Key Takeaways:
Truist Financial and Fifth Third Bancorp paused selling Delaware Life products as federal probes examine $20 billion in affiliated assets, CNBC confirmed.
"Despite what has been reported, there has been no fraud," TWG Global, Walter's holding company, said in a statement Wednesday. "There is no victim here. No one has been harmed, and no one has claimed they were harmed."
The U.S. Attorney's Office in Manhattan and the Securities and Exchange Commission are investigating Delaware Life and its affiliate Clear Spring Life and Annuity. After receiving grand jury subpoenas in February, Delaware Life revised the share of its total invested assets classified as affiliated with other Walter companies from 3 percent to 42 percent. The insurer agreed this month to exchange up to $6.5 billion of related-party investments for independent assets.
S&P Global Ratings in July revised its outlook on Delaware Life to negative from stable while affirming its A- issuer and credit and financial strength ratings. The pause by Truist and Fifth Third, which began doing business with the insurer in April, adds to pressure on Walter's empire after he agreed to sell his majority stake in the Los Angeles Lakers earlier this month at a 25 percent premium to his purchase price.
Delaware Life said it is meeting with both banks to support existing contracts and discuss insurance sector trends, while keeping them apprised of its effort to reduce affiliated-party assets. "Our communications with key distribution partners remain open and cooperative," a Delaware Life spokesperson said. Fifth Third declined to comment, and Truist did not respond to a request for comment.
The probes gained attention after FBI agents seized Walter's phone and computer last September pursuant to a warrant executed aboard a private plane in Chicago. Both Delaware Life and Clear Spring received grand jury subpoenas in February. Group 1001, which comprises the two insurers, has filed a plan with Delaware's Department of Insurance to eliminate all exposure to affiliated investments or loans.
Walter's sports portfolio includes the Los Angeles Dodgers, Chelsea Football Club, the Professional Women's Hockey League and the Cadillac Formula 1 Team. TWG said it is "not looking to sell its sports assets at 'fire sale' prices to raise capital for its insurance operations."
Neither Walter nor his companies have been charged with wrongdoing by the Justice Department or named by the SEC in an enforcement action. The next catalyst is the resolution of the federal probes, which will determine whether Delaware Life can restore its distribution channels and stabilize its credit outlook.
This article is for informational purposes only and does not constitute investment advice.
