Kansas has received $415,000 from a five-state, $2.1 million settlement with the Nationwide Insurance Co. over questionable annuities sold by Overland Park-based Waddell & Reed Inc., the Insurance Department announced Thursday.
The settlement ends about 10 years of complaints and litigation over the annuities, said Bob Hanson, an aide to Insurance Commissioner Sandy Praeger.
The states' insurance departments alleged that in 2000, Waddell & Reed, a multistate financial-advising firm, asked Nationwide to develop annuities that the company could exchange for annuities that some Waddell & Reed clients held.
Annuities are life insurance policies that pay benefits over time, either for a set period or for the life of the policyholder.
The insurance departments alleged that the problem with the Nationwide annuities was that the death benefits were lower than the benefits in the annuities that customers exchanged for them, Hanson said.
Nationwide did not admit to any wrongdoing.
"We feel it is in the best interests of all parties to settle these matters rather than to continue to engage further resources on them," the company said in a statement. "The settlement resolves the matter and allows Nationwide and the participating states to move on. "
Waddell & Reed settled its portion of the case by paying civil fines five years in 2005 — $145,000 to Kansas and $68,000 to Minnesota. The settlement announced Thursday also covers California, Missouri and Wisconsin, the Insurance Department said.
Roger Hoadley, a spokesman for Waddell & Reed, said the company was not a party to the Nationwide settlement.
Nationwide was a defendant in the case because the insurance departments alleged that it had failed to adequate supervise Waddell & Reed's transactions with the annuities.
In addition to the money paid to the states — which in Kansas' case will go to the state General Fund — the settlement also requires Nationwide to make some restitution.
The agreement requires Nationwide to raise the death benefit and reimburse "surrender fees" that customers paid when they exchanged their annuities, Insurance Department officials said.
Customers affected by the settlement will be contacted by certified mail and informed of their options, the Nationwide company statement said.