Minnesota AG Settles Annuities Case

Minnesota Attorney General Lori Swanson on Thursday secured refunds for senior citizens who bought ill-suited annuities from an Iowa company and announced she was targeting another firm for what she said were deceptive annuity practices.

Under a Minnesota court settlement, as many as 2,400 senior citizens who purchased long-term annuities from Des Moines-based American Equity Life Holding Co. will be able to pull their money from those accounts without penalty.

Policing deferred annuities has been a major focus of Swanson's first year in office. With the latest lawsuit, the Democrat has gone after four firms. She has accused each of exploiting the elderly by selling them annuities they couldn't access for a decade or more without significant penalty.

Swanson said senior citizens living on retirement nest eggs and Social Security checks have been preyed upon.

"It's the old adage, if you're a hunter, you hunt where the ducks are," she said. "People don't target 22 year olds as much with financial abuse because they don't have money. If they did they probably would be targeted, too."

American Equity's settlement with Swanson mirrors one she reached in November with industry giant Allianz Life Insurance Co. Lawsuits are pending against Midland National Life Insurance and now Aviva USA Corp. and subsidiaries AmerUS Grop Co. and American Investors Life Co.

According to Swanson's original case against American Equity, some people who bought the companies policies had to wait until their 90s to get money from the annuities without substantial penalties for tapping the accounts sooner.

In Thursday's settlement, American Equity doesn't admit wrongdoing. Chief Executive David Noble said it was purely a business decision.

"The burdens of litigation are enormous, and we prefer to use our time and resources in furtherance of our efforts to provide superior products and excellent service," Noble said in a news release.

Consumers who were 65 or older when they purchased their policies after 2001 can get their money back with 4.15 percent interest if they feel they were sold an improper annuity. Swanson's office said the payout could reach as high as $125 million.

The deal requires American Equity to modify its forms and practices to make sure future sales are suitable.

The new case against Aviva USA Corp., which does business under several names, alleges eight violations of Minnesota's consumer protection laws. The company and its subsidiaries have their main operations in Des Moines and Topeka, Kan., according to court papers.

In a written statement, the company said it reached a deal last year with the state Department of Commerce to revise its compliance and suitability procedures.

"We have taken a leadership role within the industry in addressing substantive concerns relating to the suitability of our products for certain customers," the company said. "We have one of the strongest suitability requirements in the industry."