Allied World Assurance Company, Ltd., has suspended its chief underwriting officer as a result of an investigation launched by the Attorney General of Texas stemming from the company's relationships with two insurance carrier investors and others.
The Hamilton, Bermuda-based insurer, in an amended Securities & Exchange Commission filing on Monday, said it received a request for information from the office of Texas Attorney General Greg Abbott on Nov. 8, 2005. The office was looking into questions over restraint of trade in its dealings with American International Group and Chubb.
The attorney general also was looking into questions of contingent commission practices and providing false quotes for insurance brokers–the subject of numerous investigations by other state attorney generals and insurance regulators.
On May 26 the company was informed that the attorney general's investigation would result in litigation, enforcement proceedings or a voluntary settlement. Allied World said the action would likely have an adverse affect on the company and would result in other state actions.
The company went on to say that as a result of the investigation, Jordon Gantz, 50, executive vice president and chief underwriting officer was suspended indefinitely. There were no details given about Mr. Gantz's role in the investigation.
A call to Scott Carmilani, Allied's president and chief executive officer for comment was not returned.
A spokesman for Mr. Abbott said the attorney general's office could not comment on the investigation.
Mr. Gantz joined Allied in 2001 and was one of its first four employees. He was named the chief underwriting officer in August 2005.
The company also reported it is a defendant in a lawsuit filed in April, in U.S. District Court for the Northern District of Georgia, Atlanta Division, over the placement of insurance contracts with accusations of bid rigging and steering of those contracts.
The plaintiff in the case, New Cingular Wireless Headquaters, LLC and others, filed the suit against Marsh & McLennan Companies and its brokerage subsidiary Marsh, the broker Aon Corporation, and 78 insurers.
According to the company's filing, it has maintained a very close working relationship with AIG and its affiliates, and to a lesser extent, Chubb, since its formation in 2001. Both companies were significant financial partners in the formation of the insurer.
Andrew J. Barile, an industry financial consultant, said the allegations could have a detrimental effect on the company's IPO. He said the IPO could be delayed until the investment managers, lead by Goldman Sachs and investors have had time to review the implications of these events on the company's future finances.
The company filed papers for its initial public offering in March, with a plan to sell 8.8 million shares priced between $34 and $37 per share, which would bring between $299 million and $326 million.
Allied World has three principal business segments: property insurance, casualty insurance, and reinsurance. The company reported $1.56 billion in total gross premium for 2005. It reported a net loss of $160 million for that year, based on approximately $456 million in property losses as a result of Hurricanes Katrina, Rita, and Wilma.
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