AIG gets subpoenas from Spitzer, SEC over reinsurance, 'nontraditional' products - NewsOn6.com - Tulsa, OK - News, Weather, Video and Sports - KOTV.com |

AIG gets subpoenas from Spitzer, SEC over reinsurance, 'nontraditional' products

Updated:
NEW YORK (AP) _ Insurance giant American International Group Inc. said Monday it has received subpoenas from New York Attorney General Eliot Spitzer and the Securities and Exchange Commission related to nontraditional insurance products and ``certain assumed reinsurance transactions.''

The company said it will cooperate with the probe.

Spitzer previously accused the insurance industry of bid-rigging and price fixing in an investigation that focused on contingent commissions, which are incentive fees paid to brokers by insurance companies in exchange for getting more business.

In recent weeks, however, Spitzer has broadened his investigation to included so-called nontraditional or loss mitigation products to try to determine whether they are really insurance aimed at reducing risk or are actually vehicles to help companies smooth earnings.

Last month, Spitzer and the SEC subpoenaed billionaire investor Warren Buffett's Berkshire Hathaway Inc. demanding information about its reinsurance subsidiary, General Re Corp.

The Omaha, Neb.-based Berkshire said the subpoenas sought documentation and information relating to nontraditional or loss mitigation insurance products from General Re and all its affiliates. Berkshire Hathaway said it was cooperating with the probe.

A number of other property and casualty companies also have disclosed receiving subpoenas from the SEC, including Platinum Underwriters Holdings Ltd. and ACE Ltd., both headquartered in Bermuda; Chubb Corp. of Warren, N.J.; and Swiss Reinsurance Co. of Zurich.

Spitzer's office declined to comment on the latest subpoenas.

The subpoenas for New York-based AIG, the world's largest insurance company, are the latest in a series of legal woes that began last year.

In the case he filed Oct. 14, Spitzer accused Marsh & McLennan Companies Inc., the New York brokerage, of bid rigging and price fixing. Several insurance companies, including AIG, were named in the suit but not charged. Marsh & McLennan on Jan. 31 agreed to pay $850 million in restitution over several years to resolve the allegations.

Last November, AIG agreed to pay $126 million to settle allegations of securities fraud by the SEC and the Justice Department related to three 2001 transactions it made with PNC Financial Services Group Inc. that allegedly helped the Pittsburgh-based banking company artificially inflate its earnings.

Part of the settlement also went to resolve a similar case involving Brightpoint Inc., a Plainfield, Ind., cell phone distributor.

In Monday's statement, AIG said that it received subpoenas last Wednesday ``relating to investigations of nontraditional insurance products and certain assumed reinsurance transactions and AIG's accounting for such transactions.''

The subpoenas were received shortly after an earnings conference in which the insurance giant report an 11.5 percent increase in fourth-quarter earnings despite heavy storm losses and the settlement with federal regulators.

AIG Chairman Maurice Greenberg told a conference call of analysts that part of the cost of the regulatory settlement was being paid from the ``bonus pool'' set up to provide incentive pay for the AIG Financial Products Corp., the unit involved in the case. He did not disclose the amount.
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