Former Aviva USA Companies Agree to $4 Million Settlement Over Use of Death Master File
November 24, 2013 by Fran Lysiak
CHICAGO – Aviva Life & Annuity Co. and Aviva Life & Annuity Company of New York, formerly part of Aviva USA, have agreed to pay $4 million to several states as part of a settlement regarding their use of the Social Security Administration’s Death Master File database, according to the Illinois Department of Insurance.
The agreement stems from a multi-state market conduct examinations of the 40 largest life insurers regarding a timely payment of proceeds to beneficiaries of life insurance policies and annuities, the Illinois insurance department said, noting it was the lead state in this investigation. Insurance regulators from Florida, California, New Hampshire, Iowa, North Dakota and Pennsylvania supported the investigation.
In early October, private equity-backed Athene Holding Ltd. completed its acquisition of Aviva USA Corp. for about $1.55 billion. Aviva USA is now known as Athene USA, the parent of Athene’s U.S. operations, headquartered in Iowa. The deal included Iowa-domiciled Aviva Life and Annuity Co. and New York-domiciled Aviva Life and Annuity Company of New York. The Bermuda-based Athene Holding is owned by several institutional investors, with its largest shareholder being AP Alternative Assets, which is managed by Apollo Global Management, a private equity firm.
In December 2012, the U.K.-based Aviva plc had agreed to sell Aviva USA Corp. to Athene Holding. Then in May, Athene Holding and its subsidiaries agreed to sell Aviva USA’s life insurance business to Commonwealth Annuity and Life Insurance, part of Bermuda-based Global Atlantic Financial Group, a multiline insurance and reinsurance holding company. However, that transaction, structured as a reinsurance arrangement, was contingent on its pending acquisition of Aviva plc’s U.S. annuity and life insurance business. Last month, Athene also completed the sale of Aviva USA’s life insurance business to Presidential Life Insurance Co. USA, a unit of Commonwealth Annuity and Life.
After the settlement was negotiated with the Aviva companies, Athene Holding announced it had completed the acquisition of Aviva, the Illinois insurance department said. Soon after Commonwealth’s acquisition of the common stock of Presidential Life Insurance Co.-USA from Athene, Presidential Life Insurance Co.-USA and First Allmerica Financial Life Insurance Co. will together, as the “Global Atlantic insurers,” reinsure all of the life insurance business of Aviva in a bulk reinsurance transaction, the department said.
Under the settlement, Athene and the Global Atlantic insurers will implement business reforms concerning the Aviva companies they purchased, and the reinsured life business, to promote a fast and efficient search for the beneficiaries of both its in-force life insurance policies and annuities using the Death Master File.
Life insurers have used the Death Master File to search for and stop payment to annuity holders but failed to use the database to identify deceased life insurance policyholders and the proceeds owed to beneficiaries. In 2011, regulators began to investigate companies’ use of the file. Most recently, New York Life Insurance Co. in October agreed to pay $15 million to state regulators over its use of the database but called for state regulators to craft uniform national standards for companies to follow when conducting searches on unclaimed property using the file and other tools.
“With this settlement, there have been 10 resolutions with insurers that have agreed to implement consumer friendly practices to timely pay benefits rightfully owed to beneficiaries,” said Andrew Boron, director of the Illinois Department of Insurance, in the statement.
In the third quarter, Aviva USA was a top seller of indexed annuities in the United States. The No. 5-ranked company recorded $518.2 million in sales, according to Wink Inc. (Best’s News Service, Nov. 21, 2013).
Market conduct examinations of seven of the 10 largest insurers in the United States have been resolved, the Illinois insurance department said. These life insurers, and other smaller insurers who have settled, represent more than 50% of the market.
A National Association of Insurance Commissioners’ panel is considering whether to conduct a study that would determine if the NAIC should develop guidelines to provide insurers with consistency in handling unclaimed death benefits (Best’s News Service, Nov. 12, 2013).
Aviva Life & Annuity Co. and Aviva Life & Annuity Company of New York each currently has a Best’s Financial Strength Rating of B++ (Good).
(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)
BN-NJ-11-11/21/2013-2013 169 ET #
