HARRISBURG, Pa. (AP) — American Insurance Group Inc. and its insurance affiliates have agreed to pay more than $100 million in fines and other penalties to resolve claims the insurer violated workers compensation regulations.
New York-based AIG also agreed to pay about $46.5 million in additional taxes and assessments.
The proposed settlement negotiated between AIG and insurance regulators in eight states would close out a probe into allegations the insurance giant under-reported some $2.12 billion of workers compensation premiums, Pennsylvania insurance officials said Wednesday.
State regulators accused AIG of reporting the workers compensations premiums as general or commercial automobile liability premiums. The violations occurred over a period of time, primarily before 1996, regulators claimed.
“Accurate company financial data is an essential ingredient of proper insurance regulation,” said Robert Pratter, Pennsylvania’s acting insurance commissioner.
Under the terms of the settlement, AIG insurance companies will have to file restated financial statements by March 1 to reflect the reallocation of the $2.1 billion in premiums.
The company also must submit to periodic monitoring by the states for a 24-month period and agree to pay a fine of up to $150 million if it fails to meet the terms of a compliance plan.
In addition to Pennsylvania, state officials in Delaware, Florida, Indiana, Massachusetts, Minnesota, New York and Rhode Island participated in the probe.
But insurance regulators in all 50 states and the District of Columbia will split the $100 million in fines.
The deal must be adopted by at least 35 additional states by March 1.
A call to an AIG spokesman was not immediately returned late Thursday.
AIG became a household name in the U.S. after the recent financial crisis and received the largest government rescue of any financial company. Its lifelines from the Federal Reserve and Treasury were worth $182 billion.
It got into deep water after helping banks invest heavily in risky mortgage bonds by offering insurance-like protection against losses on those bonds. When the bonds lost value, AIG could not afford to pay the banks. The government covered the losses to prevent panic from spreading.
AIG’s chairman said recently the company will repay its bailouts and is developing a strategy for growth.
Its shares fell $1.43 to close Thursday at $54.33.