Yes, Spitzer may have higher political ambition but that does not take away from the fact that he has been the only Attorney General who has exposed significant fraud and wrongdoing by some of America’s biggest corporations. The real question should be: why have other AG’s, and/or people at the SEC or U.S. Justice Department not initiated these investigations. Could it be they have all been ‘bought off’ with political contributions?
Additionally, I compliment Mr. Spitzer for commending Mr. Buffet’s business ethics. While both Mr. Greenberg and Mr. Buffet are successful businessmen only one became so by using ethical and legal strategies. Eliot Spitzer has a consistent record throughout the years of supporting and defending the consumers of NY State.
While Eliot Spitzer would be technically considered a politician due to the fact that he is holding and seeking elected office, I personally limit the term “politician” to the corrupt and bureaucratic officials in government. I do not however put Eliot Spitzer in that category.
E. Spitzer is to be commended for taking the lead in having the courage to take on a major force such as Maurice Greenberg.
I would not want to offend Mr. Spitzer by referring to him as a politician-if successful,he will simply be an elected official governing the State of NY. By referring to him a politician, we would be placing him in the same category as Bloomber or even worse George Pataki, which would be an outright insult.
I am a avid supporter for one reason and one reason only-E. Spitzer is performing his duties as Attorney General of NY to the utmost degree.
I will be most enthused when “Hank” is brought up on criminal charges. That should bring him back down to earth. This guy has been led to believe that he is an untouchable.
If you believe that Spitzer is not a politician, I have some swampland in Florida for sale…interested? He is about the most political animal you can find as he moves from headline to headline.
it’s hard to defend AIG. many people that deal with them do so with great caution and sometimes as a last resort. the service is awful and most employees can only work their so long. it is a dog eat dog culture. it does serve a valuable purpose however.
however it’s becoming more and more common for some goofus governor wannabe to attack without regard to reality or it’s impact on the majority. It’s also hard to determine which is the most blatant goofus.
Spitzer attacks one CEO but praises another as an icon. he is a role model that will be followed by other governor wannabes.
Gallagher issues emergency orders mandating that all hurricane claims be closed by the end of april. without regard to disputes of value, inablity to get contractors or permits or totally unreasonable claimants. This affects less than 1% of overall claims but looks good on paper. Total collapse of the med mal system and future collapse of the wind fund and he’s worried about deductibles and decreasing premiums by mandate. Total inability to understand economic market models.
Garamandi’s whole state insurance enviroment is a mess and it’s always somebody elses fault. Auto, WC, Property, Constuction Defect, Med mal. None are addressed after all this time. lots of populist gestures with no real affect.
The reality is the stepping stone politicos do far more damange on getting ahead at any cost than they do when they finally become King and soothe their egos.
It’s sad that this form of demagougory works so well and will continue to be repeated.
The problem for AIG is they write complex lines of coverage and consequently deal with a high ratio informed/educated/professional agents. It is common knowledge they do not value insurance education nor do they encourage it with their employees. They just teach their creepy “culture” (they brag about it). Anyone who deals with them knows this sooner or later…it permeates their entire organization.
Consequently, many of their actions are contrary to insurance regulation and law, any improprieties are probably due to ignorance on the part of the employees. I shudder to think how many human beings they have exploited to get where they are..and how many more they will continue to exploit.
AIG has NO credibility. Anyone who works with them knows the arrogance of their management regime. All that crap about knowing about insurance is transparent lip service. Greenburg and his minions probably wish they would have hired a few “real” insurance people now (on second thought, probably not- they will probably never assume any responsibility- it’s probably just not in their nature.
– AIG has been investigated and there has been significant evidence of serious “mistakes” to the detriment of their customers, their shareholders, and (likely) the industry as a whole
– Spitzer has been the one who pursued these investigations in NY, bringing these to light and, we hope, instigating real efforts to avoid such “mistakes” in the future
– Spitzer is going to run for governor of NY
Why in the world to people keep taking that third fact to pretend the first two aren’t important? And if AIG being brought to task for wrongdoing has negative effects for the industry, why on earth are you shooting the messenger? It’s counterproductive and I personally feel it tarnishes the industry, as we already fight against a reputation for being insular and unsympathetic in how our practices affect those outside our circles.
It is interesting to read the comments about AIG and its management. It seems there is pretty much universal opinion that AIG is not a company you really want to work for or do business with and their management attitude is arrogant.
I also find it interesting how some commentaries question Eliot Spitzer’s motives and want to paint him as the ‘bad’ guy. Yes, Spitzer may have higher political ambition but that does not take away from the fact that he has been the only Attorney General who has exposed significant fraud and wrongdoing by some of America’s biggest corporations. The real question should be: why have other AG’s, and/or people at the SEC or U.S. Justice Department not initiated these investigations. Could it be they have all been ‘bought off’with political contributions?
My guess is the closer you examine AIG’s business dealings, the more fraud and unethical behaviour you would find. They were ‘in bed’ with Marsch for many years and worked ‘hand-in-glove’ to rip-off unsuspecting clients. AIG’s claims handling has always been shameful and their SOP was: sue us if you want coverage for this claim.
Regardless of the fine AIG will pay and any punishment Hank Greenberg receives, it will pale against the unfair gains AIG and Greenberg realized over the many years from their shabby and sometimes illegal business practices.
Does anyone with any objective assessment ability really believe this investigation is driven by anything other than political aspiration?
AIG is very visible and convienent target. hard to defend and an embarassment to many in the industry. However as another poster pointed out they do tend to write complex and difficult to obtain coverage. Much of what they write would not be done by many other carriers. they aren’t making a living on BOPs and personal lines.
If spitzer were really interested in the average NY consumer he would focus on driving down loss cost factors with tort reform, reduced regulation cost, fostering increased competition and addressing the rampant fraud and corruption in the state.
he’s done none of this and is merely a puppet demagouge incapable of enacting positive change for the average insurance consumer.
he’s rivaled only by the stooge in Florida who’s done everything but make a soverign proclomation banning hurricanes, floods, wind and excessive rain. If he surrounds himself with any more lackeys and yes men he’ll actually start to believe that he can change the weather.
Driving down the cost of insurance for average New York consumers is not the job of any Attorney General. Look to your insurance comissioner and/or your elected politicians and Governor to lead that charge.
Eliot Spitzer is doing what an AG should be doing. If you think price fixing by Marsh in concert with AIG and other carriers didn’t drive up prices for consumers than someone is being ‘simpleminded’.
The corporate wrongdoing Spitzer has targeted cost consumers and investors billions of dollars (e.g. Stock Exchange misdeeds, mutual fund industry misdeeds, big bank misdeeds, brokerage company misdeeds, Enron misdeeds, Tyco misdeeds, etc. etc.).
Let’s quit trying to tarnish or bash Spitzer and take our anger out on the companies and individuals who have operated unethically and often illegally.
Three cheers for your thoughtful and insightful comments Rolf. You could not be more dead on with your comments. It is a shame to see so many misguided people blaming the NY-AG for what is happening in our industry. Get over it folks – he didn’t create this and I for one, being in the business for 20+ years am happy to see it taking place. Go Spitz !!
AIG had covert deals that were unethical, unfair, and criminal. Their commissions are low for the industry and although they write complex lines of business they certainly do not comprehend complex lines of business.
Like Madonna, they ended up with a lot of the world’s money. If they were a person you could actually see, they would have a hairy chest,(or a breast augmentation, wear big gold chains and two diamond pinkie rings, and be obvious slum lords.
I hate to say it, but Greenburg looks like Mr Burns (excellent).
They have absolutely no qualms suggesting agents charge fees to the consumer as they continue to pass along their processing responsibilities to the agent. As a matter of fact, they have no problem with the agent having to disclose their commission. Of course, they will take the fifth, thank you.
This company has contempt for their agency base. But they are like Home Depot. They get used because of the price, absolutely not because of any other reason.
If you wanted to discuss the seven deadly sins, you could probably get a lot of milage out of a company like this. It is a shame because insurance is predicated on trust. On a very fundamental level you are trusting another to pay in the future..It is utterly meaningless without trust. This company proves itself management wise that it is bereft of character.
I am pleased at what Spitzer stopped at Marsh, the bid rigging and the special commissions. There may be other instances of real fraud that he has stopped.
Much of the rest seems to me to be within the current reasonable range of behavior of Brokers and Agents. If the well known Profit Sharing and overrides and volume bonuses are to be stopped, I believe, it should be by the legislature or departments of insurance.
If legal behavior can be prosecuted then we have an Attorney General making public policy.
I read the apology by Pat Ryan of Aon and I found nothing for him to apologize for. While I do not have the published article in front of me, his tying relationship with the Chubb in personal lines and the Chubb’s placement of tready reinsurance with the Aon Re people could work in some instances to the advantage of the buyer.
To try to push higher volumes with individual carriers has much to be said for it. Higher volumes and personal relationships at the top, benefits the Carrier, the Agent and the Customer. It can and most often does result in a benefit to the buyer.
I have several personal lines clients that are glad that I am friends with the Manager of the Personal Lines Insurance Carrier they are insured with.
The Attorney General, at times, seems to be trying to convict the parties in the press and not in the courtroom. The greatest damage seems to be done to the stockholders of the national brokers.
I suspect that we are on a new path of reduced income for the Broking transactions, the breaking apart of the wholesale and retail brokerages, the separation of retail sales and reinsurance transactions. We will probably see reduced market valuations for Insurance Brokers as profits decline. Privately held regional brokers will probably increase market share as they may be under the radar for income situations that will allow higher revenues and greater services to the clients. This may be good and benefit our society as a whole. Is it within the charge of the office of the Attorney General?
Is the rapid change in behavior of the National Brokers for the good of their clients, their companies and their stockholders?
I can assure you it is not to the advantage of the employees, they’re scared they are going to be laid off, get pay or benefit reductions. And tens of thousands will.
While I thought the comments by ‘Scared Broker’ were thoughtful, I don’t think there is any evidence that Eliot Spitzer is prosecuting ‘legal bahaviour’. Spitzer has more than enough to do prosecuting illegal and criminal activities.
True Profit Sharing payments to brokers and agents without regard to volume is distinct from a broker demanding increased compensation for placing business, which is what Marsh and some of the other brokers were doing. If the carrier is responsible for underwriting the business and its ultimate ‘profitability’, one could argue that ‘profit sharing’ for agents is really somewhat of an oxymoron.
Agent compensation is going down because carriers have steadily been reducing commissions. Their argument is that when premiums increased due to higher carrier loss ratios,expenses and of course less investment income that the agent should not share in this ‘windfall’. They of course forget that the agent’s expenses have steadily increased and more time is now spent filling out all the ‘supplemental’ applications that they have all invented. Also, when the market turns ‘soft’ they will be reluctant to increase commissions.
Yes the income of some of the big brokers will be reduced becasue they will no longer be able to extort ‘bonus’ payments for placing business. Since Marsh wants to minimize the net effect on their bottom line, they are laying of several thousand people. The blame for staff reductions squarely rests with Marsh management and not with Eliot Spitzer.
The insurance industry and the consumer is better served when the business is not concentrated with a few brokers (i.e. Marsh & AON) or carriers (i.e. AIG). There needs to be a balance between the independent agents who sell insurance and the carriers who insure the risks. Neither party should be in a position to unilaterally dictate to the other. When it is out of balance, you have abuses as we have witnessed
Hank Greenberg made the famous statement; \”All I Want in Life is an Unfair Advantage\”. Hank Greenberg and Howard Smith are out. AIG agreed to pay 1.6 billion dollars to settle accounting fraud charges.
Does that mean AIG corrected accounting errors and terminated senior management who manipulated accounting? Does 1.6 billion dollars cover new or undiscovered accounting frauds charges? Will AIG stock price continue going up when details of accounting frauds are revealed to general public?
Were Hank Greenberg and Howard Smith only two people who are responsible for the accounting fraud charges? Obviously currently CFO, Steve Bensinger, worked for the terminated CFO. Current comptroller, David Herzog, shares many things with Steve Bensinger, including both worked for Coopers Lybrand, and both had traveled alone with T. Watson, who does not bring any materials to business trip.
Numerous evidence of \”unfair advantage\” is evident even disregarding foreign governments\’ laws and regulations. In order to circumvent Thailand law, AIG created a secret trust arrangement which were not consolidated by the office of accounting policy. In order to evade Indonesia\’s tax laws, AIG allowed individuals to invest and refused to report to this CSFT committee. In order to circumvent Hong Kong laws, HR specifically instruct all ex-pats to re-enter from Macau; Katherine Richardson and Anthony Valoroso confirmed that AIG instructed ex-pats to work on a visitors\’ visa in violation of Hong Kong laws.
There are numerous instances in which accounting manipulation was encouraged and not a product of sloppy accounting policy, but intentional from top management to those most responsible, i.e., New York office of accounting policy.
The chairman gave the call to enhance NII \”whatever it takes,\” in order to enhance stock prices. Accounting policy is intended to classify NII instead of capital gains in order to enhance stock prices. AIG policies and SI instruction show numerous improper NII classifications. AIG adopted FAS 155 earlier, and decided to record gains to NII. The Accounting Policy Director personally gave written notice to backdate the memo, which missed election deadline. Accounting policy director authorized NII misusing FAS 133 para 13(b). The Director then knowingly recorded NII despite the fact that AIG does not meet the criteria under AICPA Audit and Accounting Guides — Audits of Investment Companies.
As the life insurance\’s CFO stated \”The whole investment accounting is significant deficiency. OTTD, UIT accounting in Dublin, 99-20 to mention just a few\”.
Other Than Temporary Declines (OTTD) was just one of issues that regulatory bodies found accounting irregularities. AIG did not write down equity investments that have been in an unrealized loss position for more than 12 consecutive months. They were not written down to fair value if investment manager considered then \”likely\” or \”possibly to recover\”. AIG policy (Appendix B) permits and encourages this practice, and accounting policy director, who consider \”possible\” to mean anything, refused to correct this blatant abuse of accounting policy. Transparency this is not.
AIG\’s submission to SEC clearly declares that OTTD is \”trading at a significant discount (25 percent or more\” \”OR\” for an extended period of time (nine months or longer)\”. No securities were written down under these criteria although millions and millions of dollars of securities are over a 40% loss. (e.g. Nan Shan, 40-50% loss: US$5.8 million, 30-39% loss: US$ 12 million, 25-29% loss: US$12 million) No fixed income securities were written down because of AIG policy. Furthermore, no securities will be written down unless equity security is in a loss position for every single day of 365 consecutively. One of CFO stated that AIG accounting policy was written ambiguously for this purpose.
Again, senior management was informed, but refused to correct it. Rather senior management resolution plan was to reclassify securities to held-to-maturity in order to hide millions and millions of losses, disregarding equities cannot be classified as HTM. This is similar to AIG practice which allowed and encouraged actuaries to make legal opinions to suit their current needs.
Senior management\’s intent to manipulate earning volatility is also shown in the separate account issue (overseas: US$10 billion). Although AIG\’s foreign offices do not qualify for separate account treatment, AIG has been matching assets and liabilities. Accounting (actuaries actually) individuals refused to deal with legal department stating that no legal counsel will state that AIG met SOP 03-1. Regional CFO consistently tried to influence legal counsels, and stated he could not afford transferring to general account because current accounting is so screwed up. Again this is not an error, and regional CFO\’s previous emails instructing separate account treatment without supporting documents support this. Even after PWC made requests to reclassify Hong Kong\’s account, the so-called accountants erroneously claimed no earnings volatility because they would enter exact amounts to offset liabilities.
Comptroller told me that AIG needed to restate because AIG did not document hedge accounting from day one. His statement was not a far stretch as it seems. Even derivatives committee minutes instruct that nothing goes to earnings, when virtually no transaction qualifies short cut method. Numerous embedded derivatives were not reviewed and not bifurcated. Numerous documents show that AIG is not capable of valuing embedded derivatives.
Japan has five functional currencies in order to manipulate earnings volatility. Korea is implementing dual g/l system in order to do the same.
Accountants\’ lack of knowledge is so blatantly obvious. Recently AIG\’s overseas office corrected the practice of recording \”notional amounts\” of derivatives on the balance sheet. Now, AIG\’s overseas offices are found \”not recording\” derivatives at all on the balance sheet. One subsidiary has erroneously recorded gain and loss of debt securities to P&L and OCI at the same time. When the majority of AIG\’s income is generated from overseas, the impact of this ignorance is significant to bottom line financial statement. A Regional CFO stated new internal auditor, Roemer, is an excellent selection, as he has no knowledge of insurance accounting.
The Regional controller who was previously controller in Japan did not know the term \”available for sale\”. AIG\’s overseas offices have hired numerous personnel at the VP level, all of whom lack US GAAP knowledge. Life CFO Grace Li obtained MBA from \”on-line\” university in the States. Recently SOX person, who never heard of SOP 03-1, is hired as insurance accounting expertise.
Does that mean AIG corrected accounting errors and terminated senior management who manipulated accounting? Does 1.6 billion dollars cover new or undiscovered accounting frauds charges? Will AIG stock price continue going up when details of accounting frauds are revealed to general public?
—–Original Message—–
From: Swift, Christopher
Sent: Tuesday, November 14, 2006 11:10 AM
Subject: RE: agenda for this week\’s conversation
The whole investment accounting is Significant deficency. OTTD, UIT accounting in Dublin, 99-20 to mention a few. Please ask for the needed clarification. We can\’t afford not to clear. Thanks. CS
Does anyone know how political AG Spitzer is? Any AG, any NY AG is going to be political, but how might this be affecting his actions? Thanks, y’all.
He has announced that he is running for Governor of New York, so I’d say he’s political.
Exactly!
To highlight a very important point herein:
Yes, Spitzer may have higher political ambition but that does not take away from the fact that he has been the only Attorney General who has exposed significant fraud and wrongdoing by some of America’s biggest corporations. The real question should be: why have other AG’s, and/or people at the SEC or U.S. Justice Department not initiated these investigations. Could it be they have all been ‘bought off’ with political contributions?
Additionally, I compliment Mr. Spitzer for commending Mr. Buffet’s business ethics. While both Mr. Greenberg and Mr. Buffet are successful businessmen only one became so by using ethical and legal strategies. Eliot Spitzer has a consistent record throughout the years of supporting and defending the consumers of NY State.
While Eliot Spitzer would be technically considered a politician due to the fact that he is holding and seeking elected office, I personally limit the term “politician” to the corrupt and bureaucratic officials in government. I do not however put Eliot Spitzer in that category.
E. Spitzer is to be commended for taking the lead in having the courage to take on a major force such as Maurice Greenberg.
I would not want to offend Mr. Spitzer by referring to him as a politician-if successful,he will simply be an elected official governing the State of NY. By referring to him a politician, we would be placing him in the same category as Bloomber or even worse George Pataki, which would be an outright insult.
I am a avid supporter for one reason and one reason only-E. Spitzer is performing his duties as Attorney General of NY to the utmost degree.
I will be most enthused when “Hank” is brought up on criminal charges. That should bring him back down to earth. This guy has been led to believe that he is an untouchable.
If you believe that Spitzer is not a politician, I have some swampland in Florida for sale…interested? He is about the most political animal you can find as he moves from headline to headline.
it’s hard to defend AIG. many people that deal with them do so with great caution and sometimes as a last resort. the service is awful and most employees can only work their so long. it is a dog eat dog culture. it does serve a valuable purpose however.
however it’s becoming more and more common for some goofus governor wannabe to attack without regard to reality or it’s impact on the majority. It’s also hard to determine which is the most blatant goofus.
Spitzer attacks one CEO but praises another as an icon. he is a role model that will be followed by other governor wannabes.
Gallagher issues emergency orders mandating that all hurricane claims be closed by the end of april. without regard to disputes of value, inablity to get contractors or permits or totally unreasonable claimants. This affects less than 1% of overall claims but looks good on paper. Total collapse of the med mal system and future collapse of the wind fund and he’s worried about deductibles and decreasing premiums by mandate. Total inability to understand economic market models.
Garamandi’s whole state insurance enviroment is a mess and it’s always somebody elses fault. Auto, WC, Property, Constuction Defect, Med mal. None are addressed after all this time. lots of populist gestures with no real affect.
The reality is the stepping stone politicos do far more damange on getting ahead at any cost than they do when they finally become King and soothe their egos.
It’s sad that this form of demagougory works so well and will continue to be repeated.
The problem for AIG is they write complex lines of coverage and consequently deal with a high ratio informed/educated/professional agents. It is common knowledge they do not value insurance education nor do they encourage it with their employees. They just teach their creepy “culture” (they brag about it). Anyone who deals with them knows this sooner or later…it permeates their entire organization.
Consequently, many of their actions are contrary to insurance regulation and law, any improprieties are probably due to ignorance on the part of the employees. I shudder to think how many human beings they have exploited to get where they are..and how many more they will continue to exploit.
AIG has NO credibility. Anyone who works with them knows the arrogance of their management regime. All that crap about knowing about insurance is transparent lip service. Greenburg and his minions probably wish they would have hired a few “real” insurance people now (on second thought, probably not- they will probably never assume any responsibility- it’s probably just not in their nature.
The most basic facts as far as we have them here:
– AIG has been investigated and there has been significant evidence of serious “mistakes” to the detriment of their customers, their shareholders, and (likely) the industry as a whole
– Spitzer has been the one who pursued these investigations in NY, bringing these to light and, we hope, instigating real efforts to avoid such “mistakes” in the future
– Spitzer is going to run for governor of NY
Why in the world to people keep taking that third fact to pretend the first two aren’t important? And if AIG being brought to task for wrongdoing has negative effects for the industry, why on earth are you shooting the messenger? It’s counterproductive and I personally feel it tarnishes the industry, as we already fight against a reputation for being insular and unsympathetic in how our practices affect those outside our circles.
It is interesting to read the comments about AIG and its management. It seems there is pretty much universal opinion that AIG is not a company you really want to work for or do business with and their management attitude is arrogant.
I also find it interesting how some commentaries question Eliot Spitzer’s motives and want to paint him as the ‘bad’ guy. Yes, Spitzer may have higher political ambition but that does not take away from the fact that he has been the only Attorney General who has exposed significant fraud and wrongdoing by some of America’s biggest corporations. The real question should be: why have other AG’s, and/or people at the SEC or U.S. Justice Department not initiated these investigations. Could it be they have all been ‘bought off’with political contributions?
My guess is the closer you examine AIG’s business dealings, the more fraud and unethical behaviour you would find. They were ‘in bed’ with Marsch for many years and worked ‘hand-in-glove’ to rip-off unsuspecting clients. AIG’s claims handling has always been shameful and their SOP was: sue us if you want coverage for this claim.
Regardless of the fine AIG will pay and any punishment Hank Greenberg receives, it will pale against the unfair gains AIG and Greenberg realized over the many years from their shabby and sometimes illegal business practices.
Does anyone with any objective assessment ability really believe this investigation is driven by anything other than political aspiration?
AIG is very visible and convienent target. hard to defend and an embarassment to many in the industry. However as another poster pointed out they do tend to write complex and difficult to obtain coverage. Much of what they write would not be done by many other carriers. they aren’t making a living on BOPs and personal lines.
If spitzer were really interested in the average NY consumer he would focus on driving down loss cost factors with tort reform, reduced regulation cost, fostering increased competition and addressing the rampant fraud and corruption in the state.
he’s done none of this and is merely a puppet demagouge incapable of enacting positive change for the average insurance consumer.
he’s rivaled only by the stooge in Florida who’s done everything but make a soverign proclomation banning hurricanes, floods, wind and excessive rain. If he surrounds himself with any more lackeys and yes men he’ll actually start to believe that he can change the weather.
Driving down the cost of insurance for average New York consumers is not the job of any Attorney General. Look to your insurance comissioner and/or your elected politicians and Governor to lead that charge.
Eliot Spitzer is doing what an AG should be doing. If you think price fixing by Marsh in concert with AIG and other carriers didn’t drive up prices for consumers than someone is being ‘simpleminded’.
The corporate wrongdoing Spitzer has targeted cost consumers and investors billions of dollars (e.g. Stock Exchange misdeeds, mutual fund industry misdeeds, big bank misdeeds, brokerage company misdeeds, Enron misdeeds, Tyco misdeeds, etc. etc.).
Let’s quit trying to tarnish or bash Spitzer and take our anger out on the companies and individuals who have operated unethically and often illegally.
Is Spitzer looking into Greenberg and AIG’s involvement in the Precious Metals Market Manipulation scam?
Three cheers for your thoughtful and insightful comments Rolf. You could not be more dead on with your comments. It is a shame to see so many misguided people blaming the NY-AG for what is happening in our industry. Get over it folks – he didn’t create this and I for one, being in the business for 20+ years am happy to see it taking place. Go Spitz !!
AIG had covert deals that were unethical, unfair, and criminal. Their commissions are low for the industry and although they write complex lines of business they certainly do not comprehend complex lines of business.
Like Madonna, they ended up with a lot of the world’s money. If they were a person you could actually see, they would have a hairy chest,(or a breast augmentation, wear big gold chains and two diamond pinkie rings, and be obvious slum lords.
I hate to say it, but Greenburg looks like Mr Burns (excellent).
They have absolutely no qualms suggesting agents charge fees to the consumer as they continue to pass along their processing responsibilities to the agent. As a matter of fact, they have no problem with the agent having to disclose their commission. Of course, they will take the fifth, thank you.
This company has contempt for their agency base. But they are like Home Depot. They get used because of the price, absolutely not because of any other reason.
If you wanted to discuss the seven deadly sins, you could probably get a lot of milage out of a company like this. It is a shame because insurance is predicated on trust. On a very fundamental level you are trusting another to pay in the future..It is utterly meaningless without trust. This company proves itself management wise that it is bereft of character.
I am pleased at what Spitzer stopped at Marsh, the bid rigging and the special commissions. There may be other instances of real fraud that he has stopped.
Much of the rest seems to me to be within the current reasonable range of behavior of Brokers and Agents. If the well known Profit Sharing and overrides and volume bonuses are to be stopped, I believe, it should be by the legislature or departments of insurance.
If legal behavior can be prosecuted then we have an Attorney General making public policy.
I read the apology by Pat Ryan of Aon and I found nothing for him to apologize for. While I do not have the published article in front of me, his tying relationship with the Chubb in personal lines and the Chubb’s placement of tready reinsurance with the Aon Re people could work in some instances to the advantage of the buyer.
To try to push higher volumes with individual carriers has much to be said for it. Higher volumes and personal relationships at the top, benefits the Carrier, the Agent and the Customer. It can and most often does result in a benefit to the buyer.
I have several personal lines clients that are glad that I am friends with the Manager of the Personal Lines Insurance Carrier they are insured with.
The Attorney General, at times, seems to be trying to convict the parties in the press and not in the courtroom. The greatest damage seems to be done to the stockholders of the national brokers.
I suspect that we are on a new path of reduced income for the Broking transactions, the breaking apart of the wholesale and retail brokerages, the separation of retail sales and reinsurance transactions. We will probably see reduced market valuations for Insurance Brokers as profits decline. Privately held regional brokers will probably increase market share as they may be under the radar for income situations that will allow higher revenues and greater services to the clients. This may be good and benefit our society as a whole. Is it within the charge of the office of the Attorney General?
Is the rapid change in behavior of the National Brokers for the good of their clients, their companies and their stockholders?
I can assure you it is not to the advantage of the employees, they’re scared they are going to be laid off, get pay or benefit reductions. And tens of thousands will.
While I thought the comments by ‘Scared Broker’ were thoughtful, I don’t think there is any evidence that Eliot Spitzer is prosecuting ‘legal bahaviour’. Spitzer has more than enough to do prosecuting illegal and criminal activities.
True Profit Sharing payments to brokers and agents without regard to volume is distinct from a broker demanding increased compensation for placing business, which is what Marsh and some of the other brokers were doing. If the carrier is responsible for underwriting the business and its ultimate ‘profitability’, one could argue that ‘profit sharing’ for agents is really somewhat of an oxymoron.
Agent compensation is going down because carriers have steadily been reducing commissions. Their argument is that when premiums increased due to higher carrier loss ratios,expenses and of course less investment income that the agent should not share in this ‘windfall’. They of course forget that the agent’s expenses have steadily increased and more time is now spent filling out all the ‘supplemental’ applications that they have all invented. Also, when the market turns ‘soft’ they will be reluctant to increase commissions.
Yes the income of some of the big brokers will be reduced becasue they will no longer be able to extort ‘bonus’ payments for placing business. Since Marsh wants to minimize the net effect on their bottom line, they are laying of several thousand people. The blame for staff reductions squarely rests with Marsh management and not with Eliot Spitzer.
The insurance industry and the consumer is better served when the business is not concentrated with a few brokers (i.e. Marsh & AON) or carriers (i.e. AIG). There needs to be a balance between the independent agents who sell insurance and the carriers who insure the risks. Neither party should be in a position to unilaterally dictate to the other. When it is out of balance, you have abuses as we have witnessed
Please visit some helpful info about bonus – Tons of interesdting stuff!!!
Hank Greenberg made the famous statement; \”All I Want in Life is an Unfair Advantage\”. Hank Greenberg and Howard Smith are out. AIG agreed to pay 1.6 billion dollars to settle accounting fraud charges.
Does that mean AIG corrected accounting errors and terminated senior management who manipulated accounting? Does 1.6 billion dollars cover new or undiscovered accounting frauds charges? Will AIG stock price continue going up when details of accounting frauds are revealed to general public?
Were Hank Greenberg and Howard Smith only two people who are responsible for the accounting fraud charges? Obviously currently CFO, Steve Bensinger, worked for the terminated CFO. Current comptroller, David Herzog, shares many things with Steve Bensinger, including both worked for Coopers Lybrand, and both had traveled alone with T. Watson, who does not bring any materials to business trip.
Numerous evidence of \”unfair advantage\” is evident even disregarding foreign governments\’ laws and regulations. In order to circumvent Thailand law, AIG created a secret trust arrangement which were not consolidated by the office of accounting policy. In order to evade Indonesia\’s tax laws, AIG allowed individuals to invest and refused to report to this CSFT committee. In order to circumvent Hong Kong laws, HR specifically instruct all ex-pats to re-enter from Macau; Katherine Richardson and Anthony Valoroso confirmed that AIG instructed ex-pats to work on a visitors\’ visa in violation of Hong Kong laws.
There are numerous instances in which accounting manipulation was encouraged and not a product of sloppy accounting policy, but intentional from top management to those most responsible, i.e., New York office of accounting policy.
The chairman gave the call to enhance NII \”whatever it takes,\” in order to enhance stock prices. Accounting policy is intended to classify NII instead of capital gains in order to enhance stock prices. AIG policies and SI instruction show numerous improper NII classifications. AIG adopted FAS 155 earlier, and decided to record gains to NII. The Accounting Policy Director personally gave written notice to backdate the memo, which missed election deadline. Accounting policy director authorized NII misusing FAS 133 para 13(b). The Director then knowingly recorded NII despite the fact that AIG does not meet the criteria under AICPA Audit and Accounting Guides — Audits of Investment Companies.
As the life insurance\’s CFO stated \”The whole investment accounting is significant deficiency. OTTD, UIT accounting in Dublin, 99-20 to mention just a few\”.
Other Than Temporary Declines (OTTD) was just one of issues that regulatory bodies found accounting irregularities. AIG did not write down equity investments that have been in an unrealized loss position for more than 12 consecutive months. They were not written down to fair value if investment manager considered then \”likely\” or \”possibly to recover\”. AIG policy (Appendix B) permits and encourages this practice, and accounting policy director, who consider \”possible\” to mean anything, refused to correct this blatant abuse of accounting policy. Transparency this is not.
AIG\’s submission to SEC clearly declares that OTTD is \”trading at a significant discount (25 percent or more\” \”OR\” for an extended period of time (nine months or longer)\”. No securities were written down under these criteria although millions and millions of dollars of securities are over a 40% loss. (e.g. Nan Shan, 40-50% loss: US$5.8 million, 30-39% loss: US$ 12 million, 25-29% loss: US$12 million) No fixed income securities were written down because of AIG policy. Furthermore, no securities will be written down unless equity security is in a loss position for every single day of 365 consecutively. One of CFO stated that AIG accounting policy was written ambiguously for this purpose.
Again, senior management was informed, but refused to correct it. Rather senior management resolution plan was to reclassify securities to held-to-maturity in order to hide millions and millions of losses, disregarding equities cannot be classified as HTM. This is similar to AIG practice which allowed and encouraged actuaries to make legal opinions to suit their current needs.
Senior management\’s intent to manipulate earning volatility is also shown in the separate account issue (overseas: US$10 billion). Although AIG\’s foreign offices do not qualify for separate account treatment, AIG has been matching assets and liabilities. Accounting (actuaries actually) individuals refused to deal with legal department stating that no legal counsel will state that AIG met SOP 03-1. Regional CFO consistently tried to influence legal counsels, and stated he could not afford transferring to general account because current accounting is so screwed up. Again this is not an error, and regional CFO\’s previous emails instructing separate account treatment without supporting documents support this. Even after PWC made requests to reclassify Hong Kong\’s account, the so-called accountants erroneously claimed no earnings volatility because they would enter exact amounts to offset liabilities.
Comptroller told me that AIG needed to restate because AIG did not document hedge accounting from day one. His statement was not a far stretch as it seems. Even derivatives committee minutes instruct that nothing goes to earnings, when virtually no transaction qualifies short cut method. Numerous embedded derivatives were not reviewed and not bifurcated. Numerous documents show that AIG is not capable of valuing embedded derivatives.
Japan has five functional currencies in order to manipulate earnings volatility. Korea is implementing dual g/l system in order to do the same.
Accountants\’ lack of knowledge is so blatantly obvious. Recently AIG\’s overseas office corrected the practice of recording \”notional amounts\” of derivatives on the balance sheet. Now, AIG\’s overseas offices are found \”not recording\” derivatives at all on the balance sheet. One subsidiary has erroneously recorded gain and loss of debt securities to P&L and OCI at the same time. When the majority of AIG\’s income is generated from overseas, the impact of this ignorance is significant to bottom line financial statement. A Regional CFO stated new internal auditor, Roemer, is an excellent selection, as he has no knowledge of insurance accounting.
The Regional controller who was previously controller in Japan did not know the term \”available for sale\”. AIG\’s overseas offices have hired numerous personnel at the VP level, all of whom lack US GAAP knowledge. Life CFO Grace Li obtained MBA from \”on-line\” university in the States. Recently SOX person, who never heard of SOP 03-1, is hired as insurance accounting expertise.
Does that mean AIG corrected accounting errors and terminated senior management who manipulated accounting? Does 1.6 billion dollars cover new or undiscovered accounting frauds charges? Will AIG stock price continue going up when details of accounting frauds are revealed to general public?
—–Original Message—–
From: Swift, Christopher
Sent: Tuesday, November 14, 2006 11:10 AM
Subject: RE: agenda for this week\’s conversation
The whole investment accounting is Significant deficency. OTTD, UIT accounting in Dublin, 99-20 to mention a few. Please ask for the needed clarification. We can\’t afford not to clear. Thanks. CS