ResponsibleWealth.org - 2004 Shareholder Resolution: AIG Speech

Good Morning. My name is Scott Klinger and I am here representing AIG shareholder Anne Ellsworth and seven other co-filers of this resolution. Each of the filers are members of Responsible Wealth, a national network of affluent Americans concerned about widening economic inequality in the United States.

This resolution asks that the company incorporate the eradication of predatory lending within AIG as one of the criteria used in determining executive pay.

We bring this resolution out of our concern for widening economic inequality, particularly when that inequality arises from unfair and unjust practices. Specifically we are concerned about the way AIG’s American General’s subsidiary markets loans to low-income, minority and elderly customers.

The community group Inner City Press/On the Move has obtained a copy of American General Insurance Product Guide. According to Inner City Press, the guide offers detailed directions for how to convince customers to accept costly credit insurance. Inner City Press has also obtained copies of recently sold single premium credit insurance through AIG’s Merit Life Insurance Company subsidiary. AIG pledged to discontinue selling the highly controversial single premium policies in September, 2001.

Sub-Prime lending is a relatively small part of AIG’s corporate activities, but the costs to shareholders of poor practices can be quite large. Household International paid $484 million of shareholder’s funds to settle predatory lending complaints, while Citigroup shareholders lost nearly $200 million to settle claims against their company. AIG is just starting to come onto the radar screen of regulators. Earlier this year the New Jersey Department of Banking and Insurance ordered American General to pay $1.2 million in restitution to 700 AIG customers in New Jersey who had been charged points significantly in excess of the amounts on the pre-loan disclosure forms.

There are several practices in place at American General that do not appear to conform to sub-prime industry best practice. In this regard we have questions about five areas of the company’s sub-prime lending business:

Is American General continuing the practice of selling single premium credit insurance financed into the mortgage?
Does American General compensates its employees on their success in including insurance products with the loan?
Does AIG have a clear and detailed statement of fair lending principles that addresses such concerns as net benefit to borrowers for mortgage refinancings, and maximum points on any consumer mortgage. If such a policy exists how is this policy available to shareholders and customers? If you go to the AIG.com website and type in either fair lending or predatory lending, you will find a single page of vague commitments by United Guaranty.
Why do AIG and American General continue to oppose state and local attempts to regulate predatory lending practices, in at least one case threatening to leave the market if the legislation was passed?
Is it the policy of AIG and American General to extend predatory lending safeguards adopted in the US to consumers in other countries, including China, where AIG is expanding rapidly?

One of management’s arguments in encouraging you to oppose this resolution is that sub-prime lending is a very small part of AIG’s business. The problem is that predatory lending is a very big problem, costing low-income borrowers tens of billions a year. Other sub-prime lenders have come to regret not focusing the attention of the highest levels of management on predatory lending criticisms. They and their shareholders have suffered as a result. We ask for your support of this proposal as a means of directing management to a problem that we do not believe is getting sufficient attention within AIG.


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		AIG Address of Scott Klinger at American International Group’s annual meeting May 19, 2004, New York City Good Morning. My name is Scott Klinger and I am here representing AIG shareholder Anne Ellsworth and seven other co-filers of this resolution. Each of the filers are members of Responsible Wealth, a national network of affluent Americans concerned about widening economic inequality in the United States. This resolution asks that the company incorporate the eradication of predatory lending within AIG as one of the criteria used in determining executive pay. We bring this resolution out of our concern for widening economic inequality, particularly when that inequality arises from unfair and unjust practices. Specifically we are concerned about the way AIG’s American General’s subsidiary markets loans to low-income, minority and elderly customers. The community group Inner City Press/On the Move has obtained a copy of American General Insurance Product Guide. According to Inner City Press, the guide offers detailed directions for how to convince customers to accept costly credit insurance. Inner City Press has also obtained copies of recently sold single premium credit insurance through AIG’s Merit Life Insurance Company subsidiary. AIG pledged to discontinue selling the highly controversial single premium policies in September, 2001. Sub-Prime lending is a relatively small part of AIG’s corporate activities, but the costs to shareholders of poor practices can be quite large. Household International paid $484 million of shareholder’s funds to settle predatory lending complaints, while Citigroup shareholders lost nearly $200 million to settle claims against their company. AIG is just starting to come onto the radar screen of regulators. Earlier this year the New Jersey Department of Banking and Insurance ordered American General to pay $1.2 million in restitution to 700 AIG customers in New Jersey who had been charged points significantly in excess of the amounts on the pre-loan disclosure forms. There are several practices in place at American General that do not appear to conform to sub-prime industry best practice. In this regard we have questions about five areas of the company’s sub-prime lending business: Is American General continuing the practice of selling single premium credit insurance financed into the mortgage? Does American General compensates its employees on their success in including insurance products with the loan? Does AIG have a clear and detailed statement of fair lending principles that addresses such concerns as net benefit to borrowers for mortgage refinancings, and maximum points on any consumer mortgage. If such a policy exists how is this policy available to shareholders and customers? If you go to the AIG.com website and type in either fair lending or predatory lending, you will find a single page of vague commitments by United Guaranty. Why do AIG and American General continue to oppose state and local attempts to regulate predatory lending practices, in at least one case threatening to leave the market if the legislation was passed? Is it the policy of AIG and American General to extend predatory lending safeguards adopted in the US to consumers in other countries, including China, where AIG is expanding rapidly? One of management’s arguments in encouraging you to oppose this resolution is that sub-prime lending is a very small part of AIG’s business. The problem is that predatory lending is a very big problem, costing low-income borrowers tens of billions a year. Other sub-prime lenders have come to regret not focusing the attention of the highest levels of management on predatory lending criticisms. They and their shareholders have suffered as a result. We ask for your support of this proposal as a means of directing management to a problem that we do not believe is getting sufficient attention within AIG. Thank you.
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