There is no evidence American International Group is engaged inpredatory pricing of its property-casualty business, the U.S.Government Accountability Office and Pennsylvania's insurancecommissioner told Congress last week.

Meanwhile, GAO expressed skepticism that AIG will ever be ableto fully repay its massive government bailout loans.

The testimony came in response to a request from members ofCongress to probe whether buzz about AIG's market conduct was true.Some competitors have charged that AIG is deliberately and perhapseven recklessly underpricing its commercial policies to retainclients, after the hit to its parent company's reputation caused byits near collapse and federal bailout.

"State insurance regulators, insurance brokers and insurancebuyers said that while AIG may be pricing somewhat moreaggressively than in the past in order to retain business in lightof damage to the parent company's reputation, they did not seeindications that this pricing was inadequate or out of line withprevious AIG pricing practices," said Orice Williams, director ofthe GAO's financial markets and community investment unit.

"With the caveat that these issues are very complex, we have notseen any clear evidence of underpricing to date, though we continueto look both at individual cases and at aggregate numbers on bothrenewals and new business at AIG," added Pennsylvania InsuranceCommissioner Joel Ario.

The pair delivered their assessments of AIG's market conductfollowing its federal bailout during a packed hearing on AIG beforethe Capital Markets Subcommittee of the House Financial ServicesCommittee.

Their testimony came in response to requests for information onwhether predatory pricing was hurting AIG's competitors in themarketplace. The requests came from Rep. Paul Kanjorski, D-Pa..,chair of the panel, and Rep. Spencer Bachus, R-Ala., rankingminority member of the parent House Financial ServicesCommittee.

New York Insurance Superintendent Eric Dinallo had come to thesame conclusion in testimony a week earlier during a hearing on AIGbefore the Senate Banking Committee.

In other testimony last week, GAO cast doubt on whether AIG willever fully repay the government for its current $173 billioninvestment in the company–a stake that under current agreementscould rise at least another $30 billion if AIG needs or wantsit.

"AIG's ability to repay its obligations to the federalgovernment has also been impaired by its deteriorating operations,inability to sell its assets and further declines in its assets,"Ms. Williams testified.

"All of these issues will continue to adversely impact AIG'sability to repay its government assistance," she added.

In her comments on the pricing of AIG's p-c products, Ms.Williams told Rep. Kanjorski and Rep. Bachus that accuratelyevaluating whether AIG is unfairly competing in the market presentsa number of "challenges," including:

o The unique, negotiated nature of many commercial insurancepolicies.

o The subjective assumptions involved in determiningpremiums.

o The fact that for some lines of commercial insurance, it cantake several years to determine if premiums charged were adequatefor the related losses.

In his response, Mr. Ario said the Pennsylvania departmentdidn't take the allegations lightly, but at the same time askedmembers of Congress to keep in mind that both sides had good reasonto complain.

"The Pennsylvania department has devoted special attention tothe current allegations because both AIG and its competitors mayhave distorted incentives to put their competitive engines intooverdrive–to preserve business on one side and to deliver aknock-out blow on the other side," Mr. Ario testified.