Long-term care insurer SHIP works to dump Platinum Partners

NEW YORK (Reuters) - 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 year.

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 2016.

“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 2016 filings.

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 [BLCELB.UL], just before it went too went bankrupt.

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 Pennsylvania.

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.

(Story refiles to correct cargo to Partners in headline.)

Reporting by Lawrence Delevingne; Editing by Carmel Crimmins