Golden Gate Capital sued over PHL insurer’s $2.2bn capital shortfall
Golden Gate Capital is facing a lawsuit from policyholders of struggling life insurer PHL Variable Insurance Company, who allege that the private equity firm and its affiliate Nassau Financial Group mismanaged the business and contributed to a $2.2bn capital shortfall, according to a report by Bloomberg.
PHL Variable Insurance Company policyholders have filed a lawsuit against private equity firm Golden Gate Capital and its affiliate Nassau Financial Group, alleging mismanagement and contributing to a $2.2 billion capital shortfall, according to Bloomberg. The federal court complaint in Connecticut accuses the companies of self-dealing and using related-party transactions to conceal the insurer's financial position.
The legal action follows Connecticut regulators' decision to abandon efforts to rehabilitate PHL, which is now facing potential liquidation. Nassau acquired PHL in 2016, and while PHL's financial issues existed before the acquisition, state regulators claim that investments made following the deal performed below expectations, and related reinsurance arrangements did not offer adequate protection for the company's capital.
The lawsuit accuses the companies of making investments in products linked to Nassau, including collateralized loan obligations and fund obligations, and a private credit fund. It also alleges that Nassau used PHL's assets to finance the purchase of existing life insurance policies, utilizing shell companies for transactions involving approximately $1 billion of stranger-originated life insurance policies.
Nassau has rejected the allegations, stating they are without merit and will defend itself against the lawsuit while continuing to cooperate with the rehabilitator overseeing PHL's affairs.
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