(Bloomberg) -- American International Group Inc. agreed to pay a $35 million penalty to resolve a New York State probe into unlicensed insurance sales by former units.

The subsidiaries, American Life Insurance Co. and Delaware American Life Insurance Co., solicited business in New York without a license and made misrepresentations to the state watchdog, according to a statement today from the Department of Financial Services.

“No company has a right to ignore the laws that every other insurer has to follow,” DFS Superintendent Benjamin Lawsky said in the statement. “This type of misconduct is unfair to its competitors and puts consumers at risk. We are pleased that AIG has decided to resolve this matter.”

AIG had sued DFS to block Lawsky from fining it over claims that the units marketed insurance to multinational companies without a state license. The New York-based insurer agreed to dismiss the suit as part of today’s agreement.

“AIG has agreed to resolve this dispute in order to avoid the distraction and expense of ongoing litigation,” Jon Diat, an AIG spokesman, said in an e-mail.

AIG sold the businesses to MetLife Inc. in 2010 for more than $16 billion. At the time, the units had operations in more than 50 countries.

MetLife agreed in March to pay $60 million after New York watchdogs found that Alico and DelAm solicited business in the state without a license and made intentional misrepresentations to regulators. MetLife also agreed to cooperate with the DFS investigation of AIG.

MetLife agreed to pay $50 million to DFS and $10 million to the Manhattan District Attorney’s Office. The New York-based insurer also agreed to a deferred prosecution agreement with the office.

The case was American International Group Inc. v. New York State Department of Financial Services, 14-cv-02355, U.S. District Court, Southern District of New York (Manhattan).

  

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