For most of a century, Atlantic Coast Life sold small life-insurance and pre-paid funeral policies out of Charleston, South Carolina. In 2014, according to South Carolina's insurance department, it had about 90,000 policies, reserves of about $110 million and net premium income of about $25 million.
On Wednesday, Florida suspended its licence to sell insurance in the state.
The order, signed by Florida's insurance commissioner, Michael Yaworsky, finds the company impaired: it has not held the minimum surplus, the cushion of assets over liabilities, that Florida requires of every insurer working in the state. It must stop taking new or renewal business in Florida, keep servicing the policies it already has, and stay suspended until the regulator decides it is no longer impaired. In Florida that means 6,001 annuities, 986 life policies and 19 health policies.
Florida is the second state to act in just over two weeks. On 15 September, South Carolina's insurance director, Michael Wise, asked a court in Richland County to put Atlantic Coast and its captive reinsurer, Southern Atlantic Re, into rehabilitation, the insurance-industry equivalent of a court-supervised restructuring. Insurers cannot file for federal bankruptcy. If the court agrees, the director would take control of the companies' assets as receiver.
The company's owner disputes the case. No rehabilitation order has been entered.
The same balance sheet, two answers
Florida's order is short, and most of it is arithmetic. It takes the surplus Atlantic Coast reported in each of its last four filings and then applies Florida's limits on how much an insurer may count from certain investments, which the company agreed to in 2006 when it was licensed in the state. Every time, the reported cushion becomes a hole.
At 30 September 2025, Atlantic Coast reported surplus of $86.0 million against a required minimum of $57.1 million. Under Florida's limits, the order says, it was impaired by $139.6 million. At the end of 2025 it reported $81.7 million and was impaired by $98.7 million. Its March 2026 statement, due on 15 May, was filed on 28 August. It showed $70.4 million and an impairment of $144.9 million.
By the June quarter the company's own numbers no longer cleared the bar. It reported $47.4 million of surplus against a minimum of $55.4 million, a shortfall of $8.0 million before any adjustment. After Florida's limits, the order puts the impairment at $170.0 million. Between December and June, the surplus the company itself reported fell by 42 per cent.
"Atlantic Coast's concerning financial condition led to our office issuing an Immediate Final Order and urgent notice to insurance agents to halt any further transactions within Florida," Mr Yaworsky told Insurance Journal.
From funeral policies to annuities
The change in the company dates to June 2015, when Advantage Capital Holdings, known as A-CAP, bought it. A-CAP is ultimately controlled by Kenneth King, according to both regulators, and describes itself as a holding company for insurers, reinsurers and an investment adviser.
Under A-CAP, South Carolina's petition says, Atlantic Coast shifted from life insurance and funeral policies to annuities, contracts in which a customer, often near retirement, hands over a lump sum in return for a guaranteed rate. Direct premiums went from about $25 million in 2015 to about $102 million in 2016, and the petition's chart shows them near $1 billion by 2021. Most of the annuity reserves it keeps are for multi-year guaranteed annuities with terms of three to 20 years.
The money was managed by an investment adviser in the same group, Advantage Capital Management, and by sub-advisers that the petition says were often affiliated too, for base and performance fees. By 2025, the department says, Atlantic Coast's investment expenses were more than twice the industry average for its size.
What the money bought
The investment agreements allowed no more than 10 per cent of the portfolio in private placements rated below the top two grades used by the National Association of Insurance Commissioners. By the department's count, Atlantic Coast had 23.8 per cent of its cash and invested assets in sub-investment-grade private credit bonds and unrated collateral loans at the end of 2025. Reclassifying assets that it says were wrongly reported as highly rated bonds, the department puts the figure at 30.2 per cent. Its share of below-investment-grade and unrated holdings, the petition says, was double the average even among life insurers owned by private equity firms.
Its examples include a loan to a film-industry insurer that went bankrupt in 2024, whose business now sits in a company half-owned by A-CAP; a $6 million loan whose balance had grown to $34.5 million by the end of 2025, with no sign of cash interest; and loans whose maturities were extended again and again while unpaid interest was added to the balance.
The largest thread runs to 777 Partners, the Miami investment firm known for buying stakes in airlines and football clubs. A loan the two companies made to 777 in early 2020, of about $46 million, was amended more than 100 times and grew to more than $700 million, with the insurers holding part of it, the petition says. 777 Partners filed for Chapter 11 in August. In a sworn declaration, it said it owed A-CAP-affiliated companies almost $1.3 billion, all in default. In February, according to the petition, A-CAP had told the department that all legacy 777 risk had been removed. A superseding indictment of 777's founder, Joshua Wander, describes A-CAP as a lender deceived with altered bank statements, according to the petition. A-CAP's people say they were victims of the alleged fraud, not participants.
All told, the department says, investments in entities under common control with Mr King came to more than $400 million at Atlantic Coast and more than $350 million at Southern Atlantic Re at the end of 2025. If the part above South Carolina's single-issuer limit were excluded, as it argues the law requires, Atlantic Coast's capital would be negative.
The capital ratio and the reinsurance
When South Carolina approved the 2015 purchase, it required Atlantic Coast to keep its risk-based capital ratio, a regulatory measure of capital against the riskiness of the business, at 500 per cent or more. The company reported 278 per cent at the end of 2024 and 239 per cent at the end of 2025. The department estimates it was below 185 per cent at the end of June. Below 200 per cent, state law requires an insurer to file a plan to fix it.
Much of the business has been passed on. Southern Atlantic Re had taken on $2.37 billion of Atlantic Coast's policy reserves by the end of 2025, and passed some of them on to other reinsurers. From 2020 these included 777 Re, a Bermuda reinsurer in the 777 group, until that business was taken back in 2024. The department says Atlantic Coast took about $180 million too much credit for reinsurance placed with a Puerto Rico reinsurer, and Southern Atlantic Re about $245 million too much on business sent to another. Either correction, it says, would push the companies' reported surplus below zero.
The cash question
A life insurer's assets can be worth less than reported for years without anyone being harmed, as long as the money is not needed. The petition argues that the money is now needed, and a private loan's value is an opinion until somebody has to sell.
Multi-year annuities usually carry a surrender charge, a penalty for withdrawing early, and most of Atlantic Coast's also carry a market value adjustment, which reduces the payout when interest rates are higher than the contract's guaranteed rate, as they are now. When the charge period ends, the customer has a 30-day window to take everything out with neither.
According to the company's records, cited by the department, annuities with a total value of $900 million gross, nearly $400 million after reinsurance, reach the end of their surrender-charge periods in 2026. Another $900 million gross, nearly $300 million net, follows in 2027, and $800 million gross, $150 million net, in 2028. Customers surrendered $463 million gross, $165 million net, in the first half of this year. To meet that, the petition says, the insurer needs assets that turn into cash on schedule, and many of its loans have been extended or are paying no cash interest.
AM Best, the insurance rating agency, cut Atlantic Coast and its sister company Sentinel Security Life to C+, or marginal, in September, citing deteriorating capital, illiquid holdings, rising surrenders and operating losses in each of the past five quarters, Insurance Journal reported.
A-CAP's answer
A-CAP sued Mr Wise in September, calling his action reckless and in bad faith, then dropped the suit on 28 September when both sides agreed to mediation. The companies "continue to pay claims and service their obligations to policyholders," A-CAP said, adding that the petition "is not an adjudication" and that it disputes it. On Florida's order it said it would "work in good faith to resolve this matter expeditiously", while completing "the capital raise and corporate restructuring initiatives now underway."
Those initiatives include an agreement, signed in March, for funds managed by Oaktree Capital to buy a controlling stake in Atlantic Coast, which depends on A-CAP first carving the insurer out of its group and on regulatory approval. Insurance Journal described the takeover as still in progress last week.
For the customers, the practical facts are in the two orders. Florida's requires Atlantic Coast to keep paying claims there. If South Carolina's court grants rehabilitation, the director would assess whether the insurer can be put back on its feet or should be liquidated, which would take a further court order, and its petition asks for a stay on actions against the company while that happens. State guaranty associations protect annuity holders up to set limits if an insurer is liquidated. Until then, the argument is over what that money is worth.
The suspension, the surplus figures, the filing dates and the Florida policy counts are from the Florida Office of Insurance Regulation's Immediate Final Order in case 403552-26, signed by Commissioner Michael Yaworsky on 30 September 2026, read in full. The South Carolina allegations, investment shares, risk-based capital ratios, reinsurance figures, the 777 Partners loan history and the surrender schedule are from the Petition for Order Commencing Rehabilitation Proceedings filed by Director Michael Wise in the Richland County Court of Common Pleas on 15 September 2026, attached to the Florida order as Exhibit 1 and read in full; they are the department's allegations and have not been decided by the court. The quotations from Mr Yaworsky and A-CAP's statement on the Florida order are from Insurance Journal (1 October 2026). AM Best's rating action and quotations are from Insurance Journal (22 September 2026). A-CAP's statement on mediation is from its Business Wire release of 28 September 2026. The Oaktree agreement is from A-CAP's announcement as reported by Pulse 2.0 (14 March 2026). The percentage changes are this publication's calculations. Accurate to 10am ET on 5 October 2026.
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