There is no evidence American International Group is engaged in predatory pricing of its property-casualty business, the U.S. Government Accountability Office and Pennsylvania’s insurance commissioner told Congress last week.

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

The testimony came in response to a request from members of Congress to probe whether buzz about AIG’s market conduct was true. Some competitors have charged that AIG is deliberately and perhaps even recklessly underpricing its commercial policies to retain clients, after the hit to its parent company’s reputation caused by its near collapse and federal bailout.

“State insurance regulators, insurance brokers and insurance buyers said that while AIG may be pricing somewhat more aggressively than in the past in order to retain business in light of damage to the parent company’s reputation, they did not see indications that this pricing was inadequate or out of line with previous AIG pricing practices,” said Orice Williams, director of the GAO’s financial markets and community investment unit.

“With the caveat that these issues are very complex, we have not seen any clear evidence of underpricing to date, though we continue to look both at individual cases and at aggregate numbers on both renewals and new business at AIG,” added Pennsylvania Insurance Commissioner Joel Ario.

The pair delivered their assessments of AIG’s market conduct following its federal bailout during a packed hearing on AIG before the Capital Markets Subcommittee of the House Financial Services Committee.

Their testimony came in response to requests for information on whether predatory pricing was hurting AIG’s competitors in the marketplace. The requests came from Rep. Paul Kanjorski, D-Pa.., chair of the panel, and Rep. Spencer Bachus, R-Ala., ranking minority member of the parent House Financial Services Committee.

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

In other testimony last week, GAO cast doubt on whether AIG will ever fully repay the government for its current $173 billion investment in the company–a stake that under current agreements could rise at least another $30 billion if AIG needs or wants it.

“AIG’s ability to repay its obligations to the federal government 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’s ability 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 accurately evaluating whether AIG is unfairly competing in the market presents a number of “challenges,” including:

o The unique, negotiated nature of many commercial insurance policies.

o The subjective assumptions involved in determining premiums.

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

In his response, Mr. Ario said the Pennsylvania department didn’t take the allegations lightly, but at the same time asked members of Congress to keep in mind that both sides had good reason to complain.

“The Pennsylvania department has devoted special attention to the current allegations because both AIG and its competitors may have distorted incentives to put their competitive engines into overdrive–to preserve business on one side and to deliver a knock-out blow on the other side,” Mr. Ario testified.