Nearly all policyholders of Executive Life Insurance Co. will regain the full value of their former accounts with the now-defunct insurer, according to California Insurance Commissioner John Garamendi.
A plan providing full and complete recovery to 92 percent of Executive Life policyholders was approved last week by Los Angeles Superior Court Judge Kurt Lewin, who ruled that the plan meets all legal requirements.The plan calls for every policyholder to have the option of continuing their life insurance coverage with the new successor company, Aurora National Life Assurance Co.
Policyholders without guaranty association coverage will recover about 86 percent of the value if they opt to continue with Aurora and around 81 percent if they don't.
Mr. Garamendi said the liquidation of Executive Life would have yielded significantly less for policymakers.
In his ruling, Mr. Lewin also rejected a motion by opponents of the plan to rescind the sale of the company's portfolio of below-investment-grade ''junk" bonds last year.
In the 1980s, Executive Life helped propel Michael Milken into prominence as Wall Street's junk bond king. It was one of the largest buyers of the high- yielding debt sold by Drexel Burnham Lambert under Milken's reign.
The insurer wound up suffering massive losses and was seized by state regulators in April 1991.
In his order, Lewin overruled all objections to the plan from some of Executive Life's 340,000 policyholders, including a proposal to rescind a controversial junk bond sale and a provision that may limit their ability to object publicly to the sale.
The judge delayed the effective date of his Aug. 13 order for 19 days to
allow the parties to appeal the ruling.
Large holders of municipal bonds backed by Executive Life, known as muni-GIC holders, are expected to appeal last week's court ruling. Muni-GIC holders hold an estimated $1.63 billion in assets and allege Mr. Garamendi's plan undervalues the worth of Executive Life's junk-bond portfolio.
Lawyers for the Los Angeles law firm of Pillsbury Madison & Sutro, which is representing muni-GIC holders, could not be reached for comment, but published reports indicate they feel that the portfolio is worth $1.5 billion more than what state regulators say and that the additional value should be recovered and given back to investors and policyholders.