As previously disclosed in a Form 8-K that was filed on
In order to protect the interests of CNO, BCLIC, WNIC and their respective stakeholders, the CNO companies have taken the following actions:
- BCLIC and WNIC sent written notice to
Wilmington Trust, N.A. (Wilmington), as trustee to the reinsurance trusts, that BCLIC and WNIC exercised their rights to immediately withdraw all assets from the trusts, and instructed Wilmington to deliver the assets to custodial accounts of BCLIC and WNIC.
- BCLIC and WNIC gave written notice to BRe that they are terminating their reinsurance agreements with BRe, effective immediately.
- BCLIC and WNIC recently expanded the scope of the audit to include additional Level 3 investments with a reported amount of approximately
- BCLIC and WNIC commenced an arbitration proceeding and demanded emergency relief, specifically, that BRe provide immediate access to certain documents and information regarding the trust assets, which will allow the audit of the aforementioned Level 3 investments to be concluded. BCLIC and WNIC are also seeking compensatory, consequential and punitive damages from BRe as part of the arbitration.
- BCLIC and WNIC have also commenced litigation against current and former individual principals of BRe (
Mark Feuer, Scott Taylorand David Levy) for the damages caused by their actions.
- The CNO companies are resuming responsibility for all aspects of policyholder administration. We expect no impact to policyholders as a result of these actions.
A recapture of this business requires CNO to revalue the assets and liabilities based on valuation methodologies that are consistent with the methodologies used by CNO to value its own investments and insurance liabilities. While the audit of certain Level 3 investments is still in progress, preliminary information indicates that CNO would record an after-tax charge of approximately
Pro forma estimated loss:
Estimated market value adjustments related to:
Investments included in the initial scope of the audit
Other Level 3 investments
Write-off of estimated receivables due from BRe
Increase in insurance liabilities consistent with CNO valuation
assumptions (primarily related to interest rates)
Reported amount of assets held in trusts in excess of liabilities
Estimated loss before income tax benefit
Estimated income tax benefit
Estimated pro forma net loss
The estimated pro forma net loss is based on numerous assumptions, including our current best estimate of the fair value of investments and the amount of insurance liabilities expected to be received as a result of the recapture. These estimated values are based on information currently available to us and may change based on, among other factors: (i) additional information we may obtain; (ii) the actual fair value of the related investments on the recapture date; and (iii) actual assumptions used to value the insurance liabilities.
After the adjustments summarized above, the remaining value of the Level 3 investments is
As a result of the recapture, related charge and additional capital required to support the assets and liabilities of this business, CNO will contribute approximately
In order to increase its excess capital position at the holding company, CNO has suspended its share repurchase program for the remainder of 2016. As of
Based on information obtained subsequent to the filing of our
Cautionary Statement Regarding Forward-Looking Statements. Our statements, trend analyses and other information contained in this press release relative to markets for
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