New Failure in Texas

More than 40 Texas insurance companies have gone bankrupt in the past three years. Last week the state's slow-moving Insurance Commission revealed probably the biggest bust of them all. Said the commission: ICT Insurance Co. is "hopelessly insolvent," to the tune of $4,460,243. Left holding the bag were some 14,000 stockholders and 100,000 policy holders. Most of them were labor-union members, because more than 50% of ICT Insurance Co.'s stock was owned by about 380 Texas A.F.L.-C.I.O. locals.

The idea of putting unions into the insurance business came in 1951 from backslapping Ben Jack Cage, now 39, who won enthusiastic support from the Texas Federation of Labor. Cage gave union leaders a majority on the board of his Insurance Co. of Texas (later changed to ICT Insurance Co. after the scores of failures made people wary of "Texas" in an insurance title). Cage gave out cheery reports that the company was bringing in $10 million to $15 million yearly in "premium writings" from 25 states. Actually, ICT always lost money. Taking bad fire and casualty risks, it paid out some 61% of its premiums in claims, up to 35% in agents' commissions, 15% in management expenses to Cage, who also enjoyed a reported $40,000 salary and a lavish expense account. Living high, Cage took former Texas Insurance Commission Chairmen Garland A. Smith and J. Byron Saunders on free junkets to Havana and Las Vegas in his private plane.

To cover the losses, investigators found, Cage bought up small industrial plants and pumped their profits into ICT, listed questionable assets, at least once reported a loss on a business deal as a profit. Board members finally grew restless with Cage's free-wheeling management, fired him last February.

Two months later insurance investigators got suspicious when, in the company's list of assets, they turned up some bonds which ICT refused to value. Insurance commissioners refused to admit the bonds as assets, looked further and found other losses that had not been shown previously. At week's end the commission put ICT temporarily out of business, gave it two weeks to raise cash to straighten its troubles or be closed for good.

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