American International Group Inc. will be the first insurer to settle an inquiry into bid-rigging when it pays about $1.6 billion to resolve state and federal probes of accounting and sales practices, said a person familiar with the negotiations.
AIG, the world’s largest insurer, will compensate victims of price fixing as part of an accord with the Securities and Exchange Commission and New York Attorney General Eliot Spitzer, said the person, who declined to be identified because the talks aren’t completed. The accord also will resolve allegations the company manipulated earnings with improper reinsurance contracts.
Investigations of AIG led to last year’s ouster of Chief Executive Officer Maurice “Hank” Greenberg, who ran the New York-based company for 38 years. An agreement, which the person said may be announced as early as this week, may be the largest in financial-services history. It will include payments to shareholders, policyholders and state worker compensation funds.
“The finalization of a settlement would clear away many of the uncertainties surrounding AIG,” said Fox-Pitt, Kelton Inc. analyst Gary Ransom, who has an “outperform” rating on the stock. The payment would cost AIG between 37 cents and 57 cents a share, depending on how much is tax deductible, he said.