News focus - Misconduct investigations agreement.

(From Reinsurance)

US state and federal regulators have announced agreements to resolve pending litigation and investigations of fraud, bid-rigging and improper accounting by American International Group (AIG).

Under the agreements, the company has acknowledged misconduct, adopted a series of ground-breaking reforms, and agreed to pay more than $1.6bn in restitution and penalties.

The agreements were announced simultaneously by New York attorney general (NYAG) Eliot Spitzer, the Department of Insurance (DOI), the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ).

Mr Spitzer said: "AIG was and is a solid company that didn't need to cheat. It finds itself in this position solely because some senior managers thought it was acceptable to deceive the investing public and regulators. However, by changing management, implementing reforms and providing restitution to injured investors, customers and states, the company has placed itself on a path toward resurgence."

Howard Mills, state insurance superintendent, said: "AIG has today acknowledged that the company, over a period of years, intentionally misled investors, regulators and policyholders about the company's financial condition and operations. We're pleased that AIG is making amends to all those who were adversely affected by its conduct, and applaud the current management team's willingness to reform their financial reporting and corporate governance practices. We are confident these steps will allow AIG to remain one of the world's premier financial services companies."

In the autumn of 2004, the attorney general's office and the DOI began investigating AIG for bid-rigging as part of an ongoing probe of misconduct in the insurance industry. Previously, the probe had resulted in more than $1bn in restitution to policyholders, and guilty pleas were made by 20 insurance company executives and officers, including four former AIG employees.