Alice Schroeder, who covered AIG as an analyst with Morgan Stanley, also testified that Maurice R. Greenberg, AIG’s former chief executive officer, reassured her about AIG’s reserve levels in a meeting before she upgraded the stock to “strong buy,” Morgan Stanley’s highest rating.
The five former executives of Gen Re and AIG who are charged with conspiring to help AIG inflate its loss reserves by $500 million with a pair of allegedly bogus loss portfolio reinsurance transactions in the fourth quarter of 2000 and the first quarter of 2001.
Those charged in the case are former Gen Re Chief Executive Officer Ronald E. Ferguson; Christopher P. Garand, former senior vp in charge of U.S. finite underwriting for Gen Re; Robert D. Graham, former Gen Re senior vp and legal counsel; Elizabeth A. Monrad, former chief financial officer for the reinsurer; and Christian M. Milton, AIG’s former vp for reinsurance.
AIG’s stock dropped 6.1% in October 2000 after the insurer disclosed in its third quarter earnings report that its reserves has declined by $59 million. Prosecutors charge that the defendants engineered the reinsurance deal to inflate AIG’s reserves and shore up its stock price. As a result of the deal, AIG’s reserves increased by $106 million by year-end 2000 and by a further $63 million in the first quarter of 2001, when they would have shown further declines without the deal, prosecutors allege.