THE BIG PICTURE: USA Gymnastics estimates $75 million cost of Nassar’s claims on insurance

There was significant reporting this past week about the filings by USA Gymnastics of its 2017 financial statements and its IRS Form 990 tax filing, which is required by all non-profit organizations.

The key item regarding the federation’s potential liability for the Larry Nassar sex-abuse cases was treated in Note 12, which described the financial situation, including:

“USAG has insurance coverage encompassing numerous policies covering approximately 30 years, which in total provides substantial amounts of coverage.

“USAG considers the current range of potential impact to be between $75 million and $150 million and has concluded it is probable that a liability has been incurred and, accordingly, has recorded a provision in the amount of $75 million in its consolidated financial statements for the year ended December 31, 2016.”

The note goes on to underline that the $75 million amount is an estimate and not a certainty. However, “USAG has recorded a receivable for insurance coverage equal to $75 million since USAG concludes such insurance coverage is probable since it is part of the mediation process.”

The scope of the abuse was also described, as “Through August 13, 2018, approximately 220 individuals in the Michigan and California cases have named USAG as a defendant” and that “USAG is committed to working to achieve a mediated settlement … subject to insurance proceeds.” That’s the status.

Mostly overlooked was how the non-insurance side of USAG performed. In 2017, the federation had income of $24.7 million and expenses of $27.0 million for an operating loss of ~$2.3 million before investment income of about $2.0 million. So the enterprise lost $287,000 for the year and had assets of $7.1 million at the end of the year. The USOC provided $2.9 million in support funding during 2017.