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ITEM 8 / NOTE 16. CONTINGENCIES, COMMITMENTS AND GUARANTEES.....................................................................................................................................................................................16. CONTINGENCIES, COMMITMENTS AND GUARANTEES..............................................................................................................................................................................................In the normal course of business, various contingent liabilities and commitments are entered into by AIG and certainof its subsidiaries. In addition, AIG guarantees various obligations of certain subsidiaries.AIG recorded an increase in its estimated litigation liability of approximately $783 million for the year endedDecember 31, 2012 based on developments in several actions.Although AIG cannot currently quantify its ultimate liability for unresolved litigation and investigation matters, includingthose referred to below, it is possible that such liability could have a material adverse effect on AIG’s consolidatedfinancial condition or its consolidated results of operations or consolidated cash flows for an individual reportingperiod.Legal Contingencies..............................................................................................................................................................................................Overview. AIG and its subsidiaries, in common with the insurance and financial services industries in general, aresubject to litigation, including claims for punitive damages, in the normal course of their business. In AIG’s insuranceoperations (including UGC), litigation arising from claims settlement activities is generally considered in theestablishment of AIG’s liability for unpaid claims and claims adjustment expense. However, the potential forincreasing jury awards and settlements makes it difficult to assess the ultimate outcome of such litigation. AIG is alsosubject to derivative, class action and other claims asserted by its shareholders and others alleging, among otherthings, breach of fiduciary duties by its directors and officers and violations of insurance laws and regulations, as wellas federal and state securities laws. In the case of any derivative action brought on behalf of AIG, any recoverywould accrue to the benefit of AIG.Various regulatory and governmental agencies have been reviewing certain public disclosures, transactions andpractices of AIG and its subsidiaries in connection with industry-wide and other inquiries into, among other matters,AIG’s liquidity, compensation paid to certain employees, payments made to counterparties, and certain businesspractices and valuations of current and former operating insurance subsidiaries. AIG has cooperated, and willcontinue to cooperate, in producing documents and other information in response to subpoenas and other requests.AIG’s Subprime Exposure, AIGFP Credit Default Swap Portfolio and Related Matters..............................................................................................................................................................................................AIG, AIGFP and certain directors and officers of AIG, AIGFP and other AIG subsidiaries have been named in variousactions relating to our exposure to the U.S. residential subprime mortgage market, unrealized market valuation losseson AIGFP’s super senior credit default swap portfolio, losses and liquidity constraints relating to our securities lendingprogram and related disclosure and other matters (Subprime Exposure Issues).Consolidated 2008 Securities Litigation. Between May 21, 2008 and January 15, 2009, eight purportedsecurities class action complaints were filed against AIG and certain directors and officers of AIG and AIGFP, AIG’soutside auditors, and the underwriters of various securities offerings in the United States District Court for theSouthern District of New York (the Southern District of New York), alleging claims under the Securities Exchange Actof 1934, as amended (the Exchange Act), or claims under the Securities Act of 1933, as amended (the SecuritiesAct). On March 20, 2009, the Court consolidated all eight of the purported securities class actions as In re AmericanInternational Group, Inc. 2008 Securities Litigation (the Consolidated 2008 Securities Litigation).On May 19, 2009, lead plaintiff in the Consolidated 2008 Securities Litigation filed a consolidated complaint on behalfof purchasers of AIG Common Stock during the alleged class period of March 16, 2006 through September 16, 2008,and on behalf of purchasers of various AIG securities offered pursuant to AIG’s shelf registration statements. Theconsolidated complaint alleges that defendants made statements during the class period in press releases, AIG’squarterly and year-end filings, during conference calls, and in various registration statements and prospectuses inconnection with the various offerings that were materially false and misleading and that artificially inflated the price ofAIG Common Stock. The alleged false and misleading statements relate to, among other things, the SubprimeExposure Issues. The consolidated complaint alleges violations of Sections 10(b) and 20(a) of the Exchange Act andSections 11, 12(a)(2), and 15 of the Securities Act. On August 5, 2009, defendants filed motions to dismiss theconsolidated complaint, and on September 27, 2010, the Court denied the motions to dismiss...................................................................................................................................................................................................................................292 AIG 2012 Form 10-K