Utah insurance regulators want to put Sentinel Security Life Insurance Co. and two reinsurance company affiliates into rehabilitation.
A-CAP Group, the companies' parent, says an administrative order gives it until May 12 to make its case for why the annuity issuer and the two affiliates should stay out of rehabilitation.
In 2020, A-CAP picked 777 Partners, a Miami-based private equity firm, to invest a large share of the Utah insurers' assets in high-return, short-term loans to entities controlled by 777 Partners, according to a petition for rehabilitation that Utah Insurance Commissioner Jonathan Pike filed last week in a state court in Salt Lake City.
The 777 Partners investments "have been non-performing and, instead of realizing any return on the investments, the Utah insurers have been required to provide additional funds on the investments to avoid defaults that would disclose their worthless investments and force them to recognize losses, to continue to fund 777 Partners, and avoid the collapse of the entire enterprise," according to the rehabilitation petition.
Representatives for 777 Partners and A-CAP could not immediately be reached for comment.
A-CAP Group said earlier this month that Harvest Investments, a firm that state regulators hired to value the loans, gave the loans a much lower value than Houlihan Lokey and Dundon Advisors, A-CAP's own advisors gave the loans.
Harvest Investments disregarded the value of the collateral backing the loans, such as Boeing jets and a professional soccer team, A-CAP said.
Earlier this month, an A-CAP subsidiary announced it was divesting the interests controlled by A-CAP in Australia's Melbourne Victory soccer team. The value of the transaction was not announced.
Pike says in the rehabilitation petition that the examiner he hired to examine the Utah insurers cannot conduct a thorough analysis of the A-CAP assets because the Utah insurers have stopped providing documentation to the examiner.
The backdrop: Sentinel Security, a company founded in 1948, was acquired by A-CAP in 2016.
A-CAP formed Haymarket Insurance Co. in 2015 to serve as a reinsurer for fixed annuity and deposit fund contracts. It formed the other reinsurer, Jazz Reinsurance, in 2017.
Sentinel Security and Jazz Re were formed in Utah. Haymarket was formed in Nebraska, and A-CAP moved its state of domicile, or official home, to Utah in 2023.
Sentinel Security has been writing products such as income annuities, fixed indexed annuities, multi-year guaranteed annuities and final expense life insurance.
A-CAP, the parent, also owns two insurers based in South Carolina, Atlantic Coast Life Insurance Co. and Southern Atlantic Re.
The company says in a 2023 financial statement posted on its website that it had $51 million in net operating income that year on $1.2 billion in admitted assets.
The Utah petition shows that, as of Dec. 31, 2023, Haymarket had $3.6 billion in assets and Jazz Re had $3.1 billion in assets.
The Utah petition: The Utah commissioner put Sentinel Security and its affiliates under a supervision order in April 2024. The order required the companies to liquidate investments of concern and hire an independent service provider to value the investments.
As of Feb. 6, 2025, the risk-based capital ratios, or solvency summary indicators, for the companies were negative 1511% for Sentinel Security, negative 1924% for Haymarket and negative 5937% for Jazz Re, according to the Utah regulators' calculations.
A-CAP was working with a 777 Partners reinsurer, 777 Re, and A-CAP's insurers in Utah had ceded $1.7 billion in reserves to 777 Re, according to the regulators' rehabilitation petition.
The Utah insurers' examiner received fewer valuations from the A-CAP insurers than it had requested, and the examiner did not believe the valuations were prepared in accord with the applicable standards, the regulators say.
The Bermuda Monetary Authority reported in 2023 that it had significant concerns about corporate governance, risk management and decision-making functions at 777 Re, according to the rehabilitation petition. The authority canceled 777 Re's insurance registration in September 2024.
Utah ordered the insurers based in Utah to stop writing new business by the end of 2024. An administrative law judge in Utah agreed to keep the order from taking effect until after a trial to be held May 12, 2025.
Utah wants to put the Utah insurers in rehabilitation partly because A-CAP is continuing to invest the insurers' assets in Flair Airlines, an A-CAP-related entity, and Nutmeg, an A-CAP-related entity that invested in European soccer teams, without getting the approvals required by the April 2024 supervision agreement, the regulators say.
The insurers also made new investments without getting the required supervisor approval, officials say.
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