Annuity Seller to Refund Up to $18 Million

A Baltimore insurer that sold annuities through Alliance for Mature Americans said Tuesday that it will refund up to $18 million to about 400 Californians who were allegedly pressured into purchases or were sold investments that weren’t suitable.

The settlement with Fidelity & Guaranty Life Insurance Co. is the first among insurers and others who provided annuities for the retirement plans marketed by Alliance, said Matt Ross, spokesman for the state attorney general’s office.

The state agency is negotiating with other insurers, he said, but he would not provide further details. It has sued Fremont Life Insurance in Orange and its parent company, Fremont General Corp. in Santa Monica.

In several lawsuits brought by the state and by individuals, Alliance for Mature Americans of Lake Forest is accused of fraudulently marketing its living trust investment packages and selling clients more than $200 million worth of annuities that were risky enough to make them unsuitable investments for senior citizens.

Alliance settled with the state last April, agreeing to pay $1 million in restitution and a $100,000 civil penalty. It did not admit any wrongdoing. Other litigation is pending.

Fidelity & Guaranty “came forward to us” after learning in 1996 that the state had sued Alliance, its lawyers and others, Ross said. “They wanted to work this out.”

The insurer will send information packets within 30 days to those who bought its annuities through Alliance during a four-month period in 1996, said Mark Stone, a Fidelity & Guaranty spokesman. Customers will then have 60 days to decide whether to keep their annuities or to seek reimbursement of the premiums plus interest. Stone said the company won’t make any oral sales pitches to them.

Fidelity’s total payout will depend on how many customers seek refunds, Stone said. The insurer also will give the State Bar of California $150,000 for programs to help educate seniors on estate planning.