Financial services holding company in the United States
Ullico Inc. is a privately held insurance and financial services holding company in the United States. Formerly known as Union Labor Life Insurance Company, it was founded in 1927 by the American Federation of Labor (AFL) and its then president, Samuel Gompers, to offer health and life insurance products specifically to working men and women. Matthew Woll, president of the International Photo-Engravers Union of North America, became the company's first president. Ullico is one of the largest insurance and investment services companies for trade union members in the United States.
Overview.
Ullico Inc.'s mission is to provide financial security to union members and their families. The company offers specialty insurance and investment products to labor organizations, union employers, municipalities and institutional investors, as well as union members and retirees. Ullico is a privately held, joint stock company. The company's constitution and bylaws permit shares to be held only by trade unions, union officials, union members and union benefit funds. The stock's value changes once a year when company directors set a new share price based on the advice of independent auditors.
As of 2009, the company insured more than two million union members and dependents through $25 billion in Life, Accidental Death and Dismemberment insurance. Further, more than six million members were served through $125 million in gross written Property and Casualty premiums. Ullico had $5.5 billion in assets and a consolidated GAAP Equity of nearly $240 million.
Divisions.
Ullico Inc. consists of The Union Labor Life Insurance Company (Union Labor Life), Ullico Casualty Group Inc., Ullico Investment Advisers Inc. and Ullico Investment Company Inc. These companies fall into three divisions: Life and Health (Union Labor Life), Property and Casualty (Ullico Casualty Group) and Investment Services (Ullico Investment Advisers Inc. and Ullico Investment Company Inc.)
Life and health.
More than 85 years ago, The Union Labor Life Insurance Company (Union Labor Life) became the founding unit of Ullico Inc. Today, Union Labor Life provides life and health solutions specifically tailored for the labor market. Through alliances with market leaders in risk protection, the company offers an array of insurance products for unions, jointly managed trust funds and organized employers as well as supplemental insurance programs that are directly marketed to union members, retirees and their families. Products including:
Property and casualty.
Ullico Casualty Group creates insurance products that mitigate fiduciary risks to union workplaces and its trustees. Products include:
Investment services.
Ullico offers products and services designed for institutional investors through The Union Labor Life Insurance Company (Union Labor Life) and Ullico Investment Advisors Inc. (UIA). These products, including Ullico's real estate-related Separate Account J (also known as “J for Jobs”), are sold through the Ullico Investment Company (UIC).
Union Labor Life's Real Estate Investment Group (REIG) is responsible for originating, underwriting and managing the company's real estate mortgage and equity investments, while UIA, a registered investment advisor with the United States Securities and Exchange Commission (SEC), provides investment advice to institutional investors with a focus on jointly managed, multi-employer Taft-Hartley funds.
The UIC is a registered broker-dealer with the SEC and a member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC). The company markets and sells products managed through UIA and group annuity contracts offered through Union Labor Life.
Hearthstone Holdings, Inc., a portfolio company of Ullico's Infrastructure Fund that is headquartered in Morgantown, West Virginia, owns and operates natural gas distribution systems in Indiana, Ohio, North Carolina, Maine, Montana, and West Virginia. Hearthstone also owns and operates water and wastewater utilities in Arizona and Michigan.
History.
On May 1, 1927, in Washington, D.C., labor leaders formed the Union Labor Life Insurance Company (Union Labor Life), providing life insurance to union workers, which was unavailable at the time. Many Americans worked in hazardous jobs with few, if any, work safety laws in place to protect them. Railroads, construction sites and factories all presented too much risk for many companies’ underwriters. Life insurance was either priced out of reach of workers or insurance companies denied coverage because of the risks associated with their jobs. Union Labor Life aimed to provide a new level of stability for workers and increase their standard of living.
Samuel Gompers, the first president of the American Federation of Labor (AFL), saw the value in a union-owned insurance company. Matthew Woll, then president of the Photo Engravers Union, became Union Labor Life's first president. Soon more than 60 international unions, hundreds of local unions, and more than 300 individuals, including AFL president William Green, owned stock.
Over the years, as the needs of unions and their members evolved, Union Labor Life grew and diversified, offering health insurance, fiduciary liability insurance, investment products for pension funds and services for administering trust fund business. As other subsidiaries formed, it was clear that Union Labor Life needed another entity for future growth and diversification. In 1987, Ullico Inc. was created as a holding company for Union Labor Life and Ullico Casualty Company.
Timeline.
1925: The AFL approves the creation of a union-owned insurance company.
1927: Union Labor Life opens for business on May 1, 1927, in Washington, D.C. Its first group policy was written for the Federal Employees Local 105 of Washington, D.C.
1932: Union Labor Life begins offering retirement annuities and issues its first stockholder and policyholder dividends.
1935: Company headquarters move to New York, New York.
1943: The organization begins offering group Accident, Health and Hospitalization insurance.
1946: Union Labor Life establishes company-paid-for insurance and pension plans for its own employees.
1957: The company purchases and merges with the American Standard Life Insurance Company, founded by the International Brotherhood of Electrical Workers in 1924.
1959: Group Dental and Prescription benefits are first offered.
1961: Group annuity actuarial and administration departments are created.
1966: Group Vision, Extended Care and an extended plan of Long-Term Disability are offered.
1977: Mortgage Separate Account J (J for Jobs) is introduced.
1979: Ullico Casualty Company is created to proceed with new kinds of insurance.
1983: Ullico headquarters move back to Washington, D.C.
1986: Ullico Casualty begins to market Fiduciary Liability insurance to funds and trustees as other carriers abandon the market.
1987: Ullico Inc. is established as a holding company for the company's subsidiaries and assets. A number of new ventures quickly follow.
1990: Trust Fund Advisors, a pension fund portfolio management company, is created.
1999: UlliCare®, a managed care health plan, is introduced. Ullico also buys Tri-City Brokerage, the largest and only independent national insurance wholesaler.
2006: Ullico becomes a registered broker and dealer with the National Association of Securities Dealers (NASD) and the SEC.
2008: Ullico Captive, PCC is established to offer alternative risk solutions through the Life and Health and Property and Casualty lines of business.
2009: Ullico Casualty Company posts a record $102 million in gross written in force premiums.
2010: In December 2010, the Ullico Board appoints Edward M. Smith as the company's new chief executive officer.
2020: Ullico Benefit Solutions, LLC has signed a strategic deal with Marathon Health, LLC.
Scandals.
Ullico expanded significantly in the 1990s, creating a large number of strategic alliances with other insurance companies and making a number of acquisitions. Beginning in the late 1990s, the organization experienced a range of problems and challenges, including a conflict of interest in pension fund management and insider trading.
AFL-CIO support for single-payer health care.
Ullico's first conflict of interest occurred in 1991. In May of that year, the health care committee of the AFL-CIO executive council voted to reject a proposal to support a national single-payer health care plan. The stated reason was that the proposal had no chance of being enacted by Congress. But outside observers argued that the real reason was that government-supplied universal health care would have put union-run health insurance plans out of business. The deciding vote in the health committee was cast by Robert Georgine, chairman, president and chief executive officer of Ullico.
Conflict of interest in pension fund management.
Ullico was caught up in a second conflict of interest scandal in 2002. In June 1998, the New York City local of the United Brotherhood of Carpenters and Joiners of America hired Zenith Administrators, a former Ullico subsidiary, to oversee the union's $1.7 billion pension and benefit funds. In 2002, federal prosecutors and the United States Department of Labor investigated the company for allegedly obtaining the contract through the influence of international union president Douglas J. McCarron—who was a director of Ullico. The Labor Department ended up suing Ullico and Zenith Administrators for mismanaging the union's funds.
Insider dealing scandal.
A larger and more significant scandal also occurred in 2002, in which Ullico officers and directors were accused of engaging in insider dealing, stock price manipulation and other offenses.
Structure of the insider deal.
In 1997, Gary Winnick, founder of telecommunications company Global Crossing, gave ULLICO officers and directors the chance to buy shares of his new company at substantially lower prices than offered to the public. All but two of Ullico's directors purchased 33 million shares for $7.6 million (or about 23 cents a share), with Ullico buying additional stock. Global Crossing went public, and the stock soared to $62 a share in 1999. This netted Ullico about $1.1 billion in profit.
For a variety of reasons, Global Crossing's stock price then began to decline sharply.
In December 1999, Georgine offered Ullico's officers and directors a chance to participate in its Global Crossing profits. Under Ullico's bylaws, Ullico officers and board members had the right to buy and sell Ullico stock. Georgine sent a confidential letter to board members inviting them to sell their Global Crossing shares and use the proceeds to purchase up to 4,000 Ullico shares at the then-current price of $53.94. The increase in Global Crossing share price had not yet been recorded by Ullico's auditors, PricewaterhouseCoopers. Unlike publicly traded companies, Ullico only set its stock price once a year, based on its prior year book value. When it was, the auditors were sure to recommend a significantly higher Ullico share price. Under the bylaws, the board members could then authorize a share repurchase plan. Board members would be able to redeem their Ullico shares at the higher price. When the Ullico shares were re-priced later to reflect the now-worthless Global Crossing shares, the company's stock price would return to near its previous level. It was a chance to sell their tumbling Ullico shares.
All Ullico shareholders, including union pension plans, could sell a prorated amount based on their total holding. Yet those with fewer than 10,000 shares—mostly the directors—could sell all their stock. Ullico did not offer the deal to others. rank and file union members, who owned the bulk of Ullico stock through professionally managed union pension plans, were not told of the stock offering and would not be permitted to buy stock at the $53.94 price (had they known about the stock offering).
A majority of the Ullico board approved the plan. Many board members duly sold their tumbling Global Crossing shares and bought Ullico stock at the price of $53.94 a share. In May 2000, acting on the auditor's recommendation, the Ullico board of directors approved a share price of $146. On November 2, 2000, Ullico's board approved a plan to repurchase $30 million worth of Ullico stock at $146 a share. Board members were permitted to sell all of their shares, making nearly $13.7 million in profits, while the unions and their pension plans were allowed to sell only a fraction of their shares. In May 2001, the Ullico board, acting on the recommendation of its auditor, set the company's share price at $74 (a new, lower price established almost exclusively by the drop in Global Crossing shares).
Meanwhile, Ullico began losing money. The company lost $22 million in 2001, and $74 million in 2002. Ullico's combined capital and surplus—a key measure of an insurance company's financial health—fell from $51.8 million in 2001 to $17.95 million in 2002. PricewaterhouseCoopers expressed doubt about Ullico's financial solvency. Ullico then issued more stock, raising $50 million from its shareholders, and agreed to sell its newly completed downtown office building near the White House to raise another $160 million.
Scandal exposed.
Beginning March 15, 2002, the "Wall Street Journal" published a series of articles about Ullico's insider stock deal. Global Crossing had filed for bankruptcy in January 2002, and a number of investors suffered significant financial setbacks. Ullico's investment in Global Crossing was well known, and the newspaper's reporters wondered how severely union members' investments had suffered from the bankruptcy. The paper also discovered that a federal