AIG to Pay $1.6 Billion in Settlements

February 9, 2006 ( - American International Group Inc. (AIG) has announced it has reached settlements with the Department of Justice (DoJ), Securities and Exchange Commission (SEC), New York Attorney General (NYAG), and New York Department of Insurance (DOI).

In the announcement, AIG said it will make payments totaling approximately $1.64 billion. Terms of the settlements include:

  • AIG will pay $800 million, including $100 million as a penalty, into a fund under the supervision of the SEC to be available to make payments to investors, including investors involved in shareholder litigation relating primarily to AIG’s accounting and financial reporting practices.
  • Another $375 million will be paid into a fund under the supervision of the NYAG and the DOI to be available principally to pay certain AIG insureds who purchased excess casualty policies through Marsh Inc.
  • Approximately $343 million will be used to compensate each of the fifty states in connection with the underpayment of certain workers compensation premium taxes and other assessments.
  • AIG will pay a fine of $100 million to the State of New York and $25 million in connection with the DOJ settlement.

The settlements resolve outstanding litigation filed by the SEC, NYAG and DOI against AIG and conclude negotiations with these authorities and the DOJ in connection with the accounting, financial reporting and insurance brokerage practices of AIG and its subsidiaries (See  AIG Proposes Settlements in SEC, DOJ Probes), as well as claims relating to the underpayment of certain workers compensation premium taxes and other assessments (See  Empire State to Audit AIG’s Workers’ Comp Accounting ).

As part of its settlements, AIG said it has agreed to retain for a period of three years an independent consultant who will conduct a review that will include the adequacy of AIG’s internal controls over financial reporting and the remediation plan that AIG has implemented as a result of its own internal review.