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'MMONWEALTH OF MASSACHUSETTS
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OFFICE OF CONSUMER AFFAIRS
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SUFFOLK, ss Docket No. F 2001-0IB
IN THE MATTER OF THE PROPOSED MERGER OF
BERKSHIRE LIFE INSURANCE COMPANY
AND
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
MEMORANDUM OF DECISION AND ORDER
INTRODUCTION
I.
Berkshire Life Insurance Company, a Massachusetts domiciled mutual life
insurance company ("Berkshire"), seeks to merge with and into The Guardian Life
Insurance Company ofAmerica, a New York domiciled life insurance company
("Guardian").
By the terms ofthe companies' Amended and Restated Agreement and Plan of
Merger, dated as ofAugust 31, 2000 (the "merger agreement"), Berkshire proposes to
merge into Guardian, and Guardian would continue its corporate existence and remain
New
domiciled in and subject to the laws ofthe State of York, with its principal offices in
New York, New York.
Pursuant to Massachusetts General Laws ("M.G.L.") chapter 175, §19B ("Section
19B"), the proposed merger ("merger") and the merger agreement must be approved by
the Commissioner ofInsurance for the Commonwealth ofMassachusetts (the
"Commissioner"), who has broad discretion in granting such approval. M.G.L. c. 175,
2
§ 19B.1 Pursuant to Section 19B, the merger must be:
"evidenced by a written agreement assented to by a vote ofa majority
(1)
ofthe board ofdirectors ofeach domestic company;" and
(2) "approved by the votes ofat least two thirds ofsuch policyholders as
."
are present and voting at a special meeting
. . .
Berkshire has applied for and seeks such approval.
The Commissioner's review ofthe merger and merger agreement under Section
19B is governed by 21 1 Code ofMassachusetts Regulations ("CMR") § 140.00, et seq.
(the "merger regulation"), pursuant to which the Commissioner may consider the
following factors in deciding whether to approve the merger:
1 the fairness ofthe terms and conditions ofthe merger agreement;
.
Section 19B applies to a merger by a domestic insurer with and into a foreign insurer, where the
foreign insurer is the surviving company. M.G.L. c. 175, § 19B.
2
The statute also sets forth that the merger shall not be made "until a copy [ofthe agreement]
. . .
.and such other information as the commissioner may require, has been filed with [the commissioner]
. . .
nor until it has received from the commissioner a written authorization, in such form as he may prescribe,
authorizing [the domestic company] ... to merge or consolidate and to execute such agreement. The
commissioner may, in his discretion, refuse to issue such an authorization in any case, and his decision
shall be final." M.G.L. chapter 175, section 19B.
3
The statute also references that the plan must be "approved by a vote ofthe stockholders ofsuch
[domestic] company owning at least two thirds ofthe outstanding capital stock ofsuch [domestic] company
. . . ." However, this provision has no application in the instant case since Berkshire has no stockholders.
2. whether the interests ofBerkshire policyholders are protected; and
3. whether the merger is in the public interest.
The merger regulation also provides the Commissioner, or presiding officers appointed
by the Commissioner, with the discretion to conduct a public hearing "in order to afford
interested persons an opportunity to present data, views, arguments, or comments in
regard to the proposed merger including, but not limited to, the [Merger] Agreement,"
. . .
CMR
211 § 140.08 (the "public hearing"). Such public hearing was held on June 1, 2001
in Pittsfield, Massachusetts.
The merger agreement may be approved if"subsequent to the special meeting of
CMR
policyholders, it appears that the requirements ofM.G.L. c. 175, § 19B, 211 140.00
CMR
and other applicable laws, ifany, have been satisfied," 21 1 § 140.14.
In addition, before the merger can take effect, New York law requires the
approval ofthe Guardian Board ofDirectors and its policyholders as well as the approval
A
ofthe Commonwealth ofMassachusetts Division ofInsurance (the "Division").
number ofotherjurisdictions have laws that may affect the merger or the operations of
the surviving company. The approval ofthosejurisdictions, where required, is also a
condition precedent to the consummation ofthe merger, and Berkshire and Guardian
have agreed to use their respective best efforts to file any required notices or otherwise
take such actions as are necessary to obtain required approvals and to comply with
applicable requirements in connection with the merger under such laws.
PROCEDURAL BACKGROUND
H.
Promptly after its adoption on August 31, 2000, Berkshire submitted to the
Division for approval, a duly executed and attested copy ofthe merger agreement, which
had been unanimously approved by the two companies' respective boards ofdirectors.
In connection with Berkshire's application, the Commissioner promptly
designated an interdepartmental working group (the "working group") to conduct an
CMR
examination ofBerkshire under M.G.L. chapter 175, § 4 and 21 1 § 140.06,
including a review ofthe merger agreement and to advise the Division with respect
thereto. The Division thereafter engaged the services ofthe following outside and
independent legal, actuarial/accounting and financial advisors to assist in the conduct of
& &
the examination: Stroock Stroock Lavan LLP, as legal advisors; Tillinghast Towers
Perrin, as actuarial/accounting advisors; Dresdner Kleinwort Wasserstein, Inc., as
KPMG
financial advisors and LLP to evaluate Berkshire's compliance with mailing
policyholder information.
By letter dated September 7, 2000, the Commissioner recused herselffrom any
participation in the process ofapproving or disapproving the merger and duly appointed
Michael T. Caljouw and Richard A. Cody as her designated presiding officers. On April
3, 2001, pursuant to section 140.09(l)-(2) ofthe merger regulation, the presiding officers
issued a written notice ofpublic hearing to Berkshire and directed that it be distributed to
Berkshire's directors, officers, employees and policyholders, and to Guardian, no later
_
than 30 days prior to the public hearing. , .
Commencing on April 9, 2001, Berkshire sent, via first-class mail, the notice of
public hearing, the proxy statement, the notice ofspecial meeting and certain explanatory
materials to the Berkshire voting policyholders, as required by M.G.L. c. 175 § 19B and
CMR
211 140.09. In addition, that same day, Berkshire also sent, via first class mail, the
notice ofpublic hearing to all members ofits board ofdirectors, as well as to Guardian,
and, at the request ofthe Division, notified all employees and officers ofBerkshire ofthe
public hearing by posting the notice ofpublic hearing on Berkshire's website, by email
and on employee bulletin boards. See Affidavit ofGina Cinelli Birchall.
The merger regulation provides that the notice ofpublic hearing must also be
published in a newspaper, as approved by the Commissioner, at least 30 days prior to the
CMR
public hearing. 21 1 § 140.09(5). Similarly, the notice ofspecial meeting must be
provided in accordance with the applicable laws and published at least once a week for
three successive weeks in some newspaper printed in the Commonwealth of
Massachusetts (the "Commonwealth"). Since Guardian is outside ofthe Commonwealth,
the notice ofspecial meeting must also be published at least once a week for three
successive weeks in a newspaper printed in the towns where Guardian has its principal
CMR
offices. M.G.L. c. 175, § 19B; 21 1 § 140.13(2). As approved, Berkshire arranged
for publication ofthe notice ofpublic hearing in The Berkshire Eagle, The Boston Globe,
The Worcester Telegram and The Springfield Union News on April 24, 2001 and in the
New York Times on April 25, 2001. See Affidavit ofGina Cinelli Birchall. The notice
ofspecial meeting was duly published in The Berkshire Eagle, The Boston Globe, The
Worcester Telegram and The Springfield Union News on April 24, May 1, and May 8,
2001 and in The New York Times on April 25, May 2, and May 9, 2001. See Affidavit
ofGina Cinelli Birchall.
