2023-03-30 10:40:04 ET
Citizens Financial ( NYSE: CFG ) said Thursday it had conducted appropriate diligence in offering its customers a financial product that later became entangled in a criminal investigation related to the insurance company that underwrote the product.
The Wall Street Journal reported on Wednesday that a unit of Citizens Financial ( CFG ), Citizens Securities, was being investigated by Massachusetts authorities regarding its sales of a product offered by Colorado Bankers Life Insurance (CBL), whose controlling shareholder has been the subject of criminal charges. As a result of the investigation, North Carolina authorities took control of the insurer and payment of the fixed annuities were frozen.
CBL, which had been controlled by Greg Lindberg, had underwritten a fixed annuity product that Citizens ( CFG ) had offered to its customers from November 2017 to October 2018. A fixed annuity allows investors to pay for the product either through a series of payments over time or with a lump sum. In exchange the insurance company guarantees the account will earn a certain rate of interest.
"Citizens conducted appropriate diligence on CBL and considered CBL's investment rating and third-party research in placing CBL's products on its platform," the company said in an SEC filing. At the time, the firm's financial strength rating was investment grade equivalent from AM Best, which rates insurance companies, CFG said. ALIRT Insurance Research also had a 65 rating for CBL, well above the industry average, it added.
Citizens ( CFG ) halted sales of CBL's fixed annuities when in October 2018, it became aware of the investigation into Lindberg, the company said. "Since that time Citizens has been closely monitoring the rehabilitation and liquiditation process in North Carolina, with impacted customers currently unable to access their CBL annuity funds."
The bank has been offering liquidity programs to help customers experiencing hardship, it added.
Citizens ( CFG ) has determined that the matter doesn't present material financial exposure to the company.
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Citizens Financial conducted diligence on annuity product that's now frozen