AIG 2013 Annual Report Download - page 312

stayed until that appeal is resolved. General discovery has not commenced and AIG is unable to reasonably estimate
the possible loss or range of losses, if any, arising from the litigation.
Our life insurance companies have received and responded to industry-wide regulatory inquiries, including a multi-
state audit and market conduct examination covering compliance with unclaimed property laws and a directive from
the New York Insurance Department regarding claims settlement practices and other related state regulatory
inquiries. The inquiries concern the use of the Social Security Death Master File (SSDMF) to identify potential claims
not yet presented to us in the normal course of business. In connection with the resolution of the multi-state
examination relating to these matters in the third quarter of 2012, we paid an $11 million regulatory assessment to
the various state insurance departments that are parties to the regulatory settlement to defray costs of their
examinations and monitoring. Although we have enhanced our claims practices to include use of the SSDMF, it is
possible that the settlement remediation requirements, remaining inquiries, other regulatory activity or litigation could
result in the payment of additional amounts. AIG has also received a demand letter from a purported AIG
shareholder requesting that the Board of Directors investigate these matters, and bring appropriate legal proceedings
against any person identified by the investigation as engaging in misconduct. On January 8, 2014, the independent
members of our Board unanimously refused the demand in its entirety, and on February 19, 2014, counsel for the
Board sent a letter to counsel for the purported AIG shareholder describing the process by which our Board
considered and refused its demand. AIG believes it has adequately reserved for such claims, but there can be no
assurance that the ultimate cost will not vary, perhaps materially, from its estimate.
In connection with the previously disclosed multi-state examination of certain accident and health products, including
travel products, issued by National Union Fire Insurance Company of Pittsburgh, Pa. (National Union), Chartis Inc.,
on behalf of itself, National Union, and certain of Chartis Inc.’s insurance and non-insurance companies (collectively,
the Chartis parties) entered into a Regulatory Settlement Agreement with regulators from 50 U.S. jurisdictions
effective November 29, 2012. Under the agreement, and without admitting any liability for the issues raised in the
examination, the Chartis parties (i) paid a civil penalty of $50 million, (ii) entered into a corrective action plan
describing agreed-upon specific steps and standards for evaluating the Chartis parties’ ongoing compliance with laws
and regulations governing the issues identified in the examination, and (iii) agreed to pay a contingent fine in the
event that the Chartis parties fail to satisfy certain terms of the corrective action plan. 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. There can be no assurance that any regulatory action resulting from the issues identified will not have a
material adverse effect on our ongoing operations of the business subject to the agreement, or on similar business
written by other AIG carriers.
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. In 2011, the Consumer Financial Protection Bureau (CFPB)
assumed responsibility for violations of the Real Estate Settlement Procedures Act from HUD, and assumed HUD’s
aforementioned ongoing investigation. In June 2012, the CFPB issued a Civil Investigative Demand (CID) to UGC
and other mortgage insurance companies, requesting the production of documents and answers to written questions.
The CFPB agreed to toll the deadlines associated with the CID pending discussions that could resolve the
investigation. UGC and the CFPB reached a settlement, entered on April 8, 2013 by the United States District Court
for the Southern District of Florida, where UGC consented to discontinue its remaining captive reinsurance practices
and to pay a civil monetary penalty of $4.5 million to the CFPB. The settlement includes a release for all liability
related to UGC’s captive reinsurance practices and resolves the CFPB’s investigation. UGC has 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 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.
Regulatory and Related Matters
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AIG 2013 Form 10-K294
ITEM 8 / NOTE 15. CONTINGENCIES, COMMITMENTS AND GUARANTEES
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