NU Online News Service, June 3, 2004, 5:41 p.m. EDT – The Hartford Financial Services Group Inc. may take a large block of business over from a troubled North Carolina life insurer.[@@]

The Hartford insurer says it has an agreement with North Carolina insurance regulators to assume up to $1.5 billion in annuity and life insurance contracts from London Pacific Life & Annuity Company, Raleigh, N.C.

The agreement, which must be approved by a state superior court in Wake County, N.C., would let Hartford assume fixed annuity contracts from 46,000 fixed annuity customers of London Pacific.

Hartford still is negotiating to take over 2,000 variable universal life contracts from the state guaranty fund.

In papers filed with the state superior court, insurance regulators said they will move quickly to liquidate London Pacific once the contracts are reassigned.

The Hartford annuity and life agreement would let London Pacific policyholders surrender their policies for the cash value. The policyholders have been unable to cash in their policies since North Carolina Insurance Commissioner Jim Long placed London Pacific under receivership in August 2002.

Before North Carolina regulators placed London Pacific under receivership, it was a unit of London Pacific Group Ltd., Jersey, Channel Islands. Jersey Pacific suffered heavy investment losses in 2002, when some of the companies that issued the bonds it held stopped making bond payments.

Long placed London Pacific Life under receivership after officials decided that the company’s investment income was too low to cover the cost of the guaranteed rates that the company had promised to policyholders.

A spokesman for Long’s office says the company’s demise was due to poor investments.

“It was heavily into high tech and ventural capital investments, and then the bubble burst,” says the spokesman, Worley Smith.

By the end of 2002, financial statements showed the company’s liabilities exceeded its assets by more than $186 million.

Under Hartford’s agreement with the North Carolina Department of Insurance and the National Organization of Life and Health Insurance Guaranty Associations, Hartford Life will assume 40,000 deferred annuity contracts and 6,000 immediate annuities.

London Pacific policyholders can keep their existing contracts, and the state guaranty fund will cover the contracts.

But assigning old London Pacific contracts to Hartford will give policyholders a chance to move to a sound company with high credit ratings, a Hartford spokesman says.

Hartford plans to offer enhancements to existing fixed annuity contracts to induce London Pacific customers to switch carriers, the Hartford spokesman says. The spokesman says he cannot yet describe the enhancements because Hartford has not yet formally offered them to the affected London Pacific customers.

The agreement follows one that North Carolina regulators reached in February with Fidelity Security Life Insurance Company, Kansas City, Mo. Fidelity Security assumed $21.5 million in Lincoln Pacific obligations related to variable annuity contracts, according to Daniel Surber, Fidelity Security’s contract service officer.

Lincoln Pacific was licensed to do business in more than 40 states and the District of Columbia.