AIG Says Italian Life Insurance Unit Is Investigated by Milan Prosecutor
American International Group Inc. said an Italian subsidiary is being investigated by a prosecutor in Milan and was sued by policyholders after suspending client withdrawals from some investments that declined in value.
AIG’s Alico Life International Ltd. is cooperating with Italian regulators, the company said today in a regulatory filing reporting quarterly earnings. Clients said the company provided inadequate disclosure about the investments, AIG said. Withdrawals were halted in late 2008 as the parent company faced a liquidity squeeze that forced a U.S. bailout.
“The public prosecutor in Milan had opened a formal investigation into the actions of employees of ALIL, as well as employees of ALIL’s major distributor, based on a policyholder’s complaint,” New York-based AIG said in the filing. The insurer is “in discussions to address their concerns as well as those of the affected policyholders.”
AIG, which was rescued by the U.S. government in 2008, agreed in March to sell Alico to MetLife Inc. for about $15.5 billion. As part of the deal, AIG said it will indemnify MetLife for legal claims and regulatory fines tied to suspended funds.
MetLife, the largest U.S. life insurer, will be protected against losses tied to real estate bets in Japan and Alico’s U.K. Premier Access Bond offering, the insurer said in March.
Withdrawals Halted
AIG halted withdrawals from the U.K. bond in 2008 after clients took out more money in three days than they typically do in three months. Assets backing the investments were put into a Protected Recovery Fund, which guarantees customers a specified sum by 2012 and will be managed by MetLife, the company said.
AIG reported $44 million in life insurance premiums in Europe in the second quarter of 2008.
AIG, which lists more than 20 grouped lawsuits and probes in today’s filing, is seeking to resolve a backlog of litigation since its near-collapse. The insurer hired Thomas Russo in February to be general counsel. Russo was the Lehman Brothers Holdings Inc. chief legal officer when the securities firm went bankrupt in 2008.
The insurer agreed to pay $725 million last month to settle a lawsuit by investors, including public pension funds in Ohio, New Mexico, Mississippi and California. They claimed AIG fraudulently inflated results, causing its share price to plummet when the deception was uncovered.
“The key here is for the company to go forward and make money and do business and have issues dealing with supervisors and shareholders all in the past,” Ernest “Ernie” Patrikis, a partner at White & Case and a former general counsel at AIG, said last month.
Mark Herr, a spokesman for AIG, declined to comment. Christopher Breslin, a MetLife spokesman, didn’t return a call.
To contact the reporter on this story: Sarah Frier in New York at sfrie@bloomberg.net
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