Great American Financial Resources Settles With Minnesota A.G. Over Annuity Sales

Great American Financial Resources has become the fifth insurer to settle with Minnesota's attorney general over the alleged improper sale of deferred annuities to the state's senior citizens.

Great American Life, Annuity Investors Life and Loyal American Life insurance subsidiaries have settled the issues related to Attorney General Lori Swanson's Civil Investigative Demand in October 2007, according to statements from Great American Financial Resources and Swanson. It was alleged Great American sold deferred annuities to seniors when it was not suitable.

Swanson said customers who purchased a deferred annuity from Great American between Jan. 1, 2001 and Aug. 1, 2008 are to receive a letter from the company and her office about the refund process and Great American will make changes to its suitability standards.

John Gruber, senior vice president, general counsel and secretary of Great American Life Insurance Co., told BestWire the company changed its enhanced suitability program more than a year ago to address the issues, and revised the client financial disclosure form -- changing it from two pages to a single page and rearranging some of the questions.

"We do not have to do anything more in addition to what we have had in place," Gruber said. Under the terms of the settlement, Great American Financial Resources admits no wrongdoing and was not fined.

The company "already implemented the minor revisions necessary to address the attorney general's desire for uniform standards," Charles R. Scheper, chief operating officer for Great American Financial Resources, said in a statement.

Swanson said the settlement allows seniors to make refund claims involving about 2,000 policies with a value of about $50 million. Gruber said about 18 months ago, the company engaged in outreach attempts to customers in order to give them claims forms. On the form, customers were able to "check that they were fine with their purchase," said Gruber. About 1,500 forms were returned by satisfied customers, he said.

The agreement with Great American was modeled after previous ones Swanson reached with other insurers. Midland National Life Insurance Co. reached a settlement with Swanson late in 2008 (BestWire, Dec. 17, 2008). In October 2008, Swanson settled with two subsidiaries of Aviva USA, a top seller of equity-indexed annuities in the United States (BestWire, Oct. 28, 2008). American Equity Investment Life Insurance Co. settled with Swanson early that year (BestWire, Feb. 11, 2008) and Allianz Life Insurance Co. settled the year prior (BestWire, Oct. 9, 2007).

Great American Life, Annuity Investors Life and Loyal American Life insurance companies each currently have a Best's Financial Strength Rating of A (Excellent).

Great American Insurance Group companies are subsidiaries of American Financial Group Inc (NYSE: AFG). In trading on Dec. 23, shares of American Financial Group Inc. stock were selling at $24.98, up 0.60% from the previous close.

(By Chad Hemenway, associate editor, BestWeek: [email protected])