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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended December 31, 1998
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________ to __________
Commission File Number 0-9633
AMERICAN BANKERS INSURANCE GROUP, INC.
(Exact name of registrant as specified in its charter)
Florida 59-1985922
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11222 Quail Roost Drive, Miami, Fl 33157
(Address of principal executive offices)
Registrant's telephone number, including area code: (305) 253-2244
Securities registered pursuant to Section 12(b) of the act:
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Title of Class Name of each exchange on which registered
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Common Stock, $1 Par Value New York Stock Exchange, Inc.
$3.125 Series B Cumulative Convertible New York Stock Exchange, Inc.
Preferred Stock, $50 Liquidation Preference
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value on March 19, 1999, of the voting Common Stock held
by non-affiliates of the registrant was approximately $2,100,000,000. Shares of
Common Stock held by executive officers and directors who individually own 5%
or more of the outstanding Common Stock have been excluded in that such persons
may be deemed to be affiliates; however, this determination of affiliate status
is not necessarily determinative for other purposes.
There were approximately 43,200,000 shares outstanding of the Registrant's
Common Stock, $1 par value, as of march 19, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of Registrant's Proxy Statement for the annual shareholders
meeting to be held May 7, 1999 to be filed within 120 days of Registrant's
fiscal year end are incorporated by reference in part III of this Form 10-K.
(2) Portions of Registrant's Schedule 14D-9 and Amendment No. 3, Amendment No.
6, Amendment No. 10, Amendment No. 11, and Amendment No. 22 Thereto; the Form
S-3 Registration Statement Number 2-94359; the Registrant's Annual Report on
Form 10-K for the years ending 1990, 1993, 1994, 1995, and 1997; the
Registrant's Current Report on Form 10-Q dated March 31, 1994; March 31, 1995;
September 30, 1997; and June 30, 1998; the 1987 Annual Meeting Proxy Statement;
the Registrant's Current Report on Form 8-K dated November 14, 1990, January
13, 1998, and March 10, 1999; Registrant's Statements on Form S-8 filed on
February 19, 1999 Number 333-72615 and 333-72619 are incorporated by reference,
in Part IV of this Form 10-K.
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ITEM 3
LEGAL PROCEEDINGS
Except as discussed in the following paragraphs, there are no material
legal proceedings, other than ordinary routine litigation incident to the
business, to which the Registrant or any of its subsidiaries is a party or
of which any of their property is subject.
LITIGATION
The following describes the material legal proceedings of the Company.
Alabama and other litigation
Certain of ABIG's subsidiaries, including the Company, are presently
parties to a number of individual consumer and class action lawsuits
pending in Alabama involving premium, rate, marketing, sales practices,
disclosure, and policy coverage issues. While a number of similar suits
have been filed in other jurisdictions, the insurance and finance
industries have been targeted in Alabama by plaintiffs' lawyers who enjoy
a favorable judicial climate. The Company typically has been named as a
co-defendant with one or several retailer or finance companies who have
sold the Company's product to a consumer. Other insurers are also joined
as co-defendants in some of the suits. Although the Alabama lawsuits and
similar suits pending in Mississippi and other jurisdictions generally
involve relatively small amounts of actual or compensatory damages, they
typically assert claims requesting substantial punitive awards or purport
to represent a large class of policyholders.
On November 12, 1998, the Company and three of its clients entered into a
settlement of all claims in class action litigation consolidated by the
Panel on Multi-District Litigation in the United States District Court for
the Middle District of Alabama, contingent upon approval of the fairness
of the settlement by the District Court and other conditions. This series
of class actions involved the largest collective class exposure to the
Company. Under the terms of the settlement, without admitting any
liability, the Company will contribute approximately $15 million in
distributions to the classes and subclasses, and has agreed to be bound by
an injunction limiting the percentage of authorized non-file insurance
premium to be charged consumer finance and retailer accounts during 6 year
and 18 month periods, respectively. The Company has accrued additional
expenses associated with implementing the settlement.
While none of the Company's remaining cases are necessarily significant in
terms of financial risk to the Company, the judicial climate in certain
jurisdictions is such that the outcome of these cases is extremely
unpredictable. Moreover, class action lawsuits to which the Company is a
party do not lend themselves to potential damage calculation. There are
still a number of cases pending, and it is expected that more suits
alleging essentially the same causes of action are likely to continue to
be filed during 1999. The Company denies any wrongdoing in any of these
suits and believes that it has not engaged in any conduct that would
warrant an award of punitive damages or that the class allegations have
merit. The Company has been advised by legal counsel that it has
meritorious defenses to all claims being asserted against it. The Company
believes, based on information currently available, that any liabilities
that could result are not expected to have a material effect on the
Company's financial position, results of operations, or cash flows.
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Merger-related Litigation
In late January and early February 1998, Cendant Corporation ("Cendant")
commenced litigation (the "Cendant Florida Litigation") in the United
States District Court for the Southern District of Florida, Miami
Division, against the Company, members of the Company's Board, American
International Group, Inc. ("AIG") and a wholly owned subsidiary of AIG,
challenging the validity of certain provisions in the merger agreement the
Company originally entered into with AIG on December 21, 1997, which
agreement was amended in January 1998 and again at the end of February
1998 ("AIG Merger Agreement"), with respect to acquisition proposals by
third parties. Cendant's complaint in the Cendant Florida Litigation also
challenged the terms of the stock option agreement between the Company and
AIG. Pursuant to the terms of a settlement agreement providing for the
termination of the AIG Merger Agreement and the payment to AIG by the
Company of $100 million and by Cendant of $10 million (the "Settlement
Agreement"), Cendant has taken the necessary actions to cause the
dismissal of all claims asserted in the Cendant Florida Litigation against
all defendants, including the Company and members of the Company's Board.
Also pursuant to the terms of the Settlement Agreement, AIG has taken the
necessary actions to cause the dismissal of claims against Cendant
alleging violations of the federal securities laws in connection with
Cendant's bid to acquire the Company.
In late January and early February 1998, five putative class actions on
behalf of American Bankers' shareholders were filed in United States
District Court for the Southern District of Florida alleging causes of
action arising out of the then proposed merger with AIG and agreeing to
pay and paying the $100 million termination fee prior to the closing of
the proposed acquisition by Cendant. The District Court Judge ordered that
these cases be consolidated and that the plaintiffs file a consolidated
complaint (the "Complaint"). That Complaint was filed in May 1998 alleging
claims against the Company, all directors, except for Messrs. Kemp and
Allen, and AIG. The Complaint alleges that directors of the Company
breached their fiduciary duties and violated their duty to act with due
care and in a disinterested manner and to maximize shareholder value by
entering into the AIG Merger Agreement and agreeing to pay and paying the
$100 million termination fee. The Complaint also alleges that the Company
and AIG violated Section 14(a) and 14(e) of the Exchange Act by making
materially false and misleading statements in the proxy statement, as
amended, for the AIG Merger Agreement. The Complaint seeks an order
requiring the directors to carry out their fiduciary duties to the
plaintiffs and other class members, damages suffered by the results of the
alleged acts, an order declaring null and void the $100 million
termination fee, an order requiring defendants to make full disclosure of
all material information, and an award of plaintiff's cost and
disbursements, including plaintiff's attorney's fees. The Company and
directors filed an answer on or about June 16, 1998. Thereafter, the
Company and Cendant entered into termination arrangements under which the
Company was paid $400 million. The Company and its directors believe that
the claims asserted in these actions are totally without merit,
particularly in light of the termination of the Cendant Merger Agreement
and payment by Cendant of $400 million, and intend to continue to
vigorously contest them.
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OTHER
The Company, in the normal course, is subject to regulatory reviews and
market conduct examinations from each of the states in which it conducts
business. During 1998, a multi-state market conduct review was initiated
under the auspices of the NAIC by several states. On November 23, 1998,
the Company entered into a Consent Order and comprehensive Compliance Plan
with 39 participating states relating to compliance with the disparate
state insurance laws, regulations and administrative interpretations which
have been difficult to apply to the marketing of the Company's credit
related insurance products through financial institutions, retailers and
other entities offering consumer financing as a regular part of their
business. The Company and participating state regulators have pledged to
cooperate in rationalizing existing insurance laws and regulations to the
marketing and administration of credit-related insurance products on a
more comprehensive and uniform basis. As a part of the adoption of the
Compliance Plan, the Company agreed in a Consent Order to pay $12 million
to the participating states, and through implementation of the Compliance
Plan, to provide restitution to insureds, if instances of excess premiums
or less than appropriate claims payments were discovered in that process.
No accrual has been made for any possible restitution since an estimate of
any possible restitution is not known. Since November 1998, four
additional states have executed Addenda joining in the multi-state Consent
Order. The Company also agreed to a multi-state market conduct examination
commencing in November 1999 for review of the Company's implementation of
the Compliance Plan, and to a payment of $3 million to participating
states if the Compliance Plan is not fully implemented by that time. The
Company took a charge against earnings for $15 million during the fourth
quarter of 1998. As of the first quarter of 1999, the Company has paid $12
million to the participating states.
The Company is involved with a number of cases in the ordinary course of
business relating to insurance matters, or more infrequently, certain
corporate matters. Generally, the Company's liability is limited to
specific amounts relating to insurance or policy coverage for which
provision has been made in the financial statements. Other cases involve
general corporate matters which generally do not represent significant
contingencies for the Company.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
American Bankers Insurance Group, Inc.
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By: /s/ Gerald N. Gaston Chief Executive Officer, President, May 17, 1999
---------------------------------- and Vice Chairman of the Board
Gerald N. Gaston
By: /s/ Robert Hill Senior Vice President and May 17, 1999
---------------------------------- Principal Accounting Officer
Robert Hill
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Pursuant to the requirements of the Securities Exchange Act of 1934, this
report signed below by the following persons on behalf of the Registrant and in
the capacities and on May 17, 1999.
American Bankers Insurance Group, Inc.
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<S> <C> <C>
/s/ R. Kirk Landon Chairman of the Board May 17, 1999
- ------------------------------------- and Director
R. Kirk Landon
/s/ Gerald N. Gaston Chief Executive Officer, May 17, 1999
- ------------------------------------- President, Vice Chairman of the
Gerald N. Gaston Board and Director
/s/ William H. Allen Jr. Director May 17, 1999
- -------------------------------------
William H. Allen Jr.
Director May 17, 1999
- -------------------------------------
Nicholas A. Buoniconti
Director May 17, 1999
- -------------------------------------
Armando M. Codina
/s/ Peter J. Dolara Director May 17, 1999
- -------------------------------------
Peter J. Dolara
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Director May 17, 1999
- -------------------------------------
Jack F. Kemp
/s/ Bernard P. Knoth, S.J. Director May 17, 1999
- -------------------------------------
Bernard P. Knoth, S.J.
Director May 17, 1999
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James F. Jorden
Director May 17, 1999
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Daryl L. Jones
/s/ Eugene M. Matalene Jr. Director May 17, 1999
- -------------------------------------
Eugene M. Matalene Jr.
/s/ Albert H. Nahmad Director May 17, 1999
- -------------------------------------
Albert H. Nahmad
/s/ Nicholas J. St. George Director May 17, 1999
- -------------------------------------
Nicholas J. St. George
/s/ Robert C. Strauss Director May 17, 1999
- -------------------------------------
Robert C. Strauss
Director May 17, 1999
- -------------------------------------
George E. Williamson II
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