About 30,000 current and former annuity owners claim company failed to pay proper dividends on contracts sold 30 years ago.
Northwestern Mutual Life Insurance Co is paying $84 million to settle a class action lawsuit that claimed the firm illegally reduced payouts on annuities it sold 30 years ago.
The lawsuit covered about 4,000 current and 29,000 former owners of annuities who claimed that the Milwaukee-based life insurance company violated terms of annuity contracts by changing the dividend calculations on deferred and fixed annuities the company sold in 1985, according to a report from Reuters.
Investors said that the firm paid dividends on the annuities but the payouts reflected interest on short-term bonds, into which the company had moved annuity assets, which deprived them of higher long-term potential payouts, Reuters said. Experts estimated compensatory damages of $278 million.
“We've agreed to settle a long-running lawsuit related to a change we made 30 years ago to a type of Northwestern Mutual annuity we haven't sold since 1985,” said Betsy Hoylman, a spokeswoman for the company, in a statement. “We stand firmly behind the actions we took. This settlement does not change our dividend process and will have no material impact on our financial results.”
The company paid out $5.2 billion in dividends in 2014 and expects that amount to increase to $5.5 billion in 2015, the company said in a statement last October.
Of the $5.5 billion payout, about 90% will be paid on whole life insurance, with $320 million on disability insurance, $150 million on term life insurance and $105 million on variable life insurance. In addition, the insurer will pay $45 million on its annuity product line.
