Daniel P Amos	$14,108,852
Frederick J Crawford	5,218,692
Alleghany Corp
Weston M Hicks	13,993,062
John L Sennott Jr	8,968,661
Joseph P Brandon	6,035,398
Allstate Corp
Thomas J Wilson	19,615,696
Steven E Shebik	6,978,948
AMBAC Financial Group Inc
Claude LeBlanc	5,588,236
American Financial Group Inc
Carl H Lindner III	10,464,587
S Craig Lindner	10,457,420
American International Group Inc
Brian Duperreault	19,369,637
Peter Zaffino	18,388,334
Douglas A Dachille	10,545,619
Kevin T Hogan	8,294,833
Mark D Lyons	7,755,130
Ameriprise Financial Inc
James M Cracchiolo	24,516,930
Walter S Berman	9,642,581
William F Truscott	7,726,201
Colin Moore	6,284,780
Joseph E Sweeney	5,114,622
Anthem Inc
Gail K Boudreaux	15,473,139
Felicia F Norwood	7,922,755
Gloria M McCarthy	5,247,126
John E Gallina	5,109,053
Peter D Haytaian	5,076,966
Aon plc
Gregory C Case	16,007,843
Christa Davies	7,739,418
Peter Lieb	5,642,995
Arch Capital Group Ltd
Marc Grandisson	9,360,029
Arthur J Gallagher & Co
Pat Gallagher	8,960,616
Assurant Inc
Alan B Colberg	10,155,682
Gene E Mergelmeyer	5,949,189
Assured Guaranty Ltd
Dominic J Frederico	12,153,470
AXIS Capital Holdings Ltd
Albert A Benchimol	9,278,330
Berkshire Hathaway Inc
Gregory E Abel	19,014,000
Ajit Jain	19,014,000
Brighthouse Financial Inc
Eric Steigerwalt	8,490,118
Brunswick Corp
David M Foulkes	5,840,775
Centene Corp
Michael F Neidorff	26,438,425
Jeffrey A Schwaneke	9,434,284
Brandy L Burkhalter	8,637,416
Jesse N Hunter	6,118,969
Chubb Ltd
Evan G Greenberg	20,475,070
John W Keogh	8,105,031
Paul J Krump	7,638,117
John J Lupica	6,691,425
Philip V Bancroft	5,078,019
Cigna Corp
Timothy C Wentworth	23,544,332
David M Cordani	19,303,032
Matthew G Manders	6,199,848
Eric P Palmer	6,140,264
CNA Financial Corp
Dino E Robusto	13,054,480
CNO Financial Group Inc
Gary C Bhojwani	6,792,823
CVS Health Corp (Acquired Aetna)
Larry J Merlo	36,451,749
Jonathan C Roberts	15,048,380
Eva C Boratto	9,564,223
Equitable Holdings Inc
Mark Pearson	11,254,123
Seth Bernstein	9,444,889
Jeffrey Hurd	5,329,638
Nick Lane	5,310,608
Everest Re Group Ltd
Dominic J Addesso	7,628,608
Fidelity National Financial Inc
Raymond R Quirk	9,646,148
Brent B Bickett	6,080,183
First American Financial Corp
Dennis J Gilmore	10,367,225
Christopher M Leavell	5,276,048
Kenneth D DeGiorgio	5,229,453
Genworth Financial Inc
Thomas J McInerney	9,102,634
Daniel J Sheehan IV	5,766,990
Kevin D Schneider	5,583,956
Globe Life Inc (Formerly Torchmark)
Gary L Coleman	8,342,279
Larry M Hutchison	8,337,263
Hartford Financial Services Group Inc
Christopher Swift	14,560,748
Douglas Elliot	9,332,849
Heritage Insurance Holdings Inc
Bruce Lucas	6,076,316
Humana Inc
Bruce D Broussard	16,726,455
Brian A Kane	5,381,124
Kemper Corp
Joseph P Lacher Jr	8,560,950
Lincoln National Corp
Dennis R Glass	15,412,217
Loews Corp
James S Tisch	5,738,615
David B Edelson	5,326,200
Kenneth I Siegel	5,166,201
Jonathan M Tisch	5,018,643
Magellan Health Inc
Barry M Smith	8,357,548
Manulife Financial Corp
(Canadian Dollars)
Roy Gori	14,695,549
Rashul Joshi	6,689,275
Marianne Harrison	6,347,665
Anil Wadhwani	5,647,644
Phil Witherington	5,112,122
Marsh & McLennan Companies Inc
Daniel S Glaser	20,331,697
John Q Doyle	7,890,432
Dominic J Burke	6,935,944
Martine Ferland	6,461,959
Mark C McGivney	5,648,555
MetLife Inc
Michel A Khalaf	14,570,581
Steven A Kandarian	12,037,102
Steven J Goulart	7,088,939
John D McCallion	6,319,358
Martin J Lippert	5,467,707
MGIC Investment Corp
Patrick Sinks	7,541,912
Molina Healthcare Inc
Joseph M Zubretsky	18,025,074
Mr Cooper Group Inc
Christopher Marshall	9,127,757
Jay Bray	7,194,496
National General Holdings Corp
Barry Karfunkel	5,607,270
Robert Karfunkel	5,037,270
Primerica Inc
Glenn J Williams	5,279,228
Principal Financial Group Inc
Daniel J Houston	14,748,051
Timothy M Dunbar	6,176,552
Patrick G Halter	5,027,436
Progressive Corp
Susan Patricia Griffith	14,041,272
Prudential Financial Inc
Mark B Grier	17,179,235
Charles F Lowrey	15,132,939
Stephen Pelletier	14,831,222
Robert M Falzon	12,082,978
Scott G Sleyster	7,495,887
Radian Group Inc
Richard G Thornberry	8,197,874
Reinsurance Group of America Inc
Anna Manning	8,116,275
RenaissanceRe Holdings Ltd
Kevin J O'Donnell	10,768,159
State Auto Financial Corp
Michael E LaRocco	5,042,968
Sun Life Financial Inc
(Canadian Dollars)
Dean A Connor	9,646,625
Stephen C Peacher	7,178,598
Travelers Companies Inc
Alan D Schnitzer	16,778,809
William H Heyman	6,123,164
Avrohom J Kess	6,303,440
Gregory C Toczydlowski	5,257,621
UnitedHealth Group Inc
David S Wichmann	18,886,989
Andrew P Witty	16,526,020
Steven H Nelson	14,059,422
John F Rex	10,627,085
Dirk C McMahon	8,966,980
Stephen J Hemsley	7,389,261
Marianne D Short	6,963,677
Universal Insurance Holdings Inc
Sean P Downes	5,406,060
Unum Corp
Richard P McKenney	9,727,186
Voya Financial Inc
Rodney O Martin Jr	12,554,291
Christine Hurtsellers	6,419,295
Michael S Smith	5,159,992
Charles P Nelson	5,001,396
W R Berkley Corp
William R Berkley	11,289,025
W Robert Berkley Jr	11,017,931
White Mountains Insurance Group Ltd
G Manning Rountree	6,858,274

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 380: Prudential Agreed in 2016 To Settle a 2012 Federal Securities Lawsuit

In No. 378 (June 24, 2020), I discussed a 2012 federal securities class action lawsuit against MetLife, Inc. that the company is settling in 2020. A reader promptly informed me of a similar 2012 federal securities class action lawsuit against Prudential Financial, Inc. that the company settled in 2016. Here I discuss the Prudential case.

On August 22, 2012, the City of Sterling Heights General Employees' Retirement System filed a class action lawsuit against Prudential (NYSE:PRU) and four senior officers of the company. (Sterling Heights is in Michigan.) The class consisted of all purchasers of Prudential common stock between May 5, 2010 and November 2, 2011. The original 50-page complaint alleged three counts of violations of federal securities laws. On May 6, 2013, the plaintiff filed a 114-page amended complaint containing two counts. (See City of Sterling Heights v. Prudential, U.S. District Court, District of New Jersey, Case No 2-12-cv-5275.)

Prudential's Descriptions of the Case
After the original complaint was filed, Prudential included a one-paragraph description of the case in the company's 10-Q report for the quarter ended September 30, 2012, which was filed with the Securities and Exchange Commission on November 8, 2012. After the case was settled, Prudential included a one-paragraph description in the company's 10-Q report for the quarter ended September 30, 2016, filed November 4, 2016. Those two short descriptions are in the complimentary package offered at the end of this post.

The Amended Complaint
The court filings in the City of Sterling Heights case were extensive throughout the four years during which the case was fought. The "Introduction and Review" section of the amended complaint alleged that Prudential used the Social Security Administration's Death Master File (DMF), known to be incomplete and inaccurate, to stop making payments to life annuitants. Another allegation was that the company did not use the DMF to try to locate life insurance beneficiaries, therefore avoiding either the escheatment of unclaimed property to the states or the payment of death benefits to beneficiaries. Part of the amended complaint is in the complimentary package offered at the end of this post.

The Settlement
A memorandum of law described the settlement. The settlement amount was $33 million. Out of that was paid 30 percent ($9.9 million) for attorneys' fees and almost $800,000 for attorneys' expenses. Here was part of a paragraph from the memorandum of law (the first 15 pages of the memorandum of law are in the complimentary package offered at the end of this post):

Lead Counsel have succeeded in obtaining a $33,000,000 cash settlement for the benefit of the Class. This is a very good result in the face of substantial risk and is a credit to Lead Counsel's vigorous, persistent, and skilled efforts. Lead Counsel respectfully move this Court for an award of attorneys' fees in the amount of 30% of the Settlement Amount and payment of their litigation expenses in the amount of $798,955.79, plus interest on both amounts....

On September 29, 2016, the judge issued an order approving the plan of settlement, an order awarding attorneys' fees and expenses, and a final judgment and order dismissing the case with prejudice (permanently). The final judgment and order are in the complimentary package at the end of this post.

General Observations
I have no basis on which to express an opinion on the fairness of the settlement in the Prudential case. Therefore, I will not do so.

The MetLife case discussed in No. 378 and the Prudential case discussed here have several similarities. First, both cases started in 2012. Second, the MetLife case dragged on for more than eight years; it is now being settled. Third, the Prudential case dragged on for more than four years; it was settled in 2016. Fourth, both cases involved failure to use the DMF to find missing life insurance beneficiaries. Fifth, both cases involved the use of the DMF to avoid payments to life annuitants. Sixth, both cases involved major investigations by state unclaimed property officials. Seventh, both cases involved major investigations by state insurance regulators. Eighth, both cases involved strong denials of wrongdoing by company officials. I think it is likely there were similar lawsuits against other life insurance companies.

Email from a Reader
After No. 378 was posted, I received an email from a reader. Here is a lightly edited version of what the reader said:

Thanks for your post about MetLife's settlement. Most MetLife common stock is held by institutional investors. If Vanguard, Black Rock, State Street, and the other exchange traded funds and mutual funds get a check as part of the settlement, I question whether beneficial investors will participate. I guess theoretically money should go to the beneficial owners who held shares during the class period. I am pretty sure there will be no effort by the exchange traded funds and mutual funds to go back eight years to try to sort out who owned shares at the time. The companies settling such cases almost never admit wrongdoing. Their strategy seems to be to drag out the litigation until the substance of the complaint is forgotten and then work to minimize any negative public relations problems associated with the settlement.

Available Material
I am offering a complimentary 41-page PDF consisting of Prudential's short descriptions of the case (1 page), an excerpt from the amended complaint (18 pages), an excerpt from a memorandum of law (15 pages), and the judge's final order and judgment (7 pages). Email jmbelth@gmail.com and ask for the July 2020 package about the case of City of Sterling Heights v. Prudential.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 379: The John Newton Russell Memorial Award and a Letter to NAIFA

The JNR Award

In each year since the 1940s, the National Association of Life Underwriters (NALU) and its successor, the National Association of Insurance and Financial Advisors (NAIFA), have been issuing the John Newton Russell Memorial Award (JNR Award). NAIFA describes the JNR Award as

the highest honor that can be bestowed upon an individual in the life insurance and financial planning industry. The award recognizes a lifetime of professional excellence, service to the industry, and commitment to ethical conduct.

About 60 years ago, when I first learned of the JNR Award, I was struck by the fact that it is given only to living recipients. That seemed odd in view of the huge contributions made by many deceased individuals.

The May 2018 Letter

I was deeply honored to receive the JNR Award in 2017. The honor was accompanied by the requirement that I serve on the nominating committee for three years. In that capacity, I considered writing to NAIFA to suggest giving the JNR Award occasionally to a deceased person. Before sending the letter, however, I ran the idea by a few old friends (all JNR Award recipients). They were receptive to the idea.

On May 22, 2018, I sent a letter to NAIFA and suggested giving the JNR Award occasionally to a deceased individual. Here are three sentences near the end of the letter:

One possibility would be to grant an award to a deceased person only once every five years. Another possibility would be to occasionally grant two awards in a single year—one to a living person and one to a deceased person. I might add that granting an award occasionally to a deceased person would serve the purpose of educating NAIFA members and others about the rich history of the life insurance business.

Attached to the letter were discussions of Elizur Wright (the first insurance regulator in the U.S.) and Charles Evans Hughes (counsel of the Armstrong investigation in New York in 1905). Also mentioned in the letter was Jacob Lyman Greene, who was chief executive officer of Connecticut Mutual during the tontine wars.

In response to the letter, a NAIFA official informed me the board had considered and rejected the idea. However, the official did not give a reason for the rejection.

General Observations

I think the occasional granting of a JNR Award to a deceased person is a reasonable suggestion. However, I would welcome readers' thoughts. My May 2018 letter and the attachments are here.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 378: MetLife Agrees to Settle an Eight-Year-Old Federal Securities Lawsuit

On January 12, 2012, the City of Westland Police and Fire Retirement System filed a class action lawsuit against MetLife, Inc. (NYSE:MET) and several MetLife senior officers and directors. The classes of plaintiffs consist of MetLife shareholders who allegedly suffered losses as the result of defendants' violations of federal securities laws. The original complaint has three counts of such violations. On May 14, 2012, the plaintiffs filed an amended complaint containing five counts. (See City of Westland v. MetLife, U.S. District Court, Southern District of New York, Case No 1-12-cv-256.)

MetLife's Descriptions of the Case
After the original complaint was filed, MetLife included a one-paragraph description of the case in the company's 10-K report for the year ended December 31, 2011, which was filed with the Securities and Exchange Commission on February 28, 2012. The most recent description is in the company's 10-Q report for the quarter ended March 31, 2020, filed May 8, 2020. Those two short descriptions are in the complimentary package offered at the end of this post.

Recently I learned through news reports that the parties are settling the case. I asked a media relations person at MetLife whether the company has issued a statement about the settlement. The person referred me to another person, from whom I heard nothing. I followed up with the person who had made the referral. MetLife apparently has not issued a statement recently on the case (other than the short statement in the latest 10-Q report, which does not mention the settlement). The person provided the following statement, which apparently was prepared especially for me:

MetLife denies the claims brought forward in the lawsuit and strongly believes its conduct was at all times proper and in compliance with all applicable laws and regulations. The company is entering into this settlement to eliminate the burden and expense of further litigation.

On page 80 in the 10-Q report for the quarter ended March 31, 2020, MetLife said its board received six letters dated from March 2018 to April 2020 on behalf of individual shareholders. I asked the media relations person for copies of the letters. In response, another person said: "The 10-Q you reference is the public notification of those letters. The letters themselves are not public."

The Original Complaint
The court filings in the City of Westland case have been extensive throughout the eight years since the case began. Here is part of the "Summary of Action" in the original 22-page complaint (the full complaint is in the complimentary package offered at the end of this post):

This is a securities fraud class action alleging violations of the anti-fraud provisions of the federal securities laws on behalf of all purchasers of the common stock of MetLife, Inc. between February 2, 2010 and October 6, 2011, inclusive. The claims asserted herein are brought against MetLife and certain of its current and former officers and directors...

During the class period, the defendants engaged in a fraudulent scheme and multiple violations of the Securities Exchange Act of 1934 ... by making false and misleading statements concerning the Company's current and future financial condition in quarterly and year-end financial statements.

The Amended Complaint
The amended complaint is more elaborate than the original complaint. The first 13 pages of the 182-page document include a "Table of Contents" and an "Introduction and Review." The latter section, for example, alleges that MetLife used the Social Security Administration's Death Master File (DMF) to stop payments to supposedly deceased life annuitants, and did not use the DMF to identify and locate life insurance beneficiaries to whom death benefits may have been owed. In other words, the amended complaint alleges that the company did not adjust its reserves to reflect that it had unclaimed property subject to escheatment pursuant to state unclaimed property laws. The first 13 pages of the amended complaint are in the complimentary package offered at the end of this post.

The Class Notice
On June 17, 2020, as part of the filing of a request to the judge for preliminary approval of the proposed settlement, the plaintiff submitted as an exhibit a proposed notice to be sent to the members of the various classes. The notice has not yet been sent out, because the judge has not yet approved the form of the class notice. Nonetheless, the proposed notice is helpful because of its description of the case. Part of the beginning of the "Statement of Class Recovery" in the proposed notice reads:

Pursuant to the Settlement described herein, an $84,000,000.00 settlement fund has been established (the "Settlement Amount"). The Settlement Amount together with any interest earned thereon is the "Settlement Fund." The Settlement Fund, less (a) any taxes, (b) any Notice and Administration Expenses, and (c) any attorneys' fees and litigation costs, charges and expenses (including any award to Lead Plaintiff of its costs and expenses in representing the Classes) awarded by the Court, will be distributed to Members of the Classes in accordance with a plan of allocation that is approved by the Court. The proposed plan of allocation (the "Plan of Allocation") is set forth on pages ___ below. Based on the Lead Plaintiff's estimate of the number of shares of MetLife common stock eligible to recover, the average distribution under the Plan of Allocation is roughly $0.26 per common share, before deduction of any taxes on the income earned on the Settlement Fund, Notice and Administration Expenses, and allowable attorneys' fees and expenses (including any award to Lead Plaintiff) as determined by the Court. Members of the Classes should note, however, that these are only estimates [emphasis in original].

The proposed class notice consists of 22 pages. It is included in full in the complimentary package offered at the end of this post.

General Observations
The lengthy court docket in this case reveals that the parties fought the case intensely during the entire eight years since it was filed. During that time, they met three times with a retired judge in unsuccessful efforts to mediate the dispute. Now that the matters prompting the lawsuit are ancient history, the parties are settling the case as quietly as possible. Among those matters, for example, are investigations by state insurance regulators into the failure of companies to pay certain life annuity benefits and life insurance death benefits, and investigations by state unclaimed property officials into the failure of companies to escheat unclaimed property to the states. I think the case provides an important history lesson for persons keenly interested in the life insurance business.

Available Material
I am offering a complimentary 58-page PDF consisting of MetLife's short descriptions of the case (1 page), the original complaint (22 pages), the beginning of the amended complaint (13 pages), and the proposed class notice (22 pages). Email jmbelth@gmail.com and ask for the June 2020 package about the case of City of Westland v. MetLife.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 377: Long-Term Care Insurance—A Further Update on the Skochin Class Action Lawsuit Against Genworth

No. 371 (May 13, 2020) includes an update on a class action lawsuit against Genworth Financial, Inc. (Genworth) relating to premium increases on long-term care (LTC) insurance policies. Here I provide a further update on the case. (See Skochin v. Genworth, U.S. District Court, Eastern District of Virginia, Case No. 3:19-cv-49.)

Rejection of the Indiana Effort

As reported in No. 371, the Indiana Department of Insurance filed a motion to intervene for the purpose of filing a motion for a temporary stay of the proceedings because of the pandemic. On June 3, 2020, the judge issued a memorandum opinion in which he granted the motion to intervene but denied the motion for a temporary stay. An important reason for the denial of the motion for a temporary stay was the fact that Indiana was the only state to seek a temporary stay. The memorandum opinion is in the complimentary package offered at the end of this post.

Motion for Attorney Fees

On May 25, 2020, the plaintiffs filed a motion for entry of an award of attorney fees and expenses. They also filed five declarations in support of the motion. They sought

attorneys' fees in the amount of $2,000,000 relating to the injunctive relief achieved for the Settlement Class, and an additional contingent payment of 15% of certain amounts related to Special Election Options selected by the Settlement Class, in an amount no less than $10,000,000 and no greater than $24,500,000, as well as payment of litigation expenses of $64,398.66, to be paid in accordance with the terms of the Joint Stipulation of Class Action Settlement and Release....

The above language is similar to what appeared in the stipulation I saw earlier, and which I found ambiguous. I could not tell whether the range of $10 million to $24.5 million refers to (a) attorneys' fees, or (b) 15 percent of certain amounts related to Special Election Options. I looked at the declarations and concluded that the range referred to (b) above. The motion for attorney fees and expenses is in the complimentary package offered at the end of this post.

Objections by Class Members

The class consists of about 207,000 policyholders. The judge ordered the administrator to mail the class notice on April 14, 2020. The final approval hearing is set for July 10, 2020. In the above mentioned No. 371, I said seven class members had filed objections with the court. As of June 10, the number has grown to 17, distributed geographically as follows: Arizona (1), California (1), Colorado (1), Florida (3), Georgia (1), Idaho (1), Iowa (1), New York (1), North Carolina (1), Ohio (1), Pennsylvania (1), Texas (1), and Virginia (3). Several of the objections are in the complimentary package offered in No. 371.

General Observations

I am an Indiana resident. I was impressed by and grateful for my home state insurance department's effort to obtain a temporary stay. I thought the request was eminently reasonable, and I am disappointed that the judge denied the request. I have noted earlier that the Eastern District of Virginia has a reputation as the fastest federal civil trial court in the U.S. That may have played a role in the judge's action, but I do not know whether the action would have been different if many other state insurance regulators had made a similar request.

As for the settlement itself, I do not understand it well enough to feel comfortable expressing an opinion about its fairness. It would not surprise me, however, if the judge approves the settlement shortly after the fairness hearing.

Available Material

In No. 371, I offered a complimentary 81-page PDF containing documents relating to the case. That May 2020 Skochin package remains available.

Now I offer a complimentary 12-page PDF consisting of the judge's memorandum opinion (9 pages) and the plaintiffs' motion for attorney fees and expenses (3 pages). Send an email to jmbelth@gmail.com and ask for the June 2020 package about Skochin v. Genworth. 

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 376: Trump's Plan for November 2020

On February 27, 2019, Michael Cohen, who is President Donald Trump's former personal attorney, testified before the Committee on Oversight and Reform of the U.S. House of Representatives. The hearing was chaired by Elijah Cummings (D-MD). (When Cummings died six months later, he became the first African American lawmaker to lie in state at the U.S. Capitol.) Cohen made these comments during his testimony:

My loyalty to Mr. Trump has cost me everything: my family's happiness, friendships, my law license, my company, my livelihood, my honor, my reputation and, soon, my freedom. And I will not sit back, say nothing, and allow him to do the same to the country. Indeed, given my experience working for Mr. Trump, I fear that if he loses the election in 2020 that there will never be a peaceful transition of power, and this is why I agreed to appear before you today.

Cohen's comments have stayed with me, and I have wondered precisely what he meant by his statement that "there will never be a peaceful transition of power." Now, given the massive demonstrations over the murder of George Floyd, and given the events in Lafayette Square next to the White House, I think I know what Cohen meant.

If Trump loses the election—irrespective of the margin—I think he will declare that the election was rigged. Then, as commander-in-chief, he will order U.S. military forces to "dominate" our states, cities, towns, and countryside. In his attempted coup, he will have the support of his lap dogs in the White House, the Pentagon, the Department of Justice, and the Senate.

Carolyn Maloney (D-NY) succeeded Cummings as Chair of the House Committee on Oversight. She recently said:

I am horrified by President Trump's statements and actions. The President deployed federal police against American citizens peacefully protesting the unjust murders of Black people—for a photo opportunity. He commanded the use of tear gas and rubber bullets on innocent men and women—tactics employed by white segregationists in the 1960s. His actions are despicable, and as Americans, we will not stand for them. He should resign immediately.

James Mattis, until recently, was our Secretary of Defense. He has weighed in with a strong statement entitled "In Union There Is Strength." His statement is here.

With the presidential election only five months away, urgent action is needed. I think the House of Representatives should take the steps necessary to make Trump the first president in our history to be impeached twice.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 375: A Viatical Is Ruled Illegal After 21 Years

In January 1999, a predecessor to Jackson National Life Insurance Company issued a $500,000 ten-year term insurance policy on the life of Kelly Douglas Couch. Recently a federal judge in Georgia declared the policy void ab initio (from the beginning) as an illegal human life wagering contract. The case illustrates the long-term consequences of viaticals issued during the AIDS crisis. (See Jackson v. Crum, U.S. District Court, Northern District of Georgia, Case No. 1:17-cv-3857.)

The Lawsuit

In October 2017, Jackson filed a lawsuit against Sterling Crum, an investor (I call him a speculator in human life) in the secondary market for life insurance policies. Crum had eventually acquired the Couch policy, and had sought the death benefit after Couch's death.

Midland Life Insurance Company, a Jackson predecessor, issued the Couch policy in 1999, as mentioned earlier. Jackson, in its lawsuit, sought a declaratory judgment that the policy was void ab initio as an illegal human life wagering contract.

In November 2017, Crum moved to dismiss the complaint for failure to state a claim. The judge denied the motion. In April 2018, Crum filed a counterclaim against Jackson. In June 2018, Jackson answered the counterclaim. In March 2019, both parties filed motions for summary judgment. In April 2019, the judge denied both motions.

A bench trial began August 26, 2019, and ended August 29. The judge heard closing arguments on November 5. On March 2, 2020, the judge issued an Order declaring the policy void ab initio as an illegal human life wagering contract. The details of the policy's long journey from Couch to Crum are complex. Instead of trying to summarize them here, I am including the Order, which describes the details thoroughly, in the complimentary package offered at the end of this post.

The Appeal

On April 1, 2020, Crum filed a notice of appeal. At this time, dates for the filing of initial briefs have not been set. (See Jackson v. Crum, U.S. Court of Appeals, Eleventh Circuit, Case No. 20-11280.)

General Observations

Before I started this blog site in October 2013, I published The Insurance Forum, my monthly newsletter, from January 1974 through December 2013. Working on this blog post brought to mind some Forum articles I wrote about viaticals in 1999, the year the Couch policy was issued. I think readers of this blog who did not see those articles may find them interesting. The articles may help readers understand my long-time negative outlook on the secondary market for life insurance policies in general and on viaticals in particular. The Forum articles are in the complimentary package offered at the end of this post.

Available Material

I am offering a complimentary 50-page package consisting of the judge's March 2020 Order (24 pages) and the 1999 Forum articles about viaticals (26 pages). Email jmbelth@gmail.com and ask for the June 2020 package about Jackson v. Crum.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 374: Time Insurance Company—Another Long-Term Care Insurer Heads for Rehabilitation

On May 18, 2020, the Wisconsin Office of the Insurance Commissioner (OIC) issued a press release about its petition to a state court for permission to place Time Insurance Company (Time) in rehabilitation. Because Time is a long-term care (LTC) insurance company, this is a significant development in view of similar actions relating to two other LTC insurance companies: the liquidation of Penn Treaty Network America Insurance Company (Penn Treaty) and the rehabilitation of Senior Health Insurance Company of Pennsylvania (SHIP). The first sentence and the second paragraph of the OIC press release read as follows (the full press release is in the complimentary package offered at the end of this post):

Insurance Commissioner Mark Afable took measures today to help protect nearly 200,000 individuals who have long-term care insurance or other insurance policies with Time Insurance Company....

"Our filing with the court today protects nearly 200,000 consumers across the country," said Commissioner Afable. "State law requires me to act when our office believes an insurer is in financial trouble and that is what we have done today."

The Petition

The "Notice of Verified Petition and Verified Petition for Order for Rehabilitation" of Time consists of an eleven-page text and a five-page attachment. The text describes the background, lists the grounds for rehabilitation, and explains why the OIC determined that "rehabilitation is the only remaining option." The petition also states: "The Commissioner intends to file a plan of rehabilitation within 60 days of the Court's entry of the Order for Rehabilitation."

The petition provides details of a change of Time's ownership, Time's redomestication to Puerto Rico and its later redomestication back to Wisconsin, OIC's concerns about Time's risk-based capital (RBC) levels, OIC's cease and desist orders, and other significant matters. The petition is in the complimentary package offered at the end of this post.

The Statutory Statement

The petition says Time filed its statutory annual statement for the year ended December 31, 2019 on April 3, 2020. The statement shows total admitted assets of $16.2 million, total liabilities of $12.7 million, and statutory net worth of $3.5 million. On page 19.1 of the statement, there is a discussion of whether the company will be able to continue as a going concern. Selected pages of the statutory statement are in the complimentary package offered at the end of this post.

The RBC Ratios

RBC data for the past five years are shown on page 22 of Time's statutory statement for 2019. The RBC ratio at the end of each year, with company action level as the denominator of each ratio, are as follows (the RBC ratios with authorized control level as the denominator are twice the ratios shown here): 238 percent in 2015, 431 percent in 2016, 273 percent in 2017, 152 percent in 2018, and 210 percent in 2019.

An Omission

In The Insurance Forum (my monthly newsletter published from January 1974 through December 2013) and later on this blog site, I have written extensively about LTC insurance for 32 years. Recently a reader brought to my attention an important item on which I have not written.

My first article about LTC insurance was in the February 1988 issue of the Forum. It grew out of a solicitation I had received in the mail concerning a new LTC insurance product then being offered by Union Fidelity Life Insurance Company.

My second article about LTC insurance was in the August 1991 issue of the Forum. It grew out of an article in the June 1991 issue of Consumer Reports, the magazine of Consumers Union (CU). The CU article was entitled "An Empty Promise to the Elderly?" It described a CU study of 46 LTC insurance policies. None of the policies was rated "excellent" or "very good," but CU did not discuss the reason for those findings. In my August 1991 issue, I said "excellent" or "very good" LTC insurance policies would never be found because the problem of financing the LTC exposure violates insurance principles and therefore cannot be solved through private insurance.

In the July 2008 issue of the Forum, I elaborated on the discussion in my August 1991 issue. The July 2008 article is in the complimentary package offered at the end of this post.

What I have never discussed, because I have no recollection of ever having seen it, is a 16-page "Special Report" on LTC insurance published in the October 1997 issue of CU's magazine. The report included two pages of "ratings and recommendations" of 67 "comprehensive" LTC insurance policies and 47 "nursing home only" policies. The 67 "comprehensive" policies were ranked by "overall score." Six of them were rated as "very good," and none as "excellent." The top two policies on the list were "very good" Penn Treaty policies. My reader asserted that CU's October 1997 report created a huge demand for Penn Treaty's LTC insurance policies. I do not know whether his assertion is correct, but he may be right.

General Observations

I am not aware of anyone who has formally and publicly agreed with me that private LTC insurance cannot solve the problem of financing the LTC exposure. Nor am I aware of anyone who has formally and publicly disagreed with me. My views on the matter remain unchanged.

The previously mentioned July 2008 Forum article, entitled "Shortcomings of Private Insurance in Financing Long-Term Care," ends with this sentence: "I think many of those who try to address the problem [of financing long-term care] by purchasing private long-term care insurance will encounter disappointment."

Since October 2013, when I began this blog, I have received hundreds of emails from disgruntled owners of LTC insurance policies. For the most part, the complaints are about substantial premium increases or difficulties encountered in the handling of claims. Often the policyholders ask for my advice on what to do. In response, I have always said I am neither an attorney nor a consultant, and am not in a position to comment beyond what I have written. I then tell each person how to obtain, through the search box in the extreme upper left corner of the home page of my blog site, my posts relating to his or her company or about LTC insurance generally. I also sometimes suggest that the person contact the state insurance department in the person's home state. Each email from a disappointed LTC insurance policyholder has been a painful experience.

Available Material

I am offering a complimentary 30-page package consisting of the OIC press release (1 page), the OIC petition (16 pages), selected pages from Time's 2019 statutory statement (8 pages), and the July 2008 Forum article (5 pages). Email jmbelth@gmail.com and ask for the May 2020 package about the rehabilitation of Time.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 373: Texas Securities Commissioner Iles Issues an Emergency Order Directed At an Out-of-State Promoter

On May 15, 2020, Texas Securities Commissioner Travis J. Iles issued an Emergency Cease and Desist Order (Order) directed at Nickolas Steele (aka Nick Vop Steele aka Nick Steele). The Order shows addresses for Steele in Bellwood, Illinois, in Elmhurst, Illinois, and in Franklin, Wisconsin.

The Order relates to cryptocurrency trading during the COVID-19 pandemic. I reached out to the securities departments in Illinois and Wisconsin to see if they know of Steele. I was not able to contact Illinois; the department may be closed due to the pandemic. I received this email from a spokesperson in Wisconsin:

Our research since you contacted us indicates that Nickolas Steele may have resided in an apartment in Wisconsin from approximately 2016 to early 2018. The rest of his residential history is largely in Illinois. In August 2016, he was charged in Racine County with operating a vehicle while suspended, and he provided an Illinois address at that time. The Texas order does not allege any activities occurring in Wisconsin or any investors here. We have not located any Craigslist advertisements targeting Wisconsin investors by Steele. However, we will record this inquiry in our database and be on the alert for any Wisconsin activity past or future.

I contacted the North American Securities Administrators Association to see if they know of Steele. I am awaiting a reply.

According to the Order, Steele has 31 days to request a hearing. Any knowing violation of the Order is a criminal offense punishable by a fine of not more than $10,000, or imprisonment for two to ten years, or by both such fine and imprisonment. The nine-page Order is here.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 372: The Age 100 Problem—Another Update on the Lebbin Lawsuit Against Transamerica

As regular readers know, I have written extensively about what I call "the age 100 problem" in general, and in particular about the Lebbin lawsuit against Transamerica Life Insurance Company. The most recent update on the case is in No. 341 (November 15, 2019). Here I provide another update. (See Lebbin v. Transamerica, U.S. District Court, Southern District of Florida, Case No. 9:18-cv-80558.)

Background

Gary Lebbin was born in September 1917 in Germany, came to the U.S. in 1938 to escape Nazi persecution, and married in 1944. His wife died in 2015 at age 97. In 1990 he created the Lebbin-Spector Family Trust (Trust), whose trustees are his two children. At the time, the Trust bought two second-to-die universal life policies on Gary and his wife from Transamerica with a total face amount of $3.2 million. When his wife died, the policies became single-life policies on Gary.

In July 2017, when Gary was almost 100 years old, he and the Trust filed an individual lawsuit in federal court in Maryland against Transamerica. The complaint alleged the company had falsely represented the policies as "permanent insurance" for his "whole life," and had refused his request to extend the policies beyond their terminal age of 100. The complaint included a breach-of-contract count and several other counts. In October 2017, at Transamerica's request, the lawsuit was transferred to federal court in Florida, where the policies were originally sold and several potential witnesses were located.

Recent Developments

In February 2019, by which time Gary was afflicted with dementia, Transamerica settled with him for $10,000. The Trust then filed an amended complaint omitting Gary as a plaintiff, leaving the Trust as the only plaintiff. The amended complaint included several counts, including a breach-of-contract count.

In July 2019, the judge granted the Trust's claim for breach of contract. The other counts were denied by the judge or withdrawn by the Trust. The judge canceled the trial, which had been set for early August 2019. The parties said they had agreed to resolve the case, but had not agreed on the damages for the Trust's breach-of-contract claim. Those damages thus became the only remaining issue in the case. The judge set a briefing schedule on the issue of damages.

The Trust requested a return of all premiums paid to Transamerica—a total of $1,670,141 plus prejudgment interest. The prejudgment interest rates the Trust suggested were the Florida statutory rates at the time of each premium payment. The Trust said it would provide the interest figure prior to the entry of final judgment.

Transamerica strongly opposed the amount of the Trust's claim for damages. The Trust replied to Transamerica's opposition. The parties made several further filings, eventually ended their briefings, and awaited the judge's ruling on the damages.

The Judge's Ruling

On April 7, 2020, the judge issued a "Final Order on Damages." For the two policies combined, he awarded the Trust a total of $2,530,154, including interest. He described his reasoning, showed his calculations, and said "Final Judgment will be entered separately." On April 9, the judge issued a "Final Judgment." On April 10, he issued an "Order Closing Case." The three documents are in the complimentary package offered at the end of this post.

The Appeal

On May 7, Transamerica filed a notice of appeal and posted a bond in the amount of $2,783,169. I think the difference between the amount of the bond and the amount of the judgment represents interest and costs of appeal. Transamerica's appellant brief is due June 17. Two court documents relating to the appeal are in the complimentary package offered at the end of this post. (See Transamerica v. Lebbin, U.S. Court of Appeals, Eleventh Circuit, Case No. 20-11756.)

General Observations

I had hoped Transamerica would pay the amount awarded and end this three-year-old lawsuit. However, we now have to wait and see what happens in the appeal. I plan to report developments.

Available Material

I am offering a complimentary 14-page package consisting of the judge's final order on damages (7 pages), his final judgment (1 page), his order closing the case (1 page), and two court documents relating to the appeal (5 pages). Email jmbelth@gmail.com and ask for the May 2020 package about Lebbin v. Transamerica.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 371: Long-Term Care Insurance—An Update on the Skochin Class Action Lawsuit Against Genworth

In No. 334 (September 26, 2019), I discussed a class action lawsuit against Genworth Financial, Inc. (Genworth) relating to premium increases on long-term care (LTC) insurance policies. Here I provide an update on the case. (See Skochin v. Genworth, U.S. District Court, Eastern District of Virginia, Case No. 3:19-cv-49.)

Developments Reported in No. 334

On January 18, 2019, three individuals filed a class action lawsuit against Genworth and Genworth Life Insurance Company (GLIC). The plaintiffs are Pennsylvania residents Jerome and Susan Skochin, and Maryland resident Larry Huber. They purchased their policies in 2003 and 2004 from General Electric Capital Assurance Company, a predecessor of Genworth and GLIC. The original complaint included four claims for relief: Count 1 for breach of the implied covenant of good faith and fair dealing, Count 2 for fraudulent inducement, Count 3 for fraudulent omission, and Count 4 for violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (CPL).

The lawsuit is one of many involving premium increases on LTC insurance policies. Unlike other cases, however, the plaintiffs do not challenge the increases. Rather, they allege the defendants failed to disclose material information to assist policyholders in making decisions about their policies. Thus Skochin may be thought of as a disclosure (or nondisclosure) case.

On March 12, 2019, the defendants filed a motion to dismiss the complaint. The judge denied the motion. On April 29, the plaintiffs filed an amended complaint that included four claims for relief: Count 1 for breach of contract, Count 2 for fraudulent inducement, Count 3 for fraudulent omission, and Count 4 for violation of the CPL.

On May 13, the defendants filed a motion to dismiss the amended complaint. On June 28, the judge ordered the defendants to complete production of documents by July 19. On July 3, the plaintiffs filed a stipulation of dismissal of Genworth, leaving GLIC as the only defendant.

On August 7, the judge set November 14 for a class certification hearing, and March 3, 2020 for the jury trial to begin. On August 29, the judge granted GLIC's motion to dismiss Count 1 (breach of contract) in the amended complaint, and denied GLIC's motion to dismiss the other three counts. He ordered the plaintiffs to file a second amended complaint by September 20, and GLIC to file its answer by October 4. On September 20, the plaintiffs filed a second amended complaint that included two claims for relief: Count 1 for fraudulent inducement by omission, and Count 2 for violation of the CPL.

Developments Subsequent to No. 334

On October 30, the plaintiffs filed a notice of settlement. On November 1, the judge ordered the plaintiffs to file a third amended complaint, and stayed the defendant's answer pending approval of the settlement. He also ordered the plaintiffs to file a motion to notify the class and a proposed settlement agreement. On November 22, the plaintiffs filed a third amended complaint. On December 20, the plaintiffs filed a motion to notify the class and a proposed settlement agreement.

On January 15, 2020, the judge held a hearing, granted preliminary approval of the proposed settlement, directed that the class notice be mailed to class members, and set the final approval hearing for July 10. On March 31, in response to requests by Genworth, the judge granted an amendment to the preliminary approval, and directed that the notice be mailed to class members. The class notice is in the complimentary package offered at the end of this post.

The Proposed Settlement

According to the proposed settlement and the class notice, policyholders will be offered certain options. Some policyholders will be offered options that include cash benefits. However, I found no estimate of the aggregate cash benefits to policyholders, other than a wide range of figures in the ambiguous paragraph (b) of the following description of the compensation of the plaintiffs' attorneys:

As part of the request for Final Approval of the Settlement Agreement, Class Counsel will file a request seeking to be paid the following:
(a) $2,000,000 relating to the injunctive relief that is in the form of the Disclosures.
(b) An additional contingent payment of 15% of certain amounts related to Special Election Options selected by the Settlement Class, which shall be no less than $10,000,000 and no greater than $24,500,000. None of the attorneys' fees will be deducted from payments made by Genworth to Settlement Class members.

The plaintiffs' attorneys will also request an award of litigation expenses of not more than $75,000. With regard to the three named class representatives, the plaintiffs' attorneys will request approval of service payments of up to $25,000 for each of them for the time, work, and risk they undertook. None of the service payments will be deducted from payments made by Genworth to class members.

The Indiana Motion to Intervene

On April 10, after the settlement administrator mailed the class notices, the Indiana Department of Insurance (IDOI) moved to intervene to seek a temporary stay. Here is the first sentence of the motion:

Pursuant to Federal Rule of Civil Procedure 24, the Indiana Department of Insurance moves to intervene for the purpose of seeking a temporary stay of the proceedings in this case due to the on-going national emergency resulting from the COVID-19 virus.

On the same day, IDOI moved for a temporary stay and filed briefs in support of both motions. On April 17, the plaintiffs opposed the IDOI motions. On April 23, IDOI responded to the opposition. The judge has not yet ruled on the matter. Court documents relating to the IDOI effort are in the complimentary package offered at the end of this post.

Seven Policyholder Objections

Seven policyholders filed objections with the court. On April 20, a Florida policyholder objected. On April 22, a Colorado policyholder objected. On April 28, a Michigan couple objected. On May 1, a New York policyholder objected. On May 1, an Idaho policyholder objected. On May 5, a California policyholder objected. On May 5, a North Carolina couple objected. Court documents relating to the seven objections are in the complimentary package offered at the end of this post.

Excerpt from Genworth 10-Q

On May 6, Genworth filed its 10-Q report for the quarter ended March 31, 2020. On page 63, the report describes the Skochin case. Here are the last two sentences of the description (the full description is in the complimentary package offered at the end of this post):

Based on the Court's preliminary approval of the settlement, we do not anticipate the outcome of this matter to have a material adverse impact on our results of operations or financial position. If the court does not approve the final settlement, we intend to continue to vigorously defend this action.

General Observations

In other posts of mine about settlements of lawsuits involving premium increases on LTC insurance policies, there have sometimes been references to the size of a "settlement fund." Such a figure helps to evaluate the reasonableness of the proposed compensation of the plaintiffs' attorneys. Without a "settlement fund" figure, an evaluation is difficult.

It seems strange that the plaintiffs' attorneys oppose the eminently reasonable IDOI request for a temporary stay due to the pandemic. I hope the judge will grant the IDOI motions and will order a temporary stay.

I am an Indiana resident. I am impressed by and grateful for my home state department's effort. At the same time, I an disappointed that no other state insurance regulators have sought a temporary stay—not even Genworth's home state of Virginia, where the case is being tried. Also, the Virginia commissioner chairs an LTC Insurance Task Force that was created by the National Association of Insurance Commissioners and that hopes to get its arms around the problems of the LTC insurance business.

Available Material

I am offering a complimentary 81-page PDF consisting of the class notice (9 pages), court documents relating to IDOI's effort to obtain a temporary stay (54 pages), court documents relating to seven policyholder objections (17 pages), and the 10-Q description of the Skochin case (1 page). Email jmbelth@gmail.com and ask for the May 2020 package about the Skochin lawsuit against Genworth.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 370: UNUM's Long-Term Care Insurance Statutory Reserves Take a Hit

As readers of this blog site are aware, I have written often about long-term care (LTC) insurance policies. I have also written about premium increases and reserve deficiencies relating to those policies.

The Unum Disclosure

On May 4, 2020, Unum Group (NYSE: UNM) filed with the Securities and Exchange Commission (SEC) an 8-K (significant event) report. Unum disclosed an important aspect of an ongoing financial examination of Maine-domiciled Unum Life Insurance Company of America by the Maine Bureau of Insurance (MBOI). Here are the key disclosures:

MBOI has concluded that Unum America's long-term care statutory reserves are deficient by $2.1 billion as of December 31, 2018. As permitted by MBOI, Unum America will phase in the additional statutory reserves over seven years beginning with year-end 2020 and ending with year-end 2026. The 2020 phase-in amount is estimated to be between $200 million and $250 million. This strengthening will be accomplished by the Company's actuaries incorporating explicitly agreed upon margins into its existing assumptions for annual statutory reserve adequacy testing. These actions will add margins to Unum America's best estimate assumptions. The Company plans to fund the additional statutory reserves with expected cash flows. The Company's long-term care reserves and financial results reported under generally accepted accounting principles are not affected by the MBOI's examination conclusion.

The Company has suspended its current share purchase authorization and will not repurchase shares in 2020. Additionally, the Company intends to continue to pay its common stock dividend at the current rate.

General Observations

Language similar to that quoted above is in Unum's 10-Q report for the quarter ended March 31, 2020, as filed with the SEC on May 5, 2020. The MBOI examination of Unum is scheduled to close at the end of the second quarter of 2020. Therefore, the examination report is not yet publicly available. In the meantime, I felt that readers would be interested in this development relating to Unum's LTC insurance reserves.

Available Material

I am offering a complimentary three-page PDF containing Unum's 8-K report. Email jmbelth@gmail.com and ask for the May 2020 package about the Unum 8-K report.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 369: Scott Witt's Views on Indexed Universal Life—A Follow-Up

Scott Witt, FSA, MAAA, is a fee-only insurance advisor and a Financial Services Affiliate member of the National Association of Personal Financial Advisors. In No. 363 (April 8, 2020), I discussed briefly his views on indexed universal life policies and offered a complimentary copy of his seven-page article. Witt received many comments on his article, and decided to write a five-page follow-up. His original article and his follow-up are available here.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 368: Senior Health Insurance Company of Pennsylvania—The Proposed Plan of Rehabilitation

Background

Senior Health Insurance Company of Pennsylvania (SHIP) has been running off the long-term care (LTC) insurance business of Conseco Senior Health Insurance Company (CSHI) since 2008. At that time, CSHI transferred the assets and liabilities of its LTC insurance business to create SHIP. CSHI had been running off its LTC insurance business (not selling any new LTC insurance policies) for five years prior to the transfer.

For many years after 2008, SHIP's financial condition worsened, often showing risk-based capital (RBC) levels calling for formal actions by the Pennsylvania Insurance Department (Department), SHIP's primary regulator. The Department took no formal regulatory actions.

In its statutory financial statement for the year ended December 31, 2018, SHIP reported a deficit (negative surplus). Its liabilities exceeded its assets by $447 million. Still the Department took no formal regulatory action. The deficit grew to $462 million at the end of the first quarter of 2019, to $477 million at the end of the second quarter, and to $524 million at the end of the third quarter. Still the Department took no formal regulatory action.

I believe that SHIP did not file a statutory financial statement for the year ended December 31, 2019. However, according to the preliminary plan of rehabilitation (Plan) discussed in this post, SHIP's deficit at the end of 2019 was $916 million.

The Application

On January 23, 2020, Jessica E. Altman, the Pennsylvania Insurance Commissioner (Commissioner), applied to the Commonwealth Court of Pennsylvania for an order placing SHIP in rehabilitation. Here, without citations, is part of the introduction to the application:

SHIP has committed one or more acts which constitute grounds for rehabilitation. Specifically, SHIP's most recent annual statement demonstrates that the company is statutorily insolvent. Additionally, SHIP's most recent risk-based capital ("RBC") report indicates that the company's total adjusted capital is substantially below its mandatory control level RBC, therefore triggering a "mandatory control level event." Finally, the Trustees of the Senior Health Care Oversight Trust [which oversees SHIP] and SHIP's directors have consented in a signed writing to the company being placed in rehabilitation and have waived a hearing.

The Order

On January 29, President Judge Mary Hannah Leavitt of the Commonwealth Court of Pennsylvania issued an order approving the application because "rehabilitation has been requested by and consented to by SHIP's board of directors and the trustees of the Senior Health Care Oversight Trust." The judge appointed the Commissioner as rehabilitator, said the Commissioner may appoint a special deputy rehabilitator, and ordered the filing of a Plan on or before April 22, 2020. The Commissioner appointed Patrick H. Cantillo as special deputy rehabilitator, and engaged a group of consultants to develop the Plan. I wrote about these developments in No. 352 (January 29, 2020) and No. 354 (February 10, 2020). (IN RE: Senior Health Insurance Company of Pennsylvania In Rehabilitation, Commonwealth Court of Pennsylvania, No. 1 SHIP 2020.)

The Plan

On April 22, Cantillo filed in court a single-spaced 108-page Plan. Here are the components of the Plan, with the number of pages shown in parentheses (the full Plan is in the complimentary May 2020 package offered at the end of this post):

Table of Contents (5)
How to Provide Comments and Objections (1)
Important Notice (3)
Basic Information about the Plan (6 pages)
General Plan Details (18)
Details of Phase One of the Plan (16)
Details of Phase Two of the Plan (22)
Phase Three (1)
Other Matters (22)
Glossary (14)

The "Basic Information about the Plan" includes a "Summary Description of the Plan." Here is the first paragraph of the description:

The following description of the Plan is intended to provide policyholders the basic information required for them to make the required election(s) if the Plan is implemented as proposed. To that extent, it should also enable policyholders to decide what if any comments or formal objections they may offer in response to the request for approval of the Plan. Much more detail about the Plan and related matters is provided in the sections that follow.

The Plan has three phases. In Phase One, policies not in nonforfeiture status will be evaluated and policyholders will be offered options. In Phase Two, policyholders may be offered additional options. In Phase Three, SHIP will complete the run-off of policies. Policyholders are divided into various active and disabled categories, and are offered various options. The Plan provides some illustrations, but each of them carries this warning language:

This illustration is provided solely for the purpose of demonstrating how premiums and benefits under each option in the proposed rehabilitation plan compare to each other. Every policy is different and produces different results.

General Observations

The Plan is incredibly complex. Cantillo and those working with him obviously poured an enormous amount of effort into its preparation.

The Plan involves options under which policyholders may choose to pay increased premiums and/or receive reduced benefits, and those already on claim may choose to receive reduced benefits. Some of those premium increases and benefit reductions are likely to be large.

I do not know how Judge Leavitt will handle the Plan. However, I think the Plan will fail. Premium-paying policyholders may drop out in droves when they see the magnitude of the premium increases and benefit reductions. I hope the judge will reject the Plan and order SHIP into liquidation. That action would bring the state guaranty associations into the picture, along with assessments paid by other insurance companies. In short, I think liquidation would make it possible to lower the size of the premium increases and lower the size of the benefit reductions.

The Pandemic

While the Plan was being prepared, the COVID-19 pandemic was and still is wreaking havoc on the United States and the rest of the world. Moreover, the pandemic is having its greatest impact on the elderly. Many of them are in nursing homes, assisted living facilities, homes for the aged, retirement communities, facilities for elderly veterans, and other facilities offering long-term care services.

A paragraph entitled "Timeline" appears on page 15 of the 108-page PDF of the Plan. The paragraph talks about affording policyholders and other interested parties an opportunity to comment on the Plan. In that paragraph is the following sentence, which alludes to the pandemic:

Because of the extraordinary circumstances facing our nation, the Rehabilitator will ask the Court to provide policyholders and others a prolonged period of time to review the Plan before such comments are due.

To my knowledge, that is the only comment in the Plan about the pandemic. However, it is possible that I missed other comments.

It is morbid to contemplate how the impact of surging numbers of deaths among the elderly may affect the LTC insurance business. Such a surge would eliminate many claim payments, and therefore might improve the financial condition of SHIP and other LTC insurance companies.

Available Material

In No. 352 I offered a 27-page complimentary January 2020 package about SHIP. In No. 354 I offered a 23-page complimentary February 2020 package about SHIP. Those packages remain available.

Now I am offering a 108-page complimentary May 2020 package containing the full Plan. Email jmbelth@gmail.com and ask for the May 2020 package about the SHIP Rehabilitation Plan.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 367: The New York Department Comes Down on Athene, Lincoln, MassMutual, and Pacific Life

In April 2020, the New York State Department of Financial Services (Department) entered into four separate consent orders with Athene Annuity and Life Company and Athene Holding, Ltd. (together, Athene); Lincoln Life & Annuity Company of New York (Lincoln); Massachusetts Mutual Life Insurance Company (MassMutual); and Pacific Life & Annuity Company (Pacific Life). Here I briefly discuss the cases.

Athene

The Athene case involves the question of whether the company, in its pension risk transfer (PRT) business, was doing business in New York State without a license. In recent years many major employers have been seeking to shed some or all of their obligations to active and/or retired employees. To do so, they have entered into PRT arrangements. Much of the PRT activity involves major insurance companies such as The Prudential Insurance Company of America and Metropolitan Life Insurance Company. Problems at such companies sometimes arise in their PRT business. For two examples, see No. 293 and No. 301.

In January 2019, the Department began an investigation of Athene covering the period from 2017 to January 2019. The Department concluded that the company had been doing business in New York State without a license. The consent order with Athene explains the Department's findings, describes the injunctive relief, and mentions the imposition of a civil monetary penalty of $45 million. The consent order is in the complimentary package offered at the end of this post.

Lincoln, MassMutual, and Pacific Life

The other three cases involve the question of whether the companies violated New York regulations in the process of replacing deferred annuity contracts with immediate income annuity contracts. The Department conducted investigations of Lincoln, MassMutual, and Pacific Life. In separate consent orders, the Department found violations of the disclosure and suitability requirements in Regulations 60 and 187. The consent orders are in the complimentary package offered at the end of this post.

In the Lincoln case, the investigation covered the period from January 1, 2011 to March 31, 2019. The Department imposed a civil monetary penalty of $510,000 and obtained injunctive relief in the form of remediation and restitution.

In the MassMutual case, the investigation covered the period from January 1, 2012 to May 31, 2018. The Department imposed a civil monetary penalty of $692,000 and obtained injunctive relief in the form of remediation and restitution.

In the Pacific Life case, the investigation covered the period from January 1, 2012 to April 30, 2018. The Department imposed a civil monetary penalty of $172,000 and obtained injunctive relief in the form of remediation and restitution.

General Observations

The PRT business involves the exchange of large amounts of long-term liabilities and large amounts of long-term assets. It is worrisome that Athene, part of a private equity organization interested in short-term rather than long-term profits, is involved in the PRT business. As for the other three companies discussed in this post, the consent orders involve violations of Department replacement regulations.

New York State Superintendent of Financial Services Linda A. Lacewell and her Department obviously have remained hard at work in spite of the COVID-19 pandemic. I for one am grateful to her and her staff for their efforts under very difficult circumstances.

Available Material

I am offering a complimentary 63-page PDF consisting of the consent order with Athene (15 pages), the consent order with Lincoln (16 pages), the consent order with MassMutual (16 pages), and the consent order with Pacific Life (16 pages). Email jmbelth@gmail.com and ask for the April 2020 package relating to the New York consent orders.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 366: Voter Suppression by Wisconsin Republicans and the Conservative Majority of the U.S. Supreme Court

On April 7, 2020, Wisconsin held its primary election as scheduled in the midst of the COVID-19 pandemic. What happened was a dangerous, irresponsible case of voter suppression. Here I describe the incident.

The Wisconsin Primary
On the ballots were presidential preferences (Sanders withdrew after the primary), a Wisconsin Supreme Court seat held by a Republican whose reelection was supported by President Trump (the incumbent lost in the primary), an amendment to the Wisconsin Constitution, many local referenda, more than 100 other judgeships, and thousands of county, city, village, town, school district, and other positions.

On April 2, a Wisconsin federal district court judge extended by six days the deadline for receipt of absentee ballots and relaxed certain other requirements relating to absentee ballots. Republicans immediately appealed to the U.S. Seventh Circuit Court of Appeals, which allowed the federal district court judge's ruling to stand.

On April 3, Democratic Governor Tony Evers called a special session of the legislature to act on legislation to allow Wisconsin voters to vote safely by mail. On April 4, the legislature, without acting on the legislation, and with no discussion or debate, adjourned within seconds after convening.

The Governor's Executive Order
On April 6, Governor Evers, because of the COVID-19 pandemic, issued Executive Order #74 suspending in-person voting until June 9. The order is in the complimentary package offered at the end of this post.

The U.S. Supreme Court
After the Seventh Circuit allowed the federal district court judge's ruling to stand, the Republican National Committee asked the U.S. Supreme Court for a stay of the ruling. The Democratic National Committee opposed the stay. On April 6, the U.S. Supreme Court, in a 5-4 ruling, granted the stay. The application for a stay went initially to Justice Kavanaugh because he is the justice designated to receive applications after rulings emanating from the Seventh Circuit.

The Majority Opinion
It is not known who wrote the majority opinion, because it was issued Per Curiam, or "for the Court." Here, without citations, are the first paragraph, the first three sentences of the second paragraph, and the next-to-last paragraph of the majority opinion (the full majority opinion is in the complimentary package offered at the end of this post):

The application for stay presented to Justice Kavanaugh and by him referred to the Court is granted. The District Court's order granting a preliminary injunction is stayed to the extent it requires the State to count absentee ballots postmarked after April 7, 2020.

Wisconsin has decided to proceed with the elections scheduled for April 7, 2020. The wisdom of that decision is not the question before the Court. The question before the Court is a narrow, technical question about the absentee ballot process....

The Court's decision on the narrow question before the Court should not be viewed as expressing an opinion on the broader question of whether to hold the election, or whether other reforms or modifications in election procedures in light of COVID-19 are appropriate. That point cannot be stressed enough.

The Dissenting Opinion
The dissenting opinion, also on April 6, was written by Justice Ginsburg. Justices Breyer, Sotomayor, and Kagan joined in the dissent. Here, without citations, are the first and last paragraphs of the dissenting opinion (the full dissenting opinion is in the complimentary package offered at the end of this post):

The District Court, acting in view of the dramatically evolving COVID-19 pandemic, entered a preliminary injunction to safeguard the ability of absentee voting in Wisconsin's spring election. The Court now intervenes at the eleventh hour to prevent voters who have timely requested absentee ballots from casting their votes. I would not disturb the District Court's disposition, which the Seventh Circuit allowed to stand....

The majority of this Court declares that this case presents a "narrow, technical question." That is wrong. The question here is whether tens of thousands of Wisconsin citizens can vote safely in the midst of a pandemic. Under the District Court's order, they would be able to do so. Even if they receive their absentee ballot in the days immediately following election day, they could return it. With the majority's stay in place, that will not be possible. Either they will have to brave the polls, endangering their own and others' safety. Or they will lose their right to vote, through no fault of their own. That is a matter of utmost importance—to the constitutional rights of Wisconsin's citizens, the integrity of the State's election process, and in this most extraordinary time, the health of the Nation.

A Bill Introduced in the U.S. Senate
On March 18, 2020, U.S. Senator Klobuchar (D-MN) issued a press release announcing she and U.S. Senator Wyden (D-OR) had that day introduced the "Natural Disaster and Emergency Ballot Act" (NDEBA). The bill had 29 cosponsors—28 Democrats and one Independent (Sanders). The NDEBA was introduced amid confusion over whether the Ohio primary would be postponed, and over whether there would be delayed primaries in two other states. The introduction of the bill preceded the Wisconsin primary. The NDEBA would provide, among other things, expansion of early in-person voting and use of printable ballots currently available only to military and overseas voters. The press release is in the complimentary package offered at the end of this post.

General Observations
Rocket science is not needed to estimate the probability that the NDEBA will pass in the Republican-controlled Senate. The probability is zero. President Trump has said mass voting by mail would mean no Republican would ever be elected. Therefore, a veto-proof majority in the Senate would be needed.

Our nation has always engaged in voter suppression. One need look no further than Thomas Jefferson's lofty words about all men being created equal and consider what it took for women, former slaves, and others to win the right to vote.

For many years it was southern Democrats and the Ku Klux Klan who fought to suppress voting by African Americans. It is not hard to imagine the shock when a southern Democratic President named Lyndon Johnson rammed through Congress the Voting Rights Act of 1965. Since then, conservatives have succeeded in many efforts to weaken the law.

In recent years it has been the Republicans who have embraced voter suppression on the theory that they are more likely to win elections when voter turnout is small. The Wisconsin fiasco, where voters had to stand in long waiting lines six feet apart for hours in on-and-off rain and sleet will not be forgotten any time soon.

The Wisconsin primary is a precursor of what may happen in the November 2020 presidential election. Wisconsin Republicans have demonstrated they are willing to force voters to risk exposure to serious illness and even death to exercise their right to vote. What we may witness in November will be a brazen and irresponsible example of voter suppression.

A Recent News Story
In the morning on April 21, NBC News reporter Alex Seitz-Wald ran a story about the Wisconsin primary. Here is the opening sentence:

Officials have identified seven people [six voters and one poll worker] who appear to have contracted the coronavirus through activities related to the April 7 election in Wisconsin, Milwaukee's health commissioner said, and advocates worry it could be just the "tip of the iceberg."

Available Material
I am offering a complimentary 18-page PDF consisting of the Wisconsin governor's executive order (4 pages), the majority opinion in the U.S. Supreme Court (4 pages), the dissenting opinion in the U.S. Supreme Court (6 pages), and the press release about the NDEBA (4 pages). Email jmbelth@gmail.com and ask for the April 2020 package about the Wisconsin primary.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 365: David Rubenstein's Fascinating Book

Introduction
David M. Rubenstein is co-founder and co-executive chairman of the Carlyle Group and a prominent philanthropist. In October 2019, Simon & Shuster published his book entitled The American Story: Conversations with Master Historians. The book consists of 15 conversations with prominent historians about important figures in American history, and a conversation with Chief Justice John G. Roberts Jr. about the U.S. Supreme Court. Here is the list:

Jack D. Warren Jr. on George Washington
David McCullough on John Adams
Jon Meacham on Thomas Jefferson
Ron Chernow on Alexander Hamilton
Walter Isaacson on Benjamin Franklin
Cokie Roberts on Founding Mothers
Doris Kearns Goodwin on Abraham Lincoln
A. Scott Berg on Charles Lindbergh
Jay Winik on Franklin Delano Roosevelt
Jean Edward Smith on Dwight D. Eisenhower
Richard Reaves on John F. Kennedy
Taylor Branch on Martin Luther King Jr. and the Civil Rights Movement
Robert A. Caro on Lyndon B. Johnson
Bob Woodward on Richard M. Nixon and Executive Power
H. W. Brands on Ronald Reagan
Chief Justice John G. Roberts Jr. on the U.S. Supreme Court

David McCullough
When I acquired Rubenstein's book, I could not resist the temptation to start with his conversations with two of my favorite writers: David McCullough and Robert Caro. McCullough received Pulitzer Prizes for his magnificent biographies of Harry Truman and John Adams. Here is a small part of Rubenstein's conversation with McCullough about Adams:

Rubenstein
In addition to being the most ardent advocate for independence, Adams made two decisions. He recommended somebody to be the general of the army for the American colonies and somebody to write the Declaration of Independence. Why did he pick George Washington and why did he pick Thomas Jefferson?

McCullough
He picked Thomas Jefferson because he felt he was the best writer. And he liked him very much and admired him very much.

Washington was a clear choice. There wasn't really much mystery about that. There were so very few to choose from, and they were all young in their thirties or early forties, with no experience. They'd never done this before; none of them had. And it's just miraculous out of this tiny population—2,500,000 people and 500,000 of them were slaves held in bondage. Couldn't vote, had no say.

One of the most important virtues or admirable qualities that we all should know and understand about John Adams is he's the only Founding Father to become president who never owned a slave. As a matter of principle. And [his wife] Abigail was staunchly of that same point of view. The slaves weren't all in the South. They were sort of a status symbol in Boston, and you had servants who were slaves. That was the thing to have.

Rubenstein
[Adams] was not an abolitionist, though?

McCullough
No, he wasn't. Nobody was making an issue of that at the time because they had determined that "we can't solve this one now—we've got to sidestep that." They were really putting in the closet an issue they knew eventually had to be solved.

Robert Caro
Caro has received two Pulitzer Prizes. The first was for his towering biography of Robert Moses, the little known but hugely powerful shaper of New York City. The second was for the third of the first four volumes in his as yet unfinished monumental biography of Lyndon Johnson. Here is a small part of Rubenstein's conversation with Caro about Johnson:

Rubenstein
We've largely covered the four volumes of The Years of Lyndon Johnson that you've written. With the beginning of the Johnson administration, you end the fourth volume. When is volume 5 coming out? Is it going to be one volume or two volumes?

Caro
Well, you're ruining this terrific interview. I'm about halfway through.

Rubenstein
You do all your research and then you write—or type—on your Smith-Corona?

Caro
That's in theory true, but when you get into each chapter, you suddenly realize that some file that you had thought wasn't important at the Johnson Presidential Library is key. So you have to go back and look into it.

I want the last book to be in one volume. I'll tell you why: because the arc of Lyndon Johnson's presidency is one arc. He starts with the greatest victory in the history of American politics—to this day, still. Sixty-one-point-one percent over Barry Goldwater, his Republican opponent in the 1964 presidential election.

So he starts with the greatest triumph you can imagine. By the end of it, Vietnam has consumed his presidency, and he has to leave office and go back to his ranch. I want that all to be in one book because I see it as one story....

Rubenstein
Lyndon Johnson died of a heart attack at the age of sixty-four, relatively young. Would he have been able to survive with modern medical technology?

Caro
I asked his cardiologist that very question. He said, "We could have fixed him in a half-hour angioplasty."

Conclusion
I then read the other 14 sections of the Rubenstein book with great interest. I found the book fascinating, and strongly recommend it.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com