Billionaire Insurance coverage Firm Proprietor Greg Lindberg’s Camp Refutes WSJ Reporting

Greg Lindberg is a billionaire financier who owns a number of insurance coverage firms amid his holdings. Lindberg has been beneath investigation for alleged monetary impropriety and was profiled in a prolonged Wall Avenue Journal story final week.

His colleagues and representatives spent weeks answering detailed questions from the Wall Avenue Journal.  They declare key details have been omitted from the story.  Info corresponding to:

There are quite a few inaccuracies with respect to using the insurance coverage funds to finance private belongings. For instance, no insurance coverage firm cash was used to buy Mr. Lindberg's investments within the Idaho and Key West properties, his boat, or the airplanes, one in every of which was leased. Mr. Lindberg has by no means spent an evening contained in the Idaho home, the Key West home, or the Morning Mountain Home, that are investments presently held on the market. The boat has $three million a 12 months in historic constitution income which covers the vast majority of its working bills, and no insurance coverage firm funds have been ever utilized in its acquisition or operation.
No insurance coverage firm has declared and paid a dividend to Mr Lindberg.
On the contrary, Mr. Lindberg has invested over $500 million in his US insurance coverage firms, together with for the hiring of skilled management and the event of a state-of-the-art digital coverage administration platform for the businesses' new insurance coverage merchandise. Earlier than he acquired his first insurance coverage firm, Mr. Lindberg established a no-dividend coverage for every insurance coverage firm to guard policyholders and be certain that the capital that Mr. Lindberg had invested was everlasting capital. That no dividend coverage stays in place right now.
Mr. Lindberg's US insurance coverage firms have excessive ranges of liquid belongings (over $2 billion presently) and have present capital effectively in extra of minimal risk-based capital necessities.
Mr. Lindberg's affiliated funding technique was permitted upfront by the North Carolina Division of Insurance coverage ("NCDOI") and different regulators, as relevant.
North Carolina, like many different states, doesn't explicitly prohibit or restrict the funding of insurance coverage firm belongings in affiliated entities. The North Carolina insurance coverage holding firm system regulatory act does prohibit funding of insurance coverage firm belongings by North Carolina insurance coverage firms in subsidiaries (i.e., 10% of admitted belongings or 50% of capital/surplus), however this provision doesn't apply to investments in associates.
Below the unique settlement with the NCDOI in 2014, affiliated insurance coverage investments and affiliated funding grade belongings weren't included within the 40% restrict on affiliated investments agreed upon with the NCDOI. In 2016, Mr. Lindberg and group agreed with the NCDOI to change the 40% restrict to use to all non-insurance affiliated investments. As agreed with the NCDOI in 2018, the businesses are working with the NCDOI to carry the affiliated investments to 10% of belongings.
In 2015, with the approval of the NCDOI, sure of the loans have been disaffiliated beneath North Carolina regulation and fairness capital was added to enhance their score to funding grade. This concerned creating Particular Objective Autos (SPVs) to carry the unique loans, and Mr. Lindberg including tens of tens of millions of in fairness capital to the SPVs to enhance their rankings to funding grade. The SPVs have been separate LLCs managed by a third-party asset supervisor, as required beneath North Carolina regulation to disaffiliate these belongings.
In full transparency with regulators, Mr. Lindberg's insurance coverage firms have been offering a report back to NCDOI detailing all NC insurance coverage firms' belongings and transactions each month since July 2017.
All the non-public placements held by Mr. Lindberg's US insurance coverage firms have been valued by an impartial third get together.
Mr. Lindberg's firms have used quite a few third-party lenders. The capital supplied by third get together lenders and sellers for acquisitions is effectively over $500 million. Together with refinances funded by third get together lenders, that quantity is near $1 billion.
The inventory of firms the place Mr. Lindberg has an financial curiosity is mostly pledged to the insurance coverage firm lender along with being backed by the backstop/assure of Mr. Lindberg's complete web value.
Mr. Lindberg's whole capital supplied for his US insurance coverage operations is over $500 million. Mr. Lindberg has supplied over $20 million to buy third get together defaulted belongings at par, along with tens of tens of millions in capital assist to credit score improve loans, and along with the tens of tens of millions of of start-up bills and different investments made by Mr. Lindberg within the US insurance coverage firms.
The center market lending program of Mr. Lindberg's insurance coverage firms to firms the place he maintains an financial curiosity has been a unprecedented success for policyholders: excessive yields, inflation safety, senior-secured with inventory pledges of debtors, diversified, and 0 cost defaults. Mixed with Mr. Lindberg's firms' sizable liquid company bond and cash market portfolios, these center market mortgage investments present superior threat adjusted returns for policyholders. Policyholders at Mr. Lindberg's insurers have the most effective of each worlds: sturdy liquidity from a big $2 billion-plus liquid portfolio and excessive inflation-protected yields from center market loans with a zero payment-default price. Mr. Lindberg's insurers haven't sacrificed general portfolio liquidity with a purpose to obtain superior returns.
Mr. Lindberg modeled his investing insurance coverage belongings in affiliated firms after that utilized by different insurers, corresponding to Berkshire Hathaway. Mr. Lindberg's mannequin predominantly focuses on investing insurance coverage belongings in inflation protected investments in firms with excessive obstacles to entry, low capital expenditures, and steady and rising free money flows, which might allow Mr. Lindberg's insurance coverage firms to realize excessive threat adjusted returns on these investments. A extra conventional insurance coverage mannequin is to put money into long-term mounted revenue investments which doubtlessly exposes coverage holders to substantial rate of interest threat, particularly in right now's rising price setting. As well as, long-term mounted revenue investments carry credit score market threat provided that they're typically unsecured obligations unaccompanied by typical restrictive covenants required for senior secured debt.
As indicated above, many life insurers put money into much less liquid belongings to enhance funding yields. Whereas not all of Mr. Lindberg's insurance coverage entities have made affiliated investments, a few of his insurance coverage entities have pursued an funding technique of mixing these non-public investments with a extra conventional, well-diversified portfolio of publicly traded bonds.
Presently, Mr. Lindberg's US insurers maintain over $2 billion of money, money equivalents, and liquid belongings.
Correction: Because of a typo, a earlier assertion mentioned that "An enormous four accounting agency valued all of Mr. Lindberg's materials affiliated belongings and reported pre-tax web value of $1.7 billion as of 12-31-17." This assertion ought to have learn: "An enormous four accounting agency valued all of Mr. Lindberg's materials affiliated belongings and one other third-party auditor reported pre-tax web value of $1.7 billion as of 12-31-17."
Mr. Lindberg began his enterprise with $5,000 stuffing envelopes and writing a publication on house well being care reimbursement. Because the enterprise has grown, Mr. Lindberg has delegated administration to a reliable and reliable group of leaders.
These days, Mr. Lindberg is arms off and depends on CEOs for every working firm and portfolio leaders who handle all of the CEOs. As well as, Mr. Lindberg depends on a chief funding officer and a chief monetary officer who assist handle the portfolio leaders and the general economics of the non-insurance enterprise. The result's a federation of autonomous companies the place the working choices are made by the CEOs, on the bottom, who run the companies.
Over the 27 years since Mr. Lindberg's first firm was based in 1991, Mr. Lindberg and group have developed an funding strategy that has produced $1.7 billion in pretax web value as of 12-31-17, and the administration group has leveraged this funding experience to seek out engaging investments for Mr. Lindberg's insurance coverage firms, together with investing in firms the place Mr. Lindberg has an financial curiosity.
Nearly all of Mr. Lindberg's enhance in web value comes from substantial will increase in EBITDA from his principal investments. The rise in EBITDA comes from deciding on the fitting high-barrier to entry, low capex, sturdy recurring income and excessive progress investments and hiring good administration to run them, and empowering administration to develop their companies organically. This can be a effectively confirmed system for Mr. Lindberg's non-insurance entities.
Mr. Lindberg took and takes a eager curiosity in life insurance coverage merchandise to make sure that his US firms have been and aren't taking up dangers that have been or aren't prudent. Because of this focus, Mr. Lindberg's US insurance coverage firms have averted long-term care dangers, market volatility dangers, inflation dangers, and different reserve dangers. This mandate from Mr. Lindberg to give attention to simple to grasp and reserve liabilities has been a cornerstone of the expansion of his US insurance coverage operations.
Mr. Lindberg entered into the insurance coverage business with the twin purpose of reaching returns for his insurance coverage firms to guard policyholders and finally rising his general enterprise. Insurance coverage is inherently a selection enterprise and all insurance coverage firms have a technique to make funding beneficial properties on their funding portfolios. There was a protracted listing of enterprise luminaries who've been interested in the insurance coverage enterprise for that reason.