ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Sunday, December 1, 1996 TAG: 9612030037
SECTION: BUSINESS PAGE: 1 EDITION: METRO
DATELINE: RICHMOND
SOURCE: DAVID RESS RICHMOND TIMES-DISPATCH
Al Gross, Virginia's top insurance regulator, has a taste for the complicated and the subtle.
As a literature student in the 1960s and '70s, he loved the German novelist Thomas Mann - but did his Ph.D. research on Mann's older brother Heinrich, a writer of whimsy and satire who ended up as a hack, a chronicler of a time in Germany when an autocratic kaiser and a democratic Parliament fought for a nation's soul.
As a student working toward a master's degree in business administration in the late 1970s, Gross liked finance best: poring over the numbers that tell how and what companies are really doing.
Alfred W. Gross may very well be the only literature Ph.D. to run a state insurance department.
Appointed by the State Corporation Commission as commissioner of insurance in July, he runs the 175-person Bureau of Insurance. He has been an insurance regulator since 1981, joining the bureau after several years studying and teaching German literature and philosophy.
``Tastes change,'' he said.
But Gross figures his taste for digging into companies' numbers to try to understand what they are up to isn't really all that far from digging into German texts to try to understand what people of a different time and culture were all about.
``I found I really liked accounting and finance,'' the one-time professor said. ``It's the language of business.''
Gross and his colleagues at the bureau make sure insurers are treating customers fairly and have the resources to live up to the promises they make in their policies.
``When actual experience isn't what you expect, that's what insurance is about,'' Gross said. ``If you're paying for protection, it should be there.''
Gross, who started as a financial examiner at the bureau, was named deputy commissioner for financial regulation in 1989.
That job landed him right in the middle of one of the bureau's toughest jobs, the receivership of Fidelity Bankers Insurance Co. in 1991
Working with then-Commissioner Steven Foster, general counsel Peter Smith and outside consultant Patrick Cantilo, Gross wrestled with the question of what to do with Fidelity Bankers' multimillion-dollar portfolio of junk bonds.
At the time, insurers, securities firms and pension firms were selling their junk bonds as fast as they could, trying to cut their losses in a collapsing market.
The bureau team at Fidelity Bankers didn't do that.
``We said, `Look, we've got to stop and see what exactly we've got'; we tried to be very rational about it,'' Gross said.
What they found were bonds in companies that, while in trouble, were trying to work their way back to profitability. And they found bond holdings so large that Fidelity Bankers had a major voice on creditors' committees saying where bankrupt companies ought to put their money.
By hanging on to much of the paper, they ended up with a portfolio of bonds that eventually showed a profit.
``Al's a very thoughtful person. He thinks his actions over before he takes them,'' Smith said. ``He's very analytical.''
The result, Foster said, was good news for policyholders.
``I think we saved something like a half-a-billion [dollars] for policyholders,'' said Foster, who now is vice president for compliance at Prudential Insurance Co. ``Not a lot of people know the hours, days and weeks Al put in on Fidelity Bankers' asset management, work he did in addition to the expectation he would keep running his section at the bureau.''
Although Gross is now the top officer of the bureau, homework assignments haven't stopped.
While coping with junk bonds was the hot topic for insurance regulators in the early 1990s, these days they are focusing attention on how health care is paid for and how the payers are affecting the quality of care that patients receive.
``There are a lot of very technical issues; I'm not supposed to be an expert, but I am supposed to understand them. I need to do a lot of reading,'' Gross said.
There are equally tough issues in other hot areas of insurance regulation. One is the ability of homeowners who live near the coast to afford or even get insurance after the hurricanes that swept Virginia and other Southern states this summer.
As the competition among financial services companies for Americans' savings grows more intense, the annuities and retirement programs insurers offer are a key interest of regulators. The way insurers insure themselves, by buying insurance through so-called ``reinsurance treaties,'' is another major issue.
``I try not to take reinsurance treaties to bed,'' Gross said. ``They're pretty dry reading.''
He still prefers German novels and keeps a sharp eye on area newsstands for German magazines and newspapers. But he reads other things, too.
``If all I read is insurance and German, it starts to affect my English,'' Gross said. ``And that's hard enough.''
LENGTH: Medium: 97 lines ILLUSTRATION: PHOTO: AP. Al Gross more than likely is the only literatureby CNBPh.D. to run a state insurance department. color.