(Corrects cargo to Partners in headline)
By Lawrence Delevingne
NEW YORK, Sept 15 A U.S. insurance company that
works with more than 70,000 elderly policy holders to meet their
healthcare needs is aiming to cut all of its financial ties to
troubled hedge fund manager Platinum Partners by the end of the
Senior Health Insurance Company of Pennsylvania, or "SHIP,"
had at least $100 million of its assets invested in Platinum's
funds or companies backed by Platinum as of June, according to
National Association of Insurance Commissioners (NAIC) filings
reviewed by Reuters.
That represented about 3.7 percent of the long-term care
provider's $2.7 billion overall assets but nearly 3 times its
$35 million financial surplus.
New York-based Platinum, led by Mark Nordlicht, is in the
process of liquidating its main funds amid dual federal probes
and the arrest in June of a longtime associate, Murray
Huberfeld, on charges he bribed a union official in return for
an investment in the fund. Huberfeld has denied the charges.
SHIP president and chief executive Brian Wegner said in an
emailed statement to Reuters that the company is in the process
of reviewing and shedding all Platinum-related investments - now
down to about $50 million - and would be done by the end of
"SHIP has experienced no losses and fully anticipates that
will be the case as the remainder is divested," Wegner said.
He added that SHIP - a non-profit that is slowly winding
down its business by not issuing new policies - is operating
above the financial requirements of its regulators and that its
financial position will have been "substantially strengthened"
in the third quarter.
Spokespeople for Platinum and the state of Pennsylvania's
insurance commissioner declined to comment.
SHIP's investments in Platinum funds and related businesses
were made by Beechwood Re and its affiliates, a reinsurance
company with historical ties to Platinum through shared
executives and investments. Beechwood guarantees a
5.8 percent return on the $273 million it managed for SHIP as of
Dec. 31, 2015, according to the NAIC filings.
Davidson Goldin, an external spokesman for Beechwood, said
that its guarantee to SHIP is backed by Beechwood's $2.4 billion
portfolio and that the company did not expect any losses for
itself or SHIP from the Platinum funds and related investments.
"They are collateralized by tangible assets, have been
performing and are additionally supported by Beechwood's
substantial capital," Goldin said in an emailed statement.
Goldin added that Beechwood's owners "have been arranging to
buy out each asset" related to Platinum for SHIP. That has
allowed the insurance company to exit investments in various
troubled Platinum-backed companies with no loss, according to
One example was loans to China Horizon Investment Group, the
Platinum-backed company behind a bid with China Post Group
Corporation to build convenience stores in Chinese post offices;
Platinum recently sued China Post Group for $500 million in
damages for fraud and breach of contract.
Another was loans related to Northstar Offshore Group LLC, a
Platinum-backed energy company that recently filed for
bankruptcy. Northstar had taken over the assets of another
Platinum-owned energy company, Black Elk Energy Offshore
Operations LLC, just before it went too went
SHIP CEO Wegner said that his company's contract with
Beechwood to invest on its behalf would continue. The two
businesses are also linked by debt; in February 2015, SHIP took
a $50 million surplus note - essentially a loan - from Beechwood
at a 6 percent interest rate.
Beechwood also acts as a reinsurance provider for CNO
Financial Group Inc. SHIP was created out of CNO's
financially troubled portfolio of long-term care policies,
previously known as Conseco Senior Health Insurance Company. The
policies were spun off in 2008 as a non-profit based in
CNO's stock has been hit by its exposure to Platinum through
Beechwood. CNO said in a recent filing with the U.S. Securities
and Exchange Commission that it was reviewing related
investments in hard-to-value private companies' holdings to
determine if they would need to be re-valued.
(Reporting by Lawrence Delevingne; Editing by Carmel Crimmins)