Yesterday, American International Group Inc. (AIG) got the preliminary approval for a $450 million payment deal for the settlement of a workers’ compensation cheating claim, from a U.S. court.
AIG has been engaged in a legal tussle with various parties since May 2005 when a New York attorney filed a civil suit against the company with the backing of New York State Insurance Department and Securities and Exchange Commission, claiming that it was misleading investors and regulators by reporting fake transactions, concealing underwriting losses and under-reporting workers’ compensation premium.
AIG paid more than $1.6 billion as a settlement for the case in February 2006 after issuing a report, which accepted the allegations. This led to a fresh lawsuit by the National Council on Compensation Insurance Inc. (NCCI) on behalf of the National Workers Compensation Reinsurance Pool (NWCRP) in May 2007.
NWCRP claimed that it should have received a part of the settlement money to make up for the surplus share of residual market assessment that its members had to pay because AIG paid less than its share by under-reporting its workers’ compensation premium.
The NWCRP case was dismissed as the court ruled that NCCI did not have the legal standing to file a case on behalf of the members of NWCRP.
However, many insurance companies, which were members of NWCRP, had filed similar lawsuits individually against AIG. Safeco Insurance Company and Ohio Casualty Insurance Company, which are units of Liberty Mutual Holding Company, were two such companies which had filed cases in 2009.
In January 2011, AIG agreed to settle all the outstanding claims via the payment deal. Seven insurers were ready to accept the deal. However, in April this year, Liberty Mutual had announced that it will oppose the settlement and it remains to be seen whether it will continue to oppose or accept the court’s verdict. A final approval from the court is expected in near future.
Recently we had downgraded our recommendation on AIG to Neutral from Outperform, while the Neutral recommendation for rival MetLife Inc. (MET) remains. AIG currently has a Zacks #3 Rank, implying a short-term Hold rating.
AMER INTL GRP (AIG): Free Stock Analysis Report
METLIFE INC (MET): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment