Compliance January 5, 2022

New York State Fines Pacific Life for PRT Violations

The company was penalized for violating state law by conducting an unlicensed insurance business.  

Reported by

The New York State Department of Financial Services (DFS) has assessed a $3 million penalty against Pacific Life Insurance Co. (PLIC) for conducting insurance business in New York without a license.

The penalty was ordered in connection with the company’s pension risk transfer (PRT) business. Pacific Life was served with a consent order from Acting New York State DFS Superintendent Adrienne Harris.  

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“This type of unlicensed insurance activity puts the hard-earned retirement dollars of New Yorkers at risk,” she said. “The department remains committed to safeguarding the retirement assets of New Yorkers and supporting the financial stability of individuals and families, which is even more critical today as we work to revive New York’s economy amid the ongoing pandemic.”  

New York state investigations into PLIC actions found that, in 2016 and 2019, the company bid on and won two large transactions with a New York-based sponsor, in violation of state insurance laws.

“The investigation concluded that PLIC had done insurance business in New York without a New York license in connection with its pension risk transfer business,” the consent order states. “PLIC PRT representatives had exchanged hundreds of email communications and other contacts with businesses (including some located in New York) and communicated with New York individuals in violation of the insurance law.”

This enforcement action is the third penalty from DFS against unlicensed insurance businesses that have solicited and engaged in violations connected to PRT businesses.   

In April 2020, New York state penalized Athene Holding Ltd. with a $45 million fine for New York insurance law violations in connection to subsidiary Athene Annuity & Life Co. and its PRT business. AIG was punished with $12 million in fines for violations related to its subsidiary, American General Life Insurance Co. (AGL), and that company’s PRT business early last year.

As part of the agreement with DFS, PLIC will transfer the handling of transactions to PLIC’s New York subsidiary, Pacific Life & Annuity Co.

New York state insurance law Section 1102 prohibits operating an insurance business unless it is appropriately licensed. 

“Certain acts in New York, effected by mail from outside New York or otherwise, by any person or entity, constitute doing an insurance business in New York,” the consent order states. “Such acts include making, or proposing to make, as insurer, any insurance contract, including either issuance or delivery of a policy or contract of insurance to a resident of New York or to any firm, association, or corporation authorized to do business in New York, or solicitation of applications for any such policies or contracts; in addition to collecting any premium, membership fee, assessment or other consideration for any policy or contract of insurance.”

PLIC says Pacific Life “has taken the necessary steps to resolve the issue with the DFS and has implemented necessary changes to ensure proper pension risk transfer business practices in New York moving forward.”

Deals & People January 5, 2022

2022 M&A Action Picks Up Steam With Latest NFP Acquisition

The firm says its acquisition of Improved Funding Techniques Inc. expands its retirement footprint in the Northeast.

Reported by

Insurance broker and consultant NFP has announced its acquisition of Improved Funding Techniques Inc. (IFTI). The transaction closed on December 1.

IFTI is a third-party administrator (TPA), with an internal registered investment adviser (RIA), offering a consolidated solution for designing, implementing and administering retirement plans for privately owned businesses. In acquiring IFTI, NFP says it will add scale to its retirement business and expand its footprint in the New York metro area and around the country.

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According to the firm, the acquisition is also meant to advance NFP’s existing internal TPA expertise, while adding complementary defined benefit (DB) plan capabilities that can be leveraged across the entire organization.

Nick Della Vedova, president of NFP Retirement, says the acquisition will allow NFP to leverage IFTI’s existing relationships across the region while enhancing its ability to deliver value to businesses of all sizes, including larger manufacturing companies and professional services firms, such as medical and law practices.

Daniel Bystrom, IFTI’s president, will join NFP as a senior vice president reporting to Della Vedova. Bystrom and the IFTI team will collaborate with NFP’s team in the Northeast region on opportunities to introduce solutions across the NFP Retirement distribution network. Commenting on the acquisition, Bystrom says his team of consulting and actuarial experts will complement NFP’s commercial insurance, group benefits and executive benefits solutions.

The transaction comes on the heels of a recent agreement announced by Wealthspire Advisors, an NFP company and independent investment adviser, to acquire Private Ocean LLC, a fiduciary wealth management firm with $2.7 billion in assets.

News of the IFTI deal comes after another record-breaking year for adviser industry merger and acquisition (M&A) activity. According to research by Echelon, the possibility of tax code changes helped industry M&As set a quarterly record in the third quarter of 2021, which saw 78 deals announced. The previous record was 76 deals, set in the first quarter of 2021. The third quarter analysis showed large strategic acquirers, many of which are backed by private equity firms, maintained their status as the most active dealmakers in the wealth management and advisory industry.

Last year, Wise Rhino Group published a new analysis of the rapid M&A activity occurring in the retirement plan advisory industry, finding the pace of deals continued to accelerate throughout 2021. The analysis suggested the same is likely in 2022.

Wise Rhino Group found that insurance brokerage firms such as NFP are arguably the best positioned to integrate retirement advisory firms, as most have established operating companies and have coveted growth currency in the form of employee benefits and property-casualty referrals. They are also the most experienced acquirers and are very effective at integrating new partner firms. 

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