AIG Wins Bidding for Golden Eagle

New York-based American International Group is apparently the top bidder for troubled Golden Eagle Insurance Co., which was seized by California regulators in January amid allegations that its management was draining the company of needed assets.

Insurance Commissioner Chuck Quackenbush said Tuesday that AIG “had the best proposal” out of three companies that submitted bids in the auction, which closed Friday.

“It’s a major milestone,” said Karl Rubinstein, the San Diego company’s state-appointed conservator. Rubinstein said three companies submitted bids for Golden Eagle. Among the terms of AIG’s proposals, he said, were a commitment to take over all new and renewal businesses in Golden Eagle’s product lines, to cover 100% of the company’s liabilities and to attempt to reach a definitive purchase agreement with the state by the end of this week.

AIG’s proposal will be submitted to Superior Court Judge William Cahill, who will hold a hearing before ruling on the takeover plan.

Quackenbush seized Golden Eagle, the state’s second-largest workers’ compensation insurer, on Jan. 31 after charging that the company’s reserves to cover claims were $138.5 million less than needed. He also contended that Golden Eagle owner John C. Mabee, a San Diego businessman and socialite, had improperly loaned himself $69 million in company cash. Quackenbush has filed suit to recover the money.

Mabee has insisted that Golden Eagle was fully solvent at the time of the seizure and that the loans were legitimate. Reached at home Tuesday, he said the sale would not affect his determination to fight to regain the company. “It don’t mean a thing,” he said.

In 1994, AIG spent $432 million for 40% of 20th Century Industries, which was reeling from billions in losses from the Northridge quake.

AIG said it plans to keep “the employees necessary to conduct the business” at the company, which it would rename San Diego Casualty Co.

Bloomberg News contributed to this report.