Mutual of Omaha agrees to settlement in annuities case
OMAHA — Mutual of Omaha has agreed to a $1.7 million settlement with the Connecticut attorney general to end an investigation into the commissions the company paid brokers who sold certain annuities.
Connecticut Attorney General Richard Blumenthal said Wednesday that Mutual illegally paid more than $1 million in concealed compensation to brokers between 1999 and 2004. Blumenthal alleges that Mutual, in exchange for the payments, received inside information on pension plan contracts it was seeking.
Mutual acknowledged compensating the brokers but didn’t admit any wrongdoing as part of the settlement. Mutual said it disclosed the additional broker compensation as expenses or administrative costs.
Blumenthal said describing the broker compensation as expenses or administrative costs concealed the nature of the payments and inflated the cost of the annuities.
But John Fischer, vice president of Mutual’s retirement plan division, said it competed to sell the annuities based on their overall cost, which included all the payments made to brokers. Fischer said Mutual’s overall price was the lowest every time it won the bidding for an annuity.
The investigation involved single premium group annuities that some pension plans use to make their payments.
Blumenthal said the pension plans typically rely on brokers to evaluate and recommend annuities because of the complexities involved. He said the additional compensation brokers received influenced their recommendations.
Mutual agreed to establish a $1.5 million fund to refund premiums to pension plan sponsors that bought policies between 1999 and 2004 that included additional payments to brokers.
Mutual also will pay a $195,000 penalty to Connecticut and agreed to change company practices.
Blumenthal said Mutual also agreed to an eight-year ban on any broker compensation besides the disclosed commissions, and Mutual promised to disclose its compensation practices and policies on its Web site.
Blumenthal has announced similar settlements with The Hartford Financial Services Group Inc. and Principal Financial Group Inc. Blumenthal said he now plans to focus on the brokers in these transactions.
Mutual said the annuity policies investigated represent less than 1 percent of the policies it sold.
Mutual of Omaha provides insurance and financial products for individuals, businesses and groups. In its yearly report for 2007, Mutual generated $4.2 billion in revenue and $217 million net income.
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On the Net:
Mutual of Omaha: http://www.mutualofomaha.com.
Connecticut Attorney General: http://www.ct.gov/ag
Connecticut Attorney General Richard Blumenthal said Wednesday that Mutual illegally paid more than $1 million in concealed compensation to brokers between 1999 and 2004. Blumenthal alleges that Mutual, in exchange for the payments, received inside information on pension plan contracts it was seeking.
Mutual acknowledged compensating the brokers but didn’t admit any wrongdoing as part of the settlement. Mutual said it disclosed the additional broker compensation as expenses or administrative costs.
Blumenthal said describing the broker compensation as expenses or administrative costs concealed the nature of the payments and inflated the cost of the annuities.
But John Fischer, vice president of Mutual’s retirement plan division, said it competed to sell the annuities based on their overall cost, which included all the payments made to brokers. Fischer said Mutual’s overall price was the lowest every time it won the bidding for an annuity.
The investigation involved single premium group annuities that some pension plans use to make their payments.
Blumenthal said the pension plans typically rely on brokers to evaluate and recommend annuities because of the complexities involved. He said the additional compensation brokers received influenced their recommendations.
Mutual agreed to establish a $1.5 million fund to refund premiums to pension plan sponsors that bought policies between 1999 and 2004 that included additional payments to brokers.
Mutual also will pay a $195,000 penalty to Connecticut and agreed to change company practices.
Blumenthal said Mutual also agreed to an eight-year ban on any broker compensation besides the disclosed commissions, and Mutual promised to disclose its compensation practices and policies on its Web site.
Blumenthal has announced similar settlements with The Hartford Financial Services Group Inc. and Principal Financial Group Inc. Blumenthal said he now plans to focus on the brokers in these transactions.
Mutual said the annuity policies investigated represent less than 1 percent of the policies it sold.
Mutual of Omaha provides insurance and financial products for individuals, businesses and groups. In its yearly report for 2007, Mutual generated $4.2 billion in revenue and $217 million net income.
———
On the Net:
Mutual of Omaha: http://www.mutualofomaha.com.
Connecticut Attorney General: http://www.ct.gov/ag
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