By Marc Lifsher
October 1, 2009
http://www.latimes.com/business/la-fi-insurer-seized1-2009oct01,0,6675622.story
Reporting from Sacramento - State insurance regulators have seized control of Golden State Mutual Life Insurance Co., a financially struggling company that has primarily served the African American community for the last 84 years.
The Los Angeles company, which has been losing money for six consecutive years, has agreed to immediately stop selling any new policies, state officials said Wednesday.
The state takeover shocked African American political leaders. "Golden State Mutual is a revered community institution," state Assembly Speaker Karen Bass (D-Los Angeles) said. "My grandfather worked there." At the time, she said, it was "probably the only company in the Los Angeles area that would provide insurance to African Americans."
Bass vowed "to do whatever we can to restore this institution to the control of the community."
Larkin Teasley, Golden State Mutual's chairman and president, was not available for comment, and a company spokeswoman said no statement would be forthcoming from management.
Regulators stepped in after convincing a Los Angeles County Superior Court judge that the insurer's reserves had run dangerously low. By law, the state insurance commissioner has the power to reorganize and revitalize the company -- much as with a bankruptcy for corporations -- or he or she can liquidate it.
"For the protection of its policyholders, the company has been seized to prevent continuing financial deterioration," state Insurance Commissioner Steve Poizner said. As Golden State Mutual's legal "conservator," Poizner has sole authority under state law over all company business activities and assets.
State Department of Insurance examiners, who said they had been monitoring Golden State Mutual closely for a number of years, reported that the insurer was losing about $200,000 a month and was expected to run out of money by year's end.
According to court documents, state law requires that Golden State Mutual have at least $5 million in capital and surplus funds to pay claims and operating expenses. But as of June 30, the company had only $909,443, insurance examiners said.
Golden State Mutual, which started in a cubicle-size office on Central Avenue with $17,800 in capital in 1925, now offers a wide variety of financial products, including life, burial, disability and mortgage protection insurance.
The loss of Golden State Mutual is a sad event for Los Angeles' black community, said Cecil Fergerson, a retired curator of modern art at the Los Angeles County Museum of Art.
"We owe a debt of gratitude to those men who founded that company in the 1920s," said Fergerson, who grew up in Watts. Golden State Mutual "was not only an insurance company. It was a social, political and historic institution that brought jobs and proper insurance to the black community."
In a 2007 opinion piece in The Times, Fergerson lamented Golden State Mutual's decision to sell its renowned collection of African American art. The paintings, sculptures, prints and drawings sold for a total of $1.5 million at a New York auction in October 2007.
Although most of the art is gone, the company's headquarters on West Adams still hosts a number of important murals by artist Richard Wyatt Jr. One figure, titled "The Insurance Man," portrayed a Golden State Mutual agent with "the rumpled look and briefcase that I remember seeing at my mother's door in Watts in the 1940s," Fergerson wrote.
The "Golden State Mutual Insurance man was special; he was doing something for our community, helping us live and die in dignity."
The murals and all of Golden State Mutual's assets now are in the hands of the California Department of Insurance's Conservation and Liquidation Office. The office, which currently controls 25 seized insurance companies, will oversee the payment of pending claims while it develops a plan to "wind down" Golden State Mutual's operations, the department said.
In the meantime, policyholders are being told to continue paying premiums if they want their policies to remain in force.
Customers with questions can contact their insurance agent or the California Department of Insurance at (800) 927-4357 or online, the department said.
The department hopes to broker an arrangement with another life insurer to take over Golden State Mutual's business so policyholders and their families can continue to be protected financially, spokesman Darrel Ng said.
Golden State Mutual does most of its business in California but also operates in Texas, Michigan, Illinois, North Carolina and Louisiana. In 2008, it sold about $11.6 million worth of life insurance and related financial products, with 46% of the business being done in California, mainly serving African American policyholders.
The collapse of Golden State Mutual will "send shock waves through a significant segment of the African American community, particularly older African Americans," Los Angeles County Supervisor Mark Ridley-Thomas said. "They came up believing that investing in Golden State Mutual was simply the right thing to do, that it was almost an act of good citizenship if you were black."
marc.lifsher@latimes.com
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