First Executive Growth Slows to Crawl; Tougher Insurance Regulations Cited
LOS ANGELES -- The once-astounding growth of First Executive Corp. has slowed to a crawl, mostly because of tougher regulation by state insurance commissioners.</br></br>In its annual report to the Securities and Exchange Commission, the aggressive life insurance holding company provided its most detailed explanation for last year's drop in premium revenue and indicated its responses to regulatory changes will slow future growth. However, it held out the hope that profit margins may increase.</br></br>In addition, First Executive said the tougher regulation had indirectly caused it to put $345 million in new capital into its California insurance unit last year, financed largely by a $275 million debt placement.</br></br>First Executive said it is de-emphasizing the sale of certain types of single-premium insurance policies and annuities that put a strain on its capital as figured under accounting rules set by insurance regulators. The single-premium products once had been a mainstay of First Executive's business.</br></br>In addition, First Executive said it will consider redesigning some of its products, reducing the interest rates it guarantees to pay, or relying less on investments in high-yield, low-rated "junk bonds." Much of First Executive's success in the past stemmed from the higher rates it offered to pay policyholders, fueled by its investments in junk bonds.