In a parade of electronic and paper transactions that was notably short on pomp or drama, Executive Life Insurance Co. passed from existence Friday, 2 1/2 years after regulators seized it in one of America's largest insurance company failures.
Friday's transactions--capped by more than $1 billion in wire fund transfers among Paris, New York and Los Angeles--concluded the controversial sale of Executive Life to a French investment concern led by Mutuelle Assurance Artisinale de France.
The California Supreme Court on Friday morning rejected opponents' last-ditch request for a stay, clearing the way for closing the long-delayed sale at Executive Life's West Los Angeles office tower.
But Aurora National Life Assurance Co., Executive Life's newborn successor, still faces considerable legal uncertainty.
The most intransigent opponents of the Executive Life rehabilitation plan, trustees for a group of bondholders who say the plan treats them unfairly, intend to file an appeal next week with the U.S. 2nd District Court of Appeal in Los Angeles.
That challenge, plus an expected appeal by a second group of bondholders, may take another year or more to be decided.
The court has been asked to rule more quickly on a third legal challenge, which will affect the fate of 18,000 public employee pensioners in Alaska whose $150-million retirement fund consists of Executive Life guaranteed investment contracts. Their contracts and $400 million worth of similar investments have been set aside pending this appeal.
"Aurora exists," Insurance Commissioner John Garamendi said Friday afternoon, "so I guess Sleeping Beauty has been kissed by the prince."
Garamendi seized junk bond-laden Executive Life on April 11, 1991, in what was then a U.S. record insurance insolvency. As conservator of the failed insurer's assets, Garamendi engineered the rehabilitation plan, including the final sale of the company to Mutuelle Assurance Artisinale de France and the earlier sale of Executive Life's huge junk bond portfolio to a separate set of French investors for $3.25 billion.
Both stages of the plan have been under constant legal attack, but a combination of settlements by contending parties and rulings by various courts paved the way for Friday's closing.
Garamendi said he was proudest of negotiating a special benefit for California policyholders, whose insurance guarantee fund would otherwise have paid them only 80% of the first $100,000 of policy value. Under the final rehabilitation plan, they will be fully covered for the first $100,000.
Aurora's 350,000 policyholders can expect to receive letters in November notifying them of the exact values of their accounts, an Aurora spokesman said.
Policyholders at that time will be given a choice of either "opting out"--cashing in their accounts--or sticking with the new company for at least five years. Those who opt to stay will get a somewhat larger share. Policyholders will have 45 days to decide.
Aurora said 92% of all policyholders who "opt in" stand to recover their entire investment. Those not fully covered can expect to recoup an average of 86% of their account balances beyond the first $100,000, Aurora said.
The plan will result in considerable pain for policyholders who have been receiving "hardship" payments during the court battle. This group includes holders of so-called structured settlement annuities, most of which were received as compensation for severe injuries. Because they have been receiving more than their allotted share of benefits, their future payments will be correspondingly lowered.
Phoenix residents Vince and Sue Watson, for example, have been receiving full payment on the annuity that helps them care for their brain-damaged daughter. As the rehabilitation plan goes into effect, they expect to see those monthly payments sliced by more than a third, which may force them to abandon their home to the bank.
Aurora announced Friday that it had named as its chief executive Alan C. Snyder, president and chief operating officer of Executive Life since April, 1991.
The Aurora board will elect a chairman shortly, a spokesman said.