Regional lenders Truist Financial Corp. and Fifth Third Bancorp. have paused distribution of products tied to billionaire financier Mark Walter’s biggest insurance firm, according to people with knowledge of the decisions.
The banks are tapping the brakes on their role as sale channels for Delaware Life Insurance Co. amid a US probe of Walter’s sprawling business empire that has cast a shadow over credit ratings for the provider of annuities and life insurance, said the people, who asked not to be identified because the information isn’t public.
The lenders had made the insurer’s products available through branches or adviser networks with the underlying risk of the insurance and market borne by the insurer itself.
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Delaware Life is the much larger of two insurers controlled by Walter’s holding company, TWG Global, that revealed in June that they had more than $20 billion of loans on their books that should have been marked as affiliated but weren’t. TWG said in a statement earlier this week that it’s working to resolve any regulatory concerns and that there “has been no fraud.”
“There is no victim here,” it said at the time. “No one has been harmed, and no one has claimed they were harmed.”
While new sales of products are paused, the insurer is in contact with client advisers at both institutions, one of the people said. Representatives for Truist and Fifth Third declined to comment.
“Our communications with key distribution partners remain open and cooperative,” a spokesperson for Delaware Life said.
S&P Global Ratings and Fitch Ratings lowered their outlook on Delaware Life in July after the surge in disclosed affiliated assets, which can be a precursor to a potential ratings cut.
S&P, which maintained its “A-” rating for the firm, said it could lower the credit rating if Delaware Life isn’t able to carry out a plan for remediating the situation or if the government imposes penalties or takes other steps that “significantly weaken the company’s financial measures beyond our assumptions.”
Walter has been rapidly reshaping his businesses as he addresses the situation. He agreed to sell the Los Angeles Lakers at a record $12.5 billion valuation this month, less than a year after taking control of the basketball team. His TWG Global has explored other ways of freeing up cash. And it unveiled plans to buy up to $6.5 billion of affiliated assets from Delaware Life in exchange for an equal amount of unaffiliated assets.
In its statement this week, TWG Global said it’s committed to working with the Justice Department and the Securities and Exchange Commission to resolve their inquiries. It noted that its Group 1001 segment, which houses insurance holdings, has submitted a “straightforward plan” to eliminate affiliate exposures.
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