CNO Ends Deal With Platinum-Tied Insurer at Loss, Files Suit

  • Insurer is suspending share repurchase program for 2016
  • CNO files lawsuit against executives of Beechwood Re

CNO Financial Group Inc. said it ended a risk-transfer deal with a reinsurer tied to embattled hedge fund Platinum Partners and will take a $55 million loss on the termination of the transaction.

CNO units have filed a lawsuit against executives of Beechwood Re, according to a statement Thursday from the Carmel, Indiana-based insurer. CNO is suspending its share repurchase program for the rest of the year to guard capital at the holding company and is injecting about $200 million into its insurance units, the firm said.

The risk-transfer deal covered long-term care policies that were initiated by CNO, and that company was counting on Beechwood to back those obligations, a commitment that came into question after the Platinum hedge fund was raided by federal agents in New York in June. CNO said the next month that it was conducting a review of the Beechwood assets backing the deal.

CNO, along with New York and Indiana state insurance regulators, “have concluded that a significant portion of the investments do not comply with applicable regulatory requirements for assets supporting the reinsurance agreements,” CNO said in the statement. The government watchdogs have asked the company “to remedy the resultant deficiency.”

Stock Slump

CNO has dropped 16 percent in New York trading since July 26, the day before the company said it was increasing oversight of the Beechwood deal.

The lawsuit was filed Thursday in New York. CNO units said they were misled by Beechwood executives Mark Feuer and Scott Taylor and that the reinsurer concealed its deep ties to Platinum.

“There have been no losses, including to CNO, and Beechwood has acted properly at all times,” said Davidson Goldin, a spokesman for Beechwood. “Beechwood will take every possible step to refute these false claims and regrets CNO’s inappropriate decision to file a meritless lawsuit filled with baseless innuendo as a method of gaining leverage in a business negotiation.”

The $55 million figure is an estimate and takes into account market value adjustments, expenses and taxes, CNO said.

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