Texas retired teachers’ group worries about insurance deal

Jan. 14--State insurance regulators have approved a deal to allow a former New York hedge fund chief to acquire a company that holds long-term care insurance policies for thousands of retired Texas educators.

The regulators added several stipulations to the deal. Still, critics oppose it, citing the record of the former hedge fund manager.

Tim Lee, executive director of Texas Retired Teachers Association, said he continues to harbor the same concerns he had in previous weeks. Specifically, he is worried that Philip Falcone, the CEO of HC2 Holdings Inc., and his publicly traded company would bankrupt United Teacher Associates Insurance Co., which holds 20,000 retired teachers' long-term care policies that cover costs of nursing homes or other expenses associated with getting old.

Lee said he believes the company will seek to raise premiums so high that policyholders won't be able to afford the monthly payments.

"The first word I would use is disappointing," he said upon receiving word of the approval. The Texas Department of Insurance "failed to protect the people who have these policies."

Falcone didn't respond to a request for comment this week, but he told the American-Statesman last month that he remains "committed to support this business" and that the company would be headed by James Corcoran, a former insurance industry executive and one-time insurance superintendent of the state of New York.

Approval from the Texas Department of Insurance regulators was required before Falcone's company could take over.

The nod came Dec. 21 with certain stipulations.

An order signed by Doug Slape, deputy commissioner in charge of the Texas Department of Insurance's Financial Regulation Division, didn't name Falcone, but it said the department would allow the sale only if regulators could retain the right to approve any officer or director of the United Teacher Associates Insurance Co.

Department spokesman Jerry Hagins said Falcone currently isn't listed as a director or officer of the company.

Also, the commission stipulated that HC2 must maintain the insurance company's "total adjusted capital" at a minimum of 400 percent. And if the level -- which indicates how much money the company must have in surplus to cover risk -- falls below 400 percent, then the company would have five days to contribute cash or assets to bolster the reserves, the order said.

But even with the stipulations, Lee's fears have lingered.

"Our level of concern is still as high as it ever was," he said this week.

Falcone has been sanctioned by the U.S. Securities and Exchange Commission. The commission said in 2013 that it settled a dispute against Falcone and his advisory firm, Harbinger Capital Partners.

The SEC's summary of the disposition of Falcone's case can be found in a news release on the commission's website. The release said Falcone and Harbinger Capital Partners admitted in the settlement papers to "multiple acts of misconduct that harmed investors and interfered with the normal functioning of the securities markets." Falcone has disputed the accuracy of the SEC's summary, claiming that he didn't admit to such acts.

Falcone was barred from the securities industry for at least five years and forced to pay $18 million, the commission reported.

He also was banned by the New York Department of Insurance from serving in roles of officer or director at another unit at his firm, Fidelity & Guaranty Life Insurance, Reuters reported in 2013.

Toward the end of 2015, leaders of HC2 made it known that they wanted to buy the United Teacher Associates Insurance Co. from Great American Insurance Group, a subsidiary of the American Financial Group Inc. The deal would give HC2 control of 56,000 policies (20,000 of which are held by retired Texas teachers) and nearly $1.2 billion of total combined investment assets under management -- all for $7 million.

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