Court Approves $843 Million for AIG Investors Hurt By Alleged Fraud

A federal court has approved the distribution of more than $843 million to harmed investors at insurer American International Group, the U.S. Securities and Exchange Commission said Tuesday.

The court estimates that checks will soon be mailed to more than 257,000 AIG investors that were affected by an alleged accounting fraud at the company, the SEC said.

AIG, which has been propped up by billions of dollars in taxpayer funds, was charged with accounting fraud in 2006. The SEC alleged that the insurer falsified its financial statements from at least 2000 until 2005 and reported misleading information about its financial condition.

The company, which did not admit or deny the allegations, had repaid its ill-gotten gains, as well as penalties to the government. In 2007, a federal court authorized the SEC to establish a "fair fund" to distribute the money to harmed AIG investors.

"The commission continues to utilize the tools that Congress provided to ensure that funds are returned to harmed investors to the greatest extent possible," said Dick D'Anna, director of the SEC's office of collections and distributions, in an agency statement.

Florida Governor to State Farm: On Your Way Out, Here's an Award

The man who is letting insurance giant State Farm exit the state, which some fear will foster a property insurance disaster in Florida, gave the insurer an award this week for innovation and disaster mitigation.

State Farm was recognized by Gov. Charlie Crist with the Governor's Hurricane Conference Corporate Award for "innovation and achievement in public awareness and mitigation advocacy."

The award recognizes State Farm's support of StormStruck, an exhibit at Walt Disney World Resort that enables guests to experience the power of a weather event while learning how to prepare for floods, hail, high winds, lightning and more.

The award was presented at the 2009 Governor's Hurricane Conference in Fort Lauderdale this week.

"Long before disaster strikes, State Farm is there educating the public about safety and disaster preparedness," said Jamie France, property/casualty underwriting manager with State Farm Insurance. "StormStruck allows us to reach millions of people and inspire action before a disaster strikes. We are honored that the Conference recognized our commitment to saving lives and protecting property."

State Farm also recognized the the other sponsors of StormStruck: Walt Disney World, Federal Alliance for Safe Homes, RenaissanceRe, WeatherPredict Consulting and Simpson Strong-tie.

Health Groups Hope Savings Vow Wins Them Say in Obama Reforms

President Barack Obama's plan to provide medical insurance for all Americans took a big step toward becoming reality after leaders of the health care industry offered $2 trillion in spending reductions over 10 years to help pay for the program.

Hospitals, insurance companies, drug makers and doctors told Obama they'll voluntarily slow their rate increases in coming years in a move that government economists say would create breathing room to help provide health insurance to an estimated 50 million Americans who now go without it. The United States, unlike other developed countries, does not have universal health care.

With this move, Obama picks up key private-sector allies that fought former President Bill Clinton's effort to overhaul health care. Although the offer from the industry groups doesn't resolve thorny details of a new health care system, it does offer the prospect of freeing a large chunk of money to help pay for coverage. And it puts the private-sector groups in a good position to influence the bill Congress is writing.

Six major groups delivered a letter to Obama and pledged to cut the growth rate for health care by 1.5 percentage points each year, senior administration officials.

Obama has offered an outline for overhauling the health care system, and he wants Congress to work out the details and pass legislation this year. His plan would build on the current system in which employers, government and individuals share responsibility for paying the cost and care is delivered privately. The government would play a stronger role by subsidizing coverage for many more people and spelling out stronger consumer protections.

"We cannot continue down the same dangerous road we've been traveling for so many years, with costs that are out of control, because reform is not a luxury that can be postponed, but a necessity that cannot wait,'' Obama said in prepared remarks. "That is why these groups are voluntarily coming together to make an unprecedented commitment.''

The industry groups are trying to get on the administration bandwagon for expanded coverage now in the hope they can steer Congress away from legislation that would restrict their profitability in future years.

The groups include the American Medical Association, the American Hospital Association, the Service Employees International Union, the California Hospital Association and the Greater New York Hospital Association, which represents facilities in four states.

Insurers, for example, want to avoid the creation of a government health plan that would directly compete with them to enroll middle-class workers and their families. Drug makers worry that in the future, new medications might have to pass a cost-benefit test before they can win approval. And hospitals and doctors are concerned the government could dictate what they get paid to care for any patient, not only the elderly and the poor.

Obama has courted industry and provider groups, inviting their representatives to the White House. There's a sense among some of the groups that now may be the best time to act before public opinion, fueled by anger over costs, turns against them.

It's unclear whether the proposed savings will prove decisive in pushing a health care overhaul through Congress. There's no detail on how the savings pledge would be enforced. And, critically, the promised savings in private health care costs would accrue to society as a whole, not just the federal government. That's a crucial distinction because specific federal savings are needed to help pay for the cost of expanding coverage.

Indeed, costs have emerged as the most serious obstacle to Obama's plan. The estimated federal costs range from $1.2 trillion to $1.5 trillion over 10 years, and so far Obama has only spelled out how to get about half of that. Administration officials would not say Sunday how much they think Obama's plan will ultimately cost, but they indicated they were confident it can be paid for.

A reduction of 1.5 percentage points a year in the rate of increase in costs may not sound like much, but administration officials said it amounts to slowing the current 7 percent annual increase in costs by about one-fifth. That's significant when health care spending keeps running far ahead of inflation year after year.

They estimated, for instance, that five years from now, such private cost curbs could save a family of four an average of $2,500 a year in health care costs.

Administration officials said they didn't expect all the saving strategies to be announced right away, nor did they have access to specifics on how the groups reached their estimates and analysis.

But the initial reaction was positive.

"While serious questions remain about the details, AARP believes the agreement of providers to slow the skyrocketing cost of health care is critical for the health reform we are all working toward,'' said John Rother, policy director for the seniors' lobby. "Reducing the skyrocketing cost of health care is the only way to create a health care system that works for all Americans; after all, what good is access to a system that we can't afford?''

Ron Pollack, director of Families USA, a liberal group that supports coverage for all, said the health insurance industry came up with the target of a 1.5-percentage-point reduction. Karen Ignagni, president of the insurers trade group, America's Health Insurance Plans, took the idea to other major interest groups, said Pollack, who was familiar with the talks among the industry groups.

"If these cost savings are truly achievable, this may be the most significant development on the road to health care reform,'' said Pollack. "It would cut costs for families and businesses and enable subsidies to be offered so everyone has access to quality, affordable health care.''

Obama's plan envisions that people would be able to keep the coverage they now have. Those working for big companies probably would not see major changes.

But the self-employed and those working for small businesses would be able to get coverage through a new kind of insurance purchasing pool. Called an "exchange,'' the pool would offer stable rates and predictable benefits. Plans in the exchange wouldn't be able to deny coverage to those who are sick and would have to follow other new consumer protection rules.

Lawmakers in Congress are generally following Obama's outline, but the Senate plan is likely to go further by requiring all Americans to carry health insurance, much as states now require motorists to carry auto coverage. Democrats hope to get legislation to the floor this summer.

Obama to Propose Changes to Taxes on Estates, Punitive Damages

The Obama administration on Monday will propose raising nearly $60 billion over 10 years through changes to the estate tax law and closing certain domestic tax loopholes, an administration official said.

Funds raised will go to beef up a health care reserve fund, a $634 billion pot of money President Barack Obama wants to use to revamp the health care system and expand insurance to tens of millions of Americans who lack it.

The White House wants to raise $24 billion over 10 years by tightening rules related to the estate tax, a levy on an inherited part of an estate if the value exceeds an exclusion limit set by law.

Currently, the first $3.5 million for an individual, or $7 million for a couple, are exempted.

The changes to the estate tax are related to how assets are valued, said the official, who was not authorized to be quoted.

Other proposals include denying tax deductions for firms with punitive damage claims, the official said.

Later on Monday, the administration will provide details on a series of tax proposals unveiled last week, said to raise $210 billion over a decade, to tighten rules related to overseas investments.

The Hartford Reported Shopping Its P/C Insurance Business

Hartford Financial Services Group Inc. is trying to sell its property/ casualty insurance business, sources familiar with the matter said Thursday, as the U.S. insurer reels from massive losses.

Hartford has retained Goldman Sachs, which has been calling potential bidders for the property/ casualty business, the sources said.

Possible contenders for the business could include German insurer Allianz, which is already an investor; MetLife Inc, Munich Re and Travelers Companies Inc., one of the sources said. It was not clear whether any of these companies had been approached, however.

Hartford's property/casualty business is worth about $8 billion on paper, based on the company's financial statements filed with regulators, according to a February note issued by Citigroup analyst Joshua Shanker.

But getting that price could be difficult, because capital and loan markets have been difficult to tap, reducing the capacity of bidders to pay. An insurer such as Travelers, with a market capitalization of about $23 billion, could have trouble raising enough debt and equity to pay for a deal, a source said.

Allianz made a $2.5 billion investment in Hartford last October, giving it a stake, and the ability to raise its ownership in future. And Allianz could also be better situated to pay for the business, a source said.

"The investment in the Hartford is purely financial, not strategic," Sabia Schwarzer, a spokeswoman for Allianz of America, said Thursday.

She declined to comment further.

Goldman spokeswoman Andrea Rachman declined to comment, as did Travelers and MetLife.

Hartford could not immediately be reached and Munich Re spokeswoman Johanna Weber also declined to comment.

The development comes amid large losses for the 199-year-old company. Hartford, a large writer of a popular retirement product called variable annuities, has been badly battered by investment losses and higher costs from guarantees on these annuities, which are linked to stock market performance.

It had a net loss of $2.75 billion in 2008, reversing a net profit of $2.95 billion the previous year.

Earlier this month, media reports said Hartford was trying to sell parts of its life insurance unit to Canada's Sun Life Financial Inc, but Bloomberg reported those talks ended without a deal.

Hartford's shares are down some 40 percent so far this year. On Thursday, Hartford shares rose in early trading, but were down 1 cent at $9.67 by early afternoon. The stock traded as high as $76.39 last May, according to Reuters data.