Hartford Financial Services Group said it has an agreement with North Carolina insurance regulators to assume up to $1.5 billion in annuity and life insurance contracts from the financially distressed London Pacific Life & Annuity Company.
The agreement, which must be approved by a state superior court in Wake County, N.C., would allow Hartford, in Simsbury, Conn., to assume fixed annuity contracts from 46,000 fixed annuity customers of London Pacific, in Raleigh, N.C. The company is still negotiating to take over 2,000 variable universal life contracts from the state guaranty fund.
The agreement allows policyholders to surrender their policies for the cash value, which they had been unable to do since the company was placed in receivership.
Insurance Commissioner Jim Long placed the company in receivership in August 2002 after his agency found income from London Pacifics investments was not sufficient to cover the guaranteed rates promised to policyholders.
By the end of 2002, financial statements showed the companys liabilities exceeded its assets by more than $186 million.
Under Hartfords 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.
Policyholders of the financially troubled company have the option of keeping their existing contracts if they wish, because the state guaranty fund will cover their contracts.
Assigning their contracts to the Hartford would place policyholders with a sound company with high credit ratings, a Hartford spokesman points out. Hartford had 2003 revenues of almost $19 billion, vs. $364 million in premiums placed by London Pacific in 2001, prior to the announcement of its financial problems.
Hartford is offering enhancements to existing fixed annuity contracts to induce London Pacific customers to switch carriers, the spokesman says. He did not disclose what those enhancements would be because the company had not yet formally offered them to Pacific Life customers.
The agreement follows one that state regulators reached in February with Fidelity Security Life Insurance Company, Kansas City, Mo., to assume Lincoln Pacifics variable annuity obligations.
That company assumed $21.5 million in VA accounts, according to Daniel Surber, contract service officer for Fidelity Security.
The future of London Pacific is uncertain. At press time, DOI officials had not returned calls seeking comment.
Reproduced from National Underwriter Edition, June 4, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.