We mentioned this in passing last week on the LeBron bonds (LEBONDS?!) post #1554796.

When Clarice Whitmore bought an annuity from Security Benefit Life Insurance Company in 2012, she had no idea her premium would help fund the purchase of the LA Dodgers baseball team. A resident of Arkansas, she was unlikely to have been a fan. Yet according to a class action suit, the first investment Security Benefit made after Whitmore paid almost $45,000 for her annuity was a $35 million loan to Guggenheim Baseball Management, a newly-formed partnership set up to acquire the Dodgers. Her lawyers reckon that later in the year, Security Benefit extended another $925 million to fund the acquisition.

"Of course, policyholders have no more say over how their funds are used than bank depositors."

Can't exactly say the Dodgers is a +EV, long-term investment case, no? But that it's illiquid is sort of the point with a long-term insurance obligation... and these are the sort of investments forced to when we don't have long-term aggregate price predictability #1556257, #1556942 #1556660

Not a conflict of finance but of interests

Where Whitmore’s lawyers did make their case was in the conflicts of interest that circled the position. At the time it made its investment, Security Benefit was owned by Guggenheim Partners, whose CEO, Mark Walter, set up Guggenheim Baseball Management alongside company president Todd Boehly. The pair tapped Security Benefit and other insurance companies under their control for over half of the $2.15 billion it cost to acquire the Dodgers. Walter took a controlling stake and became chairman of the board, a position he has held since.

oops.

Guggenheim controlled four insurance companies in all. Between them, they invested $5.1 billion in debt issued by companies linked to Guggenheim and loaned almost $1 billion to Guggenheim business associates. Against a total reported surplus of $2 billion, this was no small change. They also reinsured risk with each other, and with a fifth insurer that wasn’t classified as an affiliate but behaved as one.

Yeah, reinsurance definitely has this type of problem regularly... my tail risk "insured" by you; your tail risk "insured" by me

"Whitmore’s lawyers assert that had she known Security Benefit Life’s true financial condition, she would not have purchased her annuity."

the allegations stuck even as the Guggenheim insurance empire grew. Earlier this year, two of its lynchpins, Delaware Life and Clear Spring Life, received grand jury subpoenas in connection with an investigation into whether certain private credit investments should have been treated as related-party transactions.

After receiving their subpoenas, the companies went back through their books and found $22 billion in private credit deals that weren’t properly disclosed to regulators as being sent to borrowers ultimately linked to Guggenheim. At Delaware Life, restatements pushed affiliated investments from 3% of invested assets to 42%.

Mark Walter is at pains to rectify the situation. He has presented a plan to the Delaware Department of Insurance to reduce affiliated exposures and has already swapped $6.5 billion of Delaware Life’s related-party investments for an equivalent ⁠amount of assets classified as independent. He has agreed to sell the majority stake in the Los Angeles Lakers he bought last year and is in talks to sell his stake in Chelsea FC. “There is no victim here,” he contends.

I confess to still not understanding much of this story