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To the editor: I feel compelled to comment on the inaccurate and irresponsible editorial, "Who's in Charge in California?" in the June 16 issue, relating to the conservation of Golden Eagle Insurance Co. Your editorial is unfair, uninformed and biased.
You say that "in looking at the Golden Eagle case, one has to wonder what Commissioner Quackenbush intended to accomplish." There is no need to wonder; the commissioner intended to accomplish exactly what he has accomplished, including:
Golden Eagle was underreserved by approximately $289 million as of Dec. 31, 1996. Those same policies will now be fully reinsured up to an additional $420 million by Liberty Mutual Insurance Co., with its $40 billion in assets and $5.8 billion in policyholder surplus.
The jobs of almost 1,300 employees were in jeopardy, but now all employees will be retained.
The economic value of the Golden Eagle business and its role as a key competitor in the California market were in serious jeopardy; now both are being fully preserved.
Most important, policyholders were in a hazardous circumstance; now they will be completely safe.
These are admirable goals and it is extraordinary that they have been accomplished in such a short time.
You, however, have chosen to ignore the facts; instead you assert that the process that has occurred is both unusual and inappropriate. You are wrong on both counts.
Among other things, you assert the commissioner initiated his bid process after "backing away from an early deal with Zurich Centre Group." This is utter nonsense. First, the agreement with Zurich Centre was an "agreement in principle," not a deal. This means that it was subject to substantial preconditions, including due diligence, and the deal may or may not have come to fruition. Second, terms of the agreement in principle expressly acknowledged that an alternative transaction process could be required by the conservation court.
If you did not know that the bid chosen by the commissioner would be subject to approval by the conservation court, and that this process might result in a further round of bidding, then you need to read some of your own back issues. Everyone actually involved in the process knew it, however. Indeed, almost every similar receivership in California over the past decade has involved an overbidding process.
Your claim that the commissioner somehow made a "hasty retreat" from the American International Group Inc. deal and that this "leaves him open to questions about the integrity of the process" is absurd. First, there was no hasty retreat. This process has flowed forward quickly, it has proceeded in a well-precedented fashion, and it has resulted in the rehabilitation of a substantial property/casualty company.
You seem not to care about the results; instead, you carp about the process. AIG did win the original bid, but at a subsequent court hearing both AIG and Liberty Mutual entered into a new series of bids and overbids. In the end, the Liberty Mutual bid was selected as the best bid.
As a result, there has been a substantial improvement in the protections and benefits for policyholders, creditors, the general public and the shareholder.
Your opinion that "to allow bidding in two separate forums is absurd" ignores that this is a very common occurrence. It is a byproduct of "due process" concepts and of the checks and balances built into the insurance insolvency statutes by the Legislature.
These things, and other aspects of your editorial, are incorrect and unfair. But you transgress to the irresponsible when you declare that the current situation "guarantees more uncertainty for policyholders." This makes your editorial a "scare piece" and a false one at that. Golden Eagle's policyholders are completely safe under all scenarios.
Karl L. Rubinstein
Deputy Conservator and Chief Executive Officer
Golden Eagle Insurance Co.