How Much Are Citigroup's Former Employees Worth Dead?
Since the beginning of 2008, Citigroup has made thousands of employee layoffs and is poised to discharge thousands more by year’s end. The layoffs may ultimately total between 17,000 to 24,000 employees due to subprime and credit-related losses, according to CNBC.
The layoffs raise the interesting question, “how much are Citigroup’s former employees worth dead?”
Citibank, N.A., like many national banks, invests heavily in policies of bank owned life insurance or “BOLI.” BOLI policies insure the lives of the bank’s employees, but unlike traditional life insurance name the bank as the policy beneficiary. When the bank employee dies, the insurance benefits are paid to the bank.
Banks, like Citibank, are required to report their life insurance holdings through reports filed with the Federal Financial Institutions Examination Council and report those holdings on line five of a schedule called “RC-F—Other Assets.” Those reports demonstrate that Citibank has acquired billions of dollars of BOLI coverage on the lives of its employees since 2006. Citibank possessed $2.215 billion in BOLI coverage as of March 31, 2006, $3.325 billion as of March 31, 2007, and $3.99 billion as of December 31, 2007. Notably, banks report their life insurance assets in terms of cash surrender value, meaning that the policy benefits due from employee deaths are likely far greater than the amount reported on the schedules.
BOLI policies remain in force even if the insured person’s employment with the bank ends. Thus, Citibank will receive insurance benefits upon the deaths of its former employees who were insured by a BOLI policy. As the employees who were laid off in 2008 die, policy benefits will flow to Citibank. And from a pool of 17,000 to 24,000 former employees, those benefits may be significant, even by Citibank’s standards.