Of the nearly 84,000 policyholders of the Southland National Insurance Corp., currently in receivership, all but two are expected to receive their full policy value thanks to the backstop provided by state guaranty associations.
Southland is one of four insurers owned by troubled billionaire Greg Lindberg. All are in a receivership supervised by the North Carolina Department of Insurance. Standard guaranty association coverages protect policyholders up to $300,000.
The two policyholders owed more than that will be covered up to $300,000, court documents say.
When that money might be released, however, remains a mystery due to the arcane receivership process.
Lindberg celebrated a big victory last week when a federal appeals court tossed out his convictions on federal funds bribery and honest services fraud due to judicial error. Lindberg is two years into a seven-year prison sentence. The appeals court ordered that he be retried, although the government can still appeal that ruling.
Meanwhile, North Carolina regulators try to sort out Lindberg’s business empire and make policyholders whole.
Lindberg to cede control
A May court victory should help. A North Carolina judge ordered Lindberg to cede control of his private companies to a special board that would use them to salvage the four financially troubled insurers. Court documents describe “hundreds” of affiliated companies encompassed by the ruling.
North Carolina Insurance Commissioner Mike Causey declined comment through a spokesman, citing a court order. But he released a statement calling the court ruling “a big win for policyholders.”
“My number one priority as Insurance Commissioner is protecting policyholders,” the statement continued. “If Mr. Lindberg and his companies had honored the promises that they made to these insurance companies and their policyholders back in 2019, we might be well on our way to having this matter resolved.”
According to court documents, the four insurers say they face shortfalls of more than $1 billion and that policyholders could take “severe losses” before the receivership is completed. The companies have more than 262,000 policyholders combined, state insurance regulators have said.
A mysterious process
The receivership process remains shrouded in mystery, with regulators only required to submit a quarterly progress report to the court. When regulators will finish their work is unknown. It could take years, legal experts say.
In the meantime, policyholders, many of them in the twilight of life, wait patiently for money they had counted on to fund retirement.
“At this rate, the only way they’re going to get [their money] now is by dying and to win by dying is not winning at all.”
— Bobby Cogdell, Cogdell Insurance Agency
“At this rate, the only way they’re going to get [their money] now is by dying and to win by dying is not winning at all,” said Bobby Cogdell, who runs Cogdell Insurance Agency in Lexington, Tenn.
An independent agent writing policies since 1963, Cogdell matched “about 30” clients with policies sold by Lindberg’s Bankers Life Insurance Co.
In the months and years since, regulators allowed hardship withdrawals, with approval, and a one-time $10,000 payment, upon request. His clients need more than that, Cogdell said, citing an 80-year-old policyholder with a history of cancer who has $250,000 tied up in a Bankers Life annuity contract.
“What good is that contract that she’s got in that annuity that gives her these rights if the North Carolina Department of Insurance is going to take that away from her?” Cogdell asked. “Does that make any sense?”
Another client is the primary caregiver for a disabled daughter and has $100,000 in a Bankers Life policy sold by Cogdell. The last policy Cogdell wrote was for his wife in 2018, he said.
Of the four insurers owned by Lindberg, only Southland National Insurance Co. is in liquidation proceedings, which must happen for policyholders to access guaranty association funds. Bankers Life is expected to be referred to liquidation this month, said a source with the North Carolina Department of Insurance.
The story of Greg Lindberg continues to shock and amaze five years after his troubles started with simmering feud with then-North Carolina deputy insurance commissioner Jackie Obusek. Lindberg began to woo Causey in a bid for more lenient regulation of his companies.
Causey assisted the Federal Bureau of Investigation in its inquiry into Lindberg’s entreaties. In March 2019, Lindberg, two business associates and the chairman of the North Carolina Republican Party, Robin Hayes, were indicted by a federal grand jury for wire fraud and bribery, among other charges.
Lindberg and his associates – coordinating efforts with Hayes – allegedly promised to donate millions of dollars to the North Carolina Republican Party. In exchange, Lindberg was to receive more favorable treatment of Global Bankers Insurance Group by regulators, investigators allege, along with Obusek’s dismissal.
In March 2020, Lindberg was found guilty of conspiracy to commit honest services wire fraud and bribery. He was later sentenced to seven years and three months in prison.
Cracks in Lindberg’s business empire emerged well before he was indicted. The Yale University graduate came to the insurance industry after establishing Eli Global, a private equity firm. In 2014, Eli Global made its first insurance acquisition when it purchased a burial-policy insurer based in Alabama.
In the ensuing two years, Lindberg acquired more insurers and grouped them together as the Global Bankers Insurance Group. Insurance profits soared and ultimately enabled Lindberg to funnel $2 billion to Eli Global, according to a Wall Street Journal report.
But this strategy of using the insurers to subsidize Lindberg’s other businesses would initiate a domino effect of troubles. It started with the first insurance company he acquired. Alabama law limited the amount of funds Lindberg could transfer from the burial-policy insurer to Eli Global.
Lindberg relocated the insurer to North Carolina. Regulators there usually enforced a cap of affiliated investments on insurers at 10% of their assets, but the insurance department, then led by commissioner Wayne Goodwin, made a special deal with Lindberg to allow his burial-policy insurer to invest as much as 40% of its assets in his other companies.
Lindberg eventually invested at least $1.2 billion of “insurance companies’ funds held for policyholders” into his other companies, court documents say.
Signs of distress
By 2019, Lindberg had acquired more than 100 companies. He reportedly owned homes in Idaho and the Florida Keys, as well as a large mansion in Raleigh, North Carolina. Lindberg counted a 214-foot yacht named the “Double Down” and a private jet among his holdings. In 2017, a spokesperson claimed his net worth was $1.7 billion.
But underneath his web of private companies, trouble bubbled into public view. In late-2017, one of his companies was reportedly declared “financially impaired” and thus restricted from doing business by Florida regulators. During this period, Lindberg became a major donor to political figures in both Florida and North Carolina.
In June 2019, the hammer dropped. North Carolina regulators placed several of Lindberg’s insurance companies into “rehabilitation,” citing concerns about their liquidity and ability to meet their obligations to policyholders.
It would be revealed later that despite being allowed to transfer up to 40% of assets from his insurer to other companies, Lindberg went beyond that bar. The 40% figure is a stunningly high number, said Michael A. Friedman, partner at Genovese Joblove & Battista, a Miami-based law firm specializing in bankruptcy and receivership litigation.
The law firm has no role in the Lindberg case, but its attorneys, Friedman and firm partner Peter W. Bellas, reviewed documents for this story.
“It really gives you a sense of how dire the liquidity position of these insurance companies was permitted to be,” Friedman said. “If you’re getting up to pledging half, or over 40% of your admitted assets, then what are you going to use in the event of some catastrophic event to pay out to policyholders?”
In July 2019, North Carolina Gov. Roy Cooper signed a bill, widely dubbed “the Lindberg bill,” that sets a statutory limit on affiliated investments by insurers at 10% of their assets. Eli Global was re-branded as Global Growth in September of that year and Lindberg resigned as its chief executive officer.
Lindberg and his companies are defendants in several lawsuits. In 2021, Lindberg was sued by executives at four of his insurance companies, who accused him of loaning the companies’ money to himself and failing to repay them. In May, a federal judge ordered Lindberg to repay $524 million to a Puerto Rican insurance company whose assets were invested with another insurer that failed.
Since Lindberg’s insurance companies entered receivership, the North Carolina Department of Insurance issues quarterly reports on their progress. The four insurers are: Bankers Life Insurance Co., Southland National Insurance Corp., Southland National Reinsurance Corp. and Colorado Bankers Life Insurance Co.
Regulators describe efforts to manage investments, increase liquidity and negotiate more favorable terms on “essential contracts,” while terminating “non-essential contracts.” Additional details from the most recent receivership report, filed with the court May 22, include:
Southland National Insurance Corp.: Regulators recommended liquidation of Southland and that petition is under a stay order issued by the Wake County Superior Court. Otherwise, Southland is a party to, or has a financial interest in, at least 18 different lawsuits. Southland had about $173.6 million of affiliated investments, about 67% of the admitted assets.
Liquidations proceedings protects policyholders by triggering state guaranty association coverage. The North Carolina Life & Health Insurance Guaranty Association provides up to $300,000 per individual, which is standard. According to the report, “only two SNIC policies, out of almost 84,000 policies, are known to exceed guaranty association coverage limits.”
“The two policies known to be in excess of guaranty association coverage limits will be covered up to those limits,” the report reads. “Those policyholders will have a pro-rata claim for the remaining policy obligations up to policy limits, against whatever assets SNIC can marshal in liquidation, or recover through litigation, after all expenses … are paid.”
Southland National Reinsurance Corp.: A pure reinsurance company, Southland no longer has any business on the books, the report said. Remaining assets and liabilities are being liquidated.
Bankers Life Insurance Co.: The company had $54.5 million of affiliated investments, about 16% of the admitted assets. Bankers Life is a party to, or has a financial interest in, at least 14 different lawsuits.
Regulators completed a “partial withdrawal program” allowing policyholders to make a one-time withdrawal of 10% of their account value up to $15,000. During the program, regulators issued 1,597 Bankers Life checks totaling $11.98 million, the report said.
Colorado Bankers Life Insurance Co.: The company had $961 million of affiliated investments, about 40% of the admitted assets. Regulators also allowed partial withdrawals of Colorado BL policies with the same terms. They wrote 40,697 checks totaling $32.5 million.
Could be a long process
Allowing the 10% distribution could be an indication that regulators anticipate a long receivership process, said Michael A. Friedman, a partner at Genovese Joblove & Battista.
“One purpose of an insurance receivership is to make as large a distribution to policyholders and other creditors as possible as soon as possible,” he said. “Thus, an interim distribution may occur if the receiver determines that the receivership estate has sufficient assets to make such a distribution while leaving sufficient assets on hand to pay administrative expenses of operating the receivership.
“This could be indicative of a long process, because there is an administrative cost of making an interim distribution. The receiver would be unlikely to assume that cost if they were close to making a final distribution.”
“Allowing policyholders a 10% withdrawal from annuities tied up in the receivership now certainly seems reasonable under the circumstances,” added Peter W. Bellas, a partner at Genovese Joblove & Battista.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected] Follow him on Twitter @INNJohnH.
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