General Reinsurance Corp. said in a filing that it briefed the Securities and Exchange Commission in June concerning its involvement with nontraditional insurance arrangements that have come under continuing scrutiny.
In a report to the Connecticut Insurance Department, Gen Re, a subsidiary of Omaha, Neb.-based Berkshire Hathaway, said the SEC is investigating transactions involving Prudential, The St. Paul Companies and municipal bond transactions that involved Gen Re financial products and certain insurance and affiliated companies of American International Group.
While not giving specific dates, the filing appears to indicate that the transactions in question took place prior to Prudential's sale of its property-casualty business in 2003 and St. Paul's merger with Travelers in 2004.
Gen Re provided a briefing on the transactions to the SEC on June 13.
In connection with the investigations, the SEC also interviewed Christopher Garand, a former senior vice president of Gen Re, and Robert McGowan, a former vice president and account executive. The carrier said it understands both invoked their Fifth Amendment rights against self-incrimination when asked to give testimony.
The investigations revolve around the use of finite insurance products that were allegedly used principally by AIG to create sham transactions that bolstered the insurer's earnings picture.
The scandal has resulted in a federal indictment in Norfolk, Va., of at least four executives–three from Gen Re and one from AIG–and guilty pleas from two other Gen Re executives in federal court in Virginia to charges of conspiracy to misstate AIG earnings.
It also resulted in an AIG earnings restatement and a settlement in February with New York Attorney General Eliot Spitzer and the SEC of $1.64 billion.
The filing reported that in July of this year, the United Kingdom's financial regulator, Financial Services Authority, issued a notice to John Byrne, a former chief executive within a Gen Re unit, prohibiting him from performing any work within the U.K. financial industry for five years. He was accused of engaging in acts of misrepresentation concerning the financial situation of non-U.S. subsidiaries of Gen Re to authorities.
Bob DeFillippo, a spokesman for Prudential, said he could not comment on the investigation but pointed to the company's SEC filing in February. Prudential said it received a formal request from the SEC and Connecticut's attorney general in 2005 filing for information on reinsurance transactions from 1997 through 2002.
Prudential said in the filing that if it should have to restate the reinsurance transactions as deposits the act would result in a decrease in its consolidated income from continuing operations of $25 million in 2002 and $49 million in 2001. The company added that it is cooperating with all requests.
St. Paul Travelers declined to comment. The SEC said it does not comment on on-going investigations.
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