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PACIFIC MUTUAL SIGNIFICANTLY ENHANCES PROPOSAL FOR FIRST CAPITAL TO BENEFIT POLICYHOLDERS

 PACIFIC MUTUAL SIGNIFICANTLY ENHANCES PROPOSAL FOR
 FIRST CAPITAL TO BENEFIT POLICYHOLDERS
 NEWPORT BEACH, Calif., April 23 /PRNewswire/ -- Pacific Mutual Life Insurance Co., California's largest life and health insurer, today significantly enhanced its proposal to rehabilitate First Capital Life Insurance Co. by providing greater profit-sharing to policyholders, guaranteeing them a permanent home with Pacific Mutual and ensuring that they earn higher credited interest rates on their policies.
 Specifically, the enhanced proposal will increase from 75 percent to 90 percent the future profit-sharing percentage Pacific Mutual guarantees First Capital Life Insurance Co. policyholders. It also commits the company to merge the rehabilitated company into Pacific Mutual at the end of five years.
 "Pacific Mutual is firmly committed to realizing the maximum value for First Capital policyholders, and our enhanced proposal offers the best, most secure way to do that while guaranteeing that policyholders will receive the majority of the firm's future profits," said Thomas C. Sutton, Pacific Mutual's chairman and chief executive officer.
 "Because we have committed to merge the rehabilitated company into Pacific Mutual at the end of five years, all residual value after the merger will continue to accrue to the benefit of policyholders."
 In addition, Pacific Mutual's enhanced proposal, submitted to State Insurance Commissioner John Garamendi today:
 -- Significantly reduces the financial penalty policyholders will receive if they surrender their contracts during the five-year rehabilitation period. Pacific Mutual's new proposal gives such policyholder 90 percent of their account values during the first three years, 93 percent during the fourth year and 96 percent during the fifth. Pacific Mutual's original proposal recommended 85, 87, 90, 93 and 96 percent penalties during the first, second, third, fourth and fifth years respectively. After the fifth year, policyholders will receive 100 percent of their account values;
 -- Improves the interest crediting procedure by providing an additional 0.25 percent of interest credited annually to each policyholder account;
 -- Significantly reduces the effective interest rate paid to Pacific Mutual, from 11 percent to 9 percent, on its $50 million capital infusion into First Capital. This reduction in the interest rate frees up more funds for First Capital policyholders;
 -- Establishes a Policyholders Advisory Council as a forum for First Capital contract holders to express their views throughout the rehabilitation period until they become voting Pacific Mutual policyholders; and
 -- Provides ongoing employment to virtually all of First Capital's current employees.
 Pacific Mutual will earmark 90 percent of the rehabilitated company's accumulated profits after five years for distribution to continuing policyholders until their account values are brought up to a 7.0 percent cumulative annual return over the five-year period (vs. 6.5 percent in its original proposal). Once the 7.0 percent return is achieved, excess profits then will be distributed 50 percent to policyholders and 50 percent to creditors.
 Both Pacific Mutual's initial and enhanced proposals surpass those of rival bidders in several other significant ways:
 -- Pacific Mutual will immediately begin to liquidate First Capital's troubled junk bond and real estate holdings in a timely and orderly manner and replace them with investment-grade assets appropriate for a life insurance company; and
 -- Pacific Mutual has the ability and willingness to take control of First Capital as early as May 8 without a need for further board approval, additional rating agency reviews, releases of liabilities or dismissal of policyholder lawsuits.
 "All the features of our revised proposal clearly make it stronger than those offered by other bidders," Sutton said. "As a mutual company, our entire focus is on our policyholders. We give them a commitment to deliver long-term value."
 Founded in 1868, Pacific Mutual 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 individuals.
 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- 4/23/92
 /CONTACT: Bill Acton, Hill and Knowlton, 213-937-7460, for Pacific Mutual/ CO: Pacific Mutual Life Insurance Co. ST: California IN: INS SU:


EH-CC -- LA046 -- 2228 04/23/92 19:03 EDT
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Publication:PR Newswire
Date:Apr 23, 1992
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