tles dispute with California insurance regulators
Marsh settles dispute with California insurance regulators

Chris Rauber
Silicon Valley/San Jose Business Journal
March 14, 2006


California's Department of Insurance has reached an agreement with Marsh & McLennan Cos. Inc. requiring the giant broker to fully disclose commission agreements, officials announced Monday.

Marsh -- the subject of investigations for several years by New York Attorney General Eliot Spitzer, California Insurance Commissioner John Garamendi and other regulators -- also agreed to "put a halt" to bid rigging and other harmful practices, the California insurance department said in a March 13 statement. In addition, Marsh agreed to help the department further its investigation into questionable practices in the brokerage and insurance industries.

No financial penalties were involved, but Marsh must pay about $100 million to California policyholders due to an earlier settlement in New York. It also agreed to pay California $15,000 for the cost of its investigation, according to department spokesman Norman Williams.

The California agreement follows a two-year CDI probe, during which "multiple instances of improper practices" by Marsh were uncovered, regulators said. "This settlement is another step in our effort to clean up this industry and end secret commissions, bid rigging and other actions that are harmful to consumers," Garamendi said in the statement.

More specifically, Williams said the agreement with Marsh can be used by the department as a precedent in future cases, and carries "the same weight as a decision by the California Court of Appeals."

Marsh officials could not be reached immediately for comment on the DOI's announcement.

Last year, Marsh ranked as the largest insurance brokerage in the Bay Area, based on 2004 regional premium volume of $1.8 billion. At the time, it had 510 agents/brokers in the region.

According to California regulators, former Marsh employees used various schemes to benefit the company at the expense of clients, such as directing insurers to submit fictitious or inflated bids to help the broker maintain existing business and keep its prices high. Marsh "neither admitted nor denied the allegations," regulators said.

In a related case, Marsh and its subsidiaries reached a settlement with New York in January 2005 requiring it to pay $850 million into a fund to be distributed to policyholders affected by its use of secret commissions. Approximately $100 million from that fund will go to California policyholders, and payment will be monitored by the insurance department. All told, 33 states' insurance commissioners signed onto that agreement.

The California settlement "mirrors" much of the New York agreement, officials said March 13, stressing that Garamendi "has the authority to enforce" its provisions.

The first payment into the $850 million fund was due Nov. 1 of last year; three other payments are due June 30, 2006, 2007 and 2008, Marsh officials said last year.

Copyright © 2006 American City Business Journals, Inc.


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€>•»$ĕ<=@›€gŸÀNƞ,NxÐDiN'a Áé`== Life and Health Insurers' Investment Profits Triple in Third Quarter 2005 as Earnings Grow to $28 Billion

Life and Health Insurers' Investment Profits Triple
in Third Quarter 2005 as Earnings Grow to $28 Billion
Close to Half Highly Rated by Weiss;
Highest Percentage since Inception of Insurance Ratings

JUPITER, Fla., March 13, 2006 – Life and health insurers' investment profits more than tripled, skyrocketing 224% to $1.8 billion in the first nine months of 2005 compared to $552 million for the same period in 2004, according to Weiss Ratings, Inc., the nation's leading independent provider of ratings and analyses of financial services companies, mutual funds, and stocks.

Insurers reporting the largest year-over-year increases in capital gains were:

Company Headquarters Weiss
Safety
Rating
Capital Gain (Loss) ($Mil)
3rd Qtr
2005
3rd Qtr
2004
$
Change
Metropolitan Life Ins. Co. New York, N.Y.    B+ 592.2  48.4  543.8
Teachers Ins. & Annuity Assn. of Amer. New York, N.Y.    A+ (66.6) (421.9) 355.3
Metropolitan Tower Life Ins. Co. New York, N.Y.    B 269.0  0.0  269.0
First Colony Life Ins. Co. Lynchburg, Va.    B (5.8) (259.7) 253.9
John Hancock Life Ins. Co. Boston, Mass.    B 126.7  6.4  120.2

Weiss Safety Rating: A=Excellent; B=Good; C=Fair; D=Weak; E=Very Weak; F=Failed; U=Unrated

As a result of the substantial investment gains, insurers' profits climbed $2.3 billion, or 8.9 percent, to $28 billion in the same period. Insurers reporting the largest year-over-year increases in earnings include:

Company Headquarters Weiss
Safety
Rating
Net Income(Loss) ($Mil)
3rd Qtr
2005
3rd Qtr
2004
$
Change
Union Fidelity Life Ins. Co. Chicago, Ill.    C 45.7 (1,806.8) 1,852.5
Prudential Ins. Co. of America Newark, N.J.    B 1,913.4 1,057.2  856.1
Teachers Ins. & Annuity Assn. of Amer. New York, N.Y.    A+ 958.9 373.0  586.0
MONY Life Ins. Co. New York, N.Y.    C 113.5 (377.2) 490.6
Travelers Life & Annuity Co. Hartford, Conn.    B- 20.3 (425.3) 445.6

Weiss Safety Rating: A=Excellent; B=Good; C=Fair; D=Weak; E=Very Weak; F=Failed; U=Unrated

"Insurers have enjoyed an extended period of growth by nearly all measures due in part to an industry trend toward asset accumulation and away from traditional products as baby boomers enter their prime earning years and put more money into variable annuities and similar insurance investment vehicles," said Melissa Gannon, vice president of Weiss Ratings, Inc.

Industry Separate Accounts1 Increase to $1.4 Trillion

The value of insurers' separate account assets jumped 14.2 percent to $1.4 trillion in the third quarter of 2005, compared to $1.2 trillion for the same period in 2004. The increase represents continued interest by consumers to invest in variable life and annuity products in anticipation of improved equity markets and rising interest rates. Companies reporting the largest year-over-year increase in separate accounts include:

Company Headquarters Weiss
Safety
Rating
Separate Accounts ($Mil)
3rd Qtr
2005
3rd Qtr
2004
$
Change
Prudential Retirement Ins. & Annuity Bloomfield, Conn.    C+ 34,510.8 575.4 33,935.4
John Hancock Life Ins. Co. (USA) Boston, Mass.    B+ 62,920.8 48,085.3 14,835.5
Axa Equitable Life Ins. Co. New York, N.Y. B 67,890.2 56,629.5 11,260.7
Prudential Ins. Co. of America Newark, N.J.    B 77,081.8 66,765.7 10,316.1
Lincoln National Life Ins. Co. Fort Wayne, Ind.    B- 53,386.1 43,384.1 10,002.0

Weiss Safety Rating: A=Excellent; B=Good; C=Fair; D=Weak; E=Very Weak; F=Failed; U=Unrated

Industry Strength Highest Percentage since Inception

Many years of solid performance have buoyed life and health insurers' financial strength, as evidenced by the distribution of Weiss' financial safety ratings. Among the 905 life and health insurers rated by Weiss, 386, or 42.7 percent, received a favorable (B- or higher) Weiss Safety Rating, the highest percentage of high-rated companies in Weiss' history of rating insurers. As the result of the industry's financial strength, upgrades outpaced downgrades by a factor of 6.6 to one in this quarterly review. Of the 838 insurers reviewed by Weiss using third quarter 2005 data, 125 companies were upgraded, while only 19 were downgraded.

Notable upgrades include:

 Jackson National Life Insurance Co. (Lansing, Mich.) from C+ to B-
 Merrill Lynch Life Insurance Co (Princeton, N.J.) from C+ to B-
 American United Life Insurance Co (Indianapolis, Ind.) from B to B+

Notable downgrades include:

 Hartford Life and Accident Insurance Co. (Simsbury, Conn.) from B+ to B
 Union Security Life Insurance Co. (Atlanta, Ga.) from B to C+
 Professional Life and Casualty Co. (Chicago, Ill) from D+ to E+

The Weiss Safety Ratings are based on an analysis of a company's risk-adjusted capital, five-year historical profitability, quality of investments, liquidity, and stability. The latter category combines a series of factors including asset growth, premium growth, strength of affiliate companies and risk diversification.

Weiss Ratings, Inc. reviews more than 8,000 stocks daily, including all those traded on the New York Stock Exchange, the American Stock Exchange, and Nasdaq. Weiss also issues investment ratings on more than 12,000 mutual funds, covering equity, fixed-income, and closed-end funds, and provides financial risk ratings on more than 15,000 financial institutions, including banks and insurance companies. It is the only major rating agency that receives no direct or indirect compensation from the companies it rates. Ratings and analyses are available through www.weissratings.com or by calling 800-289-9222.

 

1A separate account is established by an insurer to fund variable annuities, variable life insurance or other contracts where investment returns are based on segregated assets.

 

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Note to Editors: National and state listings of strongest and weakest financial life, health, and annuity insurers are available.