Golden Gate Insurer PHL Veers to Liquidation as Rehab Hopes Fade

State regulators are abandoning a plan to rehabilitate PHL Variable Insurance Co. and may pursue liquidation instead, after finding that the struggling life insurer — acquired by private equity firm Golden Gate Capitala decade ago — is in worse shape than previously thought.

Authorities said they may also sue Golden Gate and its Nassau Financial Group insurance arm on claims including breach of fiduciary duty if the firms don’t agree to an acceptable settlement. In a statement, Nassau called such accusations “without merit.”

Seeking rehabilitation no longer appears feasible, Joshua Hershman, the interim head of Connecticut’s insurance department, wrote ...