Greg Lindberg is a billionaire financier who owns several insurance companies amid his holdings. Lindberg has been under investigation for alleged financial impropriety and was profiled in a lengthy Wall Street Journal story last week.
His colleagues and representatives spent weeks answering detailed questions from the Wall Street Journal. They claim key facts were omitted from the story. Facts such as:
- There are numerous inaccuracies with respect to the use of the insurance funds to finance personal assets. For example, no insurance company money was used to purchase Mr. Lindberg's investments in the Idaho and Key West properties, his boat, or the airplanes, one of which was leased. Mr. Lindberg has never spent a night inside the Idaho house, the Key West house, or the Morning Mountain House, which are investments currently held for sale. The boat has $3 million a year in historical charter revenue which covers the majority of its operating expenses, and no insurance company funds were ever used in its acquisition or operation.
- No insurance company has declared and paid a dividend to Mr Lindberg.
To the contrary, Mr. Lindberg has invested over $500 million in his US insurance companies, including for the hiring of experienced leadership and the development of a state-of-the-art digital policy administration platform for the companies' new insurance products. Before he acquired his first insurance company, Mr. Lindberg established a no-dividend policy for each insurance company to protect policyholders and ensure that the capital that Mr. Lindberg had invested was permanent capital. That no dividend policy remains in place today.
- Mr. Lindberg's US insurance companies have high levels of liquid assets (over $2 billion currently) and have current capital well in excess of minimum risk-based capital requirements.
- Mr. Lindberg's affiliated investment strategy was approved in advance by the North Carolina Department of Insurance ("NCDOI") and other regulators, as applicable.
- North Carolina, like many other states, does not explicitly prohibit or limit the investment of insurance company assets in affiliated entities. The North Carolina insurance holding company system regulatory act does restrict investment of insurance company assets by North Carolina insurance companies in subsidiaries (i.e., 10% of admitted assets or 50% of capital/surplus), but this provision does not apply to investments in affiliates.
- Under the original agreement with the NCDOI in 2014, affiliated insurance investments and affiliated investment grade assets were not included in the 40% limit on affiliated investments agreed upon with the NCDOI. In 2016, Mr. Lindberg and team agreed with the NCDOI to modify the 40% limit to apply to all non-insurance affiliated investments. As agreed with the NCDOI in 2018, the companies are working with the NCDOI to bring the affiliated investments to 10% of assets.
- In 2015, with the approval of the NCDOI, certain of the loans were disaffiliated under North Carolina law and equity capital was added to improve their rating to investment grade. This involved creating Special Purpose Vehicles (SPVs) to hold the original loans, and Mr. Lindberg adding tens of millions of dollars in equity capital to the SPVs to improve their ratings to investment grade. The SPVs were separate LLCs managed by a third-party asset manager, as required under North Carolina law to disaffiliate these assets.
- In full transparency with regulators, Mr. Lindberg's insurance companies have been providing a report to NCDOI detailing all NC insurance companies' assets and transactions every month since July 2017.
- All of the private placements held by Mr. Lindberg's US insurance companies have been valued by an independent third party.
- Mr. Lindberg's companies have used numerous third-party lenders. The capital provided by third party lenders and sellers for acquisitions is well over $500 million. Including refinances funded by third party lenders, that number is close to $1 billion.
- The stock of companies where Mr. Lindberg has an economic interest is generally pledged to the insurance company lender in addition to being backed by the backstop/guarantee of Mr. Lindberg's entire net worth.
- Mr. Lindberg's total capital provided for his US insurance operations is over $500 million. Mr. Lindberg has provided over $20 million to purchase third party defaulted assets at par, in addition to tens of millions in capital support to credit enhance loans, and in addition to the tens of millions of dollars of start-up expenses and other investments made by Mr. Lindberg in the US insurance companies.
- The middle market lending program of Mr. Lindberg's insurance companies to companies where he maintains an economic interest has been an extraordinary success for policyholders: high yields, inflation protection, senior-secured with stock pledges of borrowers, diversified, and zero payment defaults. Combined with Mr. Lindberg's companies' sizable liquid corporate bond and money market portfolios, these middle market loan investments provide superior risk adjusted returns for policyholders. Policyholders at Mr. Lindberg's insurers have the best of both worlds: strong liquidity from a large $2 billion-plus liquid portfolio and high inflation-protected yields from middle market loans with a zero payment-default rate. Mr. Lindberg's insurers have not sacrificed overall portfolio liquidity in order to achieve superior returns.
- Mr. Lindberg modeled his investing insurance assets in affiliated companies after that used by other insurers, such as Berkshire Hathaway. Mr. Lindberg's model predominantly focuses on investing insurance assets in inflation protected investments in companies with high barriers to entry, low capital expenditures, and stable and growing free cash flows, which would enable Mr. Lindberg's insurance companies to achieve high risk adjusted returns on these investments. A more traditional insurance model is to invest in long-term fixed income investments which potentially exposes policy holders to substantial interest rate risk, especially in today's rising rate environment. In addition, long-term fixed income investments carry credit market risk given that they are generally unsecured obligations unaccompanied by typical restrictive covenants required for senior secured debt.
- As indicated above, many life insurers invest in less liquid assets to improve investment yields. While not all of Mr. Lindberg's insurance entities have made affiliated investments, some of his insurance entities have pursued an investment strategy of combining these private investments with a more traditional, well-diversified portfolio of publicly traded bonds.
- Currently, Mr. Lindberg's US insurers hold over $2 billion of cash, cash equivalents, and liquid assets.
- Correction: As a result of a typo, a previous statement said that "A big 4 accounting firm valued all of Mr. Lindberg's material affiliated assets and reported pre-tax net worth of $1.7 billion as of 12-31-17." This statement should have read: "A big 4 accounting firm valued all of Mr. Lindberg's material affiliated assets and another third-party auditor reported pre-tax net worth of $1.7 billion as of 12-31-17."
- Mr. Lindberg started his business with $5,000 stuffing envelopes and writing a publication on home health care reimbursement. As the business has grown, Mr. Lindberg has delegated management to a competent and trustworthy group of leaders.
- At the present time, Mr. Lindberg is hands off and relies on CEOs for each operating company and portfolio leaders who manage all the CEOs. In addition, Mr. Lindberg relies on a chief investment officer and a chief financial officer who help manage the portfolio leaders and the overall economics of the non-insurance enterprise. The result is a federation of autonomous businesses where the operating decisions are made by the CEOs, on the ground, who run the businesses.
- Over the 27 years since Mr. Lindberg's first company was founded in 1991, Mr. Lindberg and team have developed an investment approach that has produced $1.7 billion in pretax net worth as of 12-31-17, and the management team has leveraged this investment expertise to find attractive investments for Mr. Lindberg's insurance companies, including investing in companies where Mr. Lindberg has an economic interest.
- The majority of Mr. Lindberg's increase in net worth comes from substantial increases in EBITDA from his main investments. The increase in EBITDA comes from selecting the right high-barrier to entry, low capex, strong recurring revenue and high growth investments and hiring good management to run them, and empowering management to grow their businesses organically. This is a well proven formula for Mr. Lindberg's non-insurance entities.
- Mr. Lindberg took and takes a keen interest in life insurance products to ensure that his US companies were and are not taking on risks that were or are not prudent. As a result of this focus, Mr. Lindberg's US insurance companies have avoided long-term care risks, market volatility risks, inflation risks, and other reserve risks. This mandate from Mr. Lindberg to focus on easy to understand and reserve liabilities has been a cornerstone of the growth of his US insurance operations.
- Mr. Lindberg entered into the insurance industry with the dual goal of achieving returns for his insurance companies to protect policyholders and ultimately growing his overall enterprise. Insurance is inherently a spread business and all insurance companies have a strategy to make investment gains on their investment portfolios. There has been a long list of business luminaries who have been attracted to the insurance business for this reason.