AIG ri­vals may gain mo­men­tum in $1b law­suit af­ter state set­tle­ment

The Pak Banker - - Company & Boss News -

NEW YORK: Amer­i­can In­ter­na­tional Group Inc., the com­pany de­fend­ing it­self against a $1 bil­lion work­ers' com­pen­sa­tion law­suit filed by ri­val in­sur­ers, may have handed its ac­cusers mo­men­tum by agree­ing to pay $146.5 mil­lion to set­tle a probe by reg­u­la­tors.

"That cer­tainly can't help their po­si­tion in court," said Ed­ward Priz, pres­i­dent of River­side, Illi­nois-based com­mer­cial in­surance con­sul­tant Ad­vanced In­surance Man­age­ment LLC.

AIG will pay $100 mil­lion in fines and $46.5 mil­lion in taxes and as­sess­ments to re­solve the 50-state in­ves­ti­ga­tion, the Penn­syl­va­nia in­surance reg­u­la­tor said yes­ter­day. New York­based AIG was sus­pected of cheat­ing state-run funds that serve as in­sur­ers of last re­sort against work­place in­juries.

AIG, once the world's largest in­surer, short­changed the state pools by un­der­re­port­ing premi­ums it made sell­ing work­ers' com­pen­sa­tion pro­tec­tion, ri­vals in­clud­ing Lib­erty Mu­tual Hold­ing Co. said in court doc­u­ments filed in 2009 in U.S. District Court in Chicago. The state in­sur­ers of last re­sort, which cover in­juries at em­ploy­ers that pose unattrac­tive risks, are funded by con­tri­bu­tions from car­ri­ers that of­fer the cov­er­age. "Ac­cu­rate com­pany fi­nan­cial data is an es­sen­tial in­gre­di­ent of proper in­surance reg­u­la­tion," Penn­syl­va­nia act­ing com­mis­sioner Robert Prat­ter said in a state­ment. "This re­flects the se­ri­ous­ness of the vi­o­la­tions in this in­stance over a sus­tained pe­riod of time-pri­mar­ily prior to 1996 --by AIG's prior se­nior man­age­ment."

The agree­ment, en­dorsed by eight states in­clud­ing Penn­syl­va­nia, is con­tin­gent upon ap­proval by at least 35 other reg­u­la­tory ju­ris­dic­tions and AIG's set­tle­ments with ri­val in­sur­ers, ac­cord­ing to the state­ment. AIG Chief Ex­ec­u­tive Of­fi­cer Robert Ben­mosche has set­tled le­gal dis­putes with in­vestors and for­mer CEO Mau­rice "Hank" Green­berg to fo­cus on re­pay­ing a $182.3 bil­lion U.S. govern­ment res­cue. AIG filed a com­plaint last year against Bos­ton-based Lib­erty Mu­tual and ri­vals in­clud­ing Hart­ford Fi­nan­cial Ser­vices Group Inc., say­ing they cheated the state pools.

"If this set­tle­ment be­comes fi­nal, we will have re­solved all re­main­ing reg­u­la­tory is­sues re­lated to AIG's work­ers' com­pen­sa­tion pre­mium re­port­ing for our stake­hold­ers," Mark Herr, an AIG spokesman, said in a state­ment.

AIG has surged 86 per­cent this year in New York trad­ing af­ter de­clin­ing 4.5 per­cent in 2009 and 97 per­cent in 2008. AIG agreed this month to re­tire its obli­ga­tions with the Fed­eral Re­serve. -Bloomberg

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