Oaktree grabs control of Atlantic Coast Life Co. in blockbuster A-Cap deal

Advantage Capital signed an agreement with global investment manager Oaktree Capital Management to provide critical funding support for its financially troubled life insurance subsidiaries.

The firm known as A-Cap announced the deal Friday for Oaktree to acquire a controlling stake in Atlantic Coast Life Insurance Co., while also providing capital to Sentinel Security Life Insurance Co.

Oaktree will fund a “surplus note investment into a newly created captive insurance company,” the new partners explained in a news release.

A-Cap battled state regulators and AM Best in recent years over the financial strength of Atlantic Coast and Sentinel Security. On Jan. 23, AM Best downgraded the financial strength ratings of both insurers. In 2024, A-Cap sued AM Best over a proposed ratings downgrade – a lawsuit later settled.

Kenneth King, chairman and CEO of A-Cap, stressed Oaktree’s “track record of investing alongside insurers, particularly during times of transition.

“Oaktree’s insurance-focused credit expertise and flexible, long-term capital will support disciplined growth of our balance sheet, enhance our asset liability profile, and strengthen our ability to serve our policyholders and distribution partners over the long term,” he added in a news release.

All of the net proceeds from the transactions will be used to “support the growth and long-term objectives of Sentinel and its policyholders,” the release said.

“The company will benefit from our meaningful experience in regulated carve-outs as it works to complete its pre-closing transaction milestones,” said Patrick C. George, senior vice president, global opportunities, at Oaktree. “Following closing, we believe both Atlantic Coast Life and Sentinel will be well positioned to prioritize policyholder protection, financial strength, and sustainable long-term growth.”

Oaktree is a global investment manager specializing in alternative investments, with $223 billion in assets under management as of Dec. 31, 2025. The firm "emphasizes an opportunistic, value-oriented, and risk-controlled approach to investments in credit, equity, and real estate," the release said.

Financial strength questioned

AM Best said its ratings downgrade is “based on weakness in A-CAP Group’s business profile as manifested in the material decrease in new premium and material increase in surrenders/outflows, as well as reputational damage resulting from publicized regulatory rulings.”

In late 2024 and early 2025, the A-Cap insurers faced severe regulatory actions in Utah and South Carolina due to alleged "hazardous financial conditions" linked to their investment exposure to 777 Partners, a troubled private equity firm.

Regulators argued A-Cap used flawed, internal valuations to overstate the worth of high-risk assets, while independent audits valued those same assets at significantly lower amounts. While the states banned the insurers from writing new business, administrative law judges in both states later stayed or overturned these orders.

A-Cap provided information that “demonstrates surrenders and outflows have decreased,” AM Best noted. The insurers’ primary focus is the fixed index annuity market, a “dynamic and credit sensitive sector with strong long-term prospects,” the ratings agency added.

AM Best downgraded the FSR from B++ (Good) to B (Fair) and the Long-Term Issuer Credit Rating from "bbb" (Good) to "bb+" (Fair) for both A-Cap life insurers.

“The downgrades are also based on a decline in AM Best’s overall assessment of A-CAP Group’s balance sheet strength,” the release added. “AM Best acknowledges A-CAP Group’s pending capital raise, but also recognizes its level of illiquid assets, concentrated reinsurance leverage, which is mitigated through the use of funds held and modified coinsurance agreements, along with a recent decline in its overall capital adequacy ratios that have not fully recovered to historic levels.”

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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.