2011 Year in Review: Finance & Insurance
Insurance agents get more lenient professional standard
The passage of an insurance bill on April 19 nullified an Iowa Supreme Court ruling that had set a stricter standard for insurance agents’ professional responsibilities to their clients.
In Langwith v. American National General Insurance Co., the plaintiff, Dennis Langwith, said that his insurance agent, Janet Fitzgerald, should have provided him and his wife with better advice about how to provide coverage for their son, who had been dropped from their policy after his driver’s license was suspended. The ruling outlined several factors a jury should consider in determining the agent’s degree of liability in such cases.
On Dec. 30, 2010, the Iowa Supreme Court issued a ruling in that case that would have required a jury to determine in disputed cases whether an agent owed a higher duty to a client than simply selling him or her the requested policy. A two-paragraph provision in Senate File 406 abrogated the Supreme Court’s ruling “to the extent that it would impose higher and greater responsibilities on insurance producers” than under previous law.
On Oct. 7, West Des Moines-based FBL Financial Group Inc. announced it had agreed to sell its EquiTrust Life Insurance Co. subsidiary, marking an end to its presence in the annuity market.
“The divestiture of EquiTrust Life will allow FBL Financial Group to increase focus on its very attractive Farm Bureau market, while reducing risk and increasing financial flexibility,” James Hohmann, CEO of FBL Financial Group, said in a press release.
Guggenheim Partners LLC, a global financial services firm with more than $125 billion in assets under management, will purchase EquiTrust Life. FBL estimated the preliminary sale price of the subsidiary at $440 million. The transaction is subject to regulatory approval, and was expected to close on or about Dec. 30.
EquiTrust Life sells fixed and indexed annuities and life insurance nationally through independent agents and marketing organizations.
“Over the past 10-plus years, EquiTrust Life has grown into a significant presence in the independent distribution annuity marketplace, making it attractive to potential acquirers who are looking to pursue that line of business,” Hohmann said.
The exponential growth of Ben Milne’s Dwolla Corp. has attracted mega attention.
On Dec. 1, 2010, after securing $1 million in equity financing from The Veridian Group Inc. and The Members Group, Dwolla went national with its peer-to-peer payment system, which allows users to exchange funds over a secure network.
Offering retailers an alternative to credit and debit card processors, Dwolla said in June that it surpassed the facilitation of $1 million in transactions a week, compared with $50,000 six months earlier. At mid-year the company announced a partnership with Premier Credit Union, and said it was prepared to roll out its services in conjunction with that financial institution and 11 others in the next 12 months.
Since starting as a two-man shop in November 2010, Dwolla has grown to employ 18 people. “We are not going to be 15-person company; we are going to be a 100-person company,” Milne said in July.
Dwolla has received attention from national publications, and Milne was named to Forbes magazine’s list of 30 influential people under the age of 30 for finance.
In December Dwolla announced that there will be no fees on transactions of less than $10, and also launched its Instant product, which allows eligible users to deposit and send cash in real time, or borrow money and pay it off at the end of the month.
EMC Insurance Cos. celebrates 100th anniversary
Des Moines-based EMC Insurance Cos. turned 100 in April, and its employees, agents, shareholders and policyholders have a lot of reasons to celebrate.
EMC ranks among the top 60 insurance organizations in the United States, and is one of the largest property/casualty companies in Iowa based on net written premiums.
EMC Insurance Group Inc. last year was included on the Forbes “100 Most Trustworthy Companies” list, which recognizes companies that are “the most transparent and trustworthy businesses that trade on American exchanges.”
Surpassing $1 billion in capital has been one of EMC’s most significant accomplishments, said Bruce Kelley, EMC’s president and CEO. Reaching that size has enabled the insurer to continue to improve its economies of scale and benefit its policyholders, he said.
The year of the ‘cat’
Property/casualty insurers and their customers were hammered by record-breaking catastrophe, or “cat,” losses the past few years, particularly in the first six months of 2011. Insurers sustained $27 billion in catastrophe-related losses in the first half of the year, a 127 percent increase from the $11.9 billion in losses that occurred in the first half of 2010, according to A.M. Best Co., an industry rating company.
The losses may cause some insurers to offer less coverage for particular risks and in certain areas of the country. At the same time, companies that purchase property/casualty coverage could see premiums increase.
Nationwide Mutual Insurance Co., which reported more than $1.5 billion in weather-related claims in the first half of this year, nevertheless generated net operating income of $398 million, driven in large part by the performance of its financial services products.
Des Moines-based EMC Insurance Group Inc. reported record catastrophic losses of $50.5 million in the first six months of 2011.
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