Versicherungen USATheorie & Empirie

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WSJ.com BUSINESS Updated April 9, 2012, 7:51 p.m. ETMolina Loses, Aetna Wins in Ohio Medicaid DecisionBy JON KAMP

A surprise decision by Ohio to shake up the providers of its Medicaid health plan marked a sharp setback for incumbent insurer Molina Healthcare Inc., which lost its contract.Fellow incumbents Centene Corp., Amerigroup Corp. and WellCare Health Plans Inc. are also losing business in Ohio, but the loss is "most problematic for Molina," which gets about 20% of its revenue from Ohio, according to Citigroup analyst Carl McDonald. Molina's stock plunged 27% Monday, to $25.65.

Aetna Inc., meanwhile, was a winner as the Ohio Department of Job and Family Services picked five managed-care organizations to serve the state's Medicaid recipients starting Jan. 1. The others are UnitedHealth Group Inc., plus nonprofits CareSource, Paramount Advantage and Meridian Health Plan."The managed-care plans selected stood out among the applications and are committed to improving health outcomes, ensuring access to care, and providing intensive case-management services, especially to those individuals with the most complex medical and social conditions," Ohio Medicaid Director John McCarthy said.

The state's Medicaid program represents a new market for Aetna and Meridian. Ohio also simplified the way it organizes coverage for its Medicaid recipients by moving to three service regions rather than eight.

The change in providers came as a surprise as "most expected the large incumbents to be heavily favored to win the new awards," Wells Fargo analyst Peter Costa said.Ohio accounts for 9% of Centene's revenue, 6% of WellCare's and 3% of Amerigroup's, according to Goldman Sachs. Centene's shares dropped 15% Monday, while WellCare and Amerigroup fell 7.4% and 4.9%, respectively.Molina acknowledged it wasn't selected for the Ohio Medicaid program starting next year. Centene, which said the announcement was expected to be "immaterial" to current-year earnings, is planning to file a formal protest with the state.

"We believe there were fundamental flaws in the procurement process, and we plan to pursue all available remedies," Jesse Hunter, executive vice president of operations at Centene, said in a news release.Amerigroup said it was "disappointed" and is reviewing the scoring of the submissions. It "will evaluate our options once the analysis has been completed," Pete Haytaian, regional CEO, North Region, said. Wellcare also said it was disappointed with the results.

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Susquehanna analyst Chris Rigg downgraded both Molina and Centene to neutral from positive because of the contract losses. Both Medicaid insurers have seen their stock prices climb significantly this year because of high expectations they will capture business as states move to cover "dual-eligible" patients who qualify for both Medicaid and Medicare.

Dual patients are seen as a potential $300 billion opportunity for managed-care firms. Medicare is the federal government health plan for the elderly, and Medicaid is the plan—partly paid for by states—for the poor.

Ohio is among the states pushing to start coordinating care for dual-eligible patients next year. But the Medicaid insurers that have been dropped in Ohio could now be at a disadvantage in that process, Goldman Sachs analyst Matthew Borsch said.Meanwhile, the Ohio selection "should be viewed positively" for Aetna, the analyst said. This "marks the company's first major Medicaid contract win following a poor showing during 2011," he added.

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FT.com June 17, 2012 4:31 pmFears for US healthcare after court rulingBy Stephanie Kirchgaessner in Washington

The US healthcare system could be sent into disarray if all or part of “Obamacare” is overturned by the Supreme Court, given the breadth of the landmark law, according to analysts.

In the worst case, some say, a decision to overturn the whole law could immediately disrupt the US government’s ability to reimburse physicians and hospitals for medical services for the elderly. The Supreme Court is expected to announce its decision by the end of the month. While some analysts say that a decision to strike down the whole law would not have severe consequences because it has not yet been fully implemented – and most provisions are set to take effect in 2014 – others say that such a decision could have a host of unintended consequences. “The law was supposed to fit together like a mosaic. And if you take away one or two tiles, pretty quickly it can unravel,” said Ilisa Halpern Paul, a healthcare lobbyist.

The law includes a formula that sets rates for doctors who treat Medicare patients, and that rate would immediately be invalid, raising questions about how quickly the government could establish a new rate and commence payments. The law also created a system for regulators to begin approval of

generic versions of expensive biotech drugs. That process, too, would be in limbo if the law were overturned, creating a cloud of uncertainty over a multi-billion-dollar industry.

The law affects much of the health insurance industry, but the central issue in the legal case is whether a mandate forcing all Americans to buy insurance is constitutional. That provision essentially pays for new consumer protections contained in the law, including one forbidding insurance companies from discriminating against patients because of pre-existing conditions. It was designed to flood the insurance industry with more healthy patients to offset the cost of sick ones.

Of all the ruling’s potential permutations, the insurance industry is especially worried about the possibility that the justices will strike down the individual mandate but leave intact rules that force the companies to take all new patients – regardless of their history. ...

The hospital industry also has much to lose if the mandate alone is struck down. It agreed to $155bn in cuts from government-sponsored insurance programmes for the elderly and poor over 10 years under the assumption that the mandate would guarantee that hospitals would see a big decrease in uninsured patients, who are a drag on the industry.

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Most healthcare experts agree that the least economically disruptive outcomes would be either a decision to uphold the law, or one that struck down both the individual mandate and the rules that bar insurers from discriminating against people with pre-existing conditions.

Kathleen Sebelius, the US health secretary, said the Obama administration had contingency plans in the event that all or part of the law were overturned, and had said that striking down the whole law would have a “pretty cataclysmic impact” on millions of Americans.

Additional reporting by Alan Rappeport

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WSJ.com BUSINESS Updated June 14, 2012, 7:15 p.m. ETFed Loans Backing AIG, Bear RepaidBy SERENA NG

The Federal Reserve Bank of New York said it has fully recouped more than $70 billion in loans it made to support the 2008 bailouts of Bear Stearns Cos. and American International Group Inc., ... closing a contentious chapter in the central bank's history.

On Thursday, the regional Federal Reserve bank said it has been repaid, with interest, on $53.1 billion in loans it made to two crisis-era vehicles that held complex subprime mortgage bonds, home loans, commercial-property loans and other unwanted assets from Bear and AIG. The New York Fed earlier recouped a separate $19.5 billion loan that financed the purchase of mortgage-backed securities from AIG.

The loan repayments, which followed sales of the formerly toxic assets, end a messy episode in the government's crisis-era rescue programs, which saw the New York Fed take many souring loans and bonds onto its balance sheet when financial markets were in free fall. The moves were criticized for exposing taxpayers to undue risks when many of the assets fell in value for months after they were acquired by the Fed.

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Fed officials defended their crisis lending at the time, saying the central bank makes loans only when it expects to be fully repaid. Officials said they had to take steps to save the financial system from a collapse that threatened the economy's health. ...

During the financial crisis, the Fed's balance sheet more than doubled in size to over $2 trillion as it made loans to help stabilize many parts of the nation's debt markets, including those for short-term commercial-paper markets and securities backed by auto loans, credit-card debt and small-business loans. The troubled assets from the Bear and AIG bailouts, held in vehicles called Maiden Lane, were the New York Fed's riskiest holdings.

The Fed lent the first of three Maiden Lanes $28.8 billion in March 2008 to facilitate J.P. Morgan Chase ... & Co.'s purchase of Bear Stearns. The New York Fed later lent AIG a total of $43.8 billion—$19.5 billion to unwind its securities-lending transactions and $24.3 billion to end liquidity pressures tied to the company's agreements to back certain mortgage-related assets held by large global banks.

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The repayments show how much markets have recovered in the last few years. With interest rates near zero amid soft economic growth and slack demand for money, a hunt for higher-yielding assets has brought investor interest back to assets previously shunned, enabling the New York Fed to cash out sooner than expected.

New York Fed officials, working with various advisers spent much of the past two years working through the Bear and AIG assets. They auctioned off scores of loans and securities to Wall Street dealers and investors, and in some cases, foreclosed on residential and commercial properties where borrowers had defaulted and then sold the properties.

The Maiden Lane vehicles still hold some mortgage assets, and sales will continue. The cash generated will be used to repay loans from J.P. Morgan and AIG. Any additional proceeds will be profits that are divided between taxpayers and the financial firms.

AIG on Thursday said the loan repayment to the New York Fed extinguishes another chunk of the insurer's record $182.3 billion federal bailout, leaving only the U.S. Treasury to recoup $30 billion from selling its 60% stake in AIG.

—Al Yoon contributed to this article.

A version of this article appeared June 15, 2012, on page C3 in the U.S. edition of The Wall Street Journal, with the headline: Fed Loans Backing AIG, Bear Repaid.

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LEX/FT.com June 26, 2012 8:07 pmUS healthcare: mixed diagnosisOnly one industry can look forward to the US Supreme Court’s decision on the Affordable Care Act, expected on Thursday, with unambiguous delight. Whatever the ruling, commentators such as analysts, manufacturers of outrage and partisan triumphalists will be in great demand. Healthcare companies have more at risk.

Take hospitals. The seven biggest publicly traded hospitalcompanies by market capitalisation generated $77bn in revenues in the past fiscal year. About $7.4bn of that was written off as bad debt. To put that into context, the companies reported about $5.5bn in pre-tax income. They would benefit significantly from a law that, according to the Congressional Budget Office, would more than halve the numbers of the uninsured to about 26m by 2016. Credit Suisse estimates that complete implementation of the law could raise earnings per share at these companies by a quarter, compared with its full repeal.

The other industry with most at stake – managed care – is in an even trickier spot. The individual mandate clause, which penalises those who do not buy insurance, would increase the customer base for companies such as UnitedHealth and WellPoint, but the law also includes profit ceilings, constrains pricing and underwriting, and creates competition- increasing

insurance exchanges. Bernstein Research estimates that total repeal could have a net 15 per cent positive impact on earnings; but a repeal of just the individual mandate while retaining the rest would push earnings in the other direction.

The hard question for investors is what, after months of chatter, has already been priced into the shares. Both hospitals and insurers trade at or near single-digit price-to-earnings multiples, despite generating lots of cash. Any clarification might rally healthcare stocks, even if it won’t silence the pundits.

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WSJ.com MARKETS August 15, 2012, 7:19 p.m. ETHedge Funds Seized on Health-Care UncertaintyBy JULIET CHUNG And DAVID BENOIT

David Einhorn's Greenlight Capital Inc. and Daniel Loeb's Third Point LLC were among the prominent hedge funds that placed bets on health insurers even as Wall Street fretted over a Supreme Court ruling on the health-care overhaul.

Greenlight added 6.7 million shares in Coventry Health Care Inc. and 6.4 million shares in Cigna Corp. during the second period, according to new regulatory filings. The firm also bought 3.2 million shares in Aetna, 2.3 million in UnitedHealth Group Inc., 1.9 million WellPoint Inc. shares and 1.6 million in Humana Inc. Together, the positions make up about 13% of Greenlight's stock portfolio, according to FactSet.

On June 28, the Supreme Court upheld President Obama's health-care overhaul law, which aims to extend coverage to tens of millions of Americans while imposing various cuts and taxes on health companies.

"The entire sector had been battered in anticipation of Obamacare," Greenlight said in a recent letter to investors. The industry is insulated from some of the global economic concerns that have dogged others and, Greenlight wrote,

"there is the additional unpriced upside in the possibility that the election changes the political landscape, resulting in a possible modification or repeal of Obamacare."

The court ruling emboldened some funds to begin making bets on insurers or to ramp up the size of their existing trades, said Maria Tapia, a partner at Alternative Investment Group, a Connecticut-based firm that invests about $1.6 billion in hedge funds for institutional investors and wealthy individuals.

"There will be winners and losers," said Ms. Tapia, adding that her firm planned to move more money to managers investing in health-care-related companies. "That's why we like health care."

Third Point also spread its bets throughout the sector, buying 1.8 million shares in UnitedHealth Group and 1.7 million shares in Cigna. It took smaller stakes in Wellpoint and Humana. A Third Point spokeswoman declined to comment.

Other firms bought shares of health insurers during the period. SAC Capital Advisors, which manages about $13 billion, upped its stakes in Aetna and Humana, among others, though it decreased its position in Coventry.

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Samlyn Capital bought shares in Aetna, and Discovery Capital Management LLC and Omega Advisors made bets on Humana. Omega trimmed its bets elsewhere, though, ending the quarter with 2 million shares each in Wellpoint and UnitedHealth Group after selling some shares.

"We buy stocks that we think are going to go up and hope that we're right," Omega's Leon Cooperman said. After rallying in 2011 on higher-than expected profits, health insurers slumped this year amid uncertainty in Washington and questions on whether they can keep beating earnings forecast, said Jefferies & Co. analyst David Windley.

Aetna has fallen 11% this year, Humana is off 23% and WellPoint has lost 13%.

"We've gone from great, sleep-at-night stocks, knowing it wasn't a matter of whether the companies were going to beat earnings but by how much, to now going into earnings season wondering which companies are going to make earnings and which ones are going to miss," Mr. Windley said.

Wedbush Securities analyst Sarah James said the big-name investors appeared to be looking for companies with low stock price-to-earnings ratios, implying their shares are cheap relative to their expected profits.

Hedge-fund managers weren't all bullish. Owl Creek Asset Management trimmed its stakes in Wellpoint and Cigna during the period, while Glenview Capital Management LLC exited its Aetna position, filings show.

A version of this article appeared August 16, 2012, on page C2 in the U.S. edition of The Wall Street Journal, with the headline: Hedge Funds Bet on Health.

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WSJ.com August 20, 2012, 2:37 PM ETEinhorn’s Health-Care Bet Looks Lucrative With Aetna-Coventry DealBy David Benoit

Looks like David Einhorn has scored another victory.

As WSJ reported last week, Einhorn along with several other hedge-fund managers poured into health-care stocks including Coventry and Aetna during the second quarter, according to filings. The bets came during the period around the Supreme Court’s health-care reform act.

Coventry is up 19% to $41.62 Monday, a more than four-year high for the stock which has now added 43% in the past three months. Meanwhile, Aetna has gained 4.4% to $39.73 Monday, and has now risen 10% this month, though it remains down from its average price during the second quarter.

Einhorn’s Greenlight Capital bought 6.7 million shares of Coventry as the stock fell 10% during the second quarter. The average closing price during the second quarter was $31.95, according to FactSet. Aetna’s offer for Coventry values the shares at $42.08, up 32% from that average price.

Einhorn declined to comment, and it’s not known if Einhorn added to or sold his position since the end of June, the date of

the filing. If he did still hold it, he would be looking at a substantial gain. At that average closing price for the quarter his stake would have cost him about $214 million to build and would be worth $282 million at the offer price.

Einhorn also bulked up on shares of Aetna, purchasing 3.2 million shares during the second quarter, when Aetna shares fell 22%. The average closing price of Aetna during the period was $43.66, according to FactSet, which would have cost Einhorn about $140 million and been worth $124 million on the last day of the quarter. Today the stake would be worth about $128 million.

Other hedge fund names could also be getting a boost with Aetna’s gains if they held on through the lows last month.Steve Cohen at SAC Capital boosted his stake in Aetna to 830,730 shares at the end of the second quarter from just 63,338 at the end of the first quarter. His stake would have been worth about $32 million at the end of the second quarter and would be worth about $33 million Monday.

Cohen, however, might have missed some gains from the deal as he halved his stake in Coventry to 176,279 shares during the second quarter. That position would have been worth about $5.6 million at the end of the second quarter and at the offer price would be worth $7.4 million. The shares he sold would have been worth an additional $7.1 million.

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Meanwhile, Third Point purchased 900,000 shares of Aetna amid a broad health-care bet, and Samlyn Capital boosted its stake in Aetna by about 230,000 shares. Glenview Capita, however, sold out of its stake of over 1 million shares in Aetna.

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WSJ.com HEALTH INDUSTRY August 20, 2012, 4:18 p.m. ETAetna to Acquire Coventry HealthBy JON KAMP

Aetna Inc. continued the managed-care sector's acquisition streak Monday by announcing plans to buy Coventry Health Care Inc. in a $5.7 billion cash-and-stock deal that will boost Aetna's presence in government-financed health care.

The transaction also will lift Hartford-based Aetna's commercial membership. Coventry—which has struggled recently with high costs in Kentucky's Medicaid market—has more than five million members overall, including people who get health coverage through their employers, through the Medicare program for the elderly and through the Medicaid plan for the poor.

"Integrating Coventry into Aetna will complement our strategy to expand our core insurance business, increase our presence in the fast-growing government sector and expand our relationships with providers in local geographies," Mark T. Bertolini, Aetna's chief executive, said.

Aetna said the deal will solidify the company's position as the third-largest managed-care firm by membership, behind UnitedHealth Group Inc. and WellPoint Inc., with 22 million combined medical members as of June 30.

Meantime, the deal also will broaden Aetna's focus, traditionally on commercial insurance, more toward government plans. Based on 2012 membership numbers, a combined Aetna and Coventry would get more than 30% of its revenue from government plans, up from Aetna's current 23% tally.

"We think diversification is incredibly important as we head into health-care reform," Mr. Bertolini said on a conference call.

Big health insurers have been busy acquirers lately as they bulk up their exposure to government-based health plans. Private insurers' Medicare businesses are growing as baby boomers age Meanwhile, their Medicaid businesses are expanding as states look for help restraining costs. Medicaid also is set to grow under the coverage-expanding U.S. health-care overhaul law.

That law has measures that are expected to pressure profit margins, such as requirements to cover people with pre-existing conditions, which could make managing the business more challenging for small and midsized insurers. "I think the scale matters now," Allen F. Wise, Coventry's chief executive, said on the conference call.

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WellPoint last month agreed to buy Medicaid insurer Amerigroup Corp. for $4.46 billion, and Cigna Corp. bought Medicare-focused insurer HealthSpring for $3.8 billion early this year. Humana Inc., WellPoint and UnitedHealth all have made smaller deals to boost their Medicare operations.

The latest deal values Coventry at $42.08 a share, based on Aetna's closing price Friday, and represents a 20% premium to Coventry's price after Friday's close. Aetna plans to finance the deal—which it valued at $7.3 billion including Coventry debt—through a mix of cash and $2.5 billion of new debt and commercial paper.

Coventry stockholders will receive $27.30 in cash and 0.3885 Aetna common shares for each Coventry share. Coventry shares surged 20% to $42.02 in 4 p.m. composite trading Monday on the New York Stock Exchange, while Aetna shares rose 5.6% to $40.16. Based on the deal's terms and Aetna's recent price, Coventry shares are worth $42.69 each.

Shares of some Medicaid-focused insurers slipped because a big potential buyer—Aetna—has turned its focus elsewhere. Centene Corp. fell 4.5% while Molina Healthcare Inc. declined 1.8% and WellCare Health Plans Inc. slid 3.3%. Shares of all three firms surged after WellPoint announced plans to buy Amerigroup on hopes they could be next in line.

Aetna and Coventry expect their deal to close in mid-2013 pending approval from regulators and Coventry shareholders."We believe this transaction makes sense for both Aetna and Coventry," Wells Fargo analyst Peter Costa said in a note to investors. "Coventry adds to several of Aetna's targeted growth areas," he said.

Excluding transaction and integration costs, Aetna said the deal will add "modestly" to its per-share operating earnings in 2013, boost its 2014 numbers by 45 cents and increase 2015 earnings by 90 cents. Aetna also said it expects annual deal-related savings of $400 million in 2015.

Mr. Bertolini highlighted the way the deal sets his company up for 2014, when major provisions from the health-care law, such as state-based exchanges where people can buy coverage, are expected to begin.

In a market where people can move freely from one type of coverage to another, a diversified portfolio "is going to be very important," he said.

Bethesda, Md.-based Coventry has nearly four million medical members and 1.5 million people on Medicare prescription-drug plans. Most of the company's medical members are in its commercial insurance business, but Coventry has a growing business for Medicare Advantage plans and Medicaid plans.

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Coventry's Medicaid business became significantly larger last year when the company became one of three to win contracts to serve Kentucky's Medicaid population. That business has proved costly after Coventry was surprised by high health-care costs that overwhelmed incoming revenue from the state.

The company last month cited progress in both securing more revenue from Kentucky and getting a better handle on costs.Aetna Chief Financial Officer Joseph M. Zubretsky said on the call that Coventry has a "solid plan" to fix its Kentucky problems.

Aetna--which has talked down the idea of buying Medicaid insurers, citing high prices--has been trying to grow its own Medicaid business from within. The company hit a setback this year when it appeared to win a contract in Ohio, but Aetna had the new business taken away after successful protests from other firms. An Ohio court last week dismissed a lawsuit Aetna filed as part of its effort to win the business.

—Sharon Terlep, Anupreeta Das and Saabira Chaudhuri contributed to this article.

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NZZ.CHAmerikanisches KrankenkassenwesenAetna kauft Coventry Health

Mit dem Kauf des Konkurrenten Coventry bereitet sich der Krankenversicherer Aetna auf ein starkes Wachstum des Marktes vor. Vor allem die Gesundheitsreform beschert den Krankenkassen in den nächsten Jahren Millionen von neuen Kunden.Christiane Hanna Henkel, New York

Der an der Börse mit 13,3 Mrd. $ bewertete Krankenversicherer Aetna will den Konkurrenten Coventry Health Plans für 5,7 Mrd. $ übernehmen. Wie das in Hartford im Gliedstaat Connecticut beheimatete Unternehmen am Montag bekanntgab, soll die Akquisition zu 65% mit baren Mitteln und zu 35% mit eigenen Aktien bezahlt werden. Aetna bietet für den Wettbewerber aus Bethesda im Gliedstaat Maryland alles in allem $ 42.08 je Aktie. Die Verwaltungsräte beider Konzerne haben der Transaktion bereits zugestimmt. Inklusive von Aetna übernommener Schulden hat die Übernahme ein Volumen von 7,3 Mrd. $.

Staatlich Versicherte als ZielDer Grund für den Merger ist nicht in erster Linie die Unternehmensgrösse und Bewahrung der Rankingposition in einer sich sehr stark konsolidierenden Branche; mit künftig 22

Mio. Krankenversicherten wird das neue Unternehmen nach Branchenführer UnitedHealth Group und dem zweitplacierten WellPoint den dritten Platz einnehmen. Wichtiger aber ist für Aetna, dass es über die Transaktion Zugang zum Wachstumsmarkt der staatlich finanzierten, aber von privaten Unternehmen gemanagten Krankenversicherungen erhält. In dem Bereich ist Coventry besonders stark.

In den USA gibt es generell zwei Arten staatlicher Krankenversicherung:

Medicare erhalten Menschen ab der Pensionierung bzw. ab einem bestimmten Alter oder im Falle einer Behinderung.

Medicaid richtet sich vor allem an untere Einkommensschichten.

Rund 50 Mio. Menschen sind in den USA berechtigt, über Medicare Gesundheitsleistungen zu erhalten, und 57 Mio. Menschen sind über Medicaid versichert.

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Den Krankenversicherern spielen in diesen Bereichen künftigmehrere Entwicklungen in die Hände. So etwa die demografische Entwicklung, die das bevölkerungsstarke Segment der «Babyboomer» – also jener in denzwei Dekaden nach dem ZweitenWeltkrieg geborenen Menschen – so langsam ins Rentenalter treten lässt.

Ausserdem tendieren die Gliedstaaten dazu, die Dienstleistungen einer staatlichen Krankenversicherung immer stärker an private Anbieter bzw. Krankenkassen zu delegieren. Und schliesslich wird die jüngst verabschiedete Gesundheitsreform für einen kräftigen Zustrom von Kunden für die privaten Krankenversicherungen sorgen.

Die Gesundheitsreform sieht unter anderem vor, dass ab 2014 eine Krankenversicherung abgeschlossen werden muss. Diejenigen, die nicht über ausreichend Mittel verfügen, erhalten staatliche Zuschüsse. Schätzungsweise werden zusätzlich 17 Mio. Amerikaner in Folge der Reform Medicaid – staatlich oder von privaten Versicherern geführt – erhalten.

Experten schätzen, dass sich der Umsatz der Krankenversicherer in den ersten fünf Jahren nach Inkrafttreten des Gesetzes verdoppeln wird. Diese Prognosen werden allerdings unter der Prämisse getroffen, dass auch der nächste Präsident der USA das neue Gesetzeswerk aufrechterhalten wird. Das ist aber alles andere als sicher. Der

Sieger der republikanischen Vorwahlen, Mitt Romney, hat sich etwa gegen das Gesetz ausgesprochen.

Rollende KonsolidierungIn den letzten Monaten sind bereits eine ganze Reihe von Krankenversicherern mittels Übernahmen und Fusionen in Startposition gegangen, um vor allem vom erwarteten Wachstum staatlich bezahlter, aber privat gemanagter Krankenversicherungen zu profitieren.

So erwarb erst im Juli WellPoint den auf Medicaid spezialisierten Versicherer Amerigroup für 4,36 Mrd. $ und ein Aufgeld von 43%.

Und Anfang des Jahres sicherte sich Cigna den auf Medicare konzentrierten Versicherer HealthSpring für 3,8 Mrd. $ bzw. einen Aufpreis von 37%.

Auch Marktführer UnitedHealth Group (Marktkapitalisierung von 55 Mrd. $) hat in den letzten Monaten mehrere mittelgrosse Akquisitionen durchgeführt.

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Health-care servicesThe good old waysDoctors and hospitals are rediscovering a few ideas from the 1990sSep 8th 2012 | VERONA, NEW JERSEY | The Economist from the print editionCorrection to this article

JANET DUNI has a tiny office and a wide reach. From her desk in the heart of Vanguard Medical Group in New Jersey she combs through data, helping to co-ordinate care for thousands of patients. She checks on those who have recently left hospital, for example, and tries to encourage best practice among the staff. Thomas McCarrick, a primary- care doctor and chief medical officer, is grateful for Ms Duni’s help. Working with her, he hopes to lower costs, see more patients and keep them well—the holy grail of American health care.

But Ms Duni is not Vanguard’s employee. She works for an insurer.

Beneath the interminable squabbles over Barack Obama’s health law, a transformation is taking place. To date most doctors have been rewarded for providing more rather than better services. This is unsustainable. Health care gobbles nearly 18% of GDP.

Now a myriad experiments are under way, as described in the newest issue of Health Affairs, the wonk’s Bible. Some programmes are prodded by Mr Obama’s reform. Others are independent of it. But they share a common goal: pushing doctors and hospitals to provide better, cheaper care.

This seems familiar. In the 1990s health maintenance organisations (HMOs) used primary-care doctors to co-ordinate patient services and try to lower spending. HMOs usually gave a fixed fee for each patient to groups of doctors and hospitals—if a patient got too expensive, the groups bore the cost. Many lost money. Patients complained that HMOs encouraged doctors to skimp on care (“drive-through deliveries”, with mothers ejected from hospital soon after birth, were particularly notorious). For some, the acronym “HMO” remains lodged in the pantheon of toxic terms, somewhere between “rationing” and “death panel”.

The 1990s are not being repeated, but some elements are. Vanguard is a “patient-centred medical home”, an absurd term for a promising idea. The “home” does not house patients; rather Vanguard is a hub, where a group of doctors oversee the health of patients.

It is part of a broader experiment with Horizon Blue Cross Blue Shield of New Jersey, the insurer that employs Ms Duni.

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Horizon still pays for specific services from Dr McCarrick and 47 other primary-care practices. But Horizon also pays them fees and bonuses to co-ordinate care, keep patients well and limit unnecessary procedures.

Such patient-centred medical homes are sprouting across the country. Centres for Medicare and Medicaid Services (CMS), in charge of public- health programmes, is accelerating the change. Thanks to CMS, 37 of Horizon’s medical homes, including Vanguard, will extend their model to patients in Medicare, the health programme for the old.

CMS’s boldest new initiative, however, may be the new “accountable care organisations” (ACOs) authorised by Mr Obama’s health law. ACOs are groups of hospitals and doctors that are held responsible for a distinct set of Medicare patients.

If an ACO meets goals for the quality of its care and pushes costs below a set level, it may receive a bonus. Other experiments introduced by CMS include paying a set price for a procedure and any medical complications that follow. The private sector is moving forward apace.

UnitedHealth, the biggest insurer by revenue, is rolling out pay-for-performance contracts for hospitals, as well as testing its own medical homes and ACOs.

Bob Atlas of Avalere Health, a consultancy, offers a curt sketch of the ACO model: “HMO wannabe”. But he points to important differences. Unlike HMOs, the Medicare ACOs let patients see a range of doctors if they wish. And ACOs do not get one payment for each patient. The bonus complements regular fee-for-service.

Two other factors may make the new reforms succeed where others failed.

First, the old systems had few incentives to offer patients goodcare.

Second, they tried to co-ordinate services but had meagre tools to do so. This has changed, thanks not just to electronic health records but to software that analyses patients’ data and finds areas where care could be improved.

Still, the new experiments remain just that. New Jersey’s Horizon has yet to recoup its investment in medical homes. The new emphasis on quality and efficiency may encourage even more consolidation among hospitals—bigger hospitals can spread risk across patients, invest in information technology and create standardised procedures that can easily be replicated.

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Bigger hospitals may, in turn, use their market power to drive up prices. The main question, however, remains how to balance incentives for efficiency with incentives to skimp.

“There are two ways it could fail,” suggests Austin Frakt of Boston University. “It’s too much like what happened in the 1990s... or it is not enough like the 1990s.”

Correction: UnitedHealth is not buying hospitals, as the original version of this story suggested. This was corrected on September 7th 2012.

from the print edition | United States

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WSJ.com HEALTH INDUSTRY September 27, 2012, 4:25 p.m. ETSome Firms' Workers Will Choose From Array of BenefitsBy ANNA WILDE MATHEWS

Is health insurance just the beginning?A handful of employers may go even farther than Sears Holdings Corp. and Darden Restaurants Inc., which plan to give workers a set sum of money next year to use in choosing among health plans.

Sedgwick Inc., a closely held firm with around 11,000 employees, plans to take a similar but broader approach in 2014, giving workers an annual allotment to use on an array of benefits, including not only health coverage but also life insurance and even time off.

The idea would be for employees to divvy up the funds as they wish, perhaps opting for cheaper health coverage and a bigger 401k contribution, for instance.

"It's choice on a full range of benefits," said David North, chief executive of Memphis-based Sedgwick, which administers disability, property and casualty claims for companies. "They can spend it however they want." He said that the company believes employees will welcome the flexibility and that

Sedgwick isn't aiming to reduce its current spending on benefits. The company plans to work with Bloom Health Corp. to integrate all the options, he said.

Employees will go to a Web site, where they will be asked questions on topics including their health status, financial situation and some personality details, such as their appetite for risk, said Jill Prevost, Bloom's head of consumer experience. They can also call and get information over the phone. Employees will then pick the benefits they want, and the site will suggest how to allocate the benefits money, based on typical practices. Workers can then tweak the site's recommendations.

Analysts International Corp., an information-technology-services firm with around 1,000 employees based in Minneapolis, wants to eventually go in the same direction, said Marne Oberg, a vice president who oversees human resources. The company will start with just health coverage in 2013, using the ConnectedHealth LLC exchange, she said, but "ultimately the vision is to get to a point where it's a defined contribution to benefits in general."

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Past versions of these approaches, including some known as "cafeteria plans," which were more common in the 1980s, ran into problems partly because of the complexities of administering them using the technology then available, said Michael Turpin, executive vice president at USI Holdings Corp., a major insurance brokerage.

Proponents say today's much more sophisticated Internet technology will help solve those issues.

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Bedrängte US-KrankenversichererDer Staat droht den privaten Versicherern, Konkurrenz zu machen – Aktien führender Anbieter leiden unter politischer UnsicherheitJan Baumann, New York

Stein des Anstoßes in den Entwürfen zur Reform des Gesundheitswesens ist der Vorschlag, einen öffentlichen Krankenversicherer einzurichten. Dagegen begehren die privaten Anbieter auf. Mit anderen Reformelementen, die derzeit in Parlament und Medien diskutiert werden, können sie sich anfreunden.

Im Unterschied zur Administration Clinton, deren Reformprojekt von 1993 am Widerstand der Wirtschaft scheiterte, versucht US-Präsident Barack Obama, Pharma-, und Biotech-Industrie, Ärzteschaft, Spitalbetreiber, Medikamentenverteiler und nicht zuletzt die Versicherer auf seine Seite zu ziehen. Das ist ihm bisher gar nicht so schlecht gelungen; und eine kleine Chance besteht sogar, dass die Umkrempelung des Gesundheitswesens wenigstens von einem Teil der republikanischen Minderheit unterstützt wird.

Widerstand regt sichWollen Obama und die Demokraten den Goodwill der Versicherungswirtschaft nicht verlieren, werden sie auf einen neuen, öffentlichen Versicherungsplan verzichten müssen. Die

Gesundheitspläne, die von den kommerziellen Gesellschaften wie United Health Group, Aetna und Humana (...) angeboten werden, sind in der Regel teurer und umfassender als diejenigen der schon existierenden, staatlichen Auffanginstitutionen Medicare (für Personen ab 65) und Medicaid (für Arme).

Auf dem Gesundheitsmarkt würde ein günstiger Staatsplan die privaten Leistungsträger leicht verdrängen können. Genau das will die Branche vermeiden. Sie verdient gut am Betrieb von Managed-Care-Programmen für Unternehmen, die in den USA üblicherweise für die Krankenversicherung der Belegschaft verantwortlich sind. Eine staatliche Alternative würde der Assekuranz die Kundschaft streitig machen.

Die Debatte über die Reform wird am Aktienmarkt aufmerksam verfolgt. Jedes Mal, wenn das Schreckgespenst des öffentlichen Versicherungsmodells Oberwasser erhält, sinken die Kurse der Krankenversicherer. Umgekehrt kommt Fantasie in die Valoren, wenn es in Washington wieder mehr nach einer Lösung aussieht, die die Branche unbeschadet lässt.

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Börse reagiert empfindlichMitte Juni erhitzte eine Studie des überparteilichen Congressional Budget Office (CBO) die Gemüter. Die Berechnungen des CBO ergaben, dass eine der drei parlamentarischen Vorschläge zur Gesundheitsreform den Staatshaushalt in den kommenden zehn Jahren mit etwa 1000 Mrd. $ zusätzlich belasten würde.

Angesichts der ohnedies schon grassierenden Staatsverschuldung setzte die Schätzung des CBO hinter das gesamte Reformvorhaben ein großes Fragezeichen. Prompt rückten beispielsweise die Aktien von United Health Group innerhalb von drei Handelstagen 8% vor. Die Titel des Branchennachbarn Aetna gewannen gar 12%. Kaum ein anderes Segment des Aktienmarktes reagiert so empfindlich auf das gesundheitspolitische Wechselspiel der Kräfte wie Managed Care – nicht einmal der Pharmasektor, wo es neben der Diskussion über einen allfälligen Preisdruck durch die Reform andere, ebenso wichtige Themen gibt.

In der Vergangenheit gehörten Krankenversicherungsaktien eher zur Kategorie der defensiven Anlagen. Der Grund ist einfach: Auf Gesundheitsdienstleistungen verzichten die Leute nicht so rasch wie auf zyklische Konsumgüter. Doch in der laufenden Rezession hat das Argument untergeordnete Bedeutung. Alle Anbieter von Versicherungsdeckung und administrativen Dienstleistungen im Gesundheitswesen

müssen versuchen, die explodierenden Kosten unter Kontrolle zu bringen. Außerdem haben die Finanzanlagen der meisten Versicherer unter der Kreditkrise und der Börsenbaisse von 2008 gelitten. Es ist derzeit äußerst schwer zu beurteilen, ob von nun an das Anlageergebnis wieder einen größeren Beitrag zum Konzernergebnis beisteuern wird.

Risiken beträchtlich Die große Unsicherheit über das politische Umfeld und die Gewinnaussichten dürften erklären, warum die Aktien mit einem Kurs-Gewinn-Verhältnis (KGV) 2010 im Bereich von 6 bis 9 moderat bewertet sind. Wer nun beispielsweise Aktien der mittelgroßen Cigna erwirbt, kann auf die Entfaltung des schlummernden Erholungspotenzials spekulieren. Diese Woche gab Cigna zudem einen Wechsel an der Konzernspitze bekannt. Der bisherige Chief Operating Officer (COO), David Cordani, übernimmt die Führung, sodass sich Vorgänger Edward Hanway nach dem Rückzug aufs Amt des Chairman stärker an der Reformdebatte beteiligen kann. Die Branche ist derzeit so stark politisiert, dass sich nur Anleger engagieren sollten, die Freude an der komplexen Thematik verspüren und zudem hektische Kursschwankungen verkraften können.

Life

WSJ.com BUSINESS Updated April 26, 2012, 3:21 p.m. ETInsurers Step Up Business ExitsBy LESLIE SCISM And MIA LAMAR

Hartford Financial Services Group Inc. took a step toward exiting from the annuity business, agreeing to sell units that develop, market and distribute new versions of the investment and retirement-income products.

Meanwhile, MetLife Inc. said it reached a pact to sell its reverse-mortgage servicing portfolio, as it continues to exit from the banking business.

Hartford Financial struck its deal with Forethought Financial Group Inc., a closely held Houston firm. Terms weren't disclosed, and the deal doesn't include Hartford's vast pool of existing annuity contracts.

The transaction comes as Hartford is trying to address criticism leveled by big shareholder Paulson & Co. Hedge-fund manager John Paulson has publicly demanded that Hartford take action to improve its stock price.

Hartford said last month that it would stop selling annuities and put its life-insurance arm up for sale to focus on its property-and-casualty insurance business.

The deal "is the first tangible sign that the restructuring wheels are turning," analysts at Stifel Nicolaus wrote in a note to clients.

Hartford has struggled to recover from a global credit crisis that rattled the company and exposed weaknesses in the way it had hedged against risks at its variable-annuity business, a retirement-savings product the company had helped revolutionize.

The Stifel Nicolaus analysts said they don't expect any suitors to step forward to buy the variable annuities on Hartford's books. Hartford's revolutionary invention was a guarantee to consumers of lifetime withdrawals from their funds of specified amounts even if the underlying funds had tanked.

Many other companies have endured similar, though less punishing, struggles with their variable-annuity guarantees, and wouldn't be eager to add more to their books, analysts say.

Meanwhile, MetLife said it will sell the reverse-mortgage servicing portfolio to Nationstar Mortgage LLC. The transaction, which is subject to regulatory approvals, will eliminate about 500 jobs, MetLife said. MetLife said it won't accept new reverse-mortgage loan applications and registrations.

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MetLife's retail-banking business represented less than 2% the company's 2011 operating earnings. The nation's biggest life insurer by assets, MetLife decided in 2011 to shed its bank-holding-company status, and other agreements to wind down the MetLife operations are pending.

MetLife in March failed "stress tests" by the Federal Reserve, aimed at gauging the capital adequacy of 19 of the biggest U.S. financial firms under a severe economic worsening. MetLife, which has been a bank-holding-company since it pushed into banking in 2001 to offer retail savings and other products to its clients, was the only insurer tested.

The company maintains the test was "bank-centric" and that under insurance-industry examinations, it has excess capital.Hartford said it will continue to write new annuity products during a transition period, and Forethought will assume all expenses and risk for those sales through a reinsurance arrangement. Hartford said the majority of employees who work in the units will be offered positions with Forethought....

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WSJ.com BUSINESS July 12, 2012, 8:57 p.m. ETInsurance Plan Draws FireBy LESLIE SCISM

New York's top financial-industry watchdog questioned the wisdom of a plan by state-insurance regulators to revise rules on how life insurers set aside reserves.

Speaking at a New York conference on financial regulation Thursday, Benjamin Lawsky, superintendent of New York's Department of Financial Services, also said he disagreed with a proposal to impose new international bank capital standards on smaller lenders.

Mr. Lawsky also expressed concern that insurers, which historically have been regulated by the states, could be subjected to examinations under new federal legislation that "would look at insurance companies as banks."

Because New York is home to many of the biggest U.S. banks and insurers, Mr. Lawsky's department wields strong influence in the world of state financial-services regulation. Some of Mr. Lawsky's toughest criticism was leveled at fellow state-insurance regulators.

He is "concerned" with an effort by companies and many state insurance commissioners to champion the use of "principles-

based" standards in calculating insurance reserves. The methodology, he said, may be akin to "a movement to deregulate the life-insurance industry."

Currently, insurers follow formulas that often mandate minimum reserve requirements. The new approach would give insurers more flexibility in establishing the reserve levels based on their own modeling.

The National Association of Insurance Commissioners, an organization of state officials that sets solvency standards, voted in 2009 to proceed with principles-based reserving pending adoption of a manual for applying the approach."Do we really want to move to this model, and will we regret it?" he asked.

Susan Voss, Iowa's insurance commissioner and the NAIC's past president, said Thursday that "there's nothing written in stone." She said there are "a lot of regulators" who believe reserves are inappropriately high for certain types of life insurance, which drives up prices for consumers. She called it an effort "to right size reserves." "The bottom line is we want to get to the right reserves, it doesn't mean deregulation," she added.

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John Bruins, a senior actuary with the American Council of Life Insurers, a trade group, said principles-based reserving "gets away from a simple formula and gets more into risk-analysis." He added that regulators would "continue to have significant say over the assumptions used."

In March, the Federal Reserve rejected MetLife Inc.'s request to raise its stock dividend and buy back stock, on grounds that the insurer failed the U.S. central bank's stress tests. Mr. Lawsky's agency is MetLife's primary regulator. MetLife in March failed stress tests by the Fed aimed at gauging the capital adequacy of 19 of the biggest U.S. financial firms under a severe economic worsening. MetLife, which has been a bank holding company since it pushed into banking in 2001 to offer retail savings and other products to its clients, was the only insurer tested. MetLife's retail-banking business represented less than 2% of the company's 2011 operating earnings. MetLife has a pending agreement to sell its bank to General Electric Co., which is awaiting approval by federal regulators.

Mr. Lawsky also cautioned that application of the elaborate international bank-capital standards known as Basel III to small community banks, as has been proposed, could lead to a round of consolidation that would hurt the important role they play in small-business lending. The Fed's proposal is currently open to public comment. ...

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FTD.de 24.07.2012, 20:48Dürre in USA:Hitzewelle lähmt Gasförderung ... Der Wassermangel in den USA bringt die gasfördernden Fracking-Unternehmen zunehmend in Bedrängnis. Hedge-Fonds wetten nun auf einen kräftigen Preisanstieg. von Matthias Ruch New York

Die schlimmste Dürre in den USA seit 50 Jahren schlägt nun auch auf die amerikanische Energiewirtschaft und den Preis für Erdgas durch. Da die Landwirte Wasser für ihre trockenen Felder und Weiden benötigen, fordern sie von den Gaskonzernen eine Aussetzung des ohnehin umstrittenen Hydraulic Fracturing. Bei diesem Verfahren wird ein Gemisch aus Wasser und Chemikalien unter hohem Druck in die Tiefe gepumpt, um dort Schieferformationen aufzubrechen und so an das eingeschlossene Erdgas zu gelangen. Einzelne Behörden haben den Gaskonzernen bereits den Zugriff auf Wasserreserven verwehrt. Das sogenannte Fracking hat den USA in jüngster Zeit einen Erdgasboom beschert und den Preis für den Brennstoff in den vergangenen vier Jahren um über 70 Prozent gedrückt. Stromerzeuger investieren landesweit in neue Gaskraftwerke, der Anteil von Erdgas am Energiemix Amerikas steigt kräftig an. Auch die Industrie profitiert von den niedrigen Energiepreisen, die mittlerweile deutlich unter denen in

Europa und Asien liegen und als wichtiger Vorteil der USA im Wettbewerb um die Ansiedlung neuer Werke gelten. Zugleich sinkt mit dem Ausbau der Gasförderung die Abhängigkeit des Landes von Energielieferanten aus dem Ausland. Erstmals investieren US-Unternehmen nun sogar in Anlagen zum Export von Erdgas.

Sollte den Gaskonzernen nun der Zugriff auf Wasser beschränkt werden, könnte dies zu einem deutlichen Anstieg der Preise führen. ...

Eine Trendwende scheint vorerst nicht in Sicht: weder beim Wetter noch beim Gaspreis. Hedge-Fonds wetten in großem Umfang darauf, dass Erdgas teurer wird. Allein vom 10. bis 17. Juli stiegen die offenen Käuferpositionen für Futures und Optionen, also die Zahl der Wetten auf steigende Gaspreise, laut Statistik der Terminbörsenaufsicht Commodity Futures Trading Commission (CFTC) um 6,4 Prozent. Schon in den Wochen zuvor hatten die Aufseher einen stetigen Anstieg registriert.

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Mittelfristig könnten dadurch auch die zuletzt eingebrochenen Kohlepreise wieder anziehen. Kohlekraftwerke sind noch vor Gaskraftwerken die wichtigsten Stromlieferanten der USA. Gegen den Tagebau gibt es - anders als gegen das Fracking - kaum Bedenken von Naturschützern. Spätestens dann, wenn der Export von Erdgas richtig in Gang kommt, rechnen Experten daher wieder mit steigenden Kohlepreisen.

Im Streit ums Wasser haben die Behörden im Bundesstaat Pennsylvania bereits reagiert und den ansässigen Energiekonzernen, darunter Exxon Mobil, den Zugriff auf die Wasservorkommen vorübergehend verweigert. Ähnliche Initiativen laufen in weiteren Bundesstaaten. Als Kompromiss bieten die Öl- und Gaskonzerne zunächst an, ihre Verfahren zur Aufbereitung des Wassers weiterzuentwickeln. Kritiker fordern, dass die Unternehmen das von ihnen verunreinigte Wasser grundsätzlich klären und mehrfach verwenden müssten.

Die Hitzewelle treibt den Gaspreis nicht nur wegen der Wassernot, sondern auch durch steigenden Verbrauch. Weil die Klimaanlagen überall laufen, lag der Stromverbrauch der privaten Haushalte in den vergangenen zwei Wochen landesweit elf Prozent über dem Normalwert.

Für die Gegner des Frackings bietet die Not der Landwirte eine neue Gelegenheit, öffentlich auf die Risiken der

Förderung aus Schieferformationen hinzuweisen. Neben der Verschmutzung des Grundwassers und einem Absinken des Grundwasserspiegels fürchten sie auch Bergschäden und sogar Erdbeben. Seismische Bewegungen haben Experten bereits in zahlreichen Bundesstaaten registriert, in Arkansas und Ohio wurden daher bereits im vergangenen Jahr mehrere Bohrungen bis auf Weiteres untersagt.

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Versicherer kommen günstig davonErnteausfall Die Versicherer in den USA werden die Dürre in ihren Ergebnissen zwar zu spüren bekommen. Den Großteil der Schäden wird aber der Staat übernehmen.

"Ernteausfallversicherer könnten ihren ersten versicherungstechnischen Verlust seit 2002 schreiben", heißt es beim Insurance Information Institute. Schon im vergangenen Jahr mussten die Versicherer eine Rekordsumme von 11 Mrd. Dollar für Schäden aufgrund von Fluten, Dürre und Frost an Farmer zahlen.

Die Vereinigung der Ernteausfallversicherer National Crop Insurance Services rechnet für 2012 mit ähnlichen Belastungen. Anders als in den meisten europäischen Ländern können sich Farmer in den USA gegen Ernteausfälle absichern. Rund 80 Prozent des versicherbaren Farmlands sind durch Policen abgedeckt.

Die größten drei Ernteausfallversicherer sind ACE, QBE Insurance und Wells Fargo, aber auch die Allianz ist in diesem Feld aktiv, in erster Linie als Rückversicherer. Im Jahr 2011 kam sie mit einem Prämienvolumen von 960 Mio. Dollar auf einen Marktanteil von 7,8 Prozent.

Staatshilfe

Die Policen werden vom Staat gefördert. Landwirte können eine sogenannte Multiperil Crop Insurance abschließen, die sie vor Schäden aufgrund von Dürre, Regen oder Frost schützt. Der Staat übernimmt einen Teil der Prämien für die Landwirte, stellt Rückversicherungsschutz für die privaten Anbieter bereit und übernimmt auch Teile der Kosten.

Der hohen Anteil des Staates an der Versicherung von Ernteausfällen ist auch ein Grund, warum die Dürre für die Versicherer nicht zum Super-GAU wird. Zwischen 50 Prozent und 80 Prozent der Schäden werden wohl die US-Steuerzahler tragen müssen.

So rechnet auch die Ratingagentur Fitch für 2012 mit schlechteren Ergebnissen der Ernteausfallversicherer, erwartet aber nicht, dass die Schäden die Kapitalbasis der Anbieter erschüttern. "Wir glauben, dass die führenden Ernteausfallversicherer in der Lage sein werden, kurzfristige Ernteausfälle zu verkraften und ihre heutige Finanzstärke beizubehalten", schreibt Fitch in einem aktuellen Bericht.

Zum einen seien die Anbieter hinreichend diversifziert. Sie versichern verschiedenste Feldfrüchte an unterschiedlichen Orten in den USA. Zum anderen nehmen ihnen das staatliche Rückversicherungsprogramm und zusätzlich noch private Rückversicherer einen Teil der Risiken ab.

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Außerdem haben sie in den vergangenen Jahren gut verdient, was ihnen einen Puffer für schlechte Zeiten verschafft hat. So lag die Schaden-Kosten-Quote der Anbieter 2010 bei 73,9 Prozent der Beiträge.

Friederike Krieger

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WSJ.com BUSINESS August 12, 2012, 10:37 p.m. ETLife Insurers Pressed on Lost PoliciesBy LESLIE SCISM

Mary Lou Sowa scoured her father's records after his death, told a life insurer about two policies she found and received the proceeds. But when she asked about indications that he held other policies as well, she says the insurer told her it owed nothing more.

That was a decade ago. Last year came a surprise: a check for $7,000 for payouts on three additional life-insurance policies it turned out Ms. Sowa's father had bought.

They were found as a result of a wide-ranging effort by state officials that is giving insurers headaches: pressure to make sure companies pay out on old, sometimes forgotten policies on the lives of people who have long since died.

"Can you imagine all the millions or billions of dollars that belong to other people and they don't know to claim it?" said Ms. Sowa, a retired beautician in New Port Richey, Fla.

State regulators estimate that over the decades, life insurers have failed to pay well over $1 billion in death benefits because it is up to beneficiaries to file a claim following a death.

Absent a claim, insurer commonly can keep policy on books until insured person would be at least 95.

Insurer then tries to contact policy owner, and if it cannot, sends the policy and death benefit plus any required interest to a state unclaimed-property department following "dormancy period" of typically one to five years.

States make efforts to locate owners, including website posts.States can use policy proceeds as they await claims.

What some insurers will now do differently:

Regularly check Social Security's death database to determine if any policyholders have died.

If so, will make efforts to locate beneficiaries.

If they can't, will remit the funds as unclaimed property to the states.

An industry official didn't dispute the figure but said whatever the amount is, it is "a very small percentage" of total claims paid. "We know the percentages represent real people, and we've been working with policy makers on ways to ensure all policyholders get the benefits they deserve," said the official, Bruce Ferguson of the American Council of Life Insurers.

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Three companies, in pacts with dozens of states, have in recent months reached settlements that require the insurers to check their policyholder lists regularly against a death database and try to track down survivors of anyone whose death shows up. The deals upend more than a century of practice in how life-insurance benefits get paid.

Besides these companies—MetLife Inc., Prudential Financial Inc. and the John Hancock unit of Manulife Financial Corp. —at least eight other insurers, including American International Group Inc., Lincoln National Corp. and Nationwide Financial Services Inc., are under the scrutiny of a multistate task force, and another settlement could come as early as this week, say people familiar with the investigations.

AIG declined to comment. Nationwide said it "has been cooperating fully with the states' regulators" and "will continue to do so in hopes of resolving their concerns." Lincoln said it is cooperating and has "always viewed paying all legitimate claims to our clients in a timely fashion as a matter of utmost importance."

Standard language in life-insurance policies makes clear it is up to beneficiaries to notify the insurer when an insured person has died. But few companies want to take shelter in that argument—and risk a public-relations black eye—in the

face of database technology that today makes it relatively easy to cross-check policies against deaths.

In addition, opposing a requirement to check the databases would be particularly difficult given that many insurance companies already check them when it is in their interest—that is, to learn about the deaths of annuity customers. Such deaths usually end insurers' duty to make payments under retirement-income contracts.

Life-insurance companies don't get to simply keep the money that is due beneficiaries who fail to file claims. Under many state laws, insurers can keep unclaimed policies on their books until the insured person would be at least 95 years old, after which time the policies—and death benefits due on them—are handed over to state unclaimed-property departments.

Besides the multistate task force that is pressing insurers, which is led by Florida Insurance Commissioner Kevin McCarty, separate efforts are under way in New York. Its Department of Financial Services last year ordered insurers to check policyholder names against a death database, a move state officials have reported has already resulted in hundreds of millions of dollars being paid. Also, the offices of New York's attorney general and its comptroller have teamed up to work on what they have called a "comprehensive investigation" of death-benefit practices.

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New York Life Insurance Co. has pushed back at the idea of negotiating a deal with regulators to settle on a new approach.

"There is a tried-and-true process for developing new regulations in our industry that includes legislative debate, public notice and a comment period for both the public and the regulated to offer opinions before a law is adopted," a New York Life spokesman said, calling it "a major departure for regulators to change regulation through enforcement action and to penalize insurers when they have fulfilled their obligations under the law." New York Life last year began using a death database routinely.

Mary Jane Wilson-Bilik, a lawyer for insurers, objected to the notion that insurers "somehow…weren't meeting their legal obligations" by not having used the death database earlier.

Policies on which insurers receive no death claim mostly consist of small ones sold from around 1900 to the early 1960s. Agents went door to door in working-class neighborhoods pitching what were called "industrial" or "burial" policies, often just enough to pay for a funeral.

Ms. Sowa in Florida recalls that when she was growing up on New York's Long Island, she often saw her father, a printing-plant worker, hand cash payments to a visiting life-insurance

agent, who would make some marks in a ledger and then close it before returning the next week.

The business of selling these small policies succumbed to criticism that the coverage cost too much. In addition, insurers wanted to trim expenses related to agents. Many simply declared all such small policies paid in full.

That meant, however, that insurers were no longer keeping up with the addresses of policyholders, with the result that companies gradually lost track of some of them.

Trade groups coordinated some efforts to find policies for families who believed they might be beneficiaries. But insurers had "no strong incentive to devote extensive resources" to the projects, says Joseph Belth, an emeritus professor of insurance at Indiana University.

That changed when some mutual insurers decided to go public. The step required them to cash out existing policyholders, who are the owners of mutual insurers.In 1999, John Hancock mailed a notice to the last known addresses of about 800,000 burial-insurance policyholders but said at the time that 412,000 of the mailings couldn't be delivered.

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Massachusetts officials and consumer advocates said this showed the Boston-based company wasn't trying hard enough. In response, it hired an address-search firm and provided names to states to run through voter-registration, motor-vehicle, tax and other databases.

With this effort, John Hancock learned of several thousand deaths. Still, more than 300,000 policyholders remained unaccounted for when the Massachusetts insurance commissioner approved a conversion to stock ownership.

MetLife, for its part, mounted an effort in 1989 with a media campaign featuring TV weatherman Willard Scott, whose father was a MetLife agent and sold the so-called industrial policies. The company said it was seeking five million policyholders whose insurance totaled $4.2 billion.

MetLife says it made "considerable efforts" to find policyholders. By the time it won regulatory approval to "demutualize" in April 2000, its list of lost policyholders was down to roughly 1.1 million.

With so many policyholder-owners still missing when the insurers went public, the insurers turned over to state unclaimed-property departments about $4 billion in cash and stock that these customers were owed. But they generally held on to the underlying policies.

With such sums at stake, lawyer James Hartley Jr. of Waterbury, Conn., saw a business opportunity: an auditing firm that would work with state treasurers to identify policies that ought to be turned over as abandoned property because the insured people were dead.

The concept had appeal with states: They could help customers and get good publicity when people collected from their websites and other efforts. States typically reunite with owners less than 60% of the money they receive—and can keep the rest.

One of Mr. Hartley's business partners had a son who was a former Federal Bureau of Investigation agent experienced in using databases. Backed by money from investors, they hired programmers to write computer algorithms that could feed millions of names into the Social Security Death Master File—trying misspellings and adjusting for possible transposed digits in Social Security numbers and birth dates—to help find out about policyholder deaths.

"It is relatively easy to determine on a one-off basis if a particular individual is dead," Mr. Hartley said. For an industry with millions of customers, though, "an algorithmic-based system had to be designed, and that was an enormous task."

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By 2009, their sleuthing company, closely held Verus Financial LLC, had the first of what are now 44 contracts with states.It also alerted states to a discovery it had made: Insurers were using the Social Security death database—in their annuity businesses, where it clearly benefited them.

MetLife had begun using the database to cut off payments to dead annuity owners soon after the database became commercially available in the 1980s, company executives told Florida officials at a hearing last year. Not until 2007, however, did the firm start using the database to find out if life-insurance customers had died.

Belinda Miller, general counsel for the Florida Office of Insurance Regulation, told MetLife executives that their differing procedures on annuities and life insurance were "a little offensive to people." When the company was "looking for a way to stop paying" customers, she said, it found them easily enough.

The company responded that life-insurance beneficiaries have an incentive to notify an insurer promptly of a death, unlike heirs of customers who bought annuities that pay so long as they live.

MetLife told the Florida officials that its 2007 cross-checking effort identified 18,000 policyholders who died between 1978

and 2006. Their beneficiaries were owed $83 million, equal to 0.2% of $44 billion the company had paid to beneficiaries who filed claims during the same period. The cross-check involved certain policies for which MetLife had Social Security numbers, not the old industrial policies, for which it generally lacked them.

In an April settlement with states, MetLife agreed to check all policyholder names against the Social Security death database every month. It also said it would seek to make contact with 709,000 owners of certain older industrial life policies, representing a total of $438 million in insurance, or their beneficiaries. If it can't find either, it will gradually, over a period of years, pay this money to state unclaimed-property departments.

A MetLife spokesman said it settled to "resolve differences with the state regulators as to the interpretation of unclaimed-property laws and insurance laws, without litigation or administrative procedures."

About $1 billion in life and other insurance is expected to be paid out to policyholders and states as a result of the settlements with MetLife, John Hancock and Prudential.

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That includes the $7,000 check to Ms. Sowa in Florida, who split it with her brother. Verus Financial had identified this money in its audit of John Hancock, and the insurer forwarded the policy proceeds to Florida's unclaimed-property department.

A John Hancock spokesman said the company doesn't discuss individual policies. In general, he said, "it is important to remember than many policies are very old [and] without Social Security numbers" or other identifying information.

Though Ms. Sowa had an inkling there might be additional policies besides those that paid out right away, other families have no idea they were named as life-insurance beneficiaries.

Early this year, Meryl Ain of Dix Hills, N.Y., collected about $1,800 from a New York Life policy taken out long ago by an aunt who died in 2002. One of the original beneficiaries was Ms. Ain's father, who died in 2005.

"Many of these insurance companies that didn't make a good-faith effort to find the beneficiaries were being disingenuous," Ms. Ain says. "That's their job."

A New York Life spokesman said the company "long has had procedures in place to identify policyholders who may have died," such as tracking returned mail and sometimes using the

Social Security death database, and last year began doing such cross-checking routinely.

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WSJ.com BUSINESS June 6, 2012, 11:28 a.m. ETInsurers Now Take Grain of Salt With Catastrophe ModelsBy ERIK HOLM

Property insurers are beginning to cast a more skeptical eye toward the disaster models that predict potential losses from hurricanes, a major shift prompted in part by changes one modeling firm made to its formulas last year.

The new skepticism is being applauded by risk managers who say insurers had become too willing in recent years to accept without question the work of just a handful of disaster-modeling companies and too reliant on figures the models produce.

"There used to be a relatively monolithic view of hurricane risk," said Bill Keogh, president of modeling firm Eqecat Inc. "Now, everybody is going off in their own direction to try to understand the risk a whole lot better."

No matter which analysis insurers use, hurricanes are one of the largest threats facing the U.S. insurance industry. The $41.1 billion in claims from Hurricane Katrina, which struck the Gulf Coast in 2005, remains the largest insured loss in U.S. history, and a major hurricane could cause even more damage

if it were to make a direct strike on Miami, Houston or New York.

But such events happen so rarely that insurers have turned to companies like Eqecat or Risk Management Solutions Inc. to determine how much they stand to lose if any of the worst-case scenarios were to occur. The models use information about weather patterns, property values and building codes to provide insurers with an analysis of their probable maximum losses, or PMLs, from hurricanes, earthquakes and other disasters.

If the models reveal potential losses that are more than an insurance company can stomach, it can prompt a shift in strategy. Companies may attempt to raise rates, drop customers or buy additional protection from the reinsurance market, which sells backup coverage against large losses.

Regulators and credit-rating firms that evaluate the financial strength of insurers and reinsurers also use the PML figures in their analyses. Insurers often disclose the figures in their regulatory filings, allowing Wall Street analysts and investors to incorporate them into their models, too.

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Karen Clark, who founded modeling company AIR Worldwide more than two decades ago, has argued in recent years that the seemingly exact nature of the PMLs can lull insurers and investors into a false sense of security.

"Models are very valuable tools, but they only give you a rough indication of the risks," said Ms. Clark, who now runs Karen Clark & Co., where she works with insurers to help them better understand catastrophe risk and how to manage it.

"This isn't like the financial markets," she said. "For a Northeast hurricane, we only have a handful of data points. You can't pretend you have the same level of accuracy or precision as you do watching a stock price move every day for 20 years."

Historically, most insurers would hire either RMS or AIR Worldwide to analyze their catastrophe risk. RMS and AIR dominate the business—with Mr. Keogh's Eqecat coming in at a distant third. The results from the models "have not always been transparent, and companies have not always challenged them," said Christopher Lewis, the chief insurance risk officer for Hartford Financial Services Group Inc. ...

Now, industry observers say insurers are increasingly hiring two or more of the modeling firms, asking questions about the

results, hiring their own experts and reaching their own conclusions.

In response, the modelers are providing increasing amounts of information about their work and being more explicit about aspects of the estimates that are relatively uncertain—such as the Northeast hurricane scenario, said Claire Souch, vice president of model solutions at RMS.

Ms. Souch attributed part of the increased scrutiny to the demands of regulators and ratings firms. Under Solvency II, a new set of European solvency rules, insurers must show regulators they understand the models they're using.

Meanwhile, A.M. Best, a ratings company that specializes in insurers, began asking companies to provide their own view of their catastrophe exposures early this year.

"Models aren't the be all and end all," said Richard Attanasio, vice president of property-casualty ratings at A.M. Best. "We want to see them taking ownership of what the models are telling them."

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But many industry observers say a large part of the reason for the more intense scrutiny of the models is a new version of the RMS hurricane model released early last year. The model dramatically boosted some probable maximum losses, doubling the company's 1-in-100 year estimate for insured hurricane losses in Texas and increasing estimates in the mid-Atlantic by more than 75%.

"It was such a market-impacting event that most of the major companies took a step back," said Lara Mowery, head of the Property Specialty practice at Guy Carpenter, a reinsurance broker. "We heard loud and clear from the more sophisticated companies that they didn't want to be held hostage to a model-version change or to an outside influence to their view of risk."

Ms. Souch of RMS said many clients have "recognized the model is a step forward," but said there was "no doubt that much of the industry was surprised by the magnitude of change."

The new model led to "very individualized reinsurer behavior," Ms. Mowery said. In 2009 and 2010, reinsurers selling coverage in hurricane-prone Florida had rarely offered price quotes that varied significantly from each other, and deviated only about 3% from the average, according to data compiled by Guy Carpenter.

In mid-2011, there was "an explosion of volatility" that saw reinsurers competing for the same business offer price quotes that varied by as much as about 15% above or below the average, Ms. Mowery said.

To be sure, there was more at work in the price quotes than a new skepticism about the models, Ms. Mowery and others said. Disasters in the first half of 2011, including the earthquake and tsunami that struck Japan, sapped capital from some reinsurers. And some companies, instead of actively disagreeing with the change in the RMS model, have simply been slow to implement it, said Edward Noonan, the chairman and chief executive of Validus Holdings Ltd., ... a Bermuda-based insurer and reinsurer.But Ms. Mowery, Mr. Noonan and others said it is clear that many viewed the changes to the RMS model with skepticism."Companies are saying there are particular things they really believe are usable, and there are some things that they don't believe are necessarily completely accurate that they're going to apply their own analysis to," Ms. Mowery said.It's a development that is being greeted with applause from many corners of the industry."You're taking away some of the systemic risk," said Stephen Catlin, CEO of Catlin Group Ltd., ... a Bermuda-based insurer and reinsurer. "We're probably not all going to make the same mistake at the same time."

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WSJ.com BUSINESS Updated May 17, 2012, 6:23 p.m. ET

Forced Homeowner Policies AssailedBy LESLIE SCISM And LIZ RAPPAPORT

New York's top financial regulator turned up the heat on banks and insurers that sell homeowners policies to struggling borrowers, accusing them of an "intricate web of relationships" that pushes distressed families "over the foreclosure cliff" and also hurts mortgage-bond investors.

New York Department of Financial Services Superintendent Benjamin M. Lawsky's harsh words opened three days of hearings into whether banks have overcharged consumers for the policies while earning fat profits "for what appears to be very little work," as he put it Thursday.

The hearings focus on "force-placed" policies. Homeowners with mortgages are generally required to carry homeowner policies to protect their property, which serves as collateral for the loans. Banks can "force" these policies on customers who allow their insurance to lapse by mistake, or because they have stopped paying on their mortgages and escrow funds have run short to cover the premiums.

The hearings, held in a drab room in downtown Manhattan, were well-attended by insurance- and banking-industry representatives. A handful of homeowners who have suffered from being forced into expensive policies testified, as did consumer advocates and insurance executives. Bank executives are in the hot seat Friday.

Mr. Lawsky's office has issued subpoenas and formal document requests to banks and insurers in recent months, demanding answers on how premiums for the policies are calculated. He said his initial inquiry shows that while 63 cents of every dollar in premiums goes to pay a claim on a typical homeowner policy, the specialty companies that work with the banks often pay less than 25 cents of each premium dollar for a claim.

"The rest is mostly profit," he said in his opening remarks.Mary V. Burton, who owns a home in Staten Island, New York, said in her testimony that, after losing her job as a social worker in 2008, she didn't renew her homeowner's insurance policy. Citigroup's CitiMortgage put her into a policy that pushed up her monthly mortgage and premium payments by 50%, making it "impossible for me to get back on track," she said.

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A Citigroup spokesman said the company alerts borrowers about possible force-placed coverage, and encourages them to obtain their own policy.

Representatives from specialty insurers Assurant Inc. and QBE Insurance Group Ltd. said they will work with Mr. Lawsky's department to resolve issues raised by his department.

According to insurers, force-placed insurance prices are typically 1.5 to two times higher than regular homeowners' policies because the houses they cover carry higher-than-average risk. Many properties are abandoned and subject to vandalism.

They also said a major reason for higher prices is that force-placed insurers agree to cover all properties in a lender's portfolio, regardless of condition or location, and this saddles them with a disproportionate number in hurricane-prone coastal areas.

An executive from Assurant acknowledged that the percentage of each premium paid out for claims is currently low, but said that setting a minimum loss ratio--which Mr. Lawsky's department is exploring--would be "difficult."Mr. Lawsky, who joined the department last summer and has ramped up numerous probes of insurers and banks, said in

the hearing that insurers had an obligation to resubmit their rates given that their predicted loss ratios "were turning out to bear little resemblance to reality year after year after year."J. Robert Hunter, the director of insurance at the Consumer Federation of America, said that forced-place insurance "abuses fall into the cracks between insurance and banking regulation."

Mr. Lawsky said the "web of tight relationships" existed among banks, their subsidiaries and insurers. Among other things, the insurers often pay "large commissions" to bank insurance-brokerage subsidiaries, and they sometimes buy reinsurance from bank subsidiaries. Under a reinsurance contract, the reinsurer pays some of the claims on the underlying insurance.

"Thus, the banks pay high premiums for coverage that is highly profitable and then those big profits revert right back to the banks through reinsurance agreements," Mr. Lawsky said. "Banks purchasing this insurance seem to have little incentive to keep prices down."

Mr. Lawsky said the practices hurt mortgage-bond holders because banks often advance the high premium payments to the insurers and then recover the payments once homes land in foreclosure are sold.

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The insurers said they are successful because of the services they provide, and disputed suggestions that they benefit from inappropriate ties.

In one example, Mr. Lawsky said that J.P. Morgan Chase & Co. pays high forced-place insurance premiums to one insurance company, Assurant, which sends 75% of those premiums back to J.P. Morgan by buying reinsurance from a Vermont-based J.P. Morgan subsidiary.

J.P. Morgan did not immediately respond to a request for comment.

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FT.com August 26, 2012 9:36 pmInsurers face big agriculture lossesBy Javier Blas and Alistair Gray in London

The insurance industry faces its biggest ever loss in agriculture as the worst drought to hit the US in more than half a century devastates the country’s multibillion-dollar corn and soyabean crops, triggering large claims.

Insurance companies providing so-called crop protection will recoup part of their loss, nonetheless, as the US federal government reinsures some of their risk, on top ofsubsidising the premiums that farmers pay to private companies.

Agricultural economists at the University of Illinois estimatethe drought will trigger this year gross indemnities of roughly $30bn, with an underwriting loss of $18bn. Of that, the US government would shoulder around $14bn, while private sector insurers are likely to face a loss of $4bn, they said. Standard & Poor’s, the rating agency, put the losses of the private sector a notch higher at $5bn.

“The US drought is indeed a ‘catastrophic’ event,” Gregory W Locraft, insurance analyst at Morgan Stanley in New York, wrote in a recent note to clients, adding that it “is likely the largest [insurance] crop loss in history.”

Gary Schnitkey and Bruce Sherrick, at the University of Illinois, warned some of the US crop insurers are owned by publicly listed companies, “who may not have realised the scope of losses that their crop insurance subsidiaries could generate”.

Ace estimates a hit of $268m if its “modelled worst case” of the drought comes to fruition while Munich Re, the world’s biggest reinsurer, estimates costs of €160m.

Dom Addesso, president of Everest Re Group, the parent of Heartland Crop Insurance, told investors in a recent conference call that the “the only headwind in the insurance book” of the company right now was “the crop business”.

Moody’s, the rating agency, said other insurers with big exposures include QBE, American Financial, Rural Community, part of Wells Fargo, and Fireman’s Fund, part of Allianz.

The rating agency warned that smaller insurers focused on agriculture or with businesses concentrated in loss-affected areas, including Rural Community, Farmers Mutual and a subsidiary of John Deere., “appear considerably more vulnerable on a direct basis than their more diversified industry peers”.

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Agricultural economists said the true level of the crop losses would only be known in the fourth quarter, after farmers complete their harvests and claims adjusters visit fields across the country. The US meteorological service last week said the drought had engulfed 87 per cent of the country’s corn area and 85 per cent of the soya.

Private sector crop insurers have started to compute their crop losses on their overall portfolios, with some companies cutting their profits forecast for the year.

The multibillion losses that the US government faces comes at a difficult time as lawmakers consider a new Farm Bill, the omnibus bill adopted every five years.

Fiscal conservatives asked months ago for a reduction in the crop-insurance programme, which has been in existence in one form or other since the Great Depression of the 1930s.

But the drought has changed the political calculus, and most lawmakers are supporting an extension of the programme.

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Secondary Market for Life Insurance

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WSJ.com BUSINESS August 17, 2012, 4:31 p.m. ETLife Partners Dodges SeizureThe Texas firm avoids receivership, but the court says regulators are "likely to prevail" in the end.By MARK MAREMONT

A Texas judge declined a request by state regulators to immediately appoint a receiver over Life Partners Holdings Inc., but said the regulators were "likely to prevail" in claims that the company committed fraud in connection with its business of selling life-insurance investments.

Judge Orlinda Naranjo of Travis County District Court issued a temporary order against Life Partners, CEO Brian Pardo, and certain other defendants, enjoining them from destroying or removing records or dissipating company assets. A new hearing is scheduled for Aug. 30.

In a complaint filed Thursday, Texas' Attorney General and Securities Commissioner sued Life Partners, Mr. Pardo and others, alleging that immediate action was needed because the company's "fraudulent scheme is unraveling" and investor escrow accounts to pay policy premiums are underfunded by $300 million. Life Partners, of Waco, Texas, is a major player in the secondary market for life insurance, in which investors buy the rights to the death benefits of total strangers. The original policyholder receives a lump sum, while the investors

continue to pay the premiums, betting they will eventually collect a death benefit worth more than what they spent.

The shorter the insured person is expected to live, the more a policy is worth.

Regulators claimed in the lawsuit that Life Partners committed fraud by telling investors life expectancies were "significantly shorter" than they should have been, to generate inflated revenue. The scheme, they said, was like a used car salesman rolling back an odometer in order to get a higher price. Mr. Pardo has said that the company denies the allegations "in the strongest possible terms," and said the claim that the company was nearing insolvency was "spurious." He said Life Partners has more than $10 million in cash on hand and no debt.

In the complaint, Texas regulators said Life Partners had sold shares in policies to about 29,000 investors nationwide, who had entrusted more than $1.5 billion to the firm. Regulators warned that the declining financial situation could result in the lapse of policies, "which would cause investors to lose their entire investment."The Securities and Exchange Commission also has civil fraud charges pending against Life Partners, which the company denies.

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Variable Annuities

WSJ.com August 6, 2012 SAVING FOR RETIREMENTA New (Old) Pitch for Variable AnnuitiesInsurers say the tax-favored accounts are a smart place for alternative investmentsBy LESLIE SCISM

Like a dress designer looking to past decades for fashion inspiration, the variable annuity is evolving again—by returning to its past.

In a trend gathering momentum, the life insurers that sell these tax-advantaged vehicles for investing in funds are competing on the basis of investment choices. That's what they did in the 1980s and 1990s, before launching an arms race of escalating promises of guaranteed-minimum lifetime income, even if underlying funds tanked.

That competition cost the industry dearly when markets slid in 2008 and early 2009, leading to price increases and less-generous features as insurers sought to repair their balance sheets.

With the new offerings, insurers are drawing on the past but adding a twist: They are pitching variable annuities as a smart way to load up on alternative investments.

Alternative investments run the gamut from commodities, currencies and real estate to private equity, futures and options trading, and even exotic trading strategies of plain-vanilla stocks and bonds.

Insurers aren't alone these days in promoting their virtues. Mutual-fund firms and many financial advisers have been saying that market volatility and low interest rates make it important to diversify beyond stocks and bonds. In promoting alternative investments within variable annuities, insurers say these nontraditional options can generate a lot of capital gains and other taxable income, which can be deferred if held in a variable annuity.

"The tax advantages that come with the variable annuity work really nicely with the alternatives," says Kevin Loffredi, an annuities specialist at fund tracker Morningstar Inc.

Before going for the pitch, however, know that variable annuities charge certain fees that mutual funds don't, so you need to be careful that the expenses don't wipe out the tax advantage. It's smart to consult with a tax adviser before considering investments for tax advantages.

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The New WaveVariable annuities have been around since the 1950s. In the 1990s, insurers sought to entice consumers with menus of dozens of funds. The following decade, a wave of innovation swept through the industry, with insurers offering the lifetime-income guarantees. Many played on consumers' fears in the wake of the technology-stock collapse.

Sales soared, reaching a peak of more than $180 billion in 2007. Then came the financial crisis of 2008-09, when the worry turned to the insurers' own financial health. Two leading insurers took federal bailout money, since repaid, as regulators required fattened capital cushions to ensure they could make good on their promises to consumers.

Since then, insurers have raised prices on these guarantees—variable annuities with the income promises easily top 3.5% in total annual expenses, a serious drag on investment returns—and dialed back the generosity. Variable-annuity sales, while reasonably strong, haven't returned to the 2007 level.

Industry analysts say the new wave of annuities, which typically don't offer the income guarantees, are an effort to reduce the insurers' risk exposure while still hauling in money on which they can earn fees.

In March, life insurer Jackson National, a unit of Prudential PLC, launched Elite Access, a variable annuity that, in addition to traditional investments, includes commodities, global infrastructure, global real estate, managed futures, merger arbitrage, natural resources and private equity among its many investment choices.

Jackson says the alternative investments it offers have similarities to some of the investments favored by university endowments. The Elite Access name derives from the fact that small investors haven't typically had easy access to such investment strategies. Managers running the funds for the Jackson annuity include BlackRock Inc. and Goldman Sachs Group Inc.

The annual charge of the Jackson variable annuity is 1% of the money under management, and investors also bear the cost of the individual fund expense ratios, which average 1.34%.

Another insurer making a move in the space is Security Benefit Corp., a Topeka, Kan., company owned by an investment group led by Guggenheim Partners. Its one-year-old EliteDesigns variable annuity offers more than 200 funds, including conventional stock and bond funds, as well as specialty ones such as "long-short momentum" plays and leveraged bets on stock and bond indexes.

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"What we've attempted to do is have a very broad and rich array of investments and a very economic cost structure," says Michael Kiley, Security Benefit's chief executive. He dubs EliteDesigns "features-light" in contrast to many of the variable annuities sold by insurers in recent years. This "more minimalist approach" makes for "an efficient vehicle for accumulation on a tax-advantaged basis," he says, predicting interest will grow if state and federal governments raise taxes amid budget deficits.

EliteDesigns' yearly annuity fees total 0.45% of the money under management, and fund expense ratios run 0.35% to 2.15%.

Cost Vs. BenefitThe alternative-investment approach appeals to financial advisers such as David McKechnie, a managing partner at Beauport Financial Services in Gloucester, Mass. He says his firm is concerned about protecting clients' downside in both stocks and bonds, as market volatility continues and interest rates eventually rise. He sees hedging strategies as a way to address these concerns and likes to employ them with a portion of clients' portfolios.

He uses a low-cost variable annuity from Jefferson National Financial Corp.; it charges a flat fee of $20 a month, regardless of the amount invested. His preferred investments

are asset-allocation portfolios created by ValMark Advisers Inc. and subadvised by Milliman Inc. These portfolios, primarily using exchange-traded funds based on stocks and bonds, seek to protect asset growth in bull markets and defend against major losses during downturns. Milliman runs a hedging program that involves shorting index-based futures contracts.

"All of the taxes on both the income from the ETFs and short-term capital gains produced from the future contracts are deferred until distribution is made from the variable annuity," Mr. McKechnie says.

Jerome Golden, a longtime variable-annuities expert in the insurance industry, cautions that the variable annuity needs to be low-cost for the tax deferral "to deliver its full potential." He urges consumers "to look at fees at the fund level as well as the insurance-company level."

In making price comparisons, buyers also need to take into consideration whether their financial advisers' fee applies to money invested in the variable annuity.

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Mr. Golden says buyers should take a long-term approach when investing in variable annuities. Earnings pulled out of variable annuities are taxable as ordinary income and may be subject to a 10% federal tax penalty if withdrawn before age 59½.

Ms. Scism is a news editor for The Wall Street Journal in New York. She can be reached at leslie.scism@wsj.com.

A version of this article appeared August 6, 2012, on page R3 in the U.S. edition of The Wall Street Journal, with the headline: A New (Old) Pitch for Variable Annuities.

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AIG

WSJ.com COMMERCIAL REAL ESTATE Updated April 10, 2012, 7:55 p.m. ETReal-Estate ReduxAIG Is Planning a Return to U.S. Property InvestingBy CRAIG KARMIN And SERENA NG

American International Group Inc. is planning to jump back into U.S. property investing, reversing yearslong efforts to downsize its real-estate business in the wake of its near-collapse and government bailout in 2008.

AIG until recently had been dismantling what was once a $24 billion real-estate portfolio packed with trophy properties around the world to help pay back U.S. government loans and keep the company afloat. Its investing has been limited primarily to a few European deals with a single partner.

But now AIG is beginning to make plans for fresh investments across the U.S. that will begin later this year. A real-estate division of the New York-based company has reached out to developers of new apartment buildings in major metropolitan areas, said people familiar with the matter. "We've done multifamily deals with them before, and we're interested in working with them again," said Hal Fetner, president and chief executive of New York developer Durst Fetner Residential LLC who has been contacted by AIG about new developments.

AIG hasn't set specific targets on the size of its future investments in real estate, but people familiar with the insurer say that eventually it will amount to hundreds of millions of dollars annually.

The company once acquired flashy properties like a Vermont ski village, Shanghai office towers and a Tokyo shopping mall. This time, a humbled AIG has set its sights lower: The U.S. apartment market is where it is focusing now, said people familiar with the matter.

AIG was one of the financial groups that expressed interest in a $100 million development project in Montclair, N.J., a one-time Jaguar dealership that developer Pinnacle Cos. plans to convert into an apartment complex with retail, commercial and office space, said people familiar with the matter. It also has held discussions with brokers or developers in California and the Southeast U.S., the people said.

Some brokers said they first realized that AIG was paving the way to resume property investing when they found members of the real-estate team actively looking to partner with developers at a January multifamily housing conference in Boca Raton, Fla.

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AIG's return to real-estate investing is another sign that the insurer is regaining its footing after paying back most of its $182.3 billion federal bailout. The company is still 70%-owned by the U.S. government, which is now largely a passive shareholder and is expected to sell its holdings over time.

Over the past year, AIG has crept back into a few businesses that it abandoned because of the financial crisis, such as securities lending, as it becomes more comfortable taking risks again. Its insurance businesses also have remained active investors in commercial and residential mortgage debt.It also is part of a growing movement by insurance companies to raise their stakes in real estate as the market rebounds from a sharp correction. A number of big companies are moving into a vacuum caused by the departure of some investment-banking firms from real estate and by the struggle of many funds to raise money.

New York Life Insurance Co., for instance, said it made a new allocation to commercial mortgage loans and real-estate equity. That commitment could be as much as $1 billion, according to people familiar with the matter. Northwestern Mutual, meanwhile, made $1.57 billion in real-estate equity investments last year, the insurer said. That is up from $1.1 billion in 2010 and more than four times the amount made in 2009.

AXA Real Estate, a unit of French insurer AXA SA and one of Europe's largest real-estate managers with $55 billion under management, is raising money for its first two U.S. funds and expects to be investing it soon. Olivier Thoral, AXA Real Estate's head of North America, said U.S. property should account for 10% of its local real-estate portfolio within five years.

Even with industry peers turning more active as real-estate investors, AIG's return would be more of a milestone. The insurer's near demise in 2008 was a result of outsize bets on the U.S. housing and real-estate market through a derivatives unit that insured complex debt pools backed by residential and commercial mortgage-backed securities. That unit has been wound down.

AIG started its real-estate investing business in 1987 and built it into one of the world's largest property-investment platforms with $25 billion in assets at its peak a few years ago. Its real-estate team is led by Robert Gifford, a 55-year-old industry veteran who was hired in 2009, shortly before Robert Benmosche was appointed chief executive.

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The global real-estate business, like many of AIG's units, was originally slated for sale after the bailout. A year ago, after the company fully repaid a large loan by the Federal Reserve Bank of New York, it turned its focus from winding down its real-estate portfolio to taking steps toward getting back into the market.

AIG's real-estate assets are currently around $9.5 billion, or a little more than a third of its peak, and it maintains a staff of 150 people.

As part of its recent sale, AIG has unloaded its limestone-clad former headquarters in lower Manhattan, a Marriott Hotel in San Juan, Puerto Rico, and about $300 million of apartment buildings, mostly in New Jersey, that it acquired near the top of the market in 2007 from Kushner Cos.

While the insurer sold its Asia real-estate funds, with $5.4 billion in assets, to Invesco Ltd. for an undisclosed sum at the end of 2010, it held on to the IFC Seoul tower and a Shanghai mixed-use project with a Ritz Carlton hotel. It continues to invest in European real estate through a venture with Lincoln Property Co.

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WSJ.com LAW Updated April 24, 2012, 8:15 p.m. ETILFC Co-Founder Is Sued by AIGBy SERENA NG

American International Group Inc. sued Steven Udvar-Házy, co-founder and former chief executive of its aircraft-leasing business, accusing the industry veteran of stealing trade secrets and other confidential information for a rival company he now runs.

The bailed-out insurer and its International Lease Finance Corp. unit Tuesday filed a civil lawsuit in a California state court against Mr. Udvar-Házy, his current company Air Lease Corp., and various executives of the Los Angeles-based firm who previously worked at ILFC.

The suit alleged that Mr. Udvar-Házy and Air Lease were able "to effectively steal a business," and reap a windfall at the expense of ILFC, the world's second-largest aircraft lessor by fleet size. It described how some employees, while still working at ILFC, downloaded confidential files and allegedly diverted deals with certain ILFC customers to Air Lease, before leaving to join that firm. The companies are in the business of buying aircraft and leasing them to commercial airlines all over the world.

A spokeswoman for Air Lease called the trade-secrets lawsuit from AIG and ILFC "baseless" and said the company "will vigorously contest and defeat" the case. She added that Air Lease has, since its founding in 2010, "experienced terrific success in the marketplace and among investors" under Mr. Udvar-Házy's leadership, and said ILFC has perceived Air Lease as a growing threat. Mr. Udvar-Házy couldn't be reached for comment.

Mr. Udvar-Házy, 66 years old, co-founded ILFC in 1973 and sold the business to AIG in 1990. He remained CEO of the company until February 2010, when he resigned to run Air Lease, a company he formed shortly before leaving ILFC.

Over a two-year period, Air Lease hired roughly 30 individuals from ILFC and went public on the New York Stock Exchange following a successful stock sale. Air Lease now has a market value of $2.5 billion and its book value, or assets minus liabilities, was $2.2 billion at the end of 2011, versus ILFC's $7.5 billion book value. Mr. Udvar-Házy owns roughly 5% of Air Lease.

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AIG, which is 70% owned by the U.S. government, is seeking damages of at least several hundred million dollars, according to the lawsuit. The amount represents a "substantial portion" of the value of Air Lease's business, which was given "a critical head start at the expense of ILFC," the lawsuit alleges. The case isn't related to AIG's plans for an initial public offering for ILFC this year, according to a person familiar with the matter.

The rift between AIG and Mr. Udvar-Házy is rooted in the insurer's 2008 federal bailout, which imposed compensation curbs for top executives and limits on ILFC's ability to buy new planes. From late 2008 through 2009, AIG considered selling many assets, including ILFC, to repay U.S. taxpayers. But after bids for ILFC came in much lower than AIG expected, the company decided against selling the entire business. It then looked at selling a portion of ILFC's aircraft fleet to raise capital for the debt-laden unit.

Mr. Udvar-Házy had sought to extricate ILFC from its struggling parent and tried to buy all or part of the business by joining with some potential investors. When those efforts were unsuccessful, he resigned and started a new aircraft-leasing company in early 2010 to compete with ILFC.

The lawsuit said Mr. Udvar-Házy "actively recruited" numerous ILFC executives to work for the rival firm while he was still

ILFC's CEO, and alleged he breached his fiduciary duty to the AIG unit. The individuals who left ILFC to join Air Lease departed in two waves—one batch in 2010, and another in 2011.

It was after the second group of departures, that an internal investigation at ILFC and forensic computer analyses found that several ILFC employees downloaded thousands of electronic files with information on customer contracts, pricing and marketing strategies over the two years. The lawsuit alleged these were used by Air Lease.

An AIG spokesman said: "We regret having to file this suit, but the defendants' misconduct left us no choice but to go to court to protect our rights and the rights of our shareholders, including our largest shareholder, the American taxpayer."

—Daniel Michaels contributed to this article.

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FT.com May 7, 2012 2:29 amUS Treasury to sell $5bn of AIG sharesBy Shahien Nasiripour in Washington

The US Treasury will shed roughly $5bn worth of its stake in AIG, further reducing its ownership in the bailed-out insurer.The public offering of nearly 164m common shares announced Sunday will lower Treasury’s stake to 63 per cent. AIG will purchase $2bn worth of the offering, which priced at $30.50, a 7 per cent discount to Friday’s close.

Combined with loans from the Federal Reserve Bank of NewYork, the US government has reduced its $182bn commitment to AIG down to $39bn. Treasury said that the underwriters could purchase an additional $750m worth of AIG stock beyond the $5bn worth of shares that will be sold. “We remain hopeful that taxpayers will ultimately recover every single dollar invested in the company, which is something few would have expected during the depths of the financial crisis”, said Tim Massad, Treasury’s assistant secretary for financial stability.

Treasury’s move comes as AIG shares have rallied, climbing 41.5 per cent since the start of the year versus a 6.7 per cent increase in the Dow Jones Industrial Average.

The US government has taken advantage of apparently favourable market conditions. In March, Treasury sold nearly 207m shares for $29 apiece, generating about $6bn in returns. The March sale, however, was conducted at a much smaller discount to the stock’s closing price from the day before.Last week the insurer reported a 49 per cent rise in quarterly net income to $3.1bn, up from $2.1bn during the same period in 2011. Despite the fact that the increase in earnings beat analysts’ estimates, the insurer’s shares slumped in New York trading.

AIG was rescued in autumn of 2008 during the depths of the financial crisis after the insurer faced difficulty meeting collateral calls and demands to satisfy insurance claims on swaps tied to mortgage-linked securities.

Though largely despised by taxpayers, the bailout has beaten expectations as many companies have repaid their obligations and returned to profitability. The bank portion of the rescue has generated a profit.

The Obama administration, in turn, has sought to capitalise on the apparent good news ahead of November’s election. A few weeks ago the Treasury trumpeted its success before reporters in Washington.

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FT.com May 8, 2012 12:11 amUS gains on AIG stake could reach $15bnBy Shahien Nasiripour in Washington

The US government could make a $15bn profit on its 2008 bailout of insurer AIG, a government auditor has estimated.The Government Accountability Office, the investigative agency of the US Congress, produced the forecast Monday as part of its regular reports on the company’s rescue. Though the estimate could be seen as premature – taxpayers still own most of the company’s common shares – it provides yet another bright spot for a bailout programme which the Obama administration has sought to trumpet for its apparent successes.

GAO’s forecast is based on the Treasury being able to shed its roughly 1bn shares of common stock in AIG at the March 30 closing price of $30.83 and on the Federal Reserve Bank of New York recouping the full value of its holdings in the Maiden Lane investment vehicles that were created as part of the rescue. A Treasury spokesman declined to comment on the estimate.

On Sunday, after the Treasury sold $5bn of its stake in the company, an official said it expected to recoup “every single dollar invested in the company”.

On Monday, Treasury announced that in addition to the $5bn equity sale over the weekend the underwriters of the offering had agreed to purchase an additional $750m worth of shares.Treasury has held three offerings of its shares in AIG. It now owns about 61 per cent of the company, down from 70 per cent on Friday.

AIG shares closed down 3 per cent at $31.84 on Monday.Treasury says it considers $28.73 its break-even price on its AIG shares. GAO reckons that price rises to $29.70 including unpaid dividends and fees.

US taxpayers’ break-even price on the shares acquired through the Troubled asset relief programme would be more than $43 when not including more than 500m shares the Treasury received from the New York Fed as part of a recapitalisation programme.

Still, Monday’s estimate probably will help the Obama administration as it tries to convince voters ahead of November’s election that AIG is on the path to sustained profitability and that taxpayers will eventually turn a profit on their bailout of the insurer.AIG was rescued in the autumn of 2008 during the depths of the financial crisis after the insurer faced difficulty meeting collateral calls and demands to satisfy insurance claims on swaps tied to mortgage-linked securities. ...

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FT.com May 3, 2012 10:36 pmCore turnround helps AIG advance By Telis Demos in New York

AIG profits rose sharply in the first quarter as fewer natural disasters and higher premiums for customers led to a turnround in its core insurance business.

AIG, which was bailed out by the US government in 2008, has depended on sales of non- core assets and tax benefits in recent quarters to overcome poor results for its insurance business, Chartis, which was hit by a surge in natural disasters. But this quarter, Chartis, which insures individuals, homes, vehicles and business property, reported a $1bn after-tax gain, against a $424m loss a year ago, helping AIG report a 49 per cent rise in net income to $3.1bn, up from $2.1bn in 2011.

The US Treasury still holds a 70 per cent stake in AIG. AIG bought back some $3bn worth of shares from the Treasury earlier this year and an additional sale could come after earnings are reported.

AIG shares are up 47 per cent this year at $34.14, well above the $29 price at which the US Treasury says the government breaks even on its $180bn bailout in 2008 of AIG after the insurer made disastrous derivatives bets.

As has been the case with other insurers, Chartis has been increasing pricing and tightening underwriting standards. Rates in North America rose 5 per cent from a year ago, with an 11 per cent increase in property insurance rates and a 7 per cent increase in workers’ compensation rates.Meanwhile, net written premiums fell 3.7 per cent, to $8.8bn, due to “initiatives to improve risk selection, particularly in the casualty line of business”.AIG also saw strong gains in the value of non-core assets that are a legacy of the financial crisis. AIG’s shares in AIA, its former Asian unit it spun out to the public in 2010, weremarked at $1.8bn, up from $1.1bn a year ago, including the realised gains on a shares sale. The value of AIG’s stake in Maiden Lane III, which holds structured mortgage products taken on by the Federal Reserve as part of AIG’s bailout, rose from $744m to $1.3bn.AIG plans to sell the rest of its $8.6bn AIA stake and to gain as the Fed sells Maiden Lane III assets. The first tranche was sold last month to Deutsche Bank and Barclays. It also hopes to take its aircraft leasing unit public. With this capital, AIG hopes to continue to expand its insurance businesses, particularly its SunAmerica life and annuity unit, as well as its mortgage insurance business, United Guaranty.

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FTD.de 09.05.2012, 10:00Zusammengebrochener Versicherer:Obama rechnet sich AIG-Rettung schönDer US-Rechnungshof lobt: Washington könnte aus der teuren Rettung des Versicherers AIG sogar Gewinn schlagen. Die Kalkulation wirft jedoch Fragen auf. von Kim Bode, New York

Mit Hilfen für die Finanzbranche sind auch in den USA keine Wählerstimmen zu gewinnen. Als die US-Regierung 2008 den in der Immobilienkrise ins Wanken geratenen Versicherungsriesen American International Group (AIG) mit mehr als 180 Mrd. Dollar vor dem Absturz bewahrte, war das aber eher nachranging - gefühlt stand die Welt ohnehin vor dem Abgrund. Knapp vier Jahre und einen Wahlturnus später sieht das anders aus. Da kommt eine Bilanz des US-Rechnungshofs gerade recht: Demnach könnte die Regierung mit der Rettung einen Gewinn von mehr als 15 Mrd. Dollar machen.

So lobt das Government Accountability Office (GAO) in einem Bericht die voranschreitende Genesung des Versicherungskolosses sowie die lukrativen Anteilsverkäufe und Veräußerungen von Hypothekenpaketen. Im vergangenen Jahr fuhr AIG bereits wieder einen Gewinn von über 18,5 Mrd. Dollar ein - wohlbemerkt auch dank satter Steuervorteile sowie abgelöster Geschäftsbereiche. Anfang der Woche

verkündete das US-Finanzministerium dann auch noch, sich von weiteren AIG-Stammaktien zu trennen und damit über 5 Mrd. Dollar einnehmen zu wollen. Die Regierung wäre dann nur noch mit 30 Mrd. Dollar bei AIG investiert.

Der einst weltgrößte Versicherer - zu Hochzeiten der Finanzkrise als "gefährlichste Firma der Welt" gebrandmarkt - musste im Herbst 2008 notverstaatlicht werden, weil es sich mit Kreditderivaten verspekuliert hatte. Als plötzlich ein großer Teil der Kreditausfallversicherungen fällig wurde, konnte AIG den Verpflichtungen nicht mehr nachkommen. 105 der 180 Mrd. Dollar Staatshilfe flossen dann an die Geschäftspartner von AIG - darunter viele europäische Institute.

Angesichts der Präsidentschaftswahlen im November kommt der GAO-Bericht gerade recht für die Regierung von Barack Obama, die wegen der unpopulären Milliardenhilfen für den Finanzsektor immer wieder in die Kritik gerät. Die Bilanz der Agentur ist allerdings nur eine Prognose. Ob und mit wie viel Gewinn der Staat sich am Ende von AIG trennen wird, hängt schließlich vom Verkaufspreis der restlichen Anteile ab. Den erfahren die Amerikaner aber erst nach den Wahlen.

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FT.com June 15, 2012 12:24 amFed repaid on Bear and AIG rescue loansBy Nicole Bullock and Ajay Makan in New York and Shahien Nasiripour in Washington

The Federal Reserve has been repaid for loans it made during the financial crisis to help rescue Bear Stearns and American International Group, closing a chapter on the central bank’s controversial intervention. ...

Special vehicles called Maiden Lane and Maiden Lane IIIwere set up to buy mortgage-linked assets after the US property bubble burst and the two financial groups faltered. The New York Fed lent $28.8bn to Maiden Lane and $24.3bn to Maiden Lane III to help finance the purchases. The Fed was repaid earlier this year on another vehicle used to support AIG called Maiden Lane II and recorded a $2.8bn profit.

Still, US taxpayers remain on the hook for their rescue of AIG. The Treasury department owns roughly three-fifths of the company’s equity. The shares are trading above the Treasury’s break-even point. They were below that mark just a few weeks ago. ... AIG’s market capitalisation has increased by more than a third this year, with many analysts touting the company’s potential to return cash to shareholders using proceeds from the Maiden Lane III sale....

The New York Fed was repaid on the loans thanks to favourable market conditions for high-yielding assets. Last year the Fed had to halt its auctions of mortgage debt after prices for securities linked to risky home loans fell.

The central bank has sold securities with a face value of more than $30bn this year from the Maiden Lane II and Maiden Lane III vehicles, which contained investments tied to subprime mortgages and collateralised debt obligations, or CDOs. Maiden Lane contained a broad swath of mortgage-related instruments.

Even though the loans have been repaid, Maiden Lane and Maiden Lane III still contain assets that the New York Fed plans to sell “as market conditions warrant and if the sales represent good value for the public”, it said. ...

Future Maiden Lane III sales will first repay AIG for its $5bn equity contribution to the vehicle. After that the proceeds will be split, with the Fed receiving two-thirds and AIG receiving the remainder. On Friday the New York Fed plans to sell $5bn in face value of CDO securities from Maiden Lane III.

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FT.com June 22, 2012 11:39 pmEx-head of General Re in deal with prosecutorsBy Kara Scannell in New York

Ronald Ferguson, the former chief executive of General Re, and four other executives reached a deal with the US government to avoid a second criminal trial over allegations they created fake reinsurance transactions to bolster American International Group’s stock price.

Late Friday, US prosecutors filed deferred prosecution agreements with Mr Ferguson, three former Gen Re executives and one former AIG executive in which each “recognises that aspects” of the reinsurance transactions were “fraudulent.”

Under their deferred prosecution agreements, thegovernment will not prosecute the individuals if they do not break US laws for one year. Mr Ferguson agreed to pay $200,000 while the other executives also agreed to pay fines. The deals require court approval.

The deferred prosecution agreement resolves the case, which dates back to deals struck between Gen Re and AIG in 2000. The former executives were indicted in 2006 on charges of

conspiracy, securities fraud, mail fraud and lying to the Securities and Exchange Commission.

Mr Ferguson and the four others were convicted in 2008 and Mr Ferguson was sentenced to two years in prison and ordered to pay a $200,000 fine, which he has already done. He was allowed to remain free while appealing the verdict. In August, a US appeals court overturned the convictions after finding errors by the judge. The case was scheduled to be re-tried in 2013.

Mr Ferguson previously agreed to a lifetime bar from serving as an officer of director of a public company in a civil settlement with the SEC. In court filings, prosecutors cited the “significant” government resources that would be required for a retrial. They also noted evidentiary challenges, such as fading witness memories, for the transaction that dates back 12 years.

The case focused on a phone call in 2000 between Hank Greenberg, AIG’s then chief executive, and Mr Ferguson in which they discussed ways to shore up AIG’s stock price, whose decline Mr Greenberg blamed on decreased loss reserves.

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The transactions allowed AIG to give the false appearance of higher reserves.

Elizabeth Monrad, former chief financial officer of Gen Re, Chris Garand, a chief underwriter of Gen Re’s finite reinsurance operations, Robert Graham, legal counsel at Gen Re, and Christian Milton, a vice-president of reinsurance at AIG, each signed deferred prosecution agreements with the US government.

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WSJ.com BUSINESS Updated June 28, 2012, 8:01 p.m. ETAIG Brand RevivedBy SERENA NG

Three years after American International Group Inc. renamed its insurance businesses to distance them from its U.S. bailout, the company will revert to its AIG brand as it prepares to emerge from majority government ownership.

AIG Chief Executive Robert Benmosche told employees in a memo Thursday that the New York company's global property-and-casualty insurance business, currently called Chartis, will be known as AIG starting this fall. Its domestic life-insurance and retirement-services division, SunAmerica Financial Group, will be rebranded AIG Life & Retirement, while other units will add AIG to their logos.

The changes show how far AIG has come since the depths of the financial crisis, when its brand became an object of derision. The company's record $182.3 billion federal bailout and its subsequent payouts of bonuses to employees of a derivatives unit sparked public outrage across the country, leading AIG units to erase the logo from signs, employee identification cards and marketing materials. In the wake of the September 2008 bailout, AIG renamed various units as the parent company's financial condition deteriorated.

The name Chartis, a Greek word for map, and its logo depicting a compass were developed in 2009 with the help of a brand strategy and design firm. That firm, Lippincott, said on its website that research with AIG's customers and other groups had established the AIG brand "was damaged beyond repair" and a new brand was needed for the property and casualty insurance business, which has operations in 160 countries.

Over the past two years, AIG has repaid the bulk of its bailout with proceeds from asset sales and returned to profitability. Mr. Benmosche has predicted that U.S. taxpayers will ultimately reap a profit on the rescue after the government finishes selling its remaining 60% stake in the company over the next year or so, to recoup the last $29 billion spent in the bailout. In 4 p.m. trading, AIG shares were at $30.84, above the government's break-even price.

In an interview Thursday, Mr. Benmosche said AIG's latest rebranding effort will commence in the fall as the company makes more progress toward exiting from U.S. ownership. In the coming months, AIG could raise billions of dollars from selling its remaining stake in pan-Asian life insurer AIA Group Ltd and listing its aircraft leasing unit, International Lease Finance Corp., in an initial public offering.

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It plans to use the proceeds of these sales to buy back a large amount of shares that the U.S. government will sell.Mr. Benmosche said the Federal Reserve should earn $3 billion to $8 billion in profit from sales of mortgage securities previously linked to AIG, and after Treasury sells all its AIG shares, the U.S. government could collect about a $10 billion profit.

"We will live up to our promises and we feel that by the fall, we should be in a very good position and make progress to the point where there's no doubt in our future and strength," Mr. Benmosche said. "That's what this [rebranding] is about."

In Thursday's memo, Mr. Benmosche said the company continues to make "significant progress restoring our reputation," and said research shows the AIG name has regained respect among the company's partners and customers.

He said AIG will assess whether the Chartis name should be kept for any product line or niche business.

Maurice R. "Hank" Greenberg, who ran AIG for decades and left before its bailout, opposed the rebranding effort for Chartis in 2009. "I thought it was a terrible idea to change the name then," he said Thursday. "I think AIG is a great name with a long history and it's a wise decision to go back to it."

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FT.com July 5, 2012 6:33 pmAIG frustrates mortgage refinancing planBy Ajay Makan in New York and Shahien Nasiripour in Washington

AIG, the insurer bailed out by the US authorities, is frustrating attempts by US homeowners to refinance their government-backed mortgages, according to politicians and Obama administration officials.

Unlike its rivals, AIG’s mortgage insurer is refusing to automatically waive its right to pursue lenders for misrepresenting the quality of loans that may default. That in turn has put the brakes on some refinancings of AIG insured loans, according to industry officials.

A review of the five biggest mortgage insurers by theFinancial Times shows that borrowers with AIG insured loans have been the least likely to benefit from a US government refinancing programme.

The Home Affordable Refinance Programme, or Harp, is designed to boost refinancings of government-backed mortgages for homeowners with little to no equity. The US government wants to expand refinancings at a time of record low borrowing rates. The US government owns 61 per cent of AIG.

The stance taken by United Guaranty, an AIG subsidiary that sells mortgage insurance to lenders, undermines efforts by the Obama administration and US-controlled mortgage financiers Fannie Mae and Freddie Mac, officials said. The average rate on a 30-year fixed loan is 3.62 per cent. Most creditworthy US homeowners who are current on payments are paying more than 5 per cent, according to CoreLogic, a housing data provider. “With so many families struggling to make ends meet, it is unacceptable that United Guaranty continues to limit the ability of its customers to refinance at today’s record low rates,” said Senator Barbara Boxer.

Kim Garland, chief executive of United Guaranty, said the company “in no way interferes with borrowers’ ability to take advantage of Harp”. He added that the company gives up its right to pursue lenders for poor underwriting on the “vast majority of loans”.

About 27,000 mortgages insured by United Guaranty have been refinanced under Harp since it launched in mid-2009, the lowest number among the top five US mortgage insurers. It has refinanced loans worth $5.3bn under Harp, equal to 23 per cent of its exposure to government-backed loans as of mid-2009.

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MGIC, Radian, Genworth and PMI Financial – United Guaranty’s rivals – have all refinanced mortgages of value equal to at least 25 per cent of their exposure. For Radian and Genworth the figure is closer to 33 per cent.

AIG’s rivals all agreed to automatically waive many of their rights to challenge payouts should loans refinanced under Harp default.

Mr Garland said: “United Guaranty is unwilling to take on sole responsibility for loans that may have fraud or may have been poorly underwritten.” United Guaranty noted that Harp refinancing activity for loans it insures jumped more than 60 per cent quarter over quarter in the period ending March 31.

The AIG subsidiary is exploring easing its policy towards lenders who may have misrepresented the quality of their loans, it said.!It!would!instead!charge a fee in exchange for releasing lenders from liability.

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WSJ.com BUSINESS July 25, 2012, 9:30 a.m. ETAIG Lacks Rigorous Regulation, Watchdog Report SaysBy JEFFREY SPARSHOTT

WASHINGTON—American International Group Inc. lacks comprehensive and rigorous regulation almost four years after the federal government bailed out the faltering insurer at the height of the financial crisis, a watchdog said Wednesday.AIG was at the center of Wall Street's 2008 meltdown, though the insurer has since shed its most toxic assets, sold off some businesses and returned to profit.

"I think most people are going to be very surprised to learn that for the last two years, AIG has had no consolidated regulator over its financial business, its noninsurance business," Christy Romero, the special inspector general for the Troubled Asset Relief Program, said in an interview.

Ms. Romero's office, established by Congress to oversee TARP's management, Wednesday released its quarterly report to Congress on bailout programs. A special section on AIG detailed the federal government's intervention and recent developments at the insurer.

The federal government committed $161 billion to AIG, including $67.8 billion through TARP. Loans from the Federal

Reserve have been recouped. But the Treasury Department still holds about 61% of AIG's common stock, and roughly $30.4 billion in TARP funds are outstanding, the report said.Taxpayers could end up making an overall profit on AIG investments, according to some estimates.

"AIG has taken significant action since the crisis—working with Treasury and the Federal Reserve—to restructure, reduce risk and streamline its operations to focus on its core insurance business," said Treasury spokesman Matt Anderson.

Still, Ms. Romero's office has warned repeatedly that the U.S. financial system remains vulnerable to another crisis and urged regulators to toughen oversight.

AIG's U.S. insurance business is regulated at the state level. The Office of Thrift Supervision oversaw AIG's noninsurance business leading up to the crisis; the office admitted failures and has since been abolished.

U.S. regulators, meanwhile, are weighing a new designation for big, complex financial firms that would trigger heightened oversight by the Federal Reserve. The first designations of "systemically important" nonbanks are expected this year, and AIG is one candidate.

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"At AIG we welcome additional regulatory oversight, which, combined with the discipline we have imposed on our company, only serves to make AIG much stronger," said AIG spokesman Jim Ankner. "AIG also remains committed to making America whole, plus a profit."

Ms. Romero faulted the Treasury Department, the Fed and other top regulators for moving too slowly. "They don't have to designate all of them at once, but should roll out some of these. If AIG is one, they should designate it," she said.Wednesday's report highlights challenges to regulating AIG's vast business holdings.

Effective oversight of AIG would require the Fed to have extensive expertise of an array of nonbanking businesses, including its insurance operations, aircraft-leasing business, mortgage guaranty, securities lending and other derivatives-trading operations, the report said.

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WSJ.com BUSINESS August 1, 2012, 7:40 p.m. ETAIG Pushing Plan for IndependenceBy SERENA NG

American International Group Inc. is looking to buy back a large amount of its shares from the government, according to people familiar with the company's thinking, in a push that could make the U.S. a minority shareholder by the fall and enable the insurer to fully repay its bailout sooner than expected.

Bringing the government's current 61% stake to below 50% would be a victory for AIG and its management team. But it could bring the additional headache of tough oversight from the Federal Reserve, which is expected to regulate the company when the U.S. is no longer a majority owner.

AIG, which was effectively nationalized by the government four years ago as part of a controversial financial-industry bailout, has been accumulating billions of dollars in cash that it can use for share repurchases and other activities.Several analysts who follow the company say the government's stake could be cut below 30% before the November elections, if asset sales expected by AIG in the coming months help the company raise a total of $10 billion to $15 billion in excess capital.

The buybacks are likely to accompany one or more public share offerings of AIG stock by the Treasury, which over the past 16 months has reduced its stake from a peak of 92% through a series of at-market sales.

The timing and scale of future offerings and repurchases aren't clear. That will be determined by factors including AIG's share price, which has risen 33% this year and is above the point at which the government breaks even on stock sales, and how global markets hold up amid the euro-area debt crisis and fears of a global economic slowdown, according to people familiar with the matter.

The U.S. will be permitted to sell more shares this week, after AIG reports second-quarter results Thursday.Spokesmen from AIG and Treasury declined to comment.

Reducing the government to a minority shareholder would be a significant achievement for AIG Chief Executive Robert Benmosche, who has pledged to repay taxpayers in full, plus a significant profit, and return the company to independence.

AIG in September 2008 received a record bailout from Treasury and the Federal Reserve that swelled to include up to $182.3 billion in funds to support the company, though not all the money was used. As recently as a year ago, the full repayment was expected to take several years.

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In an interview with The Wall Street Journal in June, Mr. Benmosche said a series of future asset sales could mean that by the fall, AIG will have enough cash on hand that "we could purchase a large quantity of the overhang of Treasury's stock."

The insurer recently unveiled a rebranding effort that will kick into high gear this fall and reapply the AIG name to its insurance divisions, which abandoned the name after the bailout sparked public outrage nationwide. Over $152 billion in federal assistance to AIG has been repaid or canceled because it wasn't used, and $30 billion in aid remains outstanding in the form of Treasury's majority stake in AIG, which is to be sold completely over time.

On Wednesday last week, Treasury Secretary Timothy Geithner said in congressional testimony that the government plans to sell "as much [of AIG] as we can, as soon as we can, because we want nothing more than recovering that taxpayer's money."

The repayments so far to Treasury and to the Federal Reserve Bank of New York, which made various loans to support AIG during the crisis, have so far generated $14 billion in profit, and total gains could exceed $18 billion by this fall, according to government data and estimates of what the Fed could collect.

That means U.S. taxpayers could be made whole on the AIG bailout later this year after Treasury recoups another $12 billion from selling AIG shares. Taxpayers could reap billions of dollars in profit with further share sales.

One factor that may influence the timing and size of the next share sale is what happens after the government's stake in AIG falls below 50%. In its last annual report, AIG said it expects to become regulated by the Fed as a savings-and-loan company when Treasury ceases being a majority shareholder, because it owns a small thrift. AIG said it would become subject to "stress tests" conducted by the Fed that would determine whether it has sufficient capital to withstand an economic downturn.

Analysts say there is a risk that the Fed could limit AIG's use of cash to buy back stock. "The question is, does AIG care about being Fed regulated?" said Josh Stirling, an analyst at Bernstein Research.

Jay Cohen, an analyst at Bank of America Merrill Lynch, said in a report that the next transaction by AIG and the Treasury could take the government's stake down to just above 51%, and a second deal later could substantially reduce U.S. ownership.

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Meanwhile, AIG is piling up cash. The company recently received about $6 billion after the New York Fed sold troubled mortgage securities from the insurer's bailout. The company could collect another $2 billion in the coming weeks if the regional Fed bank finishes selling its remaining toxic assets.

In early September, AIG will be free to sell its remaining 19% stake in pan-Asian life insurer AIA Group Ltd., which is currently valued at over $7 billion.

Treasury, meanwhile, is unlikely to sell its AIG shares below $29 apiece, as it views its break-even price at $28.73 a share.

AIG shares fell 43 cents to $30.84 Wednesday.

—Leslie Scism contributed to this article.

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WSJ.com BUSINESS Updated August 3, 2012, 5:57 p.m. ETTreasury to Sell $4.5 Billion in AIG StockBy SERENA NG

The U.S. Treasury Department on Friday sold $5 billion worth of shares in American International Group Inc., taking another step toward winding down the insurer's controversial bailout.AIG agreed to buy $3 billion of Treasury's latest public offering, which was launched Friday afternoon and priced a few hours later. The shares were sold at $30.50 apiece, above the government's cost basis of $28.73 a share, meaning taxpayers will earn a profit on the sale.

The sale, Treasury's fourth so far, reduces the government's stake in AIG from 61% to 55% and brings down the amount the government needs to recoup from the AIG bailout to $25 billion. The Treasury could raise another $750 million in the coming weeks if Wall Street underwriters exercise an option to buy additional shares.

AIG shares closed at $31.34 on Friday, up 50 cents or 1.6%. The shares have gained 35%so far this year, but are trading at a deep discount to the company's reported book value, which was $60.58 a share at the end of June.

Keeping the government as a majority shareholder delays AIG's transition to becoming regulated by the Federal

Reserve. The insurer has said it expects to come under Fed oversight as a savings-and-loan holding company, or as a systemically important financial institution, after the U.S. becomes a minority shareholder.

AIG in September 2008 received a record bailout from the government that swelled to include up to $182.3 billion in taxpayer support. Not all the money was used, and most of the aid has been repaid, leaving $30 billion to be recouped by Treasury from sales of its remaining AIG shares.

AIG has been aggressively buying back shares this year, and repurchased a total of $5 billion in stock in two earlier Treasury offerings in March and May. The moves have boosted AIG's earnings per share, supported its share price and sped up the government's exit from the company.

The company is expected to buy more shares from Treasury this fall, as part of a push that could make the U.S. government a minority shareholder before the November elections and enable AIG to fully repay its bailout sooner than expected.

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AIG recently received $6.1 billion cash after the Federal Reserve Bank of New York was repaid on a crisis-era loan it made to support the insurer, and the company expects to get another $1.9 billion by the middle of this month when more asset sales are completed. AIG is also planning to sell its remaining stake in pan-Asian life insurer AIA Group Ltd., which is currently worth more than $7 billion. A large chunk of the proceeds are expected to be used for share buybacks, though some could be used for acquisitions.

When AIG eventually falls under Fed oversight, the central bank will likely take steps to determine if the company has enough capital to withstand a downturn, and may limit how much it can spend on buybacks and dividends.

During a conference call Friday morning to discuss AIG's second-quarter results, Chief Executive Robert Benmosche said the company is considering whether to close the small thrift it owns, due to concerns about regulations like the Volcker Rule that could have implications on the insurer's investing and hedging activities.

—Erik Holm contributed to this article.Write to Serena Ng at serena.ng@wsj.comA version of this article appeared August 4, 2012, on page B2 in the U.S. edition of The Wall Street Journal, with the headline: U.S. Treasury Sells $5 Billion of Its AIG Shares.

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FT.com Last updated: August 3, 2012 10:55 pmTreasury in $5bn AIG share saleBy Tom Braithwaite in New York

The US Treasury announced it had agreed to sell about $5bn of shares in AIG as the government reduces the position it acquired in the 2008 bailout of the insurer. In a statement, the Treasury said it had launched a public offering for 164m shares at $30.50 a share. AIG bought $3bn. Underwriters have an option to buy an additional $675m of shares.

The Treasury and Federal Reserve extended $182bn to AIG in loans and guarantees at the height of the crisis to preventthe insurance group’s failure.

The sale on Friday brings the Treasury’s stake down from 61 per cent to 55 per cent. AIG’s shares closed 1.6 per cent higher at $31.34 on Friday, above the $28.73 that the Treasury says is its break-even price.

Government officials had hoped to be further along with the disposal but the pace was slowed by AIG’s share price, which has fallen as low as $19.18 in the past 12 months.

“To date, we’ve given almost $37bn back to America for the aid and support they’ve given to AIG,” Robert Benmosche, chief executive of AIG, told investors on an earnings call on

Friday. “So we are well on our way to living up to our commitment to pay back all of our money given to us by the US government and you’ve seen numbers now that it’s going to be a very healthy profit as well.”

AIG has sold businesses and focused on its property and life insurance businesses after an ill-fated rush into writing credit derivatives led the group to the brink of failure during the crisis.

On Thursday, AIG reported second-quarter earnings of $2.3bn compared with $1.2bn in the second quarter a year ago and $1.8bn in the first quarter of this year. The operating performance improved but the results were also flattered by $1.8bn in tax benefits.

Even as it slowly returns to a more normal share ownership, AIG has further entanglements with the government and regulators. AIG is buying assets from a vehicle created by the Federal Reserve Bank of New York to rescue it from bankruptcy. The Maiden Lane III vehicle used funds from the central bank to buy collateralised debt obligations insured by AIG. The insurer is now looking to boost its investment returns by buying parts of the portfolio as the New York Fed auctions it off. AIG has spent $7.1bn so far this year in buying the assets.

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The insurance group is likely to be designated as a “systemically important” financial group later this year, attracting increased oversight from the Fed. As the Fed tightens its oversight of AIG, some analysts believe it will limit the insurer’s share buybacks, potentially slowing further the Treasury’s exit.

Mr Benmosche also expressed some concern about the impact of the impending Volcker rule, designed to prevent proprietary trading at banks. The insurance group owns a bank. “We are giving thought to whether we should now close the bank we have because we are concerned about that aspect of it and an insurance company invests very differently than a bank would,” he said.

Bank of America Merrill Lynch, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Macquarie Capital, Morgan Stanley, UBS and Wells Fargo were joint bookrunners on the share sale.

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WSJ.com BUSINESS August 1, 2012, 7:40 p.m. ETAIG Pushing Plan for IndependenceBy SERENA NG

American International Group Inc. is looking to buy back a large amount of its shares from the government, according to people familiar with the company's thinking, in a push that could make the U.S. a minority shareholder by the fall and enable the insurer to fully repay its bailout sooner than expected.

Bringing the government's current 61% stake to below 50% would be a victory for AIG and its management team. But it could bring the additional headache of tough oversight from the Federal Reserve, which is expected to regulate the company when the U.S. is no longer a majority owner.

AIG, which was effectively nationalized by the government four years ago as part of a controversial financial-industry bailout, has been accumulating billions of dollars in cash that it can use for share repurchases and other activities.Several analysts who follow the company say the government's stake could be cut below 30% before the November elections, if asset sales expected by AIG in the coming months help the company raise a total of $10 billion to $15 billion in excess capital.

The buybacks are likely to accompany one or more public share offerings of AIG stock by the Treasury, which over the past 16 months has reduced its stake from a peak of 92% through a series of at-market sales.

The timing and scale of future offerings and repurchases aren't clear. That will be determined by factors including AIG's share price, which has risen 33% this year and is above the point at which the government breaks even on stock sales, and how global markets hold up amid the euro-area debt crisis and fears of a global economic slowdown, according to people familiar with the matter.

The U.S. will be permitted to sell more shares this week, after AIG reports second-quarter results Thursday.Spokesmen from AIG and Treasury declined to comment.

Reducing the government to a minority shareholder would be a significant achievement for AIG Chief Executive Robert Benmosche, who has pledged to repay taxpayers in full, plus a significant profit, and return the company to independence.

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AIG in September 2008 received a record bailout from Treasury and the Federal Reserve that swelled to include up to $182.3 billion in funds to support the company, though not all the money was used. As recently as a year ago, the full repayment was expected to take several years.

In an interview with The Wall Street Journal in June, Mr. Benmosche said a series of future asset sales could mean that by the fall, AIG will have enough cash on hand that "we could purchase a large quantity of the overhang of Treasury's stock."

The insurer recently unveiled a rebranding effort that will kick into high gear this fall and reapply the AIG name to its insurance divisions, which abandoned the name after the bailout sparked public outrage nationwide. Over $152 billion in federal assistance to AIG has been repaid or canceled because it wasn't used, and $30 billion in aid remains outstanding in the form of Treasury's majority stake in AIG, which is to be sold completely over time.

On Wednesday last week, Treasury Secretary Timothy Geithner said in congressional testimony that the government plans to sell "as much [of AIG] as we can, as soon as we can, because we want nothing more than recovering that taxpayer's money."

The repayments so far to Treasury and to the Federal Reserve Bank of New York, which made various loans to support AIG during the crisis, have so far generated $14 billion in profit, and total gains could exceed $18 billion by this fall, according to government data and estimates of what the Fed could collect.

That means U.S. taxpayers could be made whole on the AIG bailout later this year after Treasury recoups another $12 billion from selling AIG shares. Taxpayers could reap billions of dollars in profit with further share sales.

One factor that may influence the timing and size of the next share sale is what happens after the government's stake in AIG falls below 50%. In its last annual report, AIG said it expects to become regulated by the Fed as a savings-and-loan company when Treasury ceases being a majority shareholder, because it owns a small thrift. AIG said it would become subject to "stress tests" conducted by the Fed that would determine whether it has sufficient capital to withstand an economic downturn.

Analysts say there is a risk that the Fed could limit AIG's use of cash to buy back stock. "The question is, does AIG care about being Fed regulated?" said Josh Stirling, an analyst at Bernstein Research.

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Jay Cohen, an analyst at Bank of America Merrill Lynch, said in a report that the next transaction by AIG and the Treasury could take the government's stake down to just above 51%, and a second deal later could substantially reduce U.S. ownership.

Meanwhile, AIG is piling up cash. The company recently received about $6 billion after the New York Fed sold troubled mortgage securities from the insurer's bailout. The company could collect another $2 billion in the coming weeks if the regional Fed bank finishes selling its remaining toxic assets.In early September, AIG will be free to sell its remaining 19% stake in pan-Asian life insurer AIA Group Ltd., which is currently valued at over $7 billion.

Treasury, meanwhile, is unlikely to sell its AIG shares below $29 apiece, as it views its break-even price at $28.73 a share. AIG shares fell 43 cents to $30.84 Wednesday.

—Leslie Scism contributed to this article.

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FT.com August 1, 2012 12:52 amAIG buys advisory group from HartfordBy Ajay Makan in London

American International Group, the insurer bailed out by the US government at the height of the financial crisis, is buying a network of financial advisers from its rival HartfordFinancial for up to $90m.

The purchase of Woodbury Financial Services, one of AIG’s largest acquisitions since its 2008 bailout, will increase the number of financial advisers at AIG’s life insurance arm, SunAmerica, by more than a quarter from 4,800 to 6,200.It comes amid signs of growing confidence at AIG, which hasrepaid most of the $182bn in taxpayer support extended in 2008, although the Treasury continues to own a majority stake in the company.

AIG has been looking to invest in US mortgages and to gain market share in retirement products such as the variable annuities sold by Woodbury’s advisers.

“Adding Woodbury Financial to our Advisor Group network sends a clear message that we are absolutely committed to the independent financial adviser business model,” said Larry Roth, chief executive of Advisor Group, the umbrella business for AIG’s three existing financial adviser networks.

Hartford has been looking to sell Woodbury since it bowed to shareholder pressure in March to focus on its property and casualty business. As well as putting Woodbury up for sale, Hartford stopped selling annuities, which provide retirees with an annual income, because of the amount of capital insurers are required to set aside against losses on the products.

AIG, which was a relatively small player in retirement products before the financial crisis, has been pushing sales of annuities this year.

Joshua Stirling, an analyst at Sanford Bernstein said: “AIG has the good fortune of being able to take market share in retirement products when the legacy providers who dominated the market before the financial crisis are retreating.” “This purchase of Woodbury fits with that strategy, and the purchase price is really not a large amount of money for AIG,” he added.

Hartford will receive up to $115m from the deal, including a one-off $25m dividend to be paid by Woodbury before the deal closes and the sale price of up to $90m from AIG. However, AIG could pay as little as $37.5m, depending on the performance of the Woodbury business between now and the close of the deal.

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The Treasury began unwinding its stake in AIG by selling shares to the public last year, but the US government continues to own more than 60 per cent of the company.

Despite the government stake, AIG has been able to make other purchases, including the Japanese insurer Fuji Fire and Marine last year.

It has also bought back shares from the Treasury and established a programme to buy back publicly traded shares.

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FT.com Last updated: July 29, 2012 9:07 pmAIG aims to grow variable annuities salesBy Ajay Makan in London

American International Group is increasing sales of retirement products that offer guaranteed investment returns in a sign of renewed ambition at the insurer that was bailed out by the US taxpayer.

AIG’s push on variable annuities – which allow savers to invest in equity and bond funds – comes as several of AIG’s rivals have stopped selling the products, which can incur losses if markets fall.

The insurer is also looking to invest directly in the USmortgage market and has said it would consider buying businesses from other companies. AIG received $182bn of government support at the height of the financial crisis.

“We’re rebuilding our business to where it was before the bailout,” said Jay Wintrob, chief executive of SunAmerica, AIG’s life insurance arm. “We see an opportunity to grow market share in variable annuities and don’t think they are inherently more risky than other products,” he added.

Variable annuities provide investors with an annual cash payment for life. The size of the payment is based on the

performance of the funds selected by the policyholder. But insurers often promise to keep increasing the payment, even if the policyholder’s original investment is reduced by poor performance.

Demand for the products is expected to grow as the US population ages and retirees look for guaranteed income. But sales so far this year are down 8 per cent compared with the same period of 2011, with several large issuers scaling back their offering amid volatile markets.

Earlier this year Hartford Financial announced plans to sell its variable annuity business completely while Metlife, the largest issuer in 2011, aims to cut sales by a third this year.

Both companies cited the need to set aside substantial capital against losses. “The cost of hedging guaranteed returns has gone through the roof since the financial crisis so some insurers see variable annuities as too risky,” said Larry Bruning, an actuary at the National Association of Insurance Commissioners, an umbrella body for state regulators.

AIG has bucked that trend. In the first three months of 2012, SunAmerica sold more than $1bn of variable annuities for the first quarterly period since 2008 and second-quarter results this week are expected to show further strong sales.

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Mr Wintrob expects to “match or exceed” record sales of $4.5bn in 2007.

Reduced competition has allowed AIG to keep a greater share of returns from variable annuity investments, by increasing fees for the product, according to Mr Wintrob.

Mr Wintrob also said AIG could increase sales without taking on significant risk. It has just 4.7 per cent of the variable annuity market, and the products account for just 5 per cent of AIG assets.

Along with other insurers, AIG has also taken steps to protect against falling markets, for example indexing fees to the Vix index of expected US equity market volatility.

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FTD.de 03.08.2012, 11:10Staatlich gestützter Versicherer:AIG will zurück in die FreiheitDer Versicherer AIG will den Anteil der amerikanischen Regierung auf unter 50 Prozent drücken. Damit würde der Staat die Kontrolle über den Versicherer aufgeben. Mit der neuen Unabhängigkeit kommen aber auch neue Pflichten. von Christine Mai

Der in der Finanzkrise mit Milliarden an Steuergeldern gerettete US-Versicherer AIG treibt die Loslösung vom amerikanischen Staat voran. Nach einem Bericht des "Wall Street Journal" will das Unternehmen einen großen Teil seiner Aktien von der Regierung zurückkaufen. Bis zum Herbst könnte Washington demnach weniger als die Hälfte der Anteile halten und somit die Kontrolle über den Versicherer aufgeben. Derzeit hält Washington noch 61 Prozent an AIG.

Ein solcher Schritt wäre ein Meilenstein für das Unternehmen und sein Topmanagement um Robert Benmosche, der es sich zum erklärten Ziel gemacht hat, AIG in die Unabhängigkeit zurückzuführen. Mit der Freiheit kämen aber auch neue Pflichten: Es wird erwartet, dass die US-Notenbank Federal Reserve (Fed) den Versicherer beaufsichtigt, sobald die US-Regierung nicht mehr die Mehrheit der Anteile kontrolliert.Vor fast vier Jahren stand AIG vor dem Kollaps. Der damals größte Versicherer der Welt hatte sich mit Wetten auf

Kreditderivate verspekuliert und musste vom Staat gerettet werden. Rund 180 Mrd. Dollar wendeten Regierung und Notenbank für die Hilfsaktion auf. Die Aktion war - wie die Rettung der großen US- Banken auch - hochumstritten.

Seitdem hat sich AIG deutlich verkleinert und erholt sich schrittweise wieder. Auch die Aktie hat zugelegt, so weit, dass die Regierung Anteile an dem Unternehmen mit Gewinn am Markt verkaufen kann. Allein in diesem Jahr haben die Papiere bisher rund 33 Prozent an Wert gewonnen. Über die vergangenen 16 Monate hat Washington seinen Anteil an AIG über mehrere Aktienplatzierungen am Markt von anfangs mehr als 92 auf derzeit 61 Prozent reduziert.

Die Versicherung hat dem Zeitungsbericht zufolge Milliarden von Dollar beiseitegelegt, die er nutzen könnte, um der Regierung weitere Anteile abzukaufen. Vom "Wall Street Journal" zitierte Analysten schätzen, dass der Regierungsanteil auf diesem Wege bis zu den Präsidentschaftswahlen im November auf weniger als 30 Prozent fallen könnte, wenn es AIG gelingt, über weitere in den nächsten Monaten erwartete Verkäufe von Geschäftsteilen 10 bis 15 Mrd. Dollar an Überschusskapital zu generieren.

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Demnach ist es wahrscheinlich, dass Washington parallel weitere Aktienpakete am Markt veräußert. Die Regierung von Präsident Barack Obama könnte die Abnabelung von AIG als Erfolg verkaufen - immerhin hat sie aus der Rettung bisher 14 Mrd. Dollar Gewinn gezogen. Bis zum Herbst könnten es nach Regierungsschätzungen 18 Mrd. Dollar werden.

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FT.com Last updated: August 2, 2012 11:24 pmAIG beats forecasts with $2.3bn profitBy Tom Braithwaite in New York

AIG reported second-quarter earnings of $2.3bn, sharply higher than previous quarters and beating analysts’ estimates.Shares in the insurance company, bailed out by the US government during the financial crisis, rose more than 1 per cent in after-hours trading.

In two signs that the company is overcoming its toxic legacyas one of the biggest financial rescues in history, AIG said it had repaid $35.6bn of government aid and would rebrand its SunAmerica and Chartis operations using the group name.

Revenues rose from $16.7bn to $17.1bn. Net income of $2.3bn rose from $1.2bn in the second quarter a year ago and $1.8bn in the first quarter of this year. It was boosted by $1.8bn in tax benefits. Analysts had expected net income of about $1.5bn. AIG made $1.33 per diluted share compared with $1 a year earlier.

“We are proud of what we have accomplished and believe we are close to achieving our goal of returning to America all that it provided to AIG during the crisis, plus a profit,” said Robert Benmosche, chief executive.

The US Treasury retains a 61 per cent stake in AIG as a result of the $182bn bailout in 2008. With the company’s shares trading above $30, the Treasury might yet make a small profit on its emergency investment in AIG, according to official figures that peg the break- even price at $28.73.

AIG has bought back some of the Treasury’s shares itself and now has $11bn in liquidity, which could go towards an additional share buyback.

Chartis, the property insurance operation, recorded $936m in operating income compared with $783m a year earlier. Lower catastrophe losses and higher prices helped that business.SunAmerica, the life insurance arm, posted $933m in operating profits compared with $723m a year earlier. ILFC, the group’s aircraft leasing arm set for an initial public offering, saw operating income rise from $86m to $88m.

The company said the value of its stake in AIA, the Asian insurer, fell $493m in the quarter, marring AIG’s overall performance, while earnings were flattered by an increase in the value of the Maiden Lane III portfolio, a collection of complex credit instruments related to the bailout held at the Federal Reserve Bank of New York.

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AIG will reap a third of the profits of future sales from the portfolio, while the bulk will go to the New York Fed.

AIG added $719m to its litigation reserves in the quarter, it said in a regulatory filing. The insurer faces various lawsuits from shareholders. It is also suing Bank of America overlosses incurred on mortgage-backed securities.

Later this year AIG is likely to be designated as a “systemically important financial institution”. This would mean it receives supervision from the Fed and tougher capital requirements.

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WSJ.com EARNINGS August 2, 2012, 8:58 p.m. ETAIG Profit Rises 27%By ERIK HOLM And SERENA NG

Profit at American International Group Inc. rose 27% to $2.3 billion in the second quarter, driven by improved results at the insurance operations the company has touted as essential to its postbailout future.

AIG's operating income of $1.9 billion, or $1.06 a share, was nearly double Wall Street's consensus estimate. Operating profit excludes some investment results.Operating results at AIG's domestic life-insurance and retirement-services business rose 29% to $933 million before taxes, while the company's global property-casualty insurance arm saw profit jump 20% to $936 million.

Chief Executive Robert Benmosche has said that improving results at both operations are critical for AIG to meet various "aspirational goals" the company laid out last year. The goals include boosting AIG's return on equity to over 10% by 2015, slashing costs and deploying up to $30 billion in excess capital on share buybacks, acquisitions and other activities.

AIG was rescued from the brink of collapse in 2008 by the U.S. government, which committed as much as $182.3 billion in taxpayer funds to support the company. Most of the aid has

been repaid, and the U.S. now owns 61% of AIG and plans to sell its stake to recoup the last $30 billion in taxpayer funds outstanding.

The government, which has sold nearly $12 billion in AIG stock this year, could hold another public offering to sell more shares now that AIG has reported its results. "We are close to achieving our goal of returning to America all that it provided to AIG during the crisis, plus a profit," Mr. Benmosche said in a statement.

AIG has been stockpiling billions of dollars in cash that it is expected to use to buy back a large portion of the government's remaining ownership, a move that could help reduce the U.S. to a minority shareholder by this fall.

The company said Thursday that it has received $6.1 billion from sales conducted by the Federal Reserve Bank of New York of complex mortgage securities AIG used to insure, and expects to receive an additional $1.9 billion in mid-August. It also bought some of the mortgage assets the New York Fed sold.

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The company's second-quarter results, meanwhile, were hurt by a $493 million decrease in the value of its minority stake in Asian life insurer AIA Group Ltd., whose Hong Kong-listed shares fell during the quarter. AIG can sell its remaining 19% ownership in AIA, which is valued at over $7 billion, in early September.

AIG also recorded a $719 million increase in its estimated legal liabilities during the quarter. The company and its executives have been sued by many U.S. and foreign investors who lost money when AIG's shares plunged in 2008 at the time of its bailout. These shareholders have alleged that AIG made false and misleading statements about its financial health and exposure to troubled subprime mortgage assets in the months leading up to the company's near collapse.

International Lease Finance Corp., AIG's aircraft-leasing arm, reported flat second-quarter profit of $88 million, after booking impairment charges of $75 million for some aircraft. AIG is waiting for better market conditions to float the unit in an initial public offering.

AIG reported book value per share of $60.58 at the end of June. Its shares have been trading at a deep discount to the company's net worth, and closed flat on Thursday at $30.84.The combined ratio at Chartis, AIG's property-casualty operation, was 102.4, meaning the company spent about

$1.02 on claims and expenses for every dollar it collected in premiums. A year ago, the combined ratio was 104 amid a more-damaging string of natural disasters. AIG adopted the Chartis name for its property-casualty company in 2009 amid widespread furor over its bailout. The unit will drop the name in favor of AIG's this fall.

At SunAmerica Financial Group, AIG's domestic life-insurance and retirement-services business, premiums, deposits and other considerations dropped by roughly $900 million to $5.4 billion as fixed-annuity deposits dropped amid the low interest-rate environment.

Still, the company touted "significant growth" in sales of variable annuities and retail mutual funds, both of which are less sensitive to low interest rates.

AIG's mortgage-insurance operation saw pretax operating income more than triple to $43 million, reflecting a 17% drop in newly delinquent policyholders and a reduction in estimates of how much it will cost to pay claims incurred in prior quarters.

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New insurance written on domestic first-lien mortgages more than doubled to $8.5 billion as the unit grabbed market share in a sector where some rivals have been forced to stop selling new coverage.

While AIG and others are still feeling the effects of policies they sold in the run-up to the housing crisis, industry observers say the new business the remaining players are now selling should prove highly profitable over time.

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FT.com August 23, 2012 9:06 pmNY Fed closes the door on Maiden LaneBy Michael Mackenzie and Nicole Bullock in New York

The Federal Reserve Bank of New York has completed the sale of securities associated with the rescue of AIG in 2008 and booked substantial gains for taxpayers.

The sale of assets held in the Fed’s Maiden Lane III portfolio closes a chapter on one of the most contentious bailouts of the financial crisis. It comes as taxpayers remain in the red over the rescue of housing giants Fannie Mae and Freddie Mac and from carmakers General Motors and Chrysler, which both filed for bankruptcy in 2009.

The final placement of securities from the ML III portfoliomeans the New York Fed has booked a total net profit for taxpayers of $17.7bn from its efforts to support AIG and AIG-related facilities, it said in a statement on Thursday.

Once deemed heavily impaired and at the centre of the housing and financial market meltdown in 2008, the various mortgage assets purchased from AIG and its bank counterparties have found willing buyers this year as investors have sought high-yielding assets with official interest rates stuck near zero.

The ML III portfolio was established in November 2008 with $62.1bn in face value, based on calculations using data on the New York Fed’s website. The central bank has sold securities and others have matured since they were acquired at the height of the financial crisis.

The ML II and III portfolios were funded with a $44bn loan from the New York Fed in conjunction with $5bn of equity from AIG.

The Fed said on Thursday that it had accrued a gain of some $6.6bn from winding down the ML III portfolio. That included $737m in accrued interest on the loan extended by the central bank to ML III.

“The completion of the sale of the Maiden Lane III portfolio marks the end of an important chapter, our assistance to AIG, that was undertaken to stabilise the financial system in the midst of the financial crisis,” said William Dudley, president of the New York Fed. Critics of the AIG rescue have noted that some of the large banks that sought and won assets from the ML III portfolio were also entities that had bought insurance on mortgage debt from AIG ahead of the crisis.

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Shares in AIG have risen 44 per cent this year as the Fed has unwound ML III in recent months and thus helped repay the central bank’s loan and AIG’s equity contribution to the portfolio.

The US Treasury holds a 53 per cent stake in AIG and the company is seeking to buy back more of its shares using the ML sale proceeds and other asset sales.

Of the US Treasury’s original $67.8bn investment in the insurer, $23.3bn remains unpaid. The New York Fed’s profit reduces the total amount outstanding to about $5.6bn.

With a remaining 871m common shares in AIG, US taxpayers hold a stake in the company worth more than $29bn.

Additional reporting by Shahien Nasiripour in Washington

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FTD.de 10.09.2012, 11:43Staatlich gestützter Versicherer: USA verkaufen weitere AIG-AktienSeit 2008 war AIG unter Kontrolle der US-Regierung. Nun schlägt das Finanzministerium Aktien im Wert von 18 Mrd. Dollar los. Damit gibt der Staat seine Mehrheit auf - ein Erfolg für AIG-Chef Robert Benmosche.

Die USA wollen weitere Anteile am Versicherungskonzern American International Group (AIG) losschlagen. Das Finanzministerium startete am Sonntag in Washington nach eigenen Angaben den Verkauf von Aktien im Wert von 18 Mrd. Dollar.

Nach Berechnungen des Datendienstleisters Bloomberg würde der Staat nur noch rund 23 Prozent halten, wenn die Regierung die nächsten Anteilsscheine zum Schlusskurs vom vergangenen Freitag, also je 33,99 Dollar, verkauft. Ziel ist neben dem Ausstieg der Verkauf der Anteile mit Gewinn, was bei einem Kurs über 28,73 Dollar gegeben wäre.

Mit der Freiheit kommen neue PflichtenSollte die US-Regierung zum Minderheitsaktionär werden, wäre das ein Meilenstein für das Unternehmen und sein Topmanagement um Robert Benmosche, der es sich zum erklärten Ziel gemacht hat, AIG in die Unabhängigkeit zurückzuführen.

Mit der Freiheit kämen aber auch neue Pflichten: Es wird erwartet, dass die US-Notenbank Federal Reserve (Fed) den Versicherer beaufsichtigt, sobald die US-Regierung nicht mehr die Mehrheit der Anteile kontrolliert.

Vor fast vier Jahren stand AIG vor dem Kollaps. Der damals größte Versicherer der Welt hatte sich mit Wetten auf Kreditderivate verspekuliert und musste vom Staat gerettet werden. Rund 180 Mrd. Dollar wendeten Regierung und Notenbank für die Hilfsaktion auf - die teuerste Rettung der Finanzkrise. Die Aktion war - wie die Rettung der großen US-Banken auch - hochumstritten.

Ein Erfolg für ObamaDaher könnte die Regierung von Barack Obama die Loslösung von AIG im Präsidentschaftswahlkampf als Erfolg verkaufen.

AIG hat sich seit der Rettung deutlich verkleinert und erholt sich schrittweise wieder. Auch die Aktie hat zugelegt, so weit, dass die Regierung Anteile an dem Unternehmen mit Gewinn am Markt verkaufen kann.

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Über die vergangenen rund anderthalb Jahre hat Washington seinen Anteil an AIG über mehrere Aktienplatzierungen am Markt von anfangs mehr als 92 auf derzeit 53 Prozent reduziert.

Beim letzten Aktienverkauf im August nahm das Finanzministerium insgesamt 5,75 Mrd. Dollar ein. Beim jetzigen Verkauf plant AIG, Anteile für etwa 5 Mrd. Dollar selbst zurückzukaufen.

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FT.com September 10, 2012 12:51 amUS Treasury launches $18bn AIG offeringBy Shahien Nasiripour

The US Treasury has launched its biggest divestment of bailed-out insurer AIG, making up to $20.7bn of its dwindling stake available for sale and probably reducing the US taxpayer to the status of a minority shareholder.

The public offering comes a few weeks after the Federal Reserve Bank of New York completed its final sale of securities associated with the AIG rescue in 2008, marking the end of the Fed’s portion of the contentious bailout while booking a $17.7bn total net profit for taxpayers.

The Treasury’s ownership of 871m common shares could bereduced to 262m shares, or less than one-fifth of the company’s common equity, if sold at Friday’s close of $33.99.

US taxpayers had made $182bn available to AIG. Some $23bn of their overall investment remains unpaid. Combined with the share offering and the valuation of the remaining stake, the US Treasury probably will eventually book a profit on its rescue of what was once the world’s largest insurer.

The offering comes about two months before November’s presidential election. To be able to say that the once-reviled

bailout of AIG could turn a profit for US taxpayers would represent a coup for Barack Obama, US president, and Tim Geithner, his Treasury secretary.

In May, the Government Accountability Office, the investigative agency of the US Congress, estimated that the Treasury could make a $15bn profit on the AIG rescue. The Treasury is making $18bn of shares available for sale, with an additional $2.7bn available over the next month to cover potential over-allotments. At Friday’s close the total sale could represent 609m shares.

AIG said on Sunday that it had indicated it intends to buy up to $5bn of the shares. Shares in AIG have risen 47 per cent this year as both the Treasury and the New York Fed have unwound their investment in the company. The Treasury once owned 92 per cent of the company. It has pared down its stake with a series of share offerings as AIG’s fortunes have improved.

In August, AIG reported second-quarter earnings of $2.3bn, following a $1.8bn profit for the first quarter of the year.Stronger earnings and more confidence in its prospects convinced AIG earlier this year to rebrand certain operations using the group name.

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Since its rescue, AIG has sold businesses and focused on its property and life assurance businesses to stabilise earnings.

It was bailed out in 2008 after soured bets on credit derivatives led the company to the brink of failure during the crisis.

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WSJ.com BUSINESS Updated September 9, 2012, 10:50 p.m. ETU.S. Plans $18 Billion Sale of AIG StockBy DAMIAN PALETTA, ERIK HOLM and SERENA NG

The Treasury Department said it would sell $18 billion of American International Group Inc. stock in a public offering, slashing its stake by more than half and making the government a minority shareholder for the first time since the financial crisis was roaring in September 2008.

The sale will mark a step that seemed hard to imagine four years ago, when the New York insurer was effectively nationalized as part of a controversial financial-industry bailout. The U.S. will move closer to recognizing a profit on its largest rescue, which included as much as $182 billion of committed aid, and AIG will revert to being mostly nongovernment-owned, fulfilling a priority of Chief Executive Robert Benmosche.

U.S. officials four years ago said the rescue of a teetering AIG was necessary because the company was so entangled with other financial firms around the world via complex instruments that its collapse could have unpredictable effects including possibly bringing down many other firms.

But the fury spawned by the rapid series of bailouts, typified in some ways by that of AIG, would eventually run wide. The government's extraordinary intervention in the economy helped seed the tea-party movement on the right. On the left, it helped spawn the Occupy Wall Street movement, which among other things contended the government propped up bankers but did less for struggling homeowners.

A near-exit by the government from one of the most controversial bailouts is both a significant accomplishment for the Obama administration and a sign of how far the markets have come in four years, thanks in part to the rescue of financial companies and the Fed's efforts to support the economy by reducing interest rates.

But the sale could also renew complaints that Treasury still hasn't outlined a concrete strategy for exiting other large financial-crisis investments, such as those in mortgage investors Fannie Mae and Freddie Mac and lender Ally Financial Inc. The government remains in the red on its investments in Fannie and Freddie, which have received $188 billion in taxpayer support. The U.S. continues to hold sizable stakes in General Motors Co. and Ally that it spent $68 billion on and may not fully recover.

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In addition, the AIG sale could raise questions about timing, coming less than two months before a closely contested presidential election.

"Anything that happens between now and the election will seem to some to have political motivations," said James Angel, finance professor at Georgetown University. "But either way, the fact that AIG is in good enough shape to buy back shares is excellent. And the deal also shows that the government is getting out of the business of owning large stakes of companies."

A Treasury official said the timing had nothing to do with the political season.

The public offering of AIG shares will be Treasury's fifth sale of share since May 2011 but its largest, potentially leaving the government with less than a 20% stake in the insurer, depending on the offering's pricing. The Treasury's stake already has fallen to about 53% from 92%.

AIG will repurchase up to $5 billion of its shares as part of the offering, the Treasury said. The company has been repurchasing shares to use cash on hand and reduce shares outstanding, a move that boosts earnings per share."It's part of our ongoing efforts to exit the investment in AIG, recover taxpayer dollars and wind down" the crisis-era

Troubled Asset Relief Program, a Treasury official said. An AIG spokesman had no comment on the size of the sale or the timing for its completion.

Treasury chose Citigroup Inc., Deutsche Bank Securities Inc., Goldman Sachs and J.P. Morgan Securities LLC to lead the offering. Like most large stock sales, it is expected to be priced below the recent market price. The lower the price, the more shares the government will likely sell, further bringing down its stake. AIG shares, down 23 cents on Friday to $33.99, have risen 47% this year. AIG shares have fallen more than 95% from their levels in the year before the rescue.AIG has haunted the federal government ever since its rescue, just a day after Lehman Brothers Holdings Inc. toppled into bankruptcy.

The AIG rescue and the Federal Reserve Bank of New York's purchases of mortgage securities that AIG previously owned or insured saw tens of billions of taxpayer aid flow from the insurer to banks in the U.S. and overseas. The New York Fed's moves were criticized in some quarters as a backdoor bank bailout that exposed U.S. taxpayers to undue risks.In early 2009, the Obama administration misjudged the public outrage that boiled over after reports of large bonuses that were supposed to be paid to AIG executives, and struggled to contain the backlash.

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But from the outset, Fed officials including Chairman Ben Bernanke said the U.S. was acting to protect the country from financial meltdown and expected to be fully repaid on loans provided to support AIG.

As of the last Treasury sale of AIG shares, the government had $24 billion of AIG-related investments outstanding, according to Treasury data, while the bailout of AIG had yielded over $18 billion in interest, fees and profits. With the coming sale of $18 billion in securities, the government by one measure can consider itself to have recouped the funds it extended on the bailout.

The government says it has already made a profit on the emergency funds injected into banks at the time of the financial-industry bailout, and the Fed has fully recouped money spent on acquiring toxic assets from troubled companies.

The Treasury, which invested $245 billion in more than 700 banks, has so far collected $264.7 billion from its bank programs.

The New York Fed, meanwhile, has fully recouped $72.7 billion in loans that were used to buy toxic assets and has reaped gains of more than $5.2 billion so far. The New York

Fed last month sold the last toxic assets it acquired in the AIG bailout.

For its part, AIG has shed its most toxic assets and returned to profitability. But with the coming sale, AIG may have some new headaches.

In its latest annual report, AIG indicated it expected to become regulated by the Fed as a savings-and-loan holding company when Treasury ceases being a majority shareholder, because AIG owns a small thrift. The company said it might become subject to rules on leverage and risk-based capital. Some Wall Street analysts speculated in notes to clients that the Fed could limit AIG's use of cash to buy back shares.

"To have a regulator like the Fed come in for the first time is certainly a step in the right direction," said Christy Romero, the special inspector general for TARP. In a July report to Congress on bailout programs, Ms. Romero's office warned that the U.S. financial system remains vulnerable to another crisis and urged regulators to toughen oversight.

—Gregory Zuckerman, Leslie Scism and Jeffrey Sparshott contributed to this article.

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Lex/FT.com September 6, 2012 11:58 pmAIG – buyback comebackOccasionally, when the government gives you a huge mountain of money, good things can happen. Shares of AIG, which received a bigger government bailout ($180bn) than any other company, have risen nearly 50 per cent this year. A lot of credit must go the repurchase of the AIG shares the US Treasury bought as part of the rescue.

With the help of sales of non-core assets, and proceeds from the wind-down of Maiden Lane II and III (entities financed by the Federal Reserve and AIG to buy foundering assets from AIG and its counterparties), AIG has funded $8bn in share buybacks this year. In all, the Treasury has sold $23bn in AIG shares, taking its stake in the insurer to 53 per cent from 92 per cent. The buybacks have been supportive in part because they have occurred below AIG’s book value. And, with each share that the Treasury sold, the overhang also has diminished, creating a virtuous cycle that reinforced investors’ confidence in the stock.

The latest step came on Thursday. AIG announced the sale of up to $2bn in shares in AIA Group, a unit based Hong Kong. AIG simultaneously announced another buyback of up to $5bn.

Investors had been expecting a larger amount, however; AIG shares fell 1.7 per cent while the wider market rallied.

Investors this year have made money buying AIG shares right alongside AIG. But the insurer has said it expects the Fed is likely to be its regulator once the Treasury’s stake falls below 50 per cent. Speculation has emerged that the central bank could put a hold on buybacks in lieu of a stress test.

In any case, the day is not too far off when the stock’s value will be determined by the strength of AIG’s core property-casualty and life assurance businesses. Investors would do well to start thinking about that day now.

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FT.com September 6, 2012 5:22 pmAIG to sell AIA stock as lock-up expiresBy Paul J Davies in Hong Kong

AIG is selling about $2bn worth of its remaining stake in Asian insurer AIA in Hong Kong as it builds funds to buy back $5bn of its own stock still held by the US Treasury. The sale, which comes two days after a lock-up expired on AIA’s former parent selling further stock, surprised the market because of its relatively small size and the very tight pricing range. The disposal comes at a sensitive time for AIA’s share price as theAsian group is still in the running for a takeover of Dutch group ING’s $6bn-plus Asian insurance business.

It is also a tough time for Asian equity markets where in spite of an 8 per cent rise in the Hang Seng index in Hong Kong this year, trading and new issue volumes have tumbled because of economic and political uncertainty driven by the eurozone crisis.

Banks have been looking carefully at their equities businesses and more job cuts are expected to follow the axing this week of about 50 staff from Deutsche Bank – a lead bookrunner on the AIA sale alongside Goldman Sachs. Other banks with bookrunner roles on the deal included Citigroup, JPMorgan Chase and HSBC.

In a statement, AIG said its board had authorised $5bn worth of buybacks from the US Treasury, which would reduce the government’s stake below the 50 per cent mark. The Treasury has not announced it intends to sell any more AIG stock, but it could do so any time this month after a lock-up on its holding expired.

The small size of the AIA block sale, roughly a quarter of AIG’s remaining $7.6bn stake, should limit any pressure on AIA’s share price. The pricing of the sale of 600m shares between HK$25.75 and HK$26.75 represents a range of a 2.1 per cent discount to a 1.7 per cent premium to AIA’s closing price of HK$26.30 on Thursday. Block sales are usually priced at a discount to the trading price.

AIG will be left with 13.6 per cent of AIA after the sale.AIA, which has performed strongly as a business since listing in October 2008, has seen its stock rise more than 30 per cent over that period. The share price recovered quickly after AIG sold $6bn worth of shares in March, trading back above the offer price within a week.

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FT.com September 7, 2012 9:47 amAIA attracts rare premium for block tradeBy Paul J Davies in Hong Kong

AIG managed to attract a rare premium for the more than $2bn block of shares in AIA, the Asian life insurer, that the US group sold overnight as global investors scrambled for stock in a sale that was smaller than expected.

The US group is raising funds to buy back $5bn of its own shares held by the US Treasury following its $180bn rescue during the financial crisis, but sold only about one-quarter of its remaining holding in AIA, disappointing some analysts on both sides of the Pacific.

In the US, some analysts following AIG said that both the size of the stake sale and the buyback plan were below market expectations, while in Hong Kong there were concerns that AIG’s remaining 13.6 per cent stake in AIA would continue to damp any rises in the Asian group’s stock.

“The sale of only a partial stake of AIA and only $5bn of potential buybacks leaves us underwhelmed,” wrote analysts at Sterne Agee & Leach in New York.

Block trades are almost always priced at a discount to the prevailing market price to attract buyers and there is an

expectation that the shares concerned will come under pressure. When AIG sold $6bn of AIA shares in March, the stock dropped more than 8 per cent the following day.AIA shares were up more than 6 per cent to HK$27.90 on Friday afternoon from Thursday’s close of HK$26.30, however. The Asian group said on Friday morning that the sale of AIG’s stake had been priced at HK$26.50, towards the top end of the range given on Thursday evening and at a near 1 per cent premium to Thursday’s close.

Investors had shown strong interest ahead of the expected stake sale and the banks involved knew the price could be squeezed higher as orders were taken, according to one person involved. “There is a scarcity value to this stock, it only trades about 60m-70m shares per day, so if an investor wants to build a position it is very difficult,” the person said.

The disposal came at a sensitive time for AIA’s share price as the Asian group is still in the running for a takeover of Dutch group ING’s $6bn-plus Asian insurance business. It is also a tough time for equity markets in Asia, where in spite of an 8 per cent rise in the Hang Seng index in Hong Kong this year, trading and new issue volumes have tumbled because of economic and political uncertainty driven by the eurozone crisis.

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Banks have been looking carefully at their equities businesses and more job cuts are expected to follow the axing this week of about 50 staff from Deutsche Bank – a lead bookrunner on the AIA sale alongside Goldman Sachs.

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WSJ.com DEALS & DEAL MAKERS Updated September 7, 2012, 12:48 a.m. ETAIG Sells $2 Billion of AIA SharesBy FIONA LAW And PRUDENCE HO

HONG KONG—American International Group Inc. has raised about $2 billion from the sale of another chunk of its stake in Asian life insurer AIA Group Ltd.

AIG's board had approved a new $5 billion stock-buyback program on Thursday that will allow the company to repurchase more of its own shares from the U.S. Treasury, an amount that would likely reduce the government's stake in the once-struggling insurance company below 50%.

AIG sold 591.9 million AIA shares for 26.50 Hong Kong dollars (US$3.42) each, a 0.8% premium to AIA's closing share price Thursday of HK$26.30, according to an announcement from AIA Friday. The price is lower than the HK$27.15 price AIG sold the shares at in March, but higher than the Asian insurer's 2010 initial public offering price of HK$19.68.

"There was a strong demand for the shares and the book was multiple times subscribed," a person familiar with the situation said Friday.

The sale of the AIA shares is the third for AIG, which once owned the entire Hong Kong-listed company but was forced to sell much of its stake beginning in 2010 to help repay the bailout, which totalled more than $180 billion.The latest sale reduces AIG's stake in the Hong Kong-listed company to about 13.69% from 18.6%.

After the last sale in March, AIG had been in a lock-up period that prevented it from reducing its stake again until Tuesday. AIG Chief Executive Robert Benmosche had telegraphed the latest sale when he said in August that the company was "looking for the right time and the right price" to further reduce its holdings.

Mr. Benmosche has been raising billions of dollars through the sale of AIG assets that he has designated as no longer essential to the scaled-back company. Much of the money has been used to aggressively buy shares held by the U.S.The government stake has been reduced to about 53% from 92%, and AIG is expected to buy more shares from the Treasury this fall in a push that could turn the U.S. government into a minority shareholder. Previous sales by the Treasury have included offerings to the public and to AIG, but even if AIG were the only buyer in the next round of sales, its $5 billion authorization would reduce the government stake to 49% at its current share price of $34.20.

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When the government stake falls below 50%, the Federal Reserve will have the authority to regulate AIG, and Deutsche Bank analyst Josh Shanker speculated in a note to clients Wednesday that the Fed may impose a temporary moratorium on future buybacks until it can conduct a stress test on AIG's capital.

Representatives from AIA and AIG declined to comment on the AIA share sale.

Investors and analysts said AIA's strong business fundamentals could help AIG price its offering at a premium.In July, AIA reported its net profit for the six months ended June 30 climbed 10% from a year earlier, while its business value, a key measure of a life insurer's profitability, climbed 28%. More than half of analysts surveyed by FactSet rate the stock a "buy."

Another appeal is that the stock is a member of the Hang Seng Index, so funds that track the HSI have to purchase the company's shares.

AIG will be subject to a 90-day lock-up period once it completes the latest share sale, the term sheet said. That would mean the New York-based company can't sell its remaining AIA shares until December.

AIA shares have been falling since the March share sale because of expectations AIG would sell more stock, not because of a lack of confidence in the company's business fundamentals, fund managers say. Its relatively cheaper valuation could also drive up demand in AIG's share sale, they say.

AIA is trading at 1.38 times its embedded value, a measure used by investors to value life-insurance companies. That multiple is lower than the 1.4-1.5 multiples of the two largest Chinese life insurers listed in Hong Kong, China Life Insurance Co. and Ping An Insurance (Group) Co. of China Ltd., analysts said.

Even after this sale, AIG will remain the largest shareholder in AIA, owning 1.64 billion shares. The holding is valued at HK$43.13 billion, based on Thursday's closing price.

Deutsche Bank AG and Goldman Sachs Group Inc. are leading the share sale, people familiar with the situation said Thursday, adding that Barclays PLC, Credit Suisse Group AG, Citigroup Inc., Morgan Stanley and J.P. Morgan Chase & Co. are also handling the transaction.

—Erik Holm in New York contributed to this article.

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FTD.de 12.09.2012, 09:51Milliardengewinn: USA verkaufen weitere AIG-Aktien

Die gigantische Rettungsaktion des Versicherungskonzerns AIG wird für die USA zu einem immer besseren Geschäft. Nach der großen Verkaufsaktion zu Beginn dieser Woche hat der Staat weitere AIG-Papiere losgeschlagen und damit seit der Rettung einen Gewinn von 15,1 Milliarden Dollar (11,8 Mrd Euro) erwirtschaftet.

Die US-Regierung hatte AIG in der Finanzkrise mit Garantien und Kapitalhilfen in Höhe von 182 Milliarden Dollar vor dem Untergang bewahrt. Durch Gebühren, Zinsen und lukrative Aktienverkäufe sind laut Ministerium inzwischen 197,4 Milliarden Dollar zurückgeflossen. Da die USA noch weitere AIG -Aktien halten, könnte noch mehr Geld in die Kasse fließen. Nach der abgelaufenen Platzierungsrunde muss sich der Staat aber zunächst mindestens 60 Tage Zeit lassen, ehe er die nächsten Papiere verkaufen kann.

Nachdem die USA im ersten Teil der Platzierungsrunde 553,8 Millionen Aktien verkauft hatten, wurden im Zuge der sogenannten Mehrzuteilungsoption weitere 83,1 Millionen Papiere veräußert. Der Preis pro Aktie lag bei 32,50 Dollar. Dadurch sank der Staatsanteil von 53,4 Prozent auf 15,9 Prozent. Für rund 5 Milliarden Dollar kaufte AIG selbst eigene

Aktien. Der Konzern möchte sich so schnell wie möglich aus den Fängen des Staats befreien, um etwa Beschränkungen bei Gehältern und Dividenden loszuwerden.

AIG war 2008 in den Strudel der Finanzkrise geraten, weil der Konzern die windigen Hypothekenwetten der Banken und Fonds abgesichert hatte. Ein Zusammenbruch von AIG hätte weitreichende Folgen für die gesamte Finanzwelt gehabt. Der Konzern hatte im Krisenjahr 2008 mit 99,3 Milliarden Dollar den höchsten Verlust der US-Wirtschaftsgeschichte eingefahren. Durch den Verkauf von Tochterfirmen gelang AIG die kaum für möglich gehaltene Sanierung.

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Lex/FT.com September 10, 2012 7:45 pmAIG – grounded enthusiasmWhen a company’s majority shareholder announces that it will dump most of its position, a big share price hit usually follows. Yet AIG shares responded with equanimity to news that the US Treasury would sell $21bn of its stake, more than a third of the company’s market capitalisation.

The Treasury had already sold $23bn in shares in small chunks. But the latest sale is much bigger than expected and the response shows how bullish investors remain on the stock, which is up nearly 50 per cent this year. The enthusiasm is grounded in the wind-down of government ownership, non-core asset sales, tax assets, and a share buyback plan that is highly accretive because of the stock’s low valuation.

Each block of shares the government sells without crushing AIG’s stock increases the likelihood that the rest of the stake will be sold smoothly. This is a legitimate source of investor confidence. Similarly, it is fair to incorporate the company’s deferred tax asset (estimated by William Blair research to have an economic value of $6.45 a share) into the valuation, assuming that AIG remains profitable. And the non- core assets, most prominently the $6bn stake in Asian insurer AIA, are a major source of value – assuming the market for Asian growth assets remains strong.

The buyback is more problematic: accretiveness always is. Yes, AIG is trading at half of book, making buybacks very accretive to book value per share.

But what matters to an insurance company is ultimately not the excess value of its assets over its liabilities.

It is its ability to earn more on its assets than it must pay on its liabilities, as reflected in its return on equity.

And AIG’s mid-single-digit ROE is well below that of peers. AIG is not buying dollars for 50 cents. It is using cash to achieve what, for the time being, operational excellence cannot.

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FT.com September 11, 2012 3:26 amUS profit at $12bn after AIG stock saleBy Shahien Nasiripour in Washington

The US Treasury has sold most of its remaining stake in AIG in an $18bn offering, earning the US government a profit on arguably the most contentious bailout of the 2008 financial crisis.

The 553m share offering, announced Sunday, was priced at $32.50 on Monday evening. The price was 4.4 per cent below Friday’s close. AIG purchased $5bn of the Treasury’s shares.The sale has reduced the Treasury’s ownership of AIG’s common equity from 53.4 per cent to 21.5 per cent. It remains AIG’s biggest shareholder.

But the removal of the US taxpayer as AIG’s majority owner paves the way for the Federal Reserve to become its primary regulator. Equity investors in AIG will now face the possibility that the company’s primary supervisor will not be as generous when it comes to dividends, stock buybacks and certain profitable yet risky business activities.

For the US taxpayer, the sale represents an overall $12.4bn profit on the once-vilified rescue of what used to be the world’s largest insurance group. The profit figure includes the $17.7bn

recorded by the Federal Reserve Bank of New York, which closed down its AIG-related facilities last month.

The Treasury will make a further $2.7bn of shares available for buyers over the next month to cover additional demand.More profits are likely to come. The US Treasury’s remaining stake of 317m shares was worth $10.3bn at Monday’s offering price.

“It’s an enormous relief. The plan worked,” said Jim Millstein, a former Treasury official who served as the architect of AIG’s restructuring.

“We did something that frankly we didn’t do with any of the other big financials – we downsized it – and we saved the core earnings engine of the company for the benefit of the US Treasury,” Mr Millstein added. “I’m very proud.”

“I think that it’s safe to say that the president is pleased with the progress being made as we wind down these investments and recover taxpayer money,” said Jay Carney, White House press secretary.

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The Treasury and the Federal Reserve, which rescued AIG after soured bets on credit derivatives pushed it to the brink of failure in the autumn of 2008, ultimately supported the group with $182bn in investments and commitments.

After a restructuring of its holdings, the Treasury ended up with 92 per cent of the company’s common equity.

“To stabilise and then restructure the company with a very substantial positive gain for the American taxpayer is a significant accomplishment,” said Tim Geithner, Treasury secretary.

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WSJ.com BUSINESS Updated September 10, 2012, 10:41 p.m. ETTreasury Sells Big Chunk of AIG StockBy LESLIE SCISM, JEFFREY SPARSHOTT and ERIK HOLM

The Treasury Department sold a massive chunk of American International Group Inc. stock Monday, ending the government's majority ownership of a company that in 2008 nearly toppled the financial system.

The deal is an achievement for the government, which has fully recovered the costs of its largest bailout after the AIG rescue drew heavy criticism from both the left and the right.The sale is "another milestone on the path of a very successful program" for the U.S. government, said Douglas Elliott, a fellow at the Brookings Institution. It also marks a turning point for AIG, which has sold billions of dollars in assets and sharpened its focus in a bid to return as quickly as possible to full private ownership.

The Treasury Department said it would sell $18 billion of AIG stock in a public offering, slashing its stake by more than half and making the government a minority shareholder for the first time since September 2008.

"What the current management has done has been nothing short of remarkable," said Jim Ryan, an insurance analyst for

Morningstar Inc. "They've worked very hard to get the company back on its feet."

The Treasury sold about 554 million shares to the public at $32.50 apiece for a total of $18 billion in one of the biggest global follow-on stock offerings since the financial crisis. The offering was the Treasury's fifth sale of AIG stock since early last year and reduced the government's stake in the company to about 22% from 92% in early 2011. The price set Monday was above the government's cost basis of $28.73 a share, meaning taxpayers will earn a profit on the sale.

AIG itself bought about $5 billion of the shares, while the rest were mostly acquired by institutional investors. AIG shares fell 69 cents, or 2%, Monday at $33.30, on a day that saw a 0.4% decline in the blue-chip Dow Jones Industrial Average. The shares are up 44% this year but have lost more than 95% of their prebailout value.

The size of Monday's sale helped feed demand, some analysts said, as fund managers took comfort in knowing that the government, which at one point controlled more than 1.65 billion AIG shares, now has 317 million shares left to sell.The sale marks a dramatic turnaround from 2008, when AIG was effectively nationalized as part of a financial-industry bailout.

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U.S. authorities maintained that the teetering AIG, which had sold complex financial instruments to clients world-wide, had to be rescued to avert a then-worsening global financial crisis from spiraling out of control. The record bailout from Treasury and the Federal Reserve mushroomed to include as much as $182.3 billion in funds to support the company, though not all the money was used.

Treasury said the latest sale will mean the federal government has fully recovered its $182 billion commitment to AIG."Treasury and the Federal Reserve have now recovered a combined total of $194.7 billion...representing a positive return of $12.4 billion to date," Treasury said.

AIG, which is primarily a property-casualty and life insurer, has since shed its most toxic assets and returned to profitability."AIG has made a lot of progress over the past couple years in strengthening its core operations and exiting noncore businesses," said Bruce Ballentine, a senior credit officer at Moody's Investors Service.

Stock investors who bought the shares are betting that the price is low enough that it will rise. AIG shares trade at about half the company's book value, a measure of net worth.

The sale comes as insurers are struggling to boost prices, and their profits are damped by ultralow interest rates. Insurers

invest the premiums paid by policyholders mostly in investment-grade bonds, and those yields have been falling as the Federal Reserve attempts to keep rates low as a way to rev up the weak economy and revive the housing market.

With Treasury's stake falling below 50%, a Fed spokeswoman confirmed Monday that AIG will now be regulated by the Fed as a savings-and-loan holding company, a result of AIG's ownership of a tiny thrift called AIG Federal Savings Bank.

The thrift is a Delaware-based company with one office, 37 employees and deposits of $839 million, giving it a market share of 0.26% in Delaware, according to federal regulators. Some Wall Street analysts have speculated that the Fed could limit AIG's use of cash to buy back more shares from Treasury.

AIG CEO Robert Benmosche has said executives at AIG "are giving thought to whether we should now close the bank" to avoid some federal scrutiny. But such a move would likely be only temporary; analysts say AIG is in short order likely to be deemed "systemically important," a new designation that would mean the company would be subject to closer scrutiny from the Fed even if AIG rids itself of the bank.

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WSJ.com HEARD ON THE STREET Updated September 10, 2012, 10:12 p.m. ETAt AIG, Fed Waits in WingsBy DAVID REILLY

Even as the U.S. Treasury steps closer to an exit from American International Group, the Federal Reserve is ready to make an entrance.

The Treasury Department's sale of $18 billion of AIG stock Monday brought its holding in the company to below 50% for the first time since the government bailed it out in 2008.While that is another marker on AIG's journey back from the brink, it will also open the insurer up to new regulation. A Fed spokeswoman said Monday that once the government's stake is below 50%, the Fed will begin to regulate AIG as a savings-and-loan holding company.

The question for investors is whether the Fed may curtail AIG's ability to return capital. AIG bought back $5 billion of stock in the first half of this year and plans to buy $5 billion of the stock currently being sold by the Treasury.

Analysts at Morgan Stanley noted in a report last month that they are "more nervous" about the pace and amount that may be possible in 2013. The Fed "has historically frowned on

outsize capital management by large systemically important financial institutions," they said.

With AIG a work in progress—single-digit returns on equity remain well below its cost of capital—investors could become unnerved by any limits. Making matters more uncertain, Fed "stress tests" have left firms and investors guessing over the rational for some decisions on capital plans.

The silver lining is that with AIG trading at about 50% of book value, the stock is priced for terminal illness even as the Treasury's latest move shows that its recuperation continues.

—David Reilly

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WSJ.com MEDIA & MARKETING May 1, 2012, 2:55 p.m. ETAllstate Ad Blitz Follows Sales HitBy ERIK HOLM

The number of new customers buying car insurance from Allstate Corp. began "rapidly declining" in the second quarter of last year, prompting the company to spend about $80 million on marketing and growth initiatives, according to an October 2011 slide show prepared for Allstate managers.The decline came amid a flurry of changes at Allstate, as the company raised prices in several states, spent less on advertising and began an effort to cut back on the number of agents selling its products.

While Allstate has discussed each of those changes publicly, the confidential presentation reviewed by Dow Jones Newswires sheds new light on how quickly and how severely potential customers turned away from Allstate in 2011, and illustrates why the company moved to increase its spending on advertising, direct mail and agent incentives late in the year. Of particular note: While the effort to cut back on agents has been targeted at under-performers, the slideshow says that "all agency performance segments" were issuing fewer price quotes.

The slides also show the Northbrook, Ill., company was concerned that another set of initiatives it planned for 2012

wouldn't be able to sustain any sales momentum generated by the $80 million "Grow to Win" effort. Allstate will give a first glimpse at its 2012 results when it reports first-quarter earnings late Wednesday.

Amid a competitive auto-insurance market, Allstate has struggled for years to bring in new customers under Chief Executive Tom Wilson. While it remains the second-largest auto insurer in the U.S., the company has lost ground to several rivals, including Progressive Corp. and Berkshire Hathaway Inc.'s Geico Corp. The number of cars insured under Allstate's standard policy is at its lowest since 2005. Allstate shares, meanwhile, have dropped by about half over the past five years.

An Allstate spokesman declined to comment.

The slide show said more drivers were shopping for auto insurance last year than in 2010, but that fewer of the potential customers were turning to Allstate for coverage. The company's call center saw a decline in call volume of at least 10% in every month from January to August, the last month displayed in the presentation. The steepest decrease came in July, when calls were off by about 30%. The monthly comparisons were on a year-over-year basis.

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At least part of this decline was on purpose: The company had intended to cut its spending on direct-mail solicitations by half in 2011, according to the presentation. But the Grow to Win effort was built in part on a reversal of that spending cut; the presentation says the company planned two national mailings at a cost of $10.8 million to increase call volume at the end of the year.

Auto insurers have been engaged in a multi-billion dollar advertising war for years, with Allstate's "Mayhem" campaign going up against Geico's gecko; Progressive's perky spokeswoman, Flo; and increasingly aggressive campaigns from Nationwide Mutual Insurance Co., State Farm Mutual Automobile Insurance Co. and Farmers Insurance Group. The slideshow said Allstate had been spending less relative to its rivals in 2011 and that consumer awareness of its ads declined.

The slide show also said that the number of applications for standard auto policies fell by 97,500 in the second and third quarters, and that about 30% of the impact was because of a planned decline in the number of agents. It attributed about half the decline to price increases, and 20% to a decline in spending on marketing relative to rivals.The October slide show said Grow to Win was expected to increase new business by 22% by increasing the number of price quotes it gave to potential customers.

In February 2012, Mr. Wilson described Grow to Win as "our effort to re-engage the organization, our agencies, on growth. … Earlier in [2011] we had not been completely engaging growth."Some of the expenditure on the initiative was a one-time cost, he told analysts and investors on a conference call, while "some of it will be continuing."

Some of last year's drop in the number of price quotes given by agents came after Allstate executives announced plans to overhaul the company's agent-compensation structure at a May 2011 event for top agents. The agents are classified as independent contractors, not employees, and must pay many of their own expenses, including some of their own marketing costs. Agents "constrained" investment in their businesses in anticipation of the changes in compensation, the slideshow said.

The company has said its goal for the changes is to increase rewards for its highest-performing agents. The plan is to cut base pay but increase bonuses, so agents that exceed a number of performance targets can see their total compensation rise.

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Amid an outcry by agents, Allstate partially backed off the proposed changes, saying in December that it planned to cut base pay by 10% instead of 20%. The changes are scheduled to take effect in 2013.

Several industry analysts predict insurers will push through more price increases in 2012 as they deal with rising claims costs. Meyer Shields, an analyst with Stifel Nicolaus, said times when insurers are raising rates are challenging periods where market share can shift more rapidly.Allstate enters the coming period with a disadvantage, Mr. Shields says.

"At a time when there are a lot of different moving parts in the industry, to start off a couple steps behind because of a detrimental relationship with your sales force and less access to your customers is a real problem," he said. "It's enough to impede their growth for several years."

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WSJ.com BUSINESS Updated April 23, 2012, 10:17 p.m. ETMetLife Settles Unclaimed Life-Benefit ProbeBy LESLIE SCISM

MetLife Inc. agreed to pay $40 million to settle a multistate probe of its handling of death benefits, in a deal that could lead to more than $400 million in payments to heirs of life-insurance policyholders.

The agreement by the nation's largest life insurer by assets is the latest development in a yearlong campaign by officials investigating whether insurers violated laws by using a Social Security death database for their own benefit but not for their customers'.

The agreement obligates MetLife to cross-check its life-insurance policyholder base against death databases on a monthly basis to identify if payments are due. Historically, insurers have paid out claims only upon filing of a claim by a policyholder's beneficiaries. Authorities have been concerned partly because those losing out often are people of modest means, who don't have lawyers or advisers keeping track of their affairs.

New York-based MetLife becomes the third big insurer in recent months to pledge more-aggressive efforts to get money into the hands of deceased customers' beneficiaries, after

Manulife Financial Corp.'s John Hancock unit and Prudential Financial Inc.

State officials, who have pledged to root out what they view as industrywide misconduct by investigating the biggest companies, said there are eight additional probes under way. Separately, New York authorities have other efforts under way to aid consumers.

"This is a landmark settlement, and it is probably the largest settlement in terms of return of money to consumers," said Florida Insurance Commissioner Kevin McCarty, whose state helps lead the task force.

MetLife said in a statement that it "has been working with regulators to develop industry best practices and is pleased to announce new processes that will provide an even stronger safety net for the limited number of beneficiaries who do not submit a claim to the company in the normal course of business."

Karen Masucci, of West Nyack, N.Y., is among consumers who have benefited from insurers' ramped-up use of the death databases to identify overdue policies.

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Ms. Masucci and two siblings recently split about $7,500 from a New York Life Insurance Co. policy that her father, a former firefighter who died in 2005 at age 91, had taken out decades ago. Ms. Masucci had identified a couple of policies and made claims, but didn't know about this one—until New York Life contacted her last year.

"I think it's a great thing" that insurers are using the databases because "elderly people don't leave you with a trail of any breadcrumbs," she said.

New York Life says that it "has long had procedures in place to identify policyholders who may have died but for which no claims had been filed" and that use of the Social Security death database evolved in 2011 into "routine checks of our entire in-force policyholder list."

Monday's MetLife pact is the biggest so far reached by state regulators, treasurers, comptrollers and some attorneys general as they probed insurers' use of databases to cut off retirement-income checks of annuity owners, while not using the database to determine if insurance policyholders had died.

Meanwhile, New York Gov. Andrew Cuomo announced Monday that regulators' efforts since last year have resulted in 32,715 insurance payments to consumers nationwide, totaling $262.2 million.

The probes have their roots in the ambitions of a little-known auditing firm that several years ago pitched cash-strapped states on identifying unclaimed life policies that those states could seize as abandoned property. Some 35 states eventually signed up, agreeing to give Connecticut-based Verus Financial LLC, a cut of any take.

As insurance regulators opened their probes about a year ago, they estimated there was more than $1 billion sitting on life insurers' books and owed as death benefits, some of it languishing for decades.

Insurers say they have behaved lawfully, and MetLife didn't admit any wrongdoing in the pact. In its statement Monday, MetLife noted it paid about $12 billion in death benefits in 2011 and its records indicate that more than 99% of death-benefit claims "are submitted by beneficiaries and routinely paid in a timely and accurate manner."

The agreement also commits MetLife to trying to find hundreds of thousands of older people to whom it sold small policies—most less than $1,000 in face value—as far back as the early 1900s, or their families. Those policies are together valued at more than $400 million, according to the insurer and state officials.

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They were sold by agents who walked through urban neighborhoods, and typically collected the small premiums weekly or monthly. Many people bought the policies to cover burial expenses.

If MetLife can't locate the people, it will turn policy proceeds over to state unclaimed-property departments over the next 17 years, MetLife said.

MetLife testified in hearings in California and Florida last year that it began using the database in its annuity business soon after it became available in the 1980s, and began cross-checking its life-insurance client base in 2007. In its statement Monday, it said it used the Social Security database to "match virtually all of its administrative records in 2011."

"I hope other life insurers will follow MetLife's lead and enter into similar agreements," said California Insurance Commissioner Dave Jones.

Besides Florida and California, other insurance departments that helped negotiate the settlement were Illinois, New Hampshire, North Dakota and Pennsylvania, Mr. Jones said.... A version of this article appeared April 24, 2012, on page C1 in some U.S. editions of The Wall Street Journal, with the headline: MetLife Vows to Track Deaths.

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FT.com April 26, 2012 11:04 pmMetLife exits reverse mortgagesBy Telis Demos in New York

MetLife has sold its reverse mortgage unit as the insurer continues moves to exit non-insurance businesses and escape strict government oversight of its use of capital.The group aims to end its designation as a “systemically important financial institution” under the Dodd-Frank Act, which applies to bank holding companies with more than $50bn in assets. Such institutions must receive Federal Reserve approval to deploy capital.

MetLife has said it would like to use what it deems excess capital to pay dividends and repurchase additional shares, but it did not pass the Fed’s stress tests of systemically important institutions in March. MetLife’s chief executive said then the company was “deeply disappointed”.

The reverse mortgage unit will be sold to Nationstar Mortgage, subject to regulatory approvals. Terms were not disclosed. Though MetLife does not break out the unit’s results, the company said that its retail banking businesses, which included the unit, represented less than 2 per cent of operating earnings.

“Given MetLife’s strategic focus as a global insurance and employee benefits leader, the company decided in 2011 that a bank holding company structure was no longer appropriate,” the company said.

MetLife agreed to sell its retail bank to GE Capital late last year, with the sale expected to close later this year, and its warehouse finance business to EverBank. It also announced it would stop writing traditional mortgages.

After market close, the company reported a first-quarter net loss due to $1.3bn in losses on derivatives, which it used to hedge against the risk of falling interest rates and unfavourable foreign currency movements.

The company said the losses were “largely due to increases in interest rates and MetLife’s lower credit spreads”.The result was a net loss for the quarter of $120m, versus net income of $884m a year ago. Total revenues grew fractionally, to $15.92bn from $15.91bn.

The derivatives loss masked a rise in premiums and other fees by 7 per cent, to $11.6bn, and a 12 per cent jump in net investment income, to $6.2bn. Expenses also rose 12 per cent, to $16.3bn.

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MetLife’s share price has fallen 18.5 per cent in the past year. The shares were unchanged in after-hours trading, after adding 1.4 per cent to $36.47 on Thursday.

MetLife, like other insurers, has been increasing its premiums following an extended period of falling rates after the financial crisis, in part to make up for a surge in losses related to weather catastrophes last year.

“These results reflect top-line growth in all of MetLife’s global regions, sound fundamentals and the core earnings power of our diversified businesses,” said Steven Kandarian, chief executive.

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FT.com May 23, 2012 6:44 pmMetLife shifts focus as fears hit sharesBy Ajay Makan in New York and Alistair Gray in London

MetLife is moving into accident and health insurance and scaling back its variable annuities business, as its chief executive warned that perceived risks in its investment portfolio were weighing on the company’s share price.

The strategic shift comes after shares in the US insurer fell 30 per cent in the past year after it failed Federal Reserve bank stress tests, and investors weigh the possibility that MetLife will be designated a systemically important financial institution (Sifi), resulting in the setting of higher capital requirements.Steven Kandarian, chief executive, said the company wouldswitch to quarterly from annual dividends as part of plans to return more cash to shareholders, once it sheds its bank charter after completing a sale of its deposit taking business to GE Capital. But Mr Kandarian acknowledged the threat of Sifi designation remains a “looming cloud.”

Shares were down 3 per cent to $30.20 shortly before midday in New York, which would be their lowest close this year.Metlife’s move into accident and health insurance comes as US insurers shift their focus away from products such as life assurance, where profits depend on long-term investment returns.

In the past quarter MetLife was the second largest seller of variable annuities, among the most potentially problematic life assurance products as they tend to offer minimum guaranteed returns to consumers, although the portfolios invest in securities which can lose value.

In order to meet such guarantees, the insurers involved often seek to hedge their exposure, although they have had mixed success in doing so, and are under pressure to hold more capital against future investment losses.

Hartford Financial Services announced the sale of its variable annuity business this year. Sales of such annuities in the US fell 7 per cent to $36.8bn in the first quarter compared with a year earlier, according to Limra, the research company.

“Across the industry we’re seeing companies try and grow reliable income streams and step back from spread businesses, as low-rates and weak equity markets weigh on returns and regulators take a worst-case scenario view of their market exposure,” said Josh Stirling, an analyst at Sanford Bernstein.MetLife also announced plans to cut $600m in costs, to increase emerging markets’ share of earnings to 20 per cent from 14 per cent and to improve its return on equity to between 12 per cent and 14 per cent from 10.3 per cent last year, all by 2016.

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FT.com June 1, 2012 10:33 pmNationwide Accident Repair shares slideBy James Shotter

Shares in Nationwide Accident Repair Services slumped 12 per cent on Friday after the group said that its work for the insurance group Aviva would fall by two-thirds, deprivingthe repair company of about £10m in revenues.

Nationwide said that Aviva had retendered some of itscontracts “on terms which are commercially unattractive to the group” and that it would no longer work for Aviva in certain parts of the UK. However, it still expects to earn about £5m per year from the insurer.

Nationwide does not expect its capacity to be affected, and has no plans to close sites. Instead it hopes to offset the lost business through flexible working practices.

Kevin Fogarty, analyst at Westhouse Securities, the company’s broker, said that the news was disappointing. However, he noted that the company still had an “encouraging pipeline of new fleet and insurance opportunities” and said that as a result he was not changing his forecast of £5.6m in pre-tax profits for the year.

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WSJ.com BUSINESS Updated May 2, 2012, 9:22 p.m. ETPrudential Financial Swings to a LossBy LESLIE SCISM And TESS STYNES

Prudential Financial Inc.'s shares tumbled in after-hours trading after the insurer reported it swung to a first-quarter loss on currency-hedging costs and a rise in disability claims.The insurer's results included $1.49 billion in pretax accounting charges tied to fluctuations in the value of the Japanese yen, which has weakened this year. The company earns nearly half its profits abroad, mostly from Japan.The stock fell 5.6%, to $57.50, in after-hours trading.

Prudential's group-insurance unit, which offers life, disability and other coverage to employers, reported an operating loss, on an adjusted basis, of $38 million for the first quarter, compared with operating income of $39 million in the year-ago period. The company became the first major insurer since the financial crisis to show a strong surge in claims filed by workers who left jobs for disability leave.

Analysts had braced for an industrywide increase in claims, which tend to rise when the economy slumps. Workers have less incentive to return to work, analysts said, if they fear widespread layoffs. Until now, though, no large insurer had reported such an increase during the downturn.

Last week, rival MetLife Inc. posted solid group-insurance results, and on Wednesday Hartford Financial Services Group Inc. reported a moderate decline in operating profit from its group-benefits arm, analysts said.

Prudential reported a quarterly loss of $988 million, or $2.09 a share. A year earlier, the company earned $539 million, or $1.10 a share. Revenue increased 16%, to $10.65 billion. Analysts polled by Thomson Reuters had expected a quarterly profit of $1.71 a share.

The results exclude a closed block of life-insurance and annuity business Prudential had offered when it was owned by its policyholders.

Adjusted operating income, which excludes the mark-to-market accounting of the currency hedges, some investment results and other items, fell to $1.56 a share from $1.62.While the results "reflect fluctuations in claims experience, expense levels and market-driven items, our business fundamentals remain solid," Prudential Chief Executive John Strangfeld said in a statement.

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The company's retirement-solutions and investment-management division posted strong gains in operating income. Its international division reported a 24% increase in new business premiums, though its operating earnings fell.Hartford's first-quarter earnings slumped 81% as net losses from its hedging program more than doubled, overshadowing higher revenue.

For the first quarter, the company reported a profit of $96 million, or 18 cents a share, down from $501 million, or 99 cents, a year earlier.

Core earnings, which exclude some investment results, rose to $1.25 a share from $1.13 a year ago. Revenue rose 22%, to $7.66 billion, beating analysts' expectations.Lincoln National Corp. on Wednesday reported that its first-quarter earnings fell 22% on heavier investments losses and lower revenue.

Lincoln National's quarterly profit fell to $245.3 million, or 83 cents a share, from $313.5 million, or 97 cents a share, in the year-ago period. The prior-year quarter included $34 million in special benefits. Lincoln's shares fell 2.6%, to $23.93, in after-hours trading.

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WSJ.com BUSINESS Updated May 3, 2012, 6:24 p.m. ETPrudential's CEO Vows to Fix Disability BusinessBy LESLIE SCISM

Prudential Financial Inc.'s chief executive told investors the company is "moving aggressively to correct" the "clear performance issues" that have beset its disability-insurance business, which led to an unexpected first-quarter loss.On a Thursday morning conference call with analysts, Chief Executive John Strangfeld said "we will make all needed changes" to fix the business, which reported a surprising surge in disability claims during the period. He said the company's goal of a 12% to 14% return on equity is still achievable.... Prudential's group-insurance unit, which sells life, disability and other insurance coverage through employers, reported an operating loss, on an adjusted basis, of $38 million for the first quarter, compared with operating income of $39 million in the year-ago quarter. The weakness came as the company swung to a first-quarter loss of $988 million, or $2.09 a share, weighed down by a $1.49 billion pretax charge stemming accounting losses tied to foreign exchange rates. ...

Prudential executives laid at least some blame on a spike in death-claim costs they said isn't likely to be repeated. But they

also confirmed a more troubling trend had also taken hold: More workers are taking disability leave from their jobs, filing larger claims and staying away from work longer, they said.Under disability-income policies, workers who are injured or sick and qualify for benefits receive part of their regular pay.

Insurers typically expect more and longer disability claims during economic downturns, as some workers have less incentive to return to work if they fear widespread layoffs.Prudential said it was countering this increase by pushing through price low double-digit price increases.

Mr. Strangfeld said the company had assigned one of its most-seasoned executives to correct the "performance issues" at the business. The company appointed Stephen Pelletier, who joined Prudential in 1992, to run group insurance last month.Mr. Strangfeld also said the company's return-on-equity goals were still achievable in the face of the unit's woes, saying that it is the smallest of the company's reporting segments.He said that "While we are very intent on fixing it, and I don't want to minimize it," the unit isn't driving the business mix.

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FT.com Last updated: June 1, 2012 11:27 pmGM cuts $26bn from pension liabilityBy Dan McCrum and Ajay Makan in New York

General Motors will cut $26bn from its $134bn pension liability by offering lump sum payments to employees and shifting pension plans over to Prudential Financial, an insurer.

The transfer will be the largest ever group annuity purchase for a corporate pension plan, according to Mercer, a consultancy that advised on the transaction, and it comes as US companies struggle with underfunded pension liabilities that are estimated to total about $400bn for S&P 500 groups.

GM will spend $3.5bn-$4.5bn on the move, includingoffering lump sum payments to 42,000 retirees and their surviving beneficiaries and paying Prudential to take over the risk of covering its remaining salaried employees and those who do not take the lump sum.

“These actions represent a major step toward our objective of de-risking our pension plans and will further strengthen our balance sheet and give us more financial flexibility,” said Dan Ammann, GM’s chief financial officer.

The status of the pension fund and its unfunded liability is one of the few issues left unresolved since the carmaker filed for bankruptcy under a government-led bailout in 2009.

Pension liabilities for US companies are now larger than at the depths of the financial crisis, with plans hit by a combination of poor investment returns and falling interest rates that have increased the value of promises to retirees.

For some years, asset managers and insurers have talked about the opportunity in reducing the risk posed by fluctuations in the value of corporate pension assets but companies have remained wary of the cost of filling in the funding gaps when interest rates are so low.

The transaction was constructed over six months of negotiations between Prudential and GM, with rivals also submitting bids, the insurer said. GM will pay Prudential 10 per cent of the liabilities it assumes, in addition to transferring the assets, once the pension buyouts are completed.

For Prudential the deal represents the first fruit for a unit set up in the aftermath of the financial crisis specifically to target corporate pension plans.

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“We’re certainly looking at other deals this year,” said Dylan Tyson, head of Prudential Retirement’s pension risk transfer unit. “We’re seeing more interest from US companies this year than we have in the last three years combined, and we’re hopeful this is an idea whose time has come,” he added.Mr Tyson said the deal would require the insurer to set aside additional capital, but would not impact meaningfully on regulatory capital requirements.

At the end of 2011, GM’s global pension plans were underfunded by $25.4bn. The planned transfer will affect 118,000 US retirees, the carmaker said.

The move follows a similar proposal by Ford Motor to offer lump sum buyouts to about 98,000 salaried retirees and former employees. GM’s competitor, which was the only US carmaker to avoid bankruptcy, has a $74bn pension liability which was underfunded by $15bn at the end of 2011.

In response to stock market volatility both carmakers have also made moves to shift more of their pension assets into bonds which more closely match the character of their liabilities.

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WSJ.com DEALS & DEAL MAKERS Updated September 27, 2012, 5:30 p.m. ETPrudential Buys Hartford Life-Insurance ArmBy LESLIE SCISM

Prudential Financial Inc. agreed to acquire the individual life-insurance business of Hartford Financial Services Group Inc. for $615 million in cash, bulking up its U.S. operations as its rival delivers on a promise to slim down.

The deal, which is expected to close early next year, will also allow Hartford to free up almost $1 billion in capital it held to support the business, the company said Thursday in a statement.

The transaction is Prudential's first big acquisition since it paid American International Group Inc. nearly $5 billion for two Japanese life insurers in early 2011. Prudential Chief Executive John Strangfeld said this summer that it was "critical" for the company to improve returns and find ways to effectively deploy billions of dollars of excess capital.

For Hartford, the sale would complete its goal to narrow its focus to property-casualty and group-benefits insurance, and mutual funds. It "represents a significant milestone in the execution" of the company's strategy "to deliver greater value

to shareholders," Hartford Chief Executive Liam McGee said in a statement.

Prudential and Hartford announced the agreement after the market close, and both companies' shares climbed after The Wall Street Journal reported earlier in the day that a deal was imminent. Prudential shares rose $1.08, or 2%, to $54.82 on Thursday, while Hartford climbed 62 cents, or 3.3%, to 19.30.

Under the agreement, a so-called reinsurance transaction, Prudential will assume responsibility for approximately 700,000 Hartford life policies. Prudential will also receive $7 billion in investment assets from Hartford that are earmarked for future claims on those policies, among other assets and liabilities.

The combination will create an organization "with greater scale, enhanced product offerings and expanded distribution expertise," Mr. Strangfeld said.

As the divestiture plan was launched, Hartford was facing criticism from big shareholder Paulson & Co., about the stock's weak performance. The hedge-fund firm has since stepped back from its activist role.

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"Hartford has made substantial progress in a short period time to become a more focused company, which we believe will have a positive impact on its valuation," Charles Murphy, a Paulson & Co. analyst, said in an email following the deal's announcement.

In recent weeks, Hartford has announced deals to sell its retirement-plans business to Massachusetts Mutual Life Insurance Co., a broker-dealer business to AIG, and an individual-annuities distribution platform to Forethought Financial Group Inc. Annuities are a tax-advantaged retirement-savings product.

In scaling back, Hartford also is running off its once-booming variable-annuity business. Hartford sold guarantees of lifetime withdrawals, even if the underlying funds tanked, and those have proved costly since the financial crisis.

In June, Prudential entered a landmark transaction with General Motors Co. in which it is helping the car maker reduce its pension obligations by billions of dollars. GM agreed to hand over assets and obligations of its salaried retiree pension program and management responsibility to Prudential through the purchase of a group annuity contract. Analysts have applauded the deal as a smart use of Prudential's capital.

Write to Leslie Scism at leslie.scism@wsj.com

A version of this article appeared September 28, 2012, on page C2 in the U.S. edition of The Wall Street Journal, with the headline: Hartford Unloads Life Unit.

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WSJ.com BUSINESS July 19, 2012, 9:22 a.m. ETTravelers Swings to a ProfitBy ERIK HOLM

Travelers Cos., one of the largest insurers of U.S. businesses, posted a $499 million second-quarter profit, reversing a year-earlier loss as the cost of natural-catastrophe claims fell. But the improved results still fell short of the most widely cited number used to reflect Wall Street's expectations. Several earnings projections included in the Thomson Reuters consensus figure appeared not to reflect the cost of claims related to a violent late-June storm that caused widespread losses across the Midwest and mid-Atlantic regions.Operating profit of $495 million, or $1.26 per share, missed the average estimate of analysts surveyed by Thomson Reuters by nine cents per share. Operating profits exclude some investment results.

While less than last year's $1.1 billion in catastrophe losses, Travelers still incurred $357 million in disaster claims after taxes in the second quarter, well above average for that time of year. Catastrophes in the quarter included wildfires in Colorado, flooding in Florida and powerful hailstorms in Texas.Companies including Hartford Financial Services Group Inc. and Chubb Corp. released estimates of their disaster claims in recent days, causing some analysts to lower their earnings estimates for Travelers and other property-casualty

companies. Still, in the case of Travelers, other estimates remained unchanged: 10 of the 25 estimates used by Thomson Reuters hadn't been altered in the past month through Wednesday.

The company's net income of $499 million, or $1.26 a share, compared with a net loss of $364 million, or 88 cents, in the same period a year earlier. Catastrophe losses in last year's second quarter set a record after tornadoes struck several U.S. states. "While much lower than in the prior year quarter," catastrophe claims "were considerably higher than we would have expected based on historical experience," Chief Executive Jay Fishman said in a statement.

Net written premiums, a measure of the value of policies sold in the quarter, rose 0.9% to $5.87 billion as Travelers raised the cost of the coverage it provides to businesses and consumers. Travelers has been raising rates across all its business segments for nearly two years, partly in response to the increased cost of natural disasters. A decline in interest rates, which have damped returns in the company's investment portfolio, have also fueled the increases.

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In the latest quarter, Mr. Fishman said, rates on renewing customers in its business-insurance segment, the company's largest, rose 7%. In its consumer segment, premiums paid by renewing holders of auto policies who buy coverage through agents rose 6%, while its homeowner-line premiums rose 11%.

Still, both segments reported underwriting losses, while the company's financial, professional and international unit posted a $99 million underwriting gain. Travelers reported a consolidated combined ratio of 100.5%, compared with 125% a year earlier. Combined ratios measure underwriting results; figures over 100% indicate an underwriting loss.

Property-casualty companies sometimes remove catastrophe costs and changes in reserves to provide a so-called "underlying" combined ratio. By that measure, Travelers' profitability improved to 94.5% from 97.8%, driven in part by the rate increases. The rate changes are coming at a cost to Travelers. The company said new business volumes decreased across all segments when compared to the same period a year earlier. Still, in its business-insurance segment, new business improved from recent quarters, the company said.

Results were helped by an $147 million reduction in the amount the company had set aside to pay claims incurred in

prior years. A year ago, the company had pulled $111 million from reserves. The company attributed the latest reserve reductions in part to better-than- expected results in its workers' compensation line for years before 2009 and lower-than-anticipated claims on last year's catastrophes.

Net investment income fell 2.8% to $589 million as the company reinvested its fixed-income assets at lower rates.During the quarter, the company repurchased 5.6 million of its own shares for a total cost of $350 million. ...

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WSJ.com HEARD ON THE STREET July 9, 2012, 5:25 p.m. ETWellPoint's Healthy Premium for AmerigroupBy SPENCER JAKAB

There is no fine print when you are speaking on a conference call. Had there been, WellPoint Chief Executive Angela Braly's bold statement that her company would have gone ahead with its acquisition of Amerigroup "no matter what" might have carried a prominent disclaimer.

It almost certainly wouldn't have paid $4.9 billion, a nearly 43% premium and the largest ever in the managed-care sector, had the Supreme Court not given its surprise reprieve to Barack Obama's health overhaul less than two weeks ago.

WellPoint paid about three times its own prospective 2012 earnings multiple in the largest all-cash deal the sector has ever seen.

Even before the ruling, the fortunes of Medicaid specialists such as Amerigroup and traditional managed-care companies such as WellPoint were diverging, but the decision put an exclamation point on it.

At Friday's close, Amerigroup's shares already were up nearly 9% this year, while its acquirer was down a similar amount.

Now, that about 17 million uninsured people likely will move onto Medicaid rolls in 2014 and another 15 million onto state-run insurance exchanges, WellPoint wanted a bigger piece of the action.

If the growth of Medicaid managed care is anything like what analysts expect, the premium paid makes sense as Amerigroup's revenue should double over five years. The combined company would cover 4.5 million, or one out of five Medicaid managed-care recipients in 2013.

States are becoming more amenable to contracting with managed-care companies to handle both Medicaid and "dual-eligible" patients over 65 who also can receive Medicare.

WellPoint's shares rallied on a weak day for stocks. The only grumbling in some quarters was that Amerigroup wasn't receiving enough of a premium. But with significant political and execution risk still looming on Medicare expansion, why push their luck? They can keep the $92 a share no matter what. ...

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WSJ.com HEALTH INDUSTRY July 9, 2012, 5:27 p.m. ETWellPoint's Amerigroup Deal Marks Big Push for 'Dual' PatientsBy JON KAMP

WellPoint Inc.'s purchase of Medicaid insurer Amerigroup Corp. catapults WellPoint deep into the chase for a huge—but potentially risky—new market covering people with costly health problems.

Known as dual-eligible patients, these are more than nine million Americans who qualify for both Medicaid and Medicare because of factors like age, disability and poverty. Rather than benefiting from the double coverage, they often wind up with poorly coordinated care from the systems' different rules.

The theory is that better management should lower their costs, estimated at about $300 billion today, by doing things like helping patients with chronic conditions avoid unnecessary hospital trips.

"The dual-eligible expansion opportunity is tremendous and was a driving force for this transaction," said Angela Braly, WellPoint's chief executive, on a conference call Monday. By purchasing Amerigroup, WellPoint becomes the biggest Medicaid insurer by adding a fast-growing company with contracts and connections in some key states.

The health-care overhaul law recently upheld by the Supreme Court created an office in the Centers for Medicare & Medicaid Services that aims to streamline the dual-eligible system. It gave grants to several states to help foster more coordinated efforts, and many other states are moving under their own power to do the same.

Serving this emerging market may require the ability to carefully manage patients' health problems, the capital to launch business, and relationships within states that can be leveraged to win contracts.

WellPoint built up on one front last year by purchasing CareMore, a firm that specializes in caring for seniors with special needs. Now it is adding Amerigroup, which has experience competing for—and winning—state contracts on the Medicaid front.

The transaction values Amerigroup at roughly $4.46 billion, or $92 a share. "With this deal, WellPoint becomes a key player in the dual opportunities across the country," said Citigroup analyst Carl McDonald. He noted that many larger plans in the managed care industry aren't that well-positioned to compete for dual patients, despite their overall heft, because of their "relatively modest Medicaid presence."

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But WellPoint with Amerigroup will have about 4.5 million Medicaid members, pushing it ahead of UnitedHealth Group Inc.

A typical dual patient might be on Medicare due to age and on Medicaid because chronic health problems drained their savings, although younger patients with disabilities are also in the system. These are "among the sickest and the poorest" people covered by the government, the Kaiser Family Foundation has said.

These patients can rack up significant expenses. WellPoint noted they represent about 20% of the Medicare population but 31% of costs. On the Medicaid side, they represent 15% of enrollment but 39% of costs.

The company highlighted 13 states with "near-term dual eligible opportunities," including big ones like California, Texas, Florida and New York, where the combined WellPoint/Amerigroup will have a presence.

Overall, the 19 states where the companies have operations comprise more than $180 billion in spending on dual patients, significantly more than half of overall U.S. spending.

WellPoint is the first big managed-care firm to pull the trigger on buying a Medicaid insurer to target this opportunity, but the

market clearly anticipates there could be more to follow. Shares of Centene Corp., Molina Healthcare Inc. and WellCare Health Plans Inc. soared at least 17% on the news their competitor Amerigroup was being bought out.

Still, some industry executives previously talked down the idea of buying Medicaid insurers because of high stock prices and tight profit margins. Humana Inc., which has a big focus on Medicare plans but limited presence in Medicaid, has preferred to go the partnership route, for example. It already has struck up an alliance with a big Medicaid provider in Ohio and is aiming for more.

The chase for the duals market also carries some risks. Insurers in Kentucky and Texas have recently run into problems where costs for new or expanded Medicaid markets were much higher than expected, exceeding premium revenue, which hurts earnings.

Considering dual-eligible patients tend to have much more complicated—and expensive—problems than those often covered by traditional Medicaid plans, an unexpected cost problem could cause significant trouble.

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Susquehanna Financial analyst Chris Rigg believes duals are best managed inside big firms that have cushion to handle potential cost problems that flare up. "A lot more revenue equals a lot more risk" in the duals market, he said.

Then again, better management of high-cost patients offers the opportunity for big savings. WellPoint is betting it has assembled the right combination of tools to get the job done."We clearly recognize those risks," Wayne DeVeydt, WellPoint's chief financial officer, told reporters Monday.

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WSJ.com HEALTH INDUSTRY Updated July 9, 2012, 7:46 p.m. ETWellPoint's Medicaid BetBy ANNA WILDE MATHEWS and JON KAMP

WellPoint Inc.'s $4.46 billion deal to buy Medicaid-focused Amerigroup Corp. underscores the future of health coverage as a business that increasingly intertwines the roles of government and private companies.

The acquisition, which will vault the No. 2 health insurer past UnitedHealth Group Inc. and others to become the biggest private Medicaid company by membership, reflects several key drivers.

Among them: budget pressures that are prodding state officials to turn to private contractors that may be able to manage Medicaid more efficiently, and the 2014 expansion of Medicaid under the federal health law.

Medicaid, the state-federal program that covers low-income Americans, costs around $457 billion a year and covers about 53 million people, WellPoint said. Around 24 million of them are enrolled with managed-care companies for comprehensive coverage, according to WellPoint. The companies are typically paid a set amount per person by states.

WellPoint said the total Medicaid population could grow to 68 million in 2014, with 41 million people enrolled in managed-care plans. Part of that may not materialize, because the Supreme Court decision gave states leeway to opt out of the Medicaid expansion, but the companies said they believed the ruling will have only limited impact on the growth of private-plan Medicaid, and analysts agreed.

"The opportunities in Medicaid are going to continue no matter what," said WellPoint chief executive Angela Braly. Ms. Braly said the deal had been considered over "weeks and months." States have already been steadily boosting the number of their current Medicaid participants who are in managed-care plans.

In particular, WellPoint is betting on so-called "dual eligibles," those who qualify for both Medicare and Medicaid coverage, who amount to around nine million people but cost more than $300 billion a year to cover.

The federal law encourages states to better manage these patients, which in many cases will involve bringing in companies to coordinate their care. WellPoint said that, combined with Amerigroup, it will have strong positions in the four states with the biggest spending on "duals." That portion of the law isn't directly affected by the high court's decision.

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Amerigroup DealManaged-Care as Growth EngineThe Deal: WellPoint is paying $4.46 billion plus debt to buy Amerigroup and become the biggest Medicaid managed-care company, with some 4.5 million members.

The Rationale: Medicaid managed care is seen as a growth area, with states turning to contractors to control costs. But the biggest prize is the market for "dual eligible" patients who qualify for Medicaid and Medicare and rack up about $300 billion in annual costs.

The Risks: If companies don't manage care for high-cost dual-eligible members well, they could see costs balloon.Carl McDonald, an analyst with Citigroup Investment Research, projected that the federal law's Medicaid expansion, if fully taken up, would result in around $40 billion to $45 billion in annual new managed-care revenue by the end of 2014, some of which might be at risk because of the high court's ruling.

However, he estimated that perhaps $60 billion to $70 billion in new annual revenue tied to duals may emerge by then, and around $50 billion from states putting more of their current participants into private plans.

WellPoint will pay $92 a share in cash for Amerigroup, a 43% premium to Friday's closing price. The deal is expected to close in the first quarter of 2013 and add to WellPoint's per-share earnings in 2013.

By 2015, the company expects the deal will add more than $1 to per-share earnings. WellPoint valued the deal at $4.9 billion, including Amerigroup's debt.

The price is rich, amounting to 18.4 times 2013 projected earnings per share, said Chris Rigg, an analyst with Susquehanna Financial Group. It's "the upper end of what I think is fair,' but "not unreasonable given the growth expected" at Amerigroup, he said.

Some analysts suggest the Medicaid carrier's revenue could triple over the next few years. Still, Mr. Rigg said, Medicaid is traditionally a thin-margin business and companies often stumble initially when they start covering new populations such as the dual-eligibles, whose complexity means "the operating risks and hence the financial risks are much higher."

WellPoint, based in Indianapolis, said Amerigroup leaders including Chief Executive Jim Carlson had signed employment agreements to remain with the company, and they will lead the combined Medicaid business.

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Currently, WellPoint is the No. 4 Medicaid company, while Amerigroup is No. 2. Combined, they will have 4.5 million members in 19 states, and analysts said they saw few antitrust hurdles, because of limited overlap.

Medicaid, which currently represents just 6% of WellPoint's 33.7 million members, would grow to 12% after the deal's close. In the past, WellPoint "hasn't been particularly successful" outside California in Medicaid, said Thomas A. Carroll, an analyst with Stifel Nicolaus, pulling out of some states over the years and recently losing out on a bid for Medicaid business in Ohio.

But more broadly, WellPoint's move, along with other insurers' recent deals like Cigna Corp.'s $3.8 billion purchase of HealthSpring Inc. and WellPoint's own previous purchase of CareMore Health Group, points out how the growth in American health coverage is largely playing out in government-linked business, including Medicare, Medicaid and the subsidized private plans coming under the federal health law—and companies are jumping to grab a bigger stake in that future.

By 2021, government spending is projected to be nearly half of national health expenditures, up from 46% in 2011, according to federal actuaries. "That is where all the growth is," said Mr. McDonald, the Citigroup analyst.

Amerigroup shares jumped 38% to $88.79 in 4 p.m. composite trading Monday on the New York Stock Exchange.Shares of Medicaid-focused companies Centene Corp., Molina Healthcare Inc. and WellCare Health Plans Inc. rose 20%, 18% and 18%, respectively Monday.

Executives at big health insurers, while eager to get into areas like covering the dual-eligibles, have previously talked down the idea of buying big Medicaid firms, partly because of the business's traditionally limited profit potential.

But WellPoint's Amerigroup deal may put pressure on competitors to consider similar moves, despite the Medicaid companies' currently high valuations.

WellPoint said that in the 14 states where its current operations are focused, around two-thirds of residents could be eligible under the new law for either Medicaid or federally subsidized plans, which go to those making up to 400% of the federal poverty level.

Many of those eligible will likely retain other coverage, however. The company said it aimed to serve the large number of people who are likely to move back and forth between subsidized plans and Medicaid as their incomes fluctuate.

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For states, the growing dive into managed care will raise policy questions about the oversight of so many frail and challenging patients by companies, said Diane Rowland, executive vice president of the Kaiser Family Foundation.

"What's going to be the accountability mechanism?" she said.

Research so far has shown no consistent pattern for the quality of managed-care companies' Medicaid care versus the traditional government version, she said. ...

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FT.com/Lex July 9, 2012 7:38 pmWellPoint / AmerigroupIt is easy to succeed in business. Find a towering heap of money. Stand right next to it. When it starts moving, stick out your hand, and take a bit of the flow. Those sceptical of this technique can visit the summer home of an investment banker or corporate lawyer.

US health insurer WellPoint sidled up to one of the very biggest heaps on Monday, when it announced it would pay $5bn for Amerigroup, an insurer specialising in managing benefits for members of Medicaid, the US federal-state insurance scheme for the poor.

Medicaid will dole out about $460bn in benefits this year (16 per cent of US health spending); the government expects that sum to more than double (to 20 per cent of the total) by 2021.

The Affordable Care Act, ruled constitutional this month, expands eligibility in the programme.

Particularly promising for insurers are the so-called “dualeligibles”, who fall under the protection of both Medicaid and Medicare, the scheme for the elderly and disabled. Duals account for a wildly disproportionate share of government health costs, and many states are looking to managed care companies for help in controlling the bleeding.

Barclays puts the revenue opportunity for health insurers at $122bn or more during the next few years.

Wellpoint’s shares rose 3 per cent on the news, even though it paid a premium of $1.4bn for Amerigroup, more than the $125m in expected annual synergies can justify on theirown. Perhaps the growth potential justifies the price.

Remember, though, that the ACA did more to expand coverage than control costs. As the country gets older (10m Americans will turn 65 in the next seven years) and the burden heavier, the agreement between the government and private insurers will remain in flux. That pile of money is set to move in some unexpected directions.

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WSJ.com MANAGEMENT Updated August 28, 2012, 11:16 p.m. ETWellPoint's Braly Quits Amid PressureBy ANNA WILDE MATHEWS And JON KAMP

Under pressure from investors unhappy with the health insurer's performance and direction, WellPoint Inc. Chief Executive Angela Braly resigned Tuesday, and the company's board said it would begin a search for a permanent replacement.

The abrupt shift came as the board's leadership had been meeting with major investors in the wake of a disappointing second-quarter earnings report that sharpened concerns about Ms. Braly and the company's strategy. Indeed, lead independent director Jackie M. Ward was scheduled to meet with other investors Wednesday.

Though Ms. Ward, on behalf of the board, had issued a statement expressing support for the company's direction just a month ago, pressure mounted rapidly as the board heard from some major shareholders such as Omega Advisors and T. Rowe Price Group Inc., which sent a letter raising concerns about WellPoint's performance and direction in the wake of the earnings release, according to a person with knowledge of the matter.

A person familiar with the board's thinking said the move came because of "a firestorm from the investors." The person said Ms. Braly's departure emerged from a "mutual understanding" between her and the board's leadership as it became clear that it was untenable for her to stay, and the board didn't force her to resign. According to a person with knowledge of the matter, the board met Tuesday and focused largely on managing the transition.

The company's shares rose 3.3% to $59.29 in after-hours trading Tuesday, as some investors said they welcomed the move. WellPoint's stock had been down more than 13% on the year after the 4 p.m. close of regular trading. Robert Medway, managing partner at WellPoint shareholder Royal Capital Management LLC, which wrote a letter to the board last week criticizing Ms. Braly's management, said he applauded the change. "This is a company with good assets in an industry that's not completely predictable," Mr. Medway said in an interview. "Good management can make a difference."

In a statement, WellPoint said its interim CEO and president will be John Cannon, the company's executive vice president and general counsel. Mr. Cannon doesn't want to be considered for the permanent job, WellPoint said. Ms. Ward will become nonexecutive chairman of the board.

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The company said it would begin a search for a new CEO, looking at both internal and external candidates. Among the names floated by analysts were James G. Carlson, 60 years old, the CEO of Amerigroup Corp., the Medicaid-focused plan that WellPoint is in the process of buying; WellPoint Chief Financial Officer Wayne DeVeydt; Ken Goulet, the executive vice president who oversees the company's commercial business; and former Aetna Inc. CEO Ronald A. Williams.

Ms. Braly, 51, in an internal email reviewed by The Wall Street Journal, told WellPoint employees she agreed the company will benefit from getting "a fresh perspective on ways we can improve execution across the company." She also said WellPoint is in a strong position strategically and has a secure foundation.

In its statement, the board signaled that WellPoint's direction might not change dramatically. Ms. Ward said that the board "continues to believe that time will prove the wisdom of potentially transformative actions taken under Angela's leadership…But now is the right time for a leadership change." She also said the board believes "the remaining executive team is dynamic and strong, with great potential to drive WellPoint's future success."

WellPoint's second-quarter earnings fell 8.3% from a year earlier, and the company lowered its full-year guidance.

Erosion in the Indianapolis-based company's membership ranks was a key factor, as well as pricing pressure in certain markets and an uptick in consumers' use of some medical care.

That was the latest blow, after what investors saw as a series of stumbles over the past few years, including an unexpected earnings hit last year tied largely to problems with a Medicare plan in California. In 2010, the company scaled back a proposed rate increase in California that had become a lightning rod in the policy debate over a health overhaul, leading to a loss. The company's stock has lagged behind that of its major rival, UnitedHealth Group Inc., which has also surpassed it in terms of membership.

Ms. Braly, who also was the board's chairman, had been chief executive since 2007, and there was considerable turnover in the ranks under her watch, with a number of the company's top executives leaving.

In addition, WellPoint is seen as a company with a particularly steep challenge tied to the major changes set for 2014 under the federal health overhaul because of its large position in the individual and small-group markets, the segments of the insurance business expected to be most impacted.

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In the past several months, WellPoint has engaged in a flurry of deal-making. In June, the company announced plans to buy contact-lens and eyewear retailer 1-800 Contacts Inc. for a sum that a person with knowledge of the matter pegged at around $900 million.

The next month, it unveiled the deal to purchase Amerigroup for about $4.46 billion, or $4.9 billion including assumption of debt. Unlike the contact-lens transaction, that deal drew generally warm reactions from analysts. ...

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WSJ.com HEALTH INDUSTRY Updated August 29, 2012, 7:48 p.m. ETBraly's Exit at WellPoint Applauded by InvestorsBy ANNA WILDE MATHEWS and DAVID BENOIT

WellPoint Inc. shares rose 7.7% Wednesday in the wake of Chief Executive Angela Braly's announced departure, signaling the extent of investor dissatisfaction about the company's performance over her five-year tenure.

Though the final move was abrupt—coming only a month after the board had publicly backed Ms. Braly's strategy—it came as the culmination of years of building concern among some shareholders over what they saw as a series of operational missteps.

Those worries crystallized after the company's disappointing second-quarter earnings release and came to the fore in a series of meetings in recent weeks between the board's leadership and major investors.

The train of events at WellPoint is unusual, at least in its relatively public nature, corporate governance experts said. Despite some evidence that money managers are increasingly willing to speak their minds on corporate governance, it remains rare for big-money investors to cause a stir without a

noted activist jumping in. Kenneth Squire of 13D Monitor, which tracks activist activity, said the majority of the shareholders in WellPoint are often big supporters of management.

Among those raising concerns to the WellPoint board was mutual-fund giant T. Rowe Price Group Inc., according to people with knowledge of the matter. While T. Rowe Price can be "very outspoken" it is "far from an activist," Mr. Squire said. A T. Rowe Price spokesman declined to comment.

In the case of WellPoint, investors and analysts said, worries dated back years, but came to a boil in the wake of the late-July earnings release and a downgrade in guidance.

"There were a series of decisions the company has taken that people have questioned; it wasn't like all of a sudden the light turned on," said Marshall Gordon, a buy-side analyst with ClearBridge Advisors, a unit of Legg Mason Inc. that currently holds WellPoint shares.

Now, he said, "the stock is a lot more attractive…with the managerial change, there's optimism for better execution."A WellPoint spokeswoman said Ms. Braly declined to comment.

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WellPoint shares rose $4.41 to $61.80 in 4 p.m. composite trading Wednesday on the New York Stock Exchange.

WellPoint's stock has lagged behind rivals, after what investors regarded as a series of stumbles over the past few years, including an unexpected earnings hit last year tied largely to problems with a Medicare plan in California. In 2010, the company scaled back a proposed rate increase in California that had become a lightning rod in the policy debate over a health overhaul, leading to a loss.

Ms. Braly also took a highly public role during the 2010 health-overhaul debate. At one point, she sent a sharply worded letter to President Barack Obama that rebuked the president for what she said was false information he gave the public about the insurer's coverage of breast-cancer patients.

But analysts said some of WellPoint's problems are tied to broader industry issues, as well as the company's own history and structure, which carries managerial challenges because it is built around 14 Blue Cross and Blue Shield plans and includes a major presence in California, often seen as a tough market for health insurers.

Health insurers generally have been facing significant challenges as they deal with the federal health overhaul.

Some of Ms. Braly's problems were "self-created, but other parts of it were out of her control," said Stifel Nicolaus & Co. analyst Thomas Carroll.

—Jon Kamp contributed to this article.

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FT.com July 11, 2012 11:30 pmUS insurer to scale up European profileBy Ed Hammond, Property Correspondent

A large US insurer has struck a deal with the City of London to build its own skyscraper, underlining the rapidly growing presence of international insurers in the Square Mile.

WR Berkley, which has a market value of $5.4bn, is understood to have agreed terms with the City’s planning authorities to construct a 40-storey tower next door to the offices of Lloyd’s of London.

WR Berkley is among the largest providers of insurance tomidsized companies in the US. The company is scaling up its operations in Europe, with offices in Germany, Ireland, Spain and Norway.

The agreement to build its own skyscraper follows a flurry of deals by US insurers to expand their office space in the centre of London, taking advantage of the shrinking of banks, which have long dominated the City office market.

In January, Aon signed a lease on 191,000 sq ft of office space in the nearby Leadenhall building, under construction and nicknamed the Cheese Grater. Meanwhile, Markel took

up a 51,000 sq ft pre-let agreement last month on Land Securities’ 36-storey Walkie-Talkie building.

The building would become one of five skyscrapers under construction in the Square Mile, which, in contrast to the low levels of development outside of the UK capital, has seen a spike in demand for new office space. The buildings are expected to capture some of the demand arising from lease expiries and breaks, expected to hit 3m sq ft a year in the City until 2017.

However, the City is undergoing a transformation in terms of its occupiers. Many of the large investment banks have relocated to Canary Wharf, favouring the wide floor plates and ability to have all of their staff in one building. The cost of office space in the City is also a big driver. Prime office rents in Canary Wharf are at £36 per sq ft a year, compared with £55 per sq ft in the City.

The departure of many traditional occupiers has opened the door for other industries, such as technology, media and professional services businesses. However, it is the rise of the insurance sector in the City market which has spurred on letting activity during the first half of this year. A recent report from CBRE, the estate agents, said that there are 13 insurers actively searching for a combined 1m sq ft of office space in central London.

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