Kaufman & Broad said Monday that its Sun Life Group of America subsidiary has submitted a proposal to acquire the annuity insurance business of Baldwin-United Corp., thus putting it in competition with an offer made by Metropolitan Life Insurance of New York.
The Los Angeles-based home-building and insurance concern said its proposal could provide "up to $670 million" more to Baldwin-United policyholders by 1990 than they would get under Metropolitan's proposal, if all holders exchange their policies for new ones.
The figure could could be as much as $975 million more than Metropolitan's by November, 1994, Kaufman & Broad said.
However, a Metropolitan Life attorney in New York told the Associated Press that it appeared Kaufman & Broad's figures did not take into account surrender charges and interest-rate reductions for holders who exchanged their old policies and then sought to cash in their new ones early.
Final proposals by Kaufman & Broad and Metropolitan were submitted last Friday to the insurance commissioners of Indiana and Arkansas. The state regulators are seeking to rehabilitate the Baldwin-United subsidiaries that sold the annuities to the public.
Last September, a federal judge in New York appointed Metropolitan to administer the initial phase of the complex claims of 165,000 Baldwin-United annuity holders, who invested more than $3 billion in the policies. Under the first phase, the holders are to receive an "enhanced" settlement from a pool of $155 million contributed by 22 brokerage firms that sold the policies. In addition, a group of 50 life insurance firms led by Metropolitan agreed to contribute $50 million more to compensate policyholders who bought the annuities from insurance agents.
The judge held that liquidation of the firm in the second phase rests with the Arkansas and Indiana regulators.
Kaufman & Broad said Monday that, under its plan--which it has been discussing with state regulators for nearly a year--Baldwin-United annuity holders would receive an average return of at least 8% on their investments from May 1, 1984, the start of the rehabilitation period. For annuity holders exchanging their policies for new ones, the rate would rise to an average of at least 11.6% through the end of the rehabilitation period, Oct. 31, 1987. Thereafter, the rate would be 9.1% through Oct. 31, 1990.
Metropolitan's average guaranteed rate through 1987 is about 8%, but the rate for the three years thereafter is 6.39%, according to the Associated Press. After 1990, both proposals are to be tied to Treasury Department indexes.
Baldwin-United had promised to pay rates as high as 15% several years ago, but annuity holders have been receiving only 5.5% since May, 1984. Investors typically paid $20,000 for the single-premium deferred annuities.
Court hearings on the rehabilitation proposals are set for April 10 in Indiana and April 28 in Arkansas.