Two paragraphs in the Business & Finance Watch column of Friday’s Journal will matter more to a great many retirement savers than anything on the front page. Robbins Geller Rudman & Dowd, one of the largest class-action law firms in the country, has sued Delaware Life, Guggenheim Partners and their owner Mark Walter on behalf of a senior citizen who bought an annuity from Delaware Life earlier this year.
The lead plaintiff is Ira Rosner, 67, who purchased the contract in April with a 30-day, no-penalty return. The complaint, filed in federal court in Miami, seeks damages for negligent misrepresentation, breach of contract, and aiding and abetting fraud. Matt Wirz reports it is one of the first such cases against Walter’s financial empire, and that others could follow.
What is alleged, and what is not
Everything in the paragraph above is an allegation. A spokesman for Walter did not respond to a request for comment. His conglomerate, TWG Global, has said there was no fraud at either his Wall Street firm, Guggenheim Partners, or at his insurers. Nothing has been proven in court, and this desk takes no view on whether it will be.
The structural fact underneath is not in dispute, because the companies themselves have addressed it. Federal investigators are examining loans that insurance companies controlled by Walter made which ultimately helped fund his other business interests, and are seeking to determine whether there was any fraud around those transactions. Those insurance companies have said they are working to eliminate most of that lending — which is a sentence you only write about an arrangement that existed.
Hundreds of thousands of Americans bought retirement products from Delaware Life and other insurers Walter owns through the parent company Group 1001. Walter appears elsewhere in Friday’s paper too: he and Todd Boehly agreed to sell their combined 25% stake in Chelsea to Clearlake Capital for about £950 million, and the Journal notes the deal comes at an opportune time, with regulators probing his insurance empire and the businessman refinancing assets. Last month he agreed to sell his majority stake in the Los Angeles Lakers in a deal valuing the team at $12.5 billion.
Our read
An annuity is a promise, and the value of a promise is the ability of the promiser to keep it. That is the whole product. Everything else — the rate, the rider, the income guarantee — sits on top of that one sentence.
Which makes this a good week to do something mildly tedious and genuinely useful, whoever your insurer is and however this particular case resolves.
Find out who actually holds the promise. Annuities are frequently sold under a distribution brand and issued by a different legal entity, sometimes several layers removed from the name on the brochure. The issuing company is named in the contract. That is the entity whose balance sheet matters.
Look up its financial-strength ratings. A.M. Best, Moody’s, S&P and Fitch all publish them free, and a rating is not a guarantee, but a downgrade is a legible early signal that is otherwise easy to miss.
Know what your state guaranty association actually covers. Every state has one, coverage limits vary meaningfully, and the limit applies per insurer — which is the specific reason that splitting a large annuity allocation across two issuers is a different risk profile from putting it all with one.
And find the surrender schedule. It is usually a table near the back of the contract listing a declining percentage by year. That table is the price of changing your mind, and most owners have never read it.
None of that is a reaction to a lawsuit. It is the audit that should have been done at purchase and rarely is. Fifteen minutes, bring the contract — not the brochure.