Gevity, a professional employer organization (PEO) that provides HR services to businesses nationwide, expects to receive an additional return of $26 million in workers' compensation funds from AIG Commercial Insurance by the end of January 2009.A substantial portion of this return is incremental to the amount included in the short-term workers' comp receivable previously reported in the company's balance sheet as of Sept. 30, 2008. In addition, the company received a refund of $4.7 million in November from AIGCI arising from lower program costs for the 2003 through 2007 policy years.
Gevity's expected receipt of approximately $26 million relates to its workers' comp policy years 2000-2002. This return of funds reflects the favorable relationship between the amount of funding held for these policy years, the relative low number of open claims and the maturing values of the estimated future costs for such claims.
Moreover, an additional material return of funds from these policy years is contractually scheduled for 2011. The announcement follows a receipt of $33.1 million of excess workers' comp collateral in September, coupled with AIGCI's agreement to waive Gevity's approximate $14.0 million in workers' comp collateral payments during the fourth quarter of 2008.
Gevity also announced it received a cash recovery of $2.0 million pursuant to a court-approved settlement arising from a liquidation proceeding related to the Bermuda reinsurance company formerly responsible for covering a specific layer of Gevity's workers' comp claims exposure in 2006.
Gevity previously recognized a loss of $4.65 million under this reinsurance arrangement in 2006 and subsequent recoveries have now fully offset this loss. The $2.0 million recovery will benefit the Company's fourth quarter 2008 operating results. The company expects to receive no additional recovery at this time.
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