AIG Takes a Bath

Friday, February 15, 2008 | 0

By Julius Young

Ever wonder if comp benefits paid out by carriers are only part of the insurance rate equation? What about the return on investments of insurers? Perhaps workers' comp payouts are only a sideshow in the three-ring circus of insurer finances?

Food for thought.

Meanwhile, consider the whopping writeoffs announced by multinational insurer AIG. Yesterday AIG announced losses of almost $5 billion (yep, that's billion)due to the subprime mortgage crisis. AIG stock has fallen by 33% over the past year. This comes on the heels of investigations in a number of states as to AIG's accounting and claims handling practices. Several years ago the axe fell on AIG chairman Hank Greenberg after revelations of questionable accounting practices. Shareholder class action suits followed.

Greenberg was said to be interested in leading a takeover of the New York Times Co. Quite a concept: discredited insurance baron as media mogul. Thankfully, it's a concept that failed to have wings.

AIG is a big player in California workers' comp.In the trenches, AIG is known for a certain inflexibility in California claims handling. It's a company that leaves few cards on the table. When settling cases they like to "structure settlements", hanging on to the money to invest in AIG subsidiaries.

Here's the article on AIG that appeared in the 2/12/08 New York Times:
http://www.nytimes.com/2008/02/12/busin ... nted

A Wall Street Journal article today questioned whether AIG is "on a slippery slope":
http://online.wsj.com/article/SB1202869 ... lenews_wsj

California insurance regulators need to keep a watchful eye on this behemoth.

Julius Young is an applicants' attorney based in Oakland. This column is reprinted with his permission from his blog at http://www.workerscompzone.com