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July 28, 2016 at 08:54 AM
(Bloomberg) — CNO Financial Group Inc. said it’s scrutinizing a risk-transfer arrangement with Beechwood Re, the reinsurer linked to embattled hedge fund Platinum Partners.
“In recent weeks, we actually have increased a level of review and oversight related to this important relationship,” CNO Chief Financial Officer Erik Helding said Wednesday in a conference call discussing second-quarter results.
The CFO was responding to an analyst’s question about a Wall Street Journal article this week that outlined a history of ties between Beechwood and Platinum, including the ownership by some hedge fund executives’ family-member trusts of a stake in the reinsurer. Davidson Goldin, a spokesman for Beechwood, which has offices in New York, said family members of Platinum executives no longer hold investments in the reinsurer.
‘Counterparty risk’
Platinum was raided by federal agents in June after prosecutors alleged that a manager bribed a union chief. Helding said that CNO is “concerned” about the report. Beechwood reached a deal in 2014 to take on some risks tied to long-term care policies initiated by CNO. Carmel, Indiana-based CNO agreed to cede more than $500 million in reserves tied to the contracts as part of the transaction.
Related: View: Tim Kaine and Mike Pence should debate long-term care policy
Helding said Wednesday that the assets are held in a trust that is subject to rigorous guidelines and over-collateralized by 7 percent.
“Those facts there give us some comfort about the structure of the deal, and help to mitigate some of the counterparty risk that we would have had going in,” Helding said. As of the end of June, “Beechwood appears to be in compliance with the agreements.”
Ryan Krueger, an analyst at Keefe, Bruyette & Woods, wrote in a note Wednesday that “at this point it appears everything is fine.” He also addressed the possibility that “issues” at Platinum could cause a spillover effect at Beechwood, leading to insurance risks being transferred back to CNO.
