Allianz Life ‘Vindicated’ in Annuities Class-Action Suit

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October 13, 2009 Tuesday 01:54 PM EST

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Allianz Life 'Vindicated' in Annuities Class-Action Suit

Fran Lysiak

MINNEAPOLIS

Allianz Life Insurance Company of North America said a federal jury in Minneapolis has ruled in its favor in a class-action lawsuit filed by thousands of policyholders who bought equity-indexed annuities from the company.

Filed more than four years ago, the suit involved allegations relating to the clarity of language in some marketing materials on some products customers bought between Feb. 9, 2000, and May 10, 2007, the company said. The case was expanded, however, to other practices and policies, it said.

The products at issue in the case were seven of the company's two-tiered equity-indexed annuity products and language concerning bonuses, said Emily Porter, a spokeswoman for Allianz Life. These products "aren't really being sold anymore," she said. The number of affected policies is about 450,000, she said.

Two-tiered annuities generally are designed for people who intend to initially defer taking income from their contracts, and then later annuitize by taking regular periodic income payments over time, she said.

It's unusual for a class action to reach trial because most cases are usually settled, Porter said. The fact that Allianz Life went to trial "shows how strongly we felt about it and the fact that a jury actually found in our favor vindicates the value of our products and services," Porter said.

However, there were other issues that the jury ruled against the company on, but it didn't award the plaintiffs any monetary damages because they found no harm was done by Allianz Life, she said.

Allianz Life, a unit of Germany's Allianz SE, was the second-biggest seller of equity indexed annuities in the second quarter, posting sales of nearly $1.5 billion, according to AnnuitySpecs.com, a firm that tracks the data (BestWire, Aug. 18, 2009).

"We are very pleased that the jury concluded that no harm came to our policyholders," said Gary C. Bhojwani, president and chief executive officer of Allianz Life, in a statement. The company has some of the most stringent sales oversight policies and procedures in the industry, he said.

Allianz Life "strives to work with only the best financial professionals in providing financial solutions for more than a million policyholders," Bhojwani said.

With indexed annuities, an insurance company invests most of the principal in bonds to ensure the policy will generate a small annual return, but the insurer uses a small portion of the premium to buy options in a stock market index. Options that are exercised can result in additional interest credited to a policy, potentially more than an investor might achieve through other fixed-income investments.

Allianz Life Insurance Company of North America currently has a Best's Financial Strength Rating of A (Excellent).

(By Fran Matso Lysiak, senior associate editor, BestWeek: [email protected])

October 14, 2009