Exclusive: Reinsurer Beechwood explores sale after Platinum woes - source

Fri Dec 9, 2016 7:07pm EST
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By Lawrence Delevingne

NEW YORK (Reuters) - The Beechwood group of reinsurance companies is in talks to sell most or all of itself after a backlash from some clients due to its relationship with troubled hedge fund manager Platinum Partners, according to a person familiar with the situation.

"The very good news is that Beechwood has a successful business model that is attractive to investors," Davidson Goldin, an external spokesman for Beechwood, said in a statement to Reuters on Friday.

"The unfortunate news that Beechwood is working to manage on behalf of its clients is that Beechwood’s historical relationships with individuals from Platinum are causing substantial reputational issues for the firm separate from its performance."

The sale discussions are with large insurance and private equity firms, according to the person, who requested anonymity because the information is private and who spoke to Reuters on Wednesday.

The talks mark a reversal of fortune for Beechwood, a once fast-growing reinsurer founded in 2013 with some funding coming indirectly from Platinum and some crossover in personnel. (See graphic: tmsnrt.rs/2hjRlW6)

The Bermuda-, Grand Cayman- and New York-based firm has been working to sever its links with Platinum after the once-$1.35 billion hedge fund manager became embroiled in multiple federal probes and put its funds in liquidation in July. Beechwood had made investments worth hundreds of millions of dollars in Platinum-related hedge funds and businesses on behalf of its insurance clients, according to public filings and information provided by one client as part of subsequent litigation.

As Manhattan-based Platinum’s troubles mounted, one of Beechwood’s major clients, Indiana insurer CNO Financial Group CNO.N, pulled business from Beechwood and sued three current and former Beechwood executives seeking damages. Another large client, Pennsylvania-domiciled Senior Health Insurance Co of Pennsylvania, better known as SHIP, is liquidating its Platinum-related holdings, invested for them by Beechwood.

Led by a former chief executive officer of Marsh USA and senior executives from Morgan Stanley (MS.N: Quote) and Merrill Lynch (BAC.N: Quote), Beechwood managed $2.44 billion as of 2015. The lawsuit from CNO subsidiaries in September claimed that Beechwood told them that “it is about to run out of cash” and that its two principals “will have to fund operations with their own money.”   Continued...