Business Notes Insurance

As Americans followed the S&L debacle, another crisis was quietly brewing in the insurance industry. That silence ended with a bang last week when the state of New Jersey seized the collapsing Mutual Benefit Life (assets: $13.8 billion) in the largest such takeover in U.S. history. Regulators took action as panicky policyholders rushed to cash in their policies out of fear that worsening problems in the Newark-based firm's real estate portfolio could put their money at risk. The insurer, which has issued some 600,000 life insurance policies in the U.S., will continue to pay death benefits and other claims while the state seeks to reorganize the company.

As regulators took over Mutual Benefit, France's Groupe Axa S.A. agreed to invest $1 billion in Equitable Life, the third largest U.S. life insurer. The deal will give Axa at least a 40% stake in the company. Equitable, plagued by troubled real estate and junk-bond investments, had been seeking a partner to strengthen its finances. The company plans to make an initial stock offering once the Axa deal is completed.