MetLife, General American Finalize Sale; MDI Begins Investment
For immediate release: Jan 6, 2000
Director Wenzel notes historic size of rehabilitation; expresses satisfaction with progress on difficult case.
Metropolitan Life Insurance Co. today finalized its purchase of General American Mutual Holding Co.'s assets — including General American Life Insurance Co. of St. Louis — placing a historic fiduciary duty on the Missouri Department of Insurance.
MDI took custody of the $1.2 billion in sale proceeds, after MetLife wired the funds to the Cole County Circuit Court, and immediately began investment operations today under court-approved guidelines.
The actual sale culminates the first phase of a difficult case that began in August when General American Life, the state's largest domestic life insurer, confronted a serious liquidity crisis. MDI placed General American in voluntary administrative supervision, and all parties agreed last fall to the sale of its parent holding company's assets to financially stable MetLife. Still ahead, however, is essentially a demutualization of the holding company — the identification of any creditors and the distribution of remaining assets in cash to policyholders, who are the owners of the mutual holding company.
"We acted last summer to protect the interest of those policyholders," said Keith Wenzel, the MDI director, "and the closing of the sale today guarantees that they will receive fair value for their stake in General American. "It is a tribute to the two companies, the court and department personnel involved that the perils of the liquidity crisis have produced not only $1.2 billion for policyholders, but a General American operation that preserves its name identity, employment base and corporate presence in St. Louis."
Albert Riederer, a former Jackson County prosecutor, stepped down from the Missouri Court of Appeals-Western District bench in Kansas City, at the request of Gov. Mel Carnahan, to take over daily management of the General American case Dec. 1 as special deputy rehabilitator. He is assisted by counsel Sidley & Austin of Chicago and an investment advisor from Fahnestock Co.
The proceeds are the largest cash amount ever handled in the receivership process by MDI.
The court-approved rehabilitation plan calls for the identification and payment of all rightful creditors, as well as a final distribution of remaining assets to policyholder/owners, within three years, or the end of 2002.
Cole County Circuit Court Judge Thomas J. Brown, who has jurisdiction over the General American case, this week approved the investment of the $1.2 billion through two fund managers, the A.G. Edwards brokerage firm and Central Bank of Jefferson City.
The investment guidelines, while conservative in nature to avoid risky securities, are designed to preserve the principal; maintain enough liquidity to meet disbursements to creditors; and maximize the total return. (A copy of the court order approving the investment policy, objectives and guidelines is posted on MDI Website)
Preparatory to the sale, MDI this week released General American Life from administrative supervision, which required state approval of major financial and operational transactions. No other entity owned by the mutual holding company had been under supervision.
The assets of General American Mutual Holding Co. included, besides the life insurer, several smaller insurers as well as controlling interest in publicly traded Reinsurance Group of America (RGA) and Conning & Co.MetLife has committed to maintaining virtually all General American operations in St. Louis, including at least 90 percent of the remaining workforce.
For further information, contact: Randy McConnell at (573) 526-4845.