AIG 2008 Annual Report Download - page 291

relationship with Allied World Assurance Company and includes an additional settlement payment of $500,000
related thereto.
AIG entered into an agreement effective March 13, 2008 with the Pennsylvania Insurance Department relating
to the Department’s investigation into the affairs of AIG and certain of its Pennsylvania-domiciled insurance
company subsidiaries. The settlement calls for total payments of approximately $13.5 million, of which approx-
imately $4.4 million was paid under previous settlement agreements. During the term of the settlement agreement,
AIG will provide annual reinsurance reports, as well as maintain certain producer compensation disclosure and
ongoing compliance initiatives.
NAIC Examination of Workers’ Compensation Premium Reporting. During 2006, the Settlement Review
Working Group of the National Association of Insurance Commissioners (NAIC), under the direction of the states
of Indiana, Minnesota and Rhode Island, began an investigation into AIG’s reporting of workers’ compensation
premiums. In late 2007, the Settlement Review Working Group recommended that a multi-state targeted market
conduct examination focusing on workers’ compensation insurance be commenced under the direction of the
NAIC’s Market Analysis Working Group. AIG was informed of the multi-state targeted market conduct exam-
ination in January 2008. The lead states in the multi-state examination are Delaware, Florida, Indiana, Massa-
chusetts, Minnesota, New York, Pennsylvania, and Rhode Island. All other states (and the District of Columbia)
have agreed to participate in the multi-state examination. To date, the examination has focused on legacy issues
related to AIG’s writing and reporting of workers’ compensation insurance between 1985 and 1996. AIG has also
been advised that the examination will focus on current compliance with legal requirements applicable to such
business. AIG has been advised by the lead states that to date no determinations have been made with respect to
these issues, and AIG cannot predict either the outcome of the investigation or provide any assurance regarding
regulatory action that may result from the investigation.
Securities Action — Southern District of New York. Beginning in October 2004, a number of putative
securities fraud class action suits were filed in the Southern District of New York against AIG and consolidated as In
re American International Group, Inc. Securities Litigation. Subsequently, a separate, though similar, securities
fraud action was also brought against AIG by certain Florida pension funds. The lead plaintiff in the class action is a
group of public retirement systems and pension funds benefiting Ohio state employees, suing on behalf of
themselves and all purchasers of AIG’s publicly traded securities between October 28, 1999 and April 1, 2005. The
named defendants are AIG and a number of present and former AIG officers and directors, as well as Starr, SICO,
General Reinsurance Corporation (General Re), and PricewaterhouseCoopers LLP (PwC), among others. The lead
plaintiff alleges, among other things, that AIG: (1) concealed that it engaged in anti-competitive conduct through
alleged payment of contingent commissions to brokers and participation in illegal bid-rigging; (2) concealed that it
used “income smoothing” products and other techniques to inflate its earnings; (3) concealed that it marketed and
sold “income smoothing” insurance products to other companies; and (4) misled investors about the scope of
government investigations. In addition, the lead plaintiff alleges that AIG’s former Chief Executive Officer,
Maurice R. Greenberg, manipulated AIG’s stock price. The lead plaintiff asserts claims for violations of Sections 11
and 15 of the Securities Act of 1933, Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder,
Section 20(a) of the Exchange Act, and Section 20A of the Exchange Act. In April 2006, the court denied the
defendants’ motions to dismiss the second amended class action complaint and the Florida complaint. In December
2006, a third amended class action complaint was filed, which does not differ substantially from the prior complaint.
Fact discovery is currently ongoing. On February 20, 2008, the lead plaintiff filed a motion for class certification.
The motion remains pending.
ERISA Action — Southern District of New York. Between November 30, 2004 and July 1, 2005, several
ERISA actions were filed in the Southern District of New York on behalf of purported class participants and
beneficiaries of three pension plans sponsored by AIG or its subsidiaries. A consolidated complaint filed on
September 26, 2005 alleges a class period between September 30, 2000 and May 31, 2005 and names as defendants
AIG, the members of AIG’s Retirement Board and the Administrative Boards of the plans at issue, and present or
former members of AIG’s Board of Directors. The factual allegations in the complaint are essentially identical to
those in the securities actions described above under Securities Actions — Southern District of New York. The
AIG 2008 Form 10-K 285
American International Group, Inc., and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)