We have been working closely with regulators and other authorities to ensure that everyone throughout the organization complies with AIG's policy of full cooperation with all investigative efforts, both internal and external, said the letter, which was signed by AIG's chief executive officer, Martin Sullivan. Among other things, AIG has been briefing the authorities on the progress of its internal review, providing documents and information, and assisting in making company personnel available as necessary, he wrote.

The letter also discussed efforts by AIG to preserve and disclose documents relevant to the investigations by Mr. Spitzer's office and the Securities and Exchange Commission, including the disclosure to authorities of efforts to remove documents from the company's Bermuda location.

Additionally, AIG acknowledged that an employee in the Bermuda office had been terminated for refusing to cooperate with an internal investigation and that several others had resigned. Other employees who do not cooperate fully with the investigations, the letter said, could also be terminated.

We are committed to improving transparency and corporate governance, and we want to have an open and constructive dialogue with our regulators, the letter said. At the same time, it is unfortunate that current circumstances have obscured the reality that AIG's unique global franchise is sound, our financial position is solid, and cash flow remains strong.

AIGs stock tumbled 8 percent on April 1, but skyrocketed over 7 percent in less than 30 minutes following Mr. Spitzers announcement that he expects a civil resolution with the insurer. The stock was also bolstered by analyst projections that AIG would not be indicted, although certain employees or officers might.

We continue to view criminal prosecution of AIG (as opposed to that of individuals), fear of which apparently accelerated the stock's decline to a two-year low on [April 1], as an extremely remote possibility, said Ronald Frank, an analyst with Smith Barney.

We cannot establish a precise worst-case scenario for AIG under the current circumstances, hence our high risk rating on AIG, added Mr. Frank in his note to investors. However, we do not view AIG's strong business model, based on global diversification and market leadership, as being broken.

Meanwhile, AIGs tangled reinsurance arrangements continued in the spotlight as federal and state investigators met with a German reinsurer. That action followed news that Maurice Greenberg, AIGs embattled former chairman and CEO, and several executives left posts they held with an AIG reinsurance subsidiary.

A representative for Munich Re confirmed that company officials were being questioned by both the SEC and Mr. Spitzers office. Anke Rosumek, reached at the companys Munich headquarters, said the meeting concerned AIG but she had no idea what the questions are about. This is an ongoing case.

AIG said last week that its internal investigation of various questioned transactions and accounting procedures found that although the company holds only a 19.9 percent ownership of Bermuda-based Richmond Insurance Company Ltd., there is undisclosed evidence of AIG control. Its coming financial restatement will treat Richmond as a consolidated entity. Munich is reported to hold a substantial stake in Bermuda-based Richmond.

AIG said last week that Mr. Greenberg had resigned as director and non-executive chairman of Transatlantic Holdings Inc., the companys New York-based reinsurance operation. Transatlantic also announced that Howard Smith and Edward E. Matthews had resigned as directors.

Mr. Smith is the former AIG chief financial officer who was fired when he invoked his Fifth Amendment right against self-incrimination rather than answer investigators questions about reinsurance transactions that are suspected of improperly improving AIGs financial picture.

Mr. Matthews, according to the Princeton, N.J.-based Robert Wood Johnson Foundation, which he serves as a trustee, was formerly AIG senior vice chairman for investments and financial services and is a director of C.V. Starr & Co. and Starr International Company, private companies that control AIG.

Robert F. Orlich, Transatlantic president and CEOwho is now serving as interim chairmansaid Transatlantic, as an AIG consolidated subsidiary, continues to cooperate in all investigations of AIG and related information requests. To date, nothing has come to our attention that would indicate that Transatlantic has been involved in any improper conduct.

(Additional reporting by Matt Brady, Daniel Hays and Arthur D. Postal.)

Reproduced from National Underwriter Edition, April 8, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.