AIG 2011 Annual Report Download - page 324

American International Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
agreed to (i) cease automatically enrolling Minnesota residents in certain insurance relating to air travel, (ii) pay a
civil penalty to Minnesota of $250,000 and (iii) refund premium to Minnesota residents who were automatically
enrolled in certain insurance relating to air travel. In early 2012, Chartis U.S., Inc., on behalf of itself, National
Union, and certain of Chartis U.S., Inc.’s insurance companies (collectively, Chartis U.S.) and the lead regulators
agreed in principle upon certain terms to resolve the multi-state examination. The terms include Chartis U.S.’s
(i) payment of a civil penalty of up to $51 million, (ii) agreement to enter into a corrective action plan describing
agreed-upon specific steps and standards for evaluating Chartis U.S.’s ongoing compliance with laws and
regulations governing the regulatory issues identified in the examination, and (iii) agreement to pay a contingent
fine in the event that Chartis U.S. fails to substantially comply with the steps and standards agreed to in the
corrective action plan. As of December 31, 2011, AIG has an accrued liability equal to the amount of the civil
penalty under the proposed agreement. As the terms outlined above are subject to agreement by the lead and
participating states and appropriate agreements or orders, AIG (i) can give no assurance that these terms will not
change prior to a final resolution of the multi-state examination that is binding on all parties and (ii) cannot
predict what other regulatory action, if any, will result from resolving the multi-state examination. There can be no
assurance that any regulatory action resulting from the issues identified will not have a material adverse effect on
AIG’s consolidated results of operations for an individual reporting period, the ongoing operations of the business
being examined, or on similar business written by other AIG carriers. National Union and other AIG companies
are also currently subject to civil litigation relating to the conduct of their accident and health business, and may
be subject to additional litigation relating to the conduct of such business from time to time in the ordinary
course.
Industry-wide examinations conducted by the Minnesota Department of Insurance and the Department of
Housing and Urban Development (HUD) on captive reinsurance practices by lenders and mortgage insurance
companies, including UGC, have been ongoing for several years. Recently, the newly formed Consumer Financial
Protection Bureau assumed responsibility for violations of the Real Estate Settlement Procedures Act from HUD,
and assumed HUD’s aforementioned ongoing investigation. UGC recently received a proposed consent order from
the Minnesota Commissioner of Commerce (the MN Commissioner) which alleges that UGC violated the Real
Estate Settlement Procedures Act, the Fair Credit Reporting Act and other state and federal laws in connection
with its practices with captive reinsurance companies owned by lenders. UGC is currently engaged in discussions
with the MN Commissioner with respect to the terms of the proposed consent order. UGC cannot predict if or
when a consent order may be entered into or, if entered into, what the terms of the final consent order will be.
UGC is also currently subject to civil litigation relating to its placement of reinsurance with captives owned by
lenders, and may be subject to additional litigation relating to the conduct of such business from time to time in
the ordinary course.
AIG’s Subprime Exposure, AIGFP Credit Default Swap Portfolio and Related Matters
AIG, AIGFP and certain directors and officers of AIG, AIGFP and other AIG subsidiaries have been named in
various actions relating to AIG’s exposure to the U.S. residential subprime mortgage market, unrealized market
valuation losses on AIGFP’s super senior credit default swap portfolio, losses and liquidity constraints relating to
AIG’s securities lending program and related disclosure and other matters (Subprime Exposure Issues).
Consolidated 2008 Securities Litigation. Between May 21, 2008 and January 15, 2009, eight purported securities
class action complaints were filed against AIG and certain directors and officers of AIG and AIGFP, AIG’s
outside auditors, and the underwriters of various securities offerings in the United States District Court for the
Southern District of New York (the Southern District of New York), alleging claims under the Securities Exchange
Act of 1934 (the Exchange Act) or claims under the Securities Act of 1933 (the Securities Act). On March 20,
2009, the Court consolidated all eight of the purported securities class actions as In re American International
Group, Inc. 2008 Securities Litigation (the Consolidated 2008 Securities Litigation). Subsequently, on
November 18, 2011 and January 20, 2012, two separate, though similar, securities actions were brought against
310 AIG 2011 Form 10-K