Swanson files suit against Allianz Life

Minnesota-based Allianz Life Insurance Co. of North America was sued Tuesday by state Attorney General Lori Swanson for allegedly deceiving thousands of elderly people into making long-term investments that in some cases lock up their money far beyond their life expectancies.

The company defended its practices.

"I feel they really took advantage of us," Leo Stulen, 78, of Hutchinson, Minn., said at a State Capitol news conference called by Swanson.

Stulen bought an Allianz Flex-Dex Bonus deferred annuity with his life savings of $40,000 in 2001-when, by his account, he had "one foot in the grave and the other on a banana peel"-only to be forced by medical bills shortly afterward to cash it in and pay a surrender penalty of nearly $6,000.

Swanson, who took office last week, said deceptive sales of deferred annuities to unsuspecting senior citizens are a widespread abuse driven by lucrative upfront commissions paid to insurance agents.

"It is a big national problem," she said. "We are looking at complaints against other insurance companies, too. It is simply wrong to tie up seniors' savings in this way to generate commissions."

An Allianz spokeswoman denied the allegations, saying the company "is confident that it has complied with Minnesota law and will vigorously defend our products, practices and legal position."

According to Swanson's office, Allianz has sold more than 4,900 deferred annuities to Minnesotans over the age of 70 since 2000, totaling more than $259 million. Some of the offerings lock up money for up to 15 years before withdrawals may be made without penalties of 15 percent, she said.

In addition, some of the Allianz annuities tout "immediate" bonuses that actually aren't fully paid for 15 years, Swanson said. But sales agents collect commissions of up to 9.8 percent right away, according to a civil complaint filed in Hennepin County District Court.

The suit alleges eight counts of deceptive trade practices and violations of a state law requiring annuity sellers to "have reasonable grounds for believing that the recommendation is suitable for the customer."

The suit seeks restitution to seniors harmed by Allianz, civil penalties to the state and an injunction to bar the firm from selling deferred annuities to seniors without first determining their suitability.

"Allianz Life annuities are high-quality products that serve a range of consumer needs," the company's vice president of corporate communications and brand management, Jody Hilgers, said in a statement e-mailed to reporters. "More than 99 percent of our annuity policyholders have never filed a complaint with Allianz Life-a consumer standard that we are proud to share."

Allianz of North America is based in Golden Valley and owned by Allianz SE of Germany. According to Swanson's office, Allianz of North America has about $75 billion in assets and a net worth of $3.5 billion. Hilgers said the company employs more than 2,000 people in Golden Valley and is represented by independent agents throughout Minnesota.

Last month, securities regulators fined an Allianz subsidiary $5 million for failing to supervise its financial advisers. Over a five- year period, USAllianz Securities, the broker arm of Allianz Life, did not have enough trained supervisors to make sure the company's thousands of advisers, who mostly sold insurance products, were following the law, according to settlement documents filed by the NASD, a self-regulating industry group formerly known as the National Association of Securities Dealers.

Allianz Life Chief Executive Mark Zesbaugh recently stepped down, saying he wanted to spend more time with his family.