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PACIFIC MUTUAL PROPOSES TO FULLY PROTECT POLICYHOLDERS AND ANNUITANTS OF FIRST CAPITAL

 PACIFIC MUTUAL PROPOSES TO FULLY PROTECT
 POLICYHOLDERS AND ANNUITANTS OF FIRST CAPITAL
 NEWPORT BEACH, Calif., April 10 /PRNewswire/ -- Pacific Mutual Life Insurance Co., California's largest life and health insurer, today submitted a proposal to rehabilitate First Capital Life Insurance Co. that fully protects the cash values of contracts held by First Capital policyholders over the next five years, credits interest to their accounts over that time and guarantees they will receive up to 75 percent of the company's future profits. The proposal also promises policyholders and annuitants a permanent home in the Pacific Mutual family of companies.
 "Our proposal is structured to preserve and protect the value of every First Capital policyholders' and annuitants' contract," said Pacific Mutual's Chairman and Chief Executive Officer Thomas C. Sutton. "Those individuals who remain with the rehabilitated company over the next five years will be made whole before anything is paid to creditors and shareholders."
 In addition, the proposal submitted to California Insurance Commissioner John Garamendi:
 -- Proposes to sell most, if not all, of First Capital's risky junk bond portfolio in a timely and orderly manner;
 -- Proposes to sell most, if not all, of First Capital's troubled real estate portfolio in a timely and orderly manner;
 -- Provides $50 million in cash to support its proposal;
 -- Offers a proposal that is not conditioned on the resolution of third party lawsuits; and,
 -- Offers financial stability to First Capital's policyholders and annuitants with a well-capitalized insurance company, removing the uncertainty that has clouded their lives over the past year.
 Policyholders and annuitants who choose not to remain with the company during the five-year rehabilitation period will, in most cases, be subject to penalties for early withdrawal. With the exception of those demonstrating financial hardship, surrendering policyholders will receive 85 percent of cash value if they cancel their policies in the first year, 87 percent during the second year, 90 percent in the third, 93 percent in the fourth and 96 percent in the fifth year of rehabilitation. After the fifth year, no additional surrender charges will be applied.
 "We want to encourage annuitants and policyholders to maintain their contracts and to understand that the five-year rehabilitation period is necessary to work out the financial problems of First Capital," Sutton said. "Additional policy cancellations, at this time, would only weaken the company and undermine the value of all First Capital policies. A stabilized company, however, is the best assurance that policyholders will receive the maximum value of their policies."
 Under Pacific Mutual's proposal, creditors of First Capital will share in a percentage of the company's accumulated profits only after continuing policyholders have been made whole and justly compensated. Creditors will receive profit sharing if the losses on First Capital's high-risk assets are minimized over the next five years.
 "A full 75 percent of any profits after five years will go to continuing policyholders and, under certain circumstances, to terminated policyholders, creditors and shareholders," Sutton said. "The remaining 25 percent of accumulated profits will stay in the company."
 Because First Capital was forced into conservatorship last May, in part because of its extensive junk bond holdings, Pacific Mutual will immediately begin to liquidate the company's junk bonds in an orderly manner and replace them with investment-grade assets. The sale of junk bonds will continue until the rehabilitated company's portfolio matches the high quality of Pacific Mutual's own bond investments, which are currently at 96.7 percent investment-grade.
 "The previous management of First Capital pursued a reckless course by investing roughly 40 percent of the company's bond portfolio in junk. Pacific Mutual will make sure the same mistake is not repeated," Sutton said.
 "We are confident that the proposal we are submitting today is far superior to the one previously submitted by Shearson Lehman Brothers and meets the desires of the commissioner and the court.
 "Our management and administration is stable and focused on the long term. Our investment portfolios are managed to generate attractive yields, without taking unnecessary risks. We have always been rated highly by the various agencies that evaluate the financial strength and claims-paying abilities of life insurance companies," Sutton added.
 Pacific Mutual has established a special phone number, 800-800-3340, which will be available weekdays starting Monday, April 13, from 8 a.m. to 4 p.m. PDT, to provide information to First Capital policyholders and annuitants regarding the company's proposal.
 Founded in 1868, Pacific Mutual Life Insurance Co. provides a variety of insurance and investment services for individuals and businesses, and offers guaranteed investment products to institutions and pension plans. Additionally, the company provides a variety of group employee benefit services, as well as investment management capabilities for institutional and high-net-worth individual clients.
 Together with its subsidiaries, Pacific Mutual has nearly $50 billion in assets and funds under management, and is ranked by Fortune as the nation's 29th largest life insurer. The company has more than $37 billion of individual and group life insurance in force and more than 4,000 employees and associates nationwide.
 -0- 4/10/92
 /CONTACT: Bill Acton, Hill and Knowlton, 213-937-7460, for Pacific Mutual Life Insurance/ CO: Pacific Mutual Life Insurance Co.; First Capital Life Insurance Co. ST: California IN: INS SU:


DM-JL -- LA027 -- 7455 04/10/92 19:03 EDT
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Publication:PR Newswire
Date:Apr 10, 1992
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