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Annuity Scammers Get Prison Three Nebraskans got nabbed for an annuity scam. Two of them – Stella Levea and James Masat – were principals of First Americans Insurance Service (not related to First American Corp., a Santa Ana, Calif.-based title and specialty insurance provide). The third – Kenneth Mottin – worked for Levea and Masat. It turns out that their “work” also included a scam perpetrated after the financial crisis of 2008. Prosecutors say the threesome solicited investments from private lenders and said the money was backed by secure annuities, according to an AP report. But instead, the three reportedly set up a Ponzi scheme and used the money to support their business and personal expenses, AP says. Once in court, Levea and Masat did apologize and express regret, the report adds, but they still got jail time – eight years and a month for Levea and James Masat and five years for Mottin. They also got three years of supervised release after leaving prison. It makes you wonder: When they were counting all their ill-gotten gains, did they consider the price they’d pay a few years later?


Variable annuity carriers have been anything but inactive in recent months, according to a new report from Morningstar. In the third quarter, carriers filed for 106 variable annuity product changes, the Chicago researcher says. That’s well above the 40 recorded in the same period last year, though significantly below the 168 filings made in second quarter, the report says. Twenty-three carriers accounted for the activity, with Lincoln National, Jackson National and Prudential making the most changes. But not all changes involve benefit reductions. New variable annuity contracts made up the largest group of filed changes in the third quarter, Morningstar says. That was followed by new variable annuity benefits and closure of variable annuity benefits. Contrary to reports that the entire industry is pulling back from living benefits, the researchers found that several new products launched with “attractive” living benefit levels. It sounds as if some carriers want to compete, despite the challenging economy. DID YOU




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Hartford Financial Services Group Inc. has joined the handful of carriers that are offering certain clients cash for their variable annuity contracts. The affected contracts include living benefit guarantees and that, in a declining stock market and low interest rate environment, can be difficult for carriers to support. According to an AP news report, the Hartford, Conn. carrier had stated, in a Securities and Exchange Commission filing, that it is making the offer “because high market volatility, declines in the equity markets and the low interest rate environment make continuing to provide the Lifetime Income Builder II rider costly to us.” In recent months, the carrier has signed deals to sell its individual life insurance division, a retirement plans unit and a securities brokerage and is now focusing on property and casualty insurance, group benefits and mutual funds. It exited the variable annuity business in March.


any money to stocks or increase current stock portfolio, even if the stock market improves. Source: Barclays Bank

InsuranceNewsNet Magazine » December 2012

Annuities are the most unsolicited products requested by clients, according to advisors surveyed by Cerulli Associates. Instead, customers are increasingly seeking out the products. In fact, the number of times that financial advisors have received requests for annuities from clients has gone up by more than 15 percent, year over year, says Donnie Ethier, senior analyst at the Boston firm. Why the spurt in consumer demand? “Both the positive and the negative attention annuities have received in the media over the past four years has led to an overall growing awareness,” suggests Ethier. However, one-third of households are still unaware of annuities, according to Cerulli. That suggests there’s potential for even greater demand.


Aviva plc has confirmed that it is in talks with “external parties” about selling its U.S business, Aviva USA, which operates out of Des Moines, Iowa. The development is timely. A few days earlier, A.M. Best downgraded the company’s’ issuer credit ratings to A from A+ but affirmed the insurer’s financial strength rating of A and also removed all ratings from “under review with negative implications.” Best assigned a stable outlook to the operation, too. Aviva USA is a market leader in indexed annuities, and an indirect, wholly-owned subsidiary of Aviva plc (Aviva), a United Kingdom company that has put many of its non-core operations up for sale this year.

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LIMRA: Annuity Sales Down 10% Q3 The low-interest-rate environment has taken a toll on sales according to LIMRA’s third quarter 2012 U.S. Individual Annuities Sales survey.

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December 2012