NU Online News Service, June 4, 1:45 p.m.EDT

American International Group will pay a total of $146.5 millionto states to settle a probe that examined whether the insurerviolated premium-reporting rules governing workers' compensationinsurance.

The state of Pennsylvania, a lead state in the probe, says itwill receive more than $16.8 million in fines and assessments aspart of the settlement, which the state's insurance department saysis the largest fine levied in the agency's history. Pennsylvaniasays its share breaks down to $8.6 million in fines, $3.6 millionto the state's Workers' Compensation Security Fund and $4.6 millionin premium taxes and assessments. 

Rosanne Placey, spokesperson for the Pennsylvania InsuranceDepartment, says the recent announcement finalizes a settlementagreement from 2010. She notes that part of what held up thesettlement was a disagreement between AIG and Liberty Mutual over a $450 million settlement AIG reached last year with otherprivate insurers to resolve the same matter. Placey says it wasultimately agreed that the matter between Liberty Mutual and AIGshould not hold up the settlement with the states.

In a statement, Pennsylvania Insurance Commissioner MichaelConsedine says, "State insurance regulators must be able to rely onaccurate company financial data. In AIG's case, we found that thecompanies, which operated in a pooled arrangement, hadunderestimated their liabilities under inter-company policyholderguarantees."

He adds, "As part of this agreement, AIG corrected previouslyfiled financial reports and reallocated approximately $2.1 billionof premium from other lines of insurance to workers'compensation." 

AIG says in a statement sent via email that the probe focused onallegations of conduct taking place between 1975 and 1996, the sameperiod that was the subject of a 2006 regulatory settlement between AIG and the state of NewYork. AIG spokesman James Ankner says in the emailed statement, "Weare pleased that with this settlement now becoming final, we haveresolved all remaining regulatory issues related to AIG's workers'compensation premium reporting for our stakeholders. The settlementrepresents AIG's unwavering commitment to regulatory compliance andprincipled corporate governance."

Additional reporting by Chad Hemenway