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Florida insurer fails.

On Aug. 27, 1991, a Florida circuit court judge ended the 69-year-old life of Central Life Insurance Co. by signing an order to liquidate the state's last surviving black-owned insurance company. Central Life, a casualty of poor investments and bad management decisions, appears to be part of what the BLACK ENTERPRISE Board of Economists predicted as a shakeout of black-owned insurance firms during the 1990's (see "Reaping Profits From Chaos," June 1990).

The Florida Life and Health Insurance Guaranty Association, a state agency that services policyholders of failed insurance companies, has taken control of Central Life's assets. Central Life had 34,000 policyholders who paid $1.2 million annually in premiums. Just prior to its closing, the company had $6.5 million in reserve funds, but its bad investments produced a net loss of about $4.5 million.

Critics say that the company might have avoided its demise if it had been more willing to develop new product lines, expand its target market and change its business practices, which included collecting premiums door-to-door.

"When was the last time you saw an iceman or television repairman knock at your door?" harrumphed Dennis Threadgill, a senior attorney with the Florida, Department of Insurance. "Insurance companies have to adjust to the times."

But Central Life President Joseph B. Williams maintains that the company was a victim of state laws that caught them at a bad time and of racial discrimination by state insurance officials. "There are a number of companies doing business the same way what are still alive and well today," Williams says.

Company officials say their troubles began in 1984 when they attempted to boost their cas flow by purchasing a guaranty investment contract with a maturity level of $4.7 million for $3.5 million. Two years later, the state ruled that by law, the investment was not worth $4.7 million, but only what they paid for it. "At the end of 1986, the company's capital and surplus was short," says Williams. "We had to look for $1.5 million, and the state gave us 30 days to correct the situation."

Desperately seeking a savior, the company found a charlatan instead. Lorenza Butler, a 26-year-old Texas businessman, was appointed company president in November 1987 on his promise to infuse $3 million into the firm. By the time he was fired in January 1989, he had glutted himself with company funds, helping to plunge the firm deeper in debt. Company officials claim Butler embezzled as much as $250,000. Central Life attorney Kaydell Wright-Douglas says, last May, a Tampa court sentenced Butler to 15 years probation and ordered him to pay $69,147 in restitution.

State officials have agreed to preserve the institution's name if a buyer claims the $2.5 million certificate of authority. Three black investor groups, including Florida Baptist Holdings Inc., attempted to rescue the firm, but were found unqualified by the Florida Department of Insurance. Central Life filed suit against the state, charging that its refusal to approve any of the investor groups amounted to racism. However, since the suit was filed after the company was technically being liquidated under a previous court order, the case was dismissed in October.
COPYRIGHT 1992 Earl G. Graves Publishing Co., Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Central Life Insurance Co.
Author:Oguntoyinbo, Lekan
Publication:Black Enterprise
Date:Jan 1, 1992
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