MBL shopping itself around

The Star-Ledger, September 13th, 1997

The Star-Ledger Archive COPYRIGHT © The Star-Ledger 1997

Date: 1997/09/13 Saturday Page: 015 Section: BUSINESS Edition: FINAL Size: 687 words

MBL shopping itself around

Search for a buyer is evidence of company's good financial health

By Sam Ali Star-Ledger Staff

Mutual Benefit Life Insurance Co., which collapsed six years ago in the biggest failure of its kind in U.S. history and later re-emerged under the name MBL Life Assurance Corp., is shopping for a buyer.

In a two-page letter, obtained by The Star-Ledger yesterday, Alan J. Bowers, MBL's president and chief executive office, said the company's board of directors agreed to hire Goldman, Sachs & Co., the New York-based investment banking company, "to help us further evaluate our options, including identifying potential buyers."

The Newark-based insurer, founded in 1845, informed its 600 employees yesterday, said company spokeswoman Mary Ann Green.

For MBL, the news is a signal of the company's newfound financial health.

Mutual Benefit Life Insurance Co. collapsed in July 1991 in the largest insurance-company failure in U.S. history. It was undone by losses suffered on heavy investments in commercial real estate and was facing a run by policyholders when state regulators stepped in and took over.

The company changed its name in 1994 to MBL Life Assurance Corp. and has been operating under state supervision ever since the takeover.

"It's a good statement that the company is in excellent financial condition," said Elizabeth Randall, the commissioner of banking and insurance. "We feel we have exceeded the expectations that were laid out in the plan of rehabilitation and the responsible thing to do now is to chart a future course for the company."

The company has 425,000 customers nationwide, including 40,000 in New Jersey.

Any deal must first be approved by Randall as well as Superior Court.

Last year, the company purged its balance sheet of most of its real estate holdings and reached a settlement with its creditors, halting years of litigation that had threatened to derail the company's financial recovery. This month, MBL's real estate portfolio had fallen to $550 million compared with $5.5 billion in 1991.

"Our strategic analysis included consideration of a number of alternatives, including re-entering the marketplace on a standalone basis, seeking a joint venture partner and the sale of the company to another business," Bowers wrote in his letter to members of the legislature. "Although we would have liked to be able to make a convincing case for remaining independent, we concluded reluctantly that a sale is likely to provide our policyholders and equity owners with the greatest value and towards that end, we are obliged to explore that route."

The state-imposed five-year financial rehabilitation of MBL is scheduled to come to an end on Dec. 31, 1999. But Bowers, who described this now well-capitalized company's balance sheet as "bullet proof," said the company is 15 months ahead of schedule.

"As it turns out, the work out we've done here has gone exceptionally well, and now we have the opportunity to take advantage of the improving market place," he said.

During its state-imposed rehabilitation, MBL was not permitted to sell or underwrite any new policies, so in effect, the company has been out of the highly-competitive insurance business for six years, he said.

Bowers said MBL's board felt a "larger, stronger, more well-respected and more highly-rated" company could provide a better bridge from rehabilitation to the marketplace, for policyholders as well as the company's equity owners.

Bowers said he did not expect any major developments to occur until the first quarter of 1998.

As a matter of custom and courtesy, Bowers penned letters to Newark Mayor Sharpe James and each member of the Senate Commerce Committee and Assembly's Insurance Committee, to spread the word of the company's pending sale.

"Mutual Benefit is an interesting case study in how the market place and government can come together to do something good," said Bowers. "We've adopted a philosophy that whenever important events happen in the company, we want to make sure the people in the legislature . . . are made aware of what's going on."

TAG: 1997-341a8e951