Order Approving Investment Policy, Objectives and Guidelines

Purpose of the account fund:

This Account Fund has been established pursuant to Section 11.3 of the General American Mutual holding Company Plan of Reorganization dated as of September 17, 1999 (the "Plan") to hold the proceeds from the acquisition by Metropolitan Life Insurance Company ("Metlife") of GenAmerica Corporation ("GA"). In accordance with Article 11 of the Plan, such proceeds after permitted charges allowed under the stock purchase agreement (the "Stock Purchase Agreement") and the Plan will be distributed to General American Mutual Holding Company members. Proceeds distributable to members that cannot be located at the end of the distribution period specified in the Plan will be held by the Rehabilitator until the member is located or until the Court otherwise provides.

strong>Investment Objectives of the Account Fund:

The monies held herein will be invested with the primary objective of preserving the principal of the Account fund for the benefit of GAMHC members. A secondary objective will be maintaining sufficient liquidity for any disbursements required by Article 11 of the Plan. Investment returns earned on the funds should be the highest fair market after-tax returns reasonably available, net of transaction costs, consistent with achieving the prior stated objectives. In approving this investment policy, the Court relies on statements of counsel for the parties that the rehabilitation estate is expected to be taxable.

Scope of this Investment Policy:

This statement of investment policy reflects the investment policy, objectives and constraints of the Account Fund and the Rehabilitation’s general account described in Section 11.5.2 of the Plan (the "General Account") (the Account Fund and the General Account are collectively referred to herein as the "Funds").

Purpose of this Investment Policy Statement:

This statement of investment policy is set forth in order to:

  • Define and assign the role and responsibilities of all parties involved including the investment managers as reflected in their agreements.
  • Establish a clear understanding for all involved parties of the investment goals and objectives of the funds held by the Rehabilitator pursuant to the Plan.
  • Establish a basis for evaluating investment results.
  • Manage assets of the Funds according to the prudent standards as established in Missouri law.
  • Establish the relevant investment horizon for which the assets of the Funds will be managed.

In general, the purpose of this statement is to outline a philosophy and attitude which will guide the investment management of the assets toward the desired results. It is intended to be sufficiently specific to be meaningful, yet flexible enough to be practical.

Delegation of Authority

Pursuant to Section 375.1166.1 of the Insurance Code, the Rehabilitator holds legal title to the Funds and, acting pursuant to Section 375.1168 of the Insurance Code, is responsible for directing and monitoring the investment management of Funds assets subject to the provisions of this Order. Pursuant to Section 375.1168.1, the Rehabilitator has delegated supervision of these investment policies, objectives and guidelines to the Special Deputy Receiver, who in turn is authorized to delegate certain responsibilities to professional experts in various fields. These include, but are not limited to:

  • Investment Managers. General American Mutual Holding Company, acting by and through the Special Deputy Receiver will enter into one or more agreements with one or more selected investment managers who will provide day to day investment management services to the funds. Each investment manager will have discretion to purchase, sell or hold the specific securities that will be used to meet the investment objectives of the Funds. Furthermore, the Investment Manager(s) may assist the Court, the Rehabilitator and Receiver in: establishing investment policy, objectives, and guidelines, including investment time horizon, risk tolerance and total return objectives; measuring and evaluating investment performance; and other tasks as deemed appropriate.
  • Custodian. The Custodian(s) who shall be the Investment Managers will provide full custodian services. It will maintain possession of securities owned by each fund, collect interest payments, redeem maturing securities, and effect receipt and delivery following purchases and sales. Each custodian may also perform regular accounting of all assets owned, purchased, or sold, quarterly performance reports of each fund and for each Investment Manager. The Custodian will account for movement of assets into and out of each Fund account. In addition, the custodian will provide monthly or more frequently, if requested documentation of portfolio activity and portfolio value. Custodian will provide to the Receiver a Form 1099 as provided by law.
  • Investment Advisor. The Special Deputy Receiver will engage the services of an Investment Advisor to monitor the performance of the Investment Managers, provide the Receiver with periodic reports on portfolio results, review security trades and - confirmation documentation, consult on investment objectives and if necessary assist the Receiver in conducting a search and engagement of successor Investment Managers.
  • Additional professionals such as attorneys, auditors, and others may be employed by the Rehabilitator or the Receiver to assist in meeting its responsibilities and obligations to administrator Fund assets prudently.


  • The "Receiver" shall refer to the Special Deputy appointed by the Rehabilitator. The Receiver shall be responsible for day to day supervision and management of each Fund.
  • "Fiduciary" shall mean any individual or group of individuals that exercise discretionary authority or control over fund management or any authority or control over management, disposition or administration of the Fund assets.
  • "Securities" shall refer to the allowable assets, which are defined as acceptable in this statement.
  • U.S. Government securities and those of its agencies and instrumentalities, or their equivalent without specific ratings are assumed to be "AAA" in credit quality.
  • "Court" shall refer to the sitting Circuit Judge, Division One, 19th Judicial Circuit, Missouri.
  • "Investment Horizon" shall be the time period over which the investment objectives, as set forth in this statement, are expected to be met. The investment horizon for this fund is expected to be three (3) years, although if claims exist or tax returns remain open, investments for longer than three years may be permitted.
  • "Rehabilitator" means the Director of the Missouri Department of Insurance in his capacity as statutory rehabilitator.

Responsibility of the Court and the Rehabilitator:

By Statute, the Rehabilitator holds title and is charged with the responsibility for the management of the assets of the Funds. The Rehabilitator shall, with the approval of the Court, as set forth by statute:

  • Establish responsible and consistent investment objectives, policies and guidelines, which will direct the investment of each Fund’s assets.
  • Prudently and diligently select qualified investment professionals, including Investment Managers, Investment Advisors and Custodians.
  • Determine the Fund’s risk tolerance and investment horizon, and communicate these to the appropriate parties.

Responsibility of Receiver:

Within the broad framework of policy set by the Court and the Rehabilitator pursuant to Section 755.1168 of the Insurance Code, the Receiver in addition to other responsibilities fixed by the Plan, the law or by order of this Court, shall have direct responsibility for the day to day oversight and management of the Funds:

  • Regularly evaluating the performance of the Investment Manager(s) to assure adherence to policy guidelines and monitor investment objective progress.
  • Developing and enacting proper control procedures: For example, recommendations for replacing Investment Manager(s) due to fundamental change in investment management process, or failure to comply with established guidelines.
  • Advising and communicating with the Court and the Rehabilitator as to the results of all investment performance reviews. Such reviews shall be held annually or more frequently if desired by the Court or the Rehabilitator.
  • Recommending to the Court and the Rehabilitator proposed changes and revisions to this Investment Policy.
  • Monitoring the performance of the Investment Manager(s) and provide the Court and the Rehabilitator periodic reports so that it may determine each Fund’s progress toward its investment objectives.
  • Providing "due diligence" on investment managers such as any qualitative change to investment management personnel, ownership structure, investment philosophy, etc.

Responsibility of the Investment Manager(s):

Each Investment Manager will have full discretion to make all investment decisions for the assets placed under its jurisdiction. Specific responsibilities of the Investment Manager(s) include:

  • Discretionary investment management including decisions to buy and sell securities from and to broker dealers, including affiliates, acting as agent or principal, or to hold individual securities, within the guidelines established in this statement. Where the Investment Manager acts as a principal in the purchase or sale of securities, such action shall be taken on a fully disclosed basis.
  • Communicating any major changes to economic outlook, investment strategy, or any other factors, which affect implementation of investment process.
  • Disclose all fees, commissions and transaction costs charged, including mark-ups, on Fund investments to the Receiver, the Rehabilitator, and the Investment Advisor.

Specific Investment Goals:

Over the Investment Horizon established in this statement, it is the goal of the Investment Managers of Fund assets to achieve investment returns in the following order in priority:

  • Preservation of Principal.
  • Maintenance of Reasonable Liquidity to Meet Disbursement Required or Permitted by the Plan.
  • Maximize Total Return Consistent with the Preservation of Principal and Maintenance of Liquidity.

Investment Guidelines:

Allowable Assets

  • Cash Equivalents
  • U.S. Treasury Bills and Notes
    U.S. Government Agency discount notes
    Money Market and Short-Term Bond Funds
    Commercial Paper
    Collateralized Repurchase Agreements
    Auction rate securities (including preferred stock)
    Certificates of Deposit for commercial banks with offices in Missouri

  • Fixed Income Securities
  • U.S. Government Agency Securities
    Corporate Notes and Bonds
    Over-the-Counter Option Contracts on Bonds
    Asset Backed Securities
    Mortgage Backed Securities and Collateralized Mortgage Obligation (CMO’s)
    Collateralized Term Repurchase Agreements,
    Bonds of any state municipality or other public issuing authority
    Daily and Weekly, Variable Rate Demand Bonds (VRDB’s)

  • Other Investments Approved by the Court and the Rehabilitator
  • All of the Account Fund, as defined in the Plan of Reorganization, which is subject to the Met Life Lien, shall be invested only investments which are both (1) of a kind that could be made subject to the Met Life Lien and (2) made in such a manner as to be subject to the Met Life Lien.

Prohibited Assets

Prohibited investments include, but are not limited to the following:

  • Commodities and Future Contracts
  • Equities
  • Listed Option Contracts
  • Limited Partnerships
  • Interest – Only (IO) CMOs, Principal-Only (PO) CMOs, and Residual CMOs
  • Mortgage Loans
  • Mutual Funds other than Money Market and short-term bond Funds
  • Funding agreements issued by insurance companies with short-term put feature

Prohibited Transactions

Prohibited transactions include, but are not limited to the following:

  • Short Selling
  • Margin Transactions
  • Leverage, in any form, to enhance investment returns
  • Loaning Securities
  • Making Loans
  • Investments in foreign currencies

Guidelines for Fixed Investments

  • The final maturity, average life or auction date of investments in the Fund shall not be longer than and in no event mature or have a put or auction feature later than December 31, 2002, unless otherwise approved by the Court.
  • The minimum weighted average portfolio maturity is left to the discretion of the investment manager.
  • Minimum maturity for any single security is left to the discretion of the investment manager.
  • Purchases of investment grade bonds and notes with a minimum rating of "A" (or equivalent) are permitted.
  • Corporate bonds shall include only obligations of U.S. corporations at time of purchase. To the extent possible, the corporate bond section of the total fund should be diversified by sector. Exposure to any one Corporate or Municipal Issuer should not exceed 10 percent, 5 percent in one issue, of the value of the portfolio of the Funds. This limit does not apply to obligations of the U.S. Government or its agencies or instrumentalities.
  • Investments in corporate bonds should not exceed 10 percent of an issue’s total outstanding debt.
  • Investments in Municipal bonds should not exceed 33 percent of an issuer’s total outstanding debt.
  • Fund assets invested in commercial paper issued by US corporations must be rated A1/P1 (or equivalent) or better.
  • Investments other than repurchase agreements do not have to be collateralized.

Line of Credit:

The Receiver may, however, establish a line of credit with a financial institution to provide short-term liquidity if it should be necessary. Fund investments not subject to Metlife’s lien and not in the Account fund established pursuant to Section 11.3 of the Plan may be pledged as collateral for the line of credit if required. The establishment of a line of credit must be approved in advance by the Rehabilitator and the Court.

Distribution from the Funds:

  • Fees and Expenses: The Receiver may incur and pay all reasonable fees and expenses necessary to fulfill his or her duties and responsibilities with regard to their oversight of the Funds. The Receiver shall be reimbursed for his expenses and fees incurred in this regard from the Funds. All fees and expenses to be paid by the Receiver from the Funds must be approved by the Court.
  • Commission and Mark-ups: All reasonable commissions and mark-ups required to execute investment transactions shall be paid by each fund on a fully disclosed basis.
  • Investment Income: Investment income shall be retained in the Funds and reinvested for the benefit of the policyholders of GA. Investment income shall be distributed to the policyholders of GA at the same time the original principal of the funds is distributed to them as specified in the Plan or in such other manner as is recommended by the Rehabilitator and approved by the Court.
  • Compliance with Plan: All distributions shall comply with the Plan.
  • Other: As provided for in the Plan or the Purchase Agreement between Metlife and GA approved by the Court.

Selection of Investment Manager(s):

The selection of Investment Manager(s) will be made by the Rehabilitator and the Receiver with approval of the Court. A qualifying investment manager must be a licensed financial consultant working for a registered broker/dealer under the Securities Act of 1934, a registered investment advisor under the Investment Advisors Act of 1940, a bank, a trust company, or an insurance company. The custodian may also be an Investment Manager.

Investment Manager Performance Review and Evaluation:

The performance reports generated by the Custodian shall be compiled at least quarterly and communicated to the Rehabilitator, the Receiver, and the Investment Advisor for review. The Investment Advisor will provide at least quarterly a report of investment performance of total portfolios measured against commonly accepted performance benchmarks. Consideration shall be given to the extent to which the investment results are consistent with the investment objectives, goals, and guidelines as set forth in this statement. The Rehabilitator reserves the right to terminate a manager, with the approval of the Court, at its sole discretion or for any reason including the following:

  • Investment performance which is significantly less than anticipated given the risk parameters established, or unacceptable justification of poor results.
  • Failure to adhere to any aspect of this statement of investment policy.
  • Significant qualitative changes to the investment manager organization.

Investment Policy Review:

To assure continued relevance of these policies, objectives, guidelines and capital markets expectations as established in this statement of investment policy, the Rehabilitator, the Receiver and/or the Court plan to review this investment policy at least annually.

This statement of investment policy is adopted on January 4, 2000 by the Court whose signature appears below.

Thomas J. Brown III
Circuit Judge