American International Group Inc., the world’s largest insurer, probably will announce a $1.6 billion settlement of U.S. state and federal regulatory investigations later today, people familiar with the matter said.
The agreement would resolve New York Attorney General Eliot Spitzer’s allegations that AIG used sham reinsurance contracts to hide losses and understate liabilities, two people familiar with the negotiations said. It also would end probes into rigged insurance bids, said the people, who declined to be identified because the agreement hadn’t been finalized.
The conclusion to probes dating as far back as 2001 would widen the split between New York-based AIG and ousted Chief Executive Officer Maurice “Hank” Greenberg, who ran the company for 38 years. AIG’s auditors blamed Greenberg for skirting internal controls to alter the company’s books, fueling separate accounting fraud allegations against the former CEO.
“It’s expensive, but it’s important for them to get over this and get on with their business,” said Thomas Russo, who helps manage $2.5 billion, including 2 million shares of AIG, at Gardner, Russo & Gardner in Lancaster, Pennsylvania. “It will lift a cloud on the company, but not for Hank.”
Martin Sullivan, the former chief operating officer who replaced Greenberg, oversaw a $3.9 billion earnings restatement in May after promising to settle with investigators. The pledge has helped the company recover two-thirds of the $59 billion in market value it lost between February and April. The company’s shares rose 58 cents, or 0.8 percent, to $66.38 in New York Stock Exchange composite trading yesterday.