Insurers run by Advantage Capital Holdings — and slated for takeover by Oaktree Capital Management — are facing a state regulator’s calls for emergency intervention over claims they’re in a “financially hazardous” position.
Atlantic Coast Life Insurance Co. and reinsurance subsidiary Southern Atlantic Re Inc. are exposed to collapsed investment firm 777 Partners, overstating the value of certain assets and failing to fully disclose some investments with affiliates, Michael Wise, the director of the South Carolina Department of Insurance, wrote in a petition to place them in rehabilitation at a state court on Tuesday. He pointed to a separate 777 bankruptcy filing indicating that A-Cap and affiliates may be owed almost $1.3 billion.
“Improper investments threaten respondents’ ability to pay back the thousands of mostly elderly policyholders who bought annuities and other insurance products from Atlantic Coast Life,” according to the document. Despite Atlantic Coast’s past assurances it had resolved certain exposures to 777, “the Department has substantial concerns that the financial distress will increase and spread,” Wise wrote.
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Atlantic Coast’s combined capital and surplus — a measure of its financial cushion against losses — tumbled 42% in this year’s first six months as policyholders cashed out a gross $463 million of annuities, according to the petition.
A statement from the firm pushed back:
“We fought these claims before and will fight them again. In 2025, Director Wise was told that the Department of Insurance’s allegations were unsupported and that the public and the companies were harmed by his decision to publicize false allegations,” A-Cap’s statement reads.
It added: “After these issues were litigated before and rejected by two respected South Carolina judges, and despite a court order enjoining the Department’s prior action, Director Wise nevertheless went public with his claims again — without warning, notice, or any opportunity for the companies to respond — putting policyholders at risk and creating fear in the market. Throughout this dispute, the companies have met every policyholder obligation and will continue to put policyholders first. We will defend ourselves against these false allegations and intend to hold Director Wise accountable for his irresponsible conduct and abuse of power.”
An online docket doesn’t indicate that a judge has responded to the petition. If the court agrees, the insurers would be placed under the regulator’s control so it can examine their finances and attempt to address shortfalls, if any.
The legal move revives state regulatory concerns about the stability of Atlantic Coast. A-Cap and its chief executive officer, Kenneth King, have previously disputed claims that past dealings with 777 might prevent Atlantic Coast from making good on promises to policyholders.
South Carolina regulators sought to ban Atlantic Coast from selling annuities, before a judge struck down the move in 2025. Insurance regulators in Utah went into mediation with other A-Cap insurers.
In January, credit rater AM Best downgraded Atlantic Coast, citing a decrease in new premiums as well as “reputational damage resulting from publicized regulatory rulings.”
Oaktree said in March that it planned to acquire a controlling stake in Atlantic Coast, but it hasn’t since announced the deal’s completion. The private equity firm’s parent company declined to comment on Tuesday’s filing.
Risky Assets
Established in 1925, Atlantic Coast was acquired in 2015 by King’s A-Cap, which reshaped the business, selling more annuities and setting up investment management agreements with itself and affiliates.
According to Wise’s petition, the insurers’ expenses including management fees reached twice the industry average relative to their size, even as some investments weren’t performing.
The setup caused the firms “to agree to inappropriate amendments, extensions of maturity, capitalizations of interest rather than receipt of cash payments, and restructuring of these distressed investments, including subordinating their interests to other lenders and accepting other unfavorable terms,” the petition states. “All of these actions have caused respondents further financial harm.”
The strategy resulted in a concentration of risky investments above limits that the insurers had set themselves, according to Wise. For example, at the end of 2025 Atlantic Coast held 30% of its cash and invested assets in sub-investment-grade private credit instruments and unrated collateral loans, the regulator’s director said. That’s above the 10% cap for private-placement holdings in its management agreements with A-Cap companies, according to the petition.
“Respondents have placed policyholder funds into high-risk and inappropriate investments in violation of South Carolina law and their agreements with the Department,” according to the petition.
The regulator also accused the insurers of misreporting practices, such as marking tens of millions of dollars of assets as rated investment grade when they weren’t rated at all, labeling a Puerto Rico-based reinsurer as authorized when it wasn’t, and tagging investments as unaffiliated when they were.
The labeling of assets by insurers has become a hot topic on Wall Street in recent months, as firms controlled by Mark Walter’s TWG Global said that more than $20 billion of their assets should have been marked as affiliated but weren’t. That disclosure followed inquiries from federal prosecutors.
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