Executive Life Insurance Company (ELIC) was once the largest life insurance company in California. Its financial problems and subsequent insolvency in April 1991 shocked its policyholders and the financial world.[1]
At the time, First Executive was the biggest insurer ever to fail, which resulted primarily from money-losing investments in junk bonds. First Executive through Fred Carr had a strong association with Mike Milken and the brokerage firm Drexel Burnham Lambert, whereby at the end of 1990 the company-owned high-yield debt, much of it issued through Drexel, with a carrying value of $9 billion.[2] According to Robert Sobel, First Executive was involved in 90% of Drexel's underwritings, which accounted for about $40 billion in bonds from 1982 to 1987.
After the State of California took over Executive Life, it sold the company's junk-bond portfolio to Altus Finance, a unit of Crédit Lyonnais, in November 1991 for $3.25 billion. Because banks were prohibited under the Glass–Steagall Act from owning insurance companies, Crédit Lyonnais organized an investor group to buy the insurance company operations, with the new company named Aurora National Life Assurance Co. Majority control of Aurora National was sold to Groupe Artémis