AIG 2012 Annual Report Download - page 309

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16. CONTINGENCIES, COMMITMENTS AND GUARANTEES
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In the normal course of business, various contingent liabilities and commitments are entered into by AIG and certain
of its subsidiaries. In addition, AIG guarantees various obligations of certain subsidiaries.
AIG recorded an increase in its estimated litigation liability of approximately $783 million for the year ended
December 31, 2012 based on developments in several actions.
Although AIG cannot currently quantify its ultimate liability for unresolved litigation and investigation matters, including
those referred to below, it is possible that such liability could have a material adverse effect on AIG’s consolidated
financial condition or its consolidated results of operations or consolidated cash flows for an individual reporting
period.
Legal Contingencies
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AIG and its subsidiaries, in common with the insurance and financial services industries in general, are
subject to litigation, including claims for punitive damages, in the normal course of their business. In AIG’s insurance
operations (including UGC), litigation arising from claims settlement activities is generally considered in the
establishment of AIG’s liability for unpaid claims and claims adjustment expense. However, the potential for
increasing jury awards and settlements makes it difficult to assess the ultimate outcome of such litigation. AIG is also
subject to derivative, class action and other claims asserted by its shareholders and others alleging, among other
things, breach of fiduciary duties by its directors and officers and violations of insurance laws and regulations, as well
as federal and state securities laws. In the case of any derivative action brought on behalf of AIG, any recovery
would accrue to the benefit of AIG.
Various regulatory and governmental agencies have been reviewing certain public disclosures, transactions and
practices of AIG and its subsidiaries in connection with industry-wide and other inquiries into, among other matters,
AIG’s liquidity, compensation paid to certain employees, payments made to counterparties, and certain business
practices and valuations of current and former operating insurance subsidiaries. AIG has cooperated, and will
continue to cooperate, in producing documents and other information in response to subpoenas and other requests.
AIG’s Subprime Exposure, AIGFP Credit Default Swap Portfolio and Related Matters
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AIG, AIGFP and certain directors and officers of AIG, AIGFP and other AIG subsidiaries have been named in various
actions relating to our 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 our securities lending
program and related disclosure and other matters (Subprime Exposure Issues).
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, as amended (the Exchange Act), or claims under the Securities Act of 1933, as amended (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).
On May 19, 2009, lead plaintiff in the Consolidated 2008 Securities Litigation filed a consolidated complaint on behalf
of purchasers of AIG Common Stock during the alleged class period of March 16, 2006 through September 16, 2008,
and on behalf of purchasers of various AIG securities offered pursuant to AIG’s shelf registration statements. The
consolidated complaint alleges that defendants made statements during the class period in press releases, AIG’s
quarterly and year-end filings, during conference calls, and in various registration statements and prospectuses in
connection with the various offerings that were materially false and misleading and that artificially inflated the price of
AIG Common Stock. The alleged false and misleading statements relate to, among other things, the Subprime
Exposure Issues. The consolidated complaint alleges violations of Sections 10(b) and 20(a) of the Exchange Act and
Sections 11, 12(a)(2), and 15 of the Securities Act. On August 5, 2009, defendants filed motions to dismiss the
consolidated complaint, and on September 27, 2010, the Court denied the motions to dismiss.
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AIG 2012 Form 10-K292
Overview.
Consolidated 2008 Securities Litigation.
ITEM 8 / NOTE 16. CONTINGENCIES, COMMITMENTS AND GUARANTEES