Marsh & McLennan’s
Trident Funds
Beware of sinking your teeth into these investments!
Sightings from The Catbird Seat
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March 10, 2005
Labor Department Subpoenas Marsh & McLennan Over
Benefit Services; Sale of MMC Capital Progresses
By Andrew G. Simpson, Jr.
In its annual report filed with the Securities and Exchange Commission, Marsh & McLennan reported that the U.S. Department of Labor last month served the firm with a subpoena seeking documents related to the company's employee benefit plans services as well as the bidding procedures and compensation for those services.
MMC said the DOL is "seeking documents pertaining to services provided by MMC subsidiaries to employee benefit plans, including but not limited to documents relating to how such subsidiaries have been compensated for such services. The request also seeks information concerning market service agreements and the solicitation of bids from insurance companies in connection with such services.
Marsh & McLennan said it is fully cooperating with the labor department.
That was one of several requests for information that Marsh & McLennan reported receiving recently.
The firm also reported progress on its plan to spin-off its private equity firm, MMC Capital, to a group of senior employees.
On Jan. 6, 2005, MMC said it received a request from the Pension Benefit Guaranty Corp. for documents regarding the funding status of the company's own retirement plan and financial and business developments since last October's complaint against it filed by New York Attorney General Eliot Spitzer over compensation and account placement practices.
Marsh & McLennan said in its SEC filing that it is fully cooperating with the PBGC request.
In the filing, MMC also revealed it is cooperating with a request of its Mercer Investment Consulting unit on Feb. 10 by the West Virginia Securities Commission for documents relating to services provided to that state's public retirement system.
Also, the SEC report says that on March 25, 2004, and Jan. 6, 2005, Mercer received requests for documents and testimony from the U.S. Department of Justice in connection with an industry-wide investigation of potential anti-competitive agreements or understandings among providers of actuarial consulting services relating to limitations of liability and other contractual terms or conditions of engagement. Mercer is cooperating fully with this investigation....
On Feb. 28, 2005, MMC signed a letter of intent providing for the
transfer of MMC Capital's business, including the management of the Trident
Funds, to a company to be formed by MMC Capital's senior management, including
its chairman and chief executive officer. MMC said it would maintain a strategic
alliance with the acquisition company and continue certain of its investments in the
Trident funds. In addition, MMC may maintain its investments in certain
insurance and reinsurance companies.
MMC Capital is a private equity firm that manages investments and committed capital of more than $2 billion. During the past 10 years, MMC Capital has targeted investments in the insurance and financial services industries as the investment manager of the Trident Funds, which consist of The Trident Partnership formed in 1994, Trident II formed in 1999 and Trident III formed in 2003. Investors in these funds include MMC Capital's corporate parent and other investors.
MMC Capital's investment activities date back to the mid-1980s when MMC was instrumental in sponsoring several Bermuda-based insurance and reinsurance companies, including ACE Limited, XL Capital Ltd., Centre Reinsurance Holdings Limited and Mid Ocean Limited.
More recently, MMC Capital helped to develop an additional source of insurance and reinsurance capacity after the Sept. 11, 2001 terrorist attacks through the formation of AXIS Capital Holdings Limited.
Find this article at:
http://www.insurancejournal.com/news/national/2005/03/10/52452.htm
December 23, 2004
SEC Probing Investments in
Marsh & McLennan’s Buyout Funds
NEW YORK - The Securities & Exchange Commission (SEC) is currently conducting an investigation into investments by Marsh & McLennan’s directors, shareholders and executives in the company’s buyout funds.
According to a Bloomberg report this morning, the SEC has asked the US-based insurance brokerage company to submit documents about “related party transactions” in which the directors, executives and shareholders of the company acquired a material interest in entities managed by Marsh McLennan’s MMC unit.
The New York based company said in a statement yesterday that it was cooperating with the investigation.
Marsh McLennan is currently also facing a regulatory scrutiny related to price fixing and the receipt of kickbacks. The company’s CEO, Jeffrey Greenberg was forced to quit from his post after a lawsuit was filed by the New York Attorney General in October this year.
According to an article in the New York Times, the SEC investigation includes the company’s dealings with its Trident funds. The company’s private equity unit, MMC Capital, had created three funds, namely Trident I, II and III, which received significant investments from the company’s board members and top executives.
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December 23, 2004
Marsh & McLennan Probe
May Have Wider Implication
Standard & Poor’s Equity Research reiterated a “hold” rating on Marsh & McLennan, saying the Securities and Exchange Commission has requested information regarding transactions with parties in which company insiders or major shareholders had an interest.
The SEC specifically cited transactions with Trident Funds, a series of private equity portfolios managed by Marsh & McLennan.
“We believe the Trident Funds have held investments in several reinsurers and property and casualty insurers,” S&P Equity Research said, adding that the probe might be part of an industry-wide probe into possible abuses of financial insurance and reinsurance transactions in order to manipulate accounting and earnings.
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December 24, 2004
From their website (www.mmccapital.com/tri/trident_port.shtml):
Trident Funds
Select Investments - Trident II Portfolio Companies
AMS Services, Inc, is an established software and information services provider to the property and casualty insurance industry....
ARC Excess & Surplus is a leading wholesale insurance broker specializing in Directors & Officers Liability, Errors & Omissions Insurance, Employment Practices Liability Insurance, Fiduciary Liability, Crime Insurance, and other specialty coverages.
Arch Capital Group Ltd. is the holding company for a Bermuda-based reinsurance company and a number of smaller U.S. insurance service companies. In response to the events of September 11, 2001, Arch recently raised its capital base to approximately $1 billion and hired an experienced reinsurance underwriting team to expand its underwriting business. Trident II sold its investment in Arch in March 2003.
AXIS Capital Holdings Limited is a Bermuda-based, global insurance and reinsurance company that was formed in response to the significant market dislocation that resulted following the events of September 11, 2001. AXIS focuses on specialty lines of insurance including marine & energy, aviation & aerospace, war (marine & aviation), commercial property and political risk. AXIS also writes a reinsurance book consisting of property catastrophe, property risk, aviation & aerospace, and marine.
B.H. Acquisition Limited (BHAL). BHAL is a Bermuda-based holding company that owns two insurance companies in run-off: Brittany Insurance Company Ltd and Compagnia Europeenne D’assurances Industrielles S.A. Brittany, based in Bermuda, and CEAI, based in Belgium, were formerly wholly-owned captives of Totalfina, the French petroleum company. These companies were placed in run-off by Totalfina after incurring significant losses from third party liability business written in the 1980s.
Castlewood Holdings Limited. Castlewood Holdings Limited is a Bermuda-based insurance services that specializes in managing the run-off of property and casualty insurance companies. Trident II formed Castlewood Holdings in 2001 in a joint venture with The Enstar Group, Inc. and Castlewood Limited.
DANISH RE. Danish Re is a global reinsurer formed by Trident II in 1999. The company operates primarily from its offices in Copenhagen and London, and writes substantially all of its business at Lloyd’s of London via ownership of a dedicated Lloyd’s managing agency and syndicate.
Gulf Insurance Group. Gulf Insurance Group is a leading player in the specialty lines market, providing a broad range of specialty business insurance coverage including management and professional liability, environmental and excess and surplus lines risks, umbrella, and fidelity and surety programs. Gulf also provides insurance products for financial institutions, the entertainment industry and sports organizations....
Sedgwick CMS Holdings, Inc. - Sedgwick CMS is an industry leader in the provision of cost-effective casualty and disability claims management programs and managed care services. The company’s nearly 525 clients receive services from a network of more than 2,000 colleagues in 81 offices nationwide. Sedgwick CMS’s clients include some of the largest U.S. corporations, such as Federal Express Corporation, General Electric, General Motors Corporation, The Home Depot, Inc., Kmart Corporation, SBC Communications Inc., Target Corporation, Tyco International and Winn-Dixie Stores, Inc.
Signal Holdings. The Signal is a leading provider of third party claims administration and claims fulfillment, servicing a broad range of warranty markets including wireless handsets and home appliance warranties.
Trident I Portfolio Companies
BenefitPort. BenefitPort is a leading provider of marketing services for the small employer benefits market. The company serves the small group broker through its general agencies located across the United States. BenefitPort serves more than 17,000 brokers doing business with more than 50 insurance carriers and 35,000 employer groups.
Hiscox, PLC - Hiscox was established in 1993 to provide corporate capacity to syndicates managed by the Hiscox Agency, one of Lloyd’s largest managing agencies, with approximately $510 million of capacity under management. Hiscox PLC has a strong franchise in the insurance of fine arts, private planes, yachts, vintage automobiles, high-value homes and professional indemnity. Trident I sold its stake to Chubb in March 1999....
Travelers Property Casualty Corp. (TAP) - The company, formerly Travelers/Aetna Property Casualty Corp., was formed in April 1996 with the merger of the domestic property and casualty subsidiaries of the Travelers Group and Aetna Life & Casualty. In order to finance the merger, the Travelers Group undertook a round of private equity financing from an investment group that included Trident I. Trident I completed its exit from this investment in April 1998. The company is now a wholly owned subsidiary of Citigroup, a diversified financial services company....
Other Selected Investments
LendingTree.com LendingTree is an internet-based loan marketplace that participates in the business-to-consumer and the business-to-business sectors. On the consumer side, LendingTree connects borrowers to lenders that compete for the business. The company currently create marketplaces for mortgages, home equity loans, auto loans, personal loans and credit cards. On the business-to-business side, LendingTree provides banks and other entities with a private-label platfom and infrastructure for creating their own loan marketplaces. The company trades on NASDAQ under the symbol TREE. The investment in LendingTree was sold in March 2002.
SelectQuote Insurance Services. SelectQuote is a direct marketer of term life insurance products. The company has been in operation for over 16 years and markets a variety of term life insurance products for approximately 20 life insurance carriers making it the largest general agency for term life insurance in the United States.
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Last Update June 15, 2008, by The Catbird
New Spitzer Probe Targets Legal Malpractice Underwriters(Source: AMBest)
12/06/04 17:53
New York state Attorney General Eliot Spitzer's probes of the insurance industry continue to widen, as two insurers disclosed receiving subpoenas from Spitzer's office seeking information about how they underwrite attorney malpractice risks.
Bermuda-based Arch Capital Group Ltd. (Nasdaq: ACGL) and the Great American Insurance Co. subsidiary of Cincinnati's American Financial Group Inc. (NYSE: AFG) both announced receipt of the subpoenas in filings with the U.S. Securities and Exchange Commission.
According to Arch Capital, the query the company received Dec. 2 requested "certain information concerning its underwriting activities with respect to insurance coverages to lawyers and law firms for acts of professional malpractice." AFG said it was also asked about Great American's "business practices in writing legal malpractice insurance," which it considered part of the "part of the sweeping probe of industry practices kicked off by the New York Attorney General's lawsuit against Marsh & McLennan Cos."
"While Great American has just begun its investigation of the matters covered by the subpoena, and cannot predict any impact that its receipt may have on its business, Great American believes there to be nothing illegal or improper with its business practices," AFG said. "AFG's internal investigation following previously disclosed inquiries from state regulators is ongoing."
Both companies said they intend to cooperate with the investigation. Spitzer's office had no comment on the filings.
According to California-based consultant Andrew Barile, among the industry practices the probes may be looking into are inducements that may be provided by an underwriter to a legal association in exchange for their endorsing that carrier to members.
"The industry custom and practice had been, generally speaking, for associations to get some type of remuneration for their endorsement, and the question comes up as to what form it takes, and whether the association owners tell their association members that they were getting fees," Barile said.
While noting that he is not privy to the attorney general's investigation, Barile said that if association endorsements are the target of the investigation, the probes could eventually grow to encompass all sorts of professional associations, including those affecting doctors, realtors, and any other professional group that buys malpractice, errors and omissions, or professional liability protection.
"Ultimately, this gets into how much all of these little agreements and inducements at each level are affecting the price of insurance," Barile said.
Most members of the Arch Capital Group have a financial strength rating of A- (Excellent) from A.M. Best Co. Most members of the American Financial Group have a financial strength rating of A (Excellent).
(By R.J. Lehmann, associate editor: raymond.lehmann@ambest.com)