Zionsville, Ind. (September 21, 2026) – On June 26, 2026, Clear Spring Life and Annuity Company (“Clear Spring Life”) disclosed in its 2025 audited financial statements and Q1 2026 quarterly statements the reclassification of a material portion of the private credit investments held in its investment portfolio from “unaffiliated” to “affiliated.” This reclassification followed our receipt of a grand jury subpoena issued by the U.S. Attorney’s Office for the Southern District of New York in early February 2026 and a subsequent internal investigation. The U.S. Securities and Exchange Commission is conducting a parallel investigation.
We are aware of the media coverage which followed our financial statement disclosures in June. Clear Spring Life is committed to keeping our policyholders, producers, employees, and other stakeholders informed of the progress we’re making to significantly reduce the level of our affiliated investment holdings following the reclassification issue and improve our counterparty due diligence processes, related-party and affiliate reporting and transparency, and investment governance controls. This update summarizes what happened; recent developments, including a definitive agreement designed to significantly reduce affiliated investments; recent ratings actions; and planned improvements to our system of internal controls.
What Happened
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Through our internal investigation, we identified errors relating to the identification and reporting of certain related-party investments. Specifically, the returns of certain private credit investments were determined to be predominantly contingent on the performance of affiliates. Under statutory accounting rules applicable to insurance companies, the discovery that the returns of certain private credit investments were predominantly contingent on the performance of affiliates required us to reclassify the investments from unrelated to affiliated.
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“Related party” and “affiliated” investments are technical classifications based on the relationship between an insurance company and the investment counterparty. Investment transactions with related parties and affiliates are permissible under state insurance law but must be disclosed as such in the notes to the insurance company’s statutory financial statements, as well as in detailed investment schedules which accompany those statements. In some cases, transactions with affiliates also require prior approval from the insurance company’s domestic state insurance regulator.
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Once we discovered this misclassification, we made the necessary accounting corrections in our financial statements and concluded that deficiencies existed in our internal control over financial reporting because we did not identify the misclassification issue on a timely basis.
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It is important to note that our financial statement disclosure-related changes did not change Clear Spring Life’s capital and surplus or reported earnings for year-end 2024 or 2025, and the company’s audited financial statements were accompanied by unqualified independent audit opinions.
Our Financial Strength Rating
What’s changed and why.
On June 26, 2026, Clear Spring Life disclosed the reclassification of a material portion of its private credit investments from unaffiliated to affiliated, the receipt of a grand jury subpoena in connection with an investigation by the U.S. Attorney’s Office for the Southern District of New York, and a parallel investigation by the U.S. Securities and Exchange Commission. AM Best took action in July 2026 following these disclosures.
AM Best rating actions were driven by:
In its release, AM Best affirmed Clear Spring Life’s financial strength rating of A- while revising the outlook from Positive to Negative, due in part to the reclassification of investments from unaffiliated to affiliated. Read the AM Best press release in its entirety here.
Our Affiliated Investments Reduction Plan
After we issued our financial statements in June, we immediately began working with our parent company, TWG Global (“TWG”), on plans to reduce the level of our affiliated investments. We recently finalized several agreements to do just that, which taken together support what we’re calling our “Affiliated Investments Reduction Plan.”
As part of the Affiliated Investments Reduction Plan, TWG has committed to purchase recently reclassified private credit investments from Clear Spring Life pursuant to the terms of an Asset Purchase Agreement. Under this agreement, we expect to further reduce Clear Spring Life’s total affiliated investment holdings (as a percentage of its total general account invested assets) to approximately 10% by June 30, 2027. Please note that Clear Spring Life is under no regulatory requirement or external mandate to reduce the amount of its affiliated investments to a certain level by the end of the year, or by any other date. The Asset Purchase Agreement with TWG is also subject to the company’s receipt of required regulatory approval.
The table below shows the carrying value of Clear Spring Life’s affiliated assets as of December 31, 2025, March 31, 2026, and June 30, 2026
| $ in mm | December 31, 2025 (Restated)(1) | March 31, 2026 | June 30, 2026 |
| Affiliated Assets | 5,895 | 5,323 | 4,898 |
| General Account Invested Assets(2) | 9,923 | 10,142 | 10,033 |
| % Affiliated Assets | 59% | 52% | 49% |
(1) Restated December 31, 2025 amounts reflect additional related-party investments disclosed in the Company’s 2025 audited financial statements, which were omitted from the Company’s 2025 Annual Statement. (2) General Account Invested Assets represent Cash and Invested Assets (net) per Page 2, Line 12, Column 3 of Clear Spring Life’s statutory financial statement.
Our Control Remediation Plan
In addition, we have developed a Control Remediation Plan. The plan has been accepted by the company’s independent audit committee and is targeted for completion prior to the filing of our December 31, 2026 statutory financial statements. Key planned actions include but are not limited to:
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Strengthening counterparty due diligence
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Improving related-party and affiliate reporting and transparency
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Enhancing Internal Audit monitoring
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Engaging third-party advisors for industry benchmarking and to develop control best practices
In addition, we are planning to strengthen several elements of our investment governance processes.
Why You Can Be Confident
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Upon identifying the issue, we owned it, disclosed it, and took immediate actions to address it.
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Clear Spring Life’s financial strength rating remains unchanged. See above for a summary of recent ratings actions with a link to AM Best’s press release.
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There is no change to the terms of your policy, benefits, or our service commitment to you.
We will provide periodic updates on this page as we continue to make progress to reduce the level of our affiliated investment holdings.