CNO tightens oversight on deal with reinsurer linked to Platinum

July 27, 2016

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.

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-based CNO agreed to cede reserves tied to the contracts as part of the transaction.

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 counter-party 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.”

Davidson Goldin, a spokesman for Beechwood, said family members of Platinum executives no longer hold investments in the reinsurer. He also addressed the Wall Street Journal’s accounts of a former Platinum employee moving to Beechwood and agreeing to deals to buy part of the hedge fund’s investment portfolio.

“There was no financial harm from these transactions that have already been substantially reallocated, were independently valued and were always a small portion of the firm’s assets,” Goldin said. Platinum has said it’s cooperated with authorities.

CNO shares were down 5 percent in the final hour of trading Wednesday, to $17.51 each.


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