AIG Faces Subpoenas From SEC, Spitzer Over Certain Products

Insurance giant American International Group Inc. said Monday that it had received subpoenas from New York Atty. Gen. Eliot Spitzer and the Securities and Exchange Commission related to nontraditional insurance products and “certain assumed reinsurance transactions.”

The company said it would 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 more business.

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

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

The Omaha-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, Switzerland.

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 for the company that began last year.

In the case he filed Oct. 14, Spitzer accused brokerage Marsh & McLennan Co. in New York 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.

In 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.

Shares of AIG fell $1.63 to $71.49 on the New York Stock Exchange.