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Labor Department Settlement Leads to Ullico Posting Full-Year Loss(BestWire Services Via Acquire Media NewsEdge) Ullico Inc. posted a $2.4 million net loss for 2007, as the impact of a $20 million settlement with the U.S. Labor Department over a 5-year-old investigation of alleged employee benefit plan self-dealing placed the union-owned insurance holding company in the red. The loss compared with the company's $16.8 million gain for 2006, as well as 2007 pretax operating income of $12 million, down 13% from the prior year. Total revenue from fees and written premium fell 5.5% to $272 million, largely on the company's decision to cease actively marketing its group health insurance plan to new customers. Under the Labor Department deal, subsidiary Union Labor Life Insurance Co. paid $16.7 million in compensation to plans that participated in the company's Separate Account J, or "J for Jobs" program, which invests in secured mortgages on commercial and residential projects constructed by unions affiliated with the Building and Construction Trade Department of the AFL-CIO. The deal also required Ullico pay $3.3 million in taxes and ERISA penalties and implement a simplified J for Jobs fee structure. In a statement, Ullico Chief Executive Officer Mark Singleton said the company "is still well positioned for continued growth in its core businesses" and that its strategic plan called for "new products and continued sales momentum in our continuing lines of business" in 2008. "Our capital and liquidity ratios remain strong. In addition, to bring clarity in our brand recognition in our market place, as indicated below, we have changed the names of several of our companies," Singleton said. Ullico's troubles with federal authorities first began in March 2002, when the Labor Department filed suit against subsidiaries Trust Fund Advisors and Union Labor Life Insurance Co., alleging the units violated ERISA when they used $10 million in pension-plan assets to buy 120 acres in the desert outside North Las Vegas in 1995. Two years later, the development was scrapped with no lots sold (BestWire, March 28, 2002). That December, the Maryland Insurance Administration sued Ullico to enforce a subpoena demanding information on stock transactions by Ullico's board. Ullico filed a motion to quash the subpoena (BestWire, Dec. 4, 2002). In May 2003, current House Minority Leader John Boehner, R-Ohio ? then serving as chairman of the House Education and Workforce Committee ? subpoenaed then-Ullico Chairman and Chief Executive Officer Robert Georgine to appear before Congress to explain nearly $6 million in profits he and three other board members allegedly made from insider stock transactions between 1998 and 2000. Ullico stock is fixed in price on an annual basis and not listed on any public exchange (BestWire, May 8, 2003). Concurrent with the subpoena, Georgine resigned and he ultimately refused to testify, citing his Fifth Amendment privileges. Union Labor Life Insurance Co. currently has a Best's Financial Strength rating of B+ (Good). (By R.J. Lehmann, Washington bureau manager: [email protected]) Copyright ? 2008 A.M. Best Company, Inc. |