Deal is expected to be announced as early as Thursday Standard & Poor’s Ratings Services could strike a $1.37 billion deal as early as Thursday resolving government allegations that it knowingly issued rosy grades of mortgages before the 2008 financial crisis, according to people familiar with the situation. An agreement isn’t yet final, but the Justice Department is expected to receive about $687 million, while more than 12 states as a group would get a similar total, the people said. California is expected to receive more than $100 million, while most other states would receive between $20 million to $25 million, the people said. A deal would resolve a 2013 Justice Department lawsuit accusing S&P of misleading investors with inflated grades of residential mortgage bonds that turned out to be inaccurate. Eventually, attorneys general from 20 states and the District of Columbia made similar accusations in separate cases. The $1.37 billion settlement would be the largest amount paid by a ratings agency to resolve allegations of favorable bond-grading methods in the run-up to the crisis. Unlike big Wall Street banks, which have paid more than $100 billion to end lawsuits related to crisis-era conduct, ratings firms have been relatively unscathed by the surge of litigation and investigations. Roughly $165 million in settlements have been announced to date for the industry’s three largest firms. S&P, a unit of McGraw Hill Financial Inc. MHFI, -2.57% won’t admit wrongdoing as part of the settlement, but it will agree to a statement outlining its actions, the people said. S&P has been adamant that it not admit wrongdoing for violating any laws over fears that doing so would expose it to future litigation, according to people familiar with the company’s thinking. An expanded version of this report appears at WSJ.com.