EXHIBIT 99.7
AGREEMENT
BETWEEN
AMERICAN INTERNATIONAL GROUP, INC.;
AIG PROPERTY CASUALTY GROUP, INC.
AND
AMERICAN HOME ASSURANCE COMPANY
This Agreement, made and entered into as of February 27, 2009, by and
between American International Group, Inc., a Delaware corporation ("AIG"), AIG
Property Casualty Group, Inc., a Delaware corporation ("PCG"), and American Home
Assurance Company, a property casualty insurer incorporated in the State of New
York ("AHAC").
WITNESSETH:
WHEREAS, AIG is the beneficial owner of 100 percent of the outstanding
common stock of PCG, which is the beneficial owner of 100 percent of the
outstanding common stock of AIG Commercial Insurance Group, Inc., a Delaware
corporation ("CIG"), which is the beneficial owner of 100 percent of the
outstanding common stock of AHAC;
WHEREAS, AHAC is the beneficial owner of 22,018,973 shares of common stock
of Transatlantic Holdings, Inc., a Delaware corporation ("TRH") and AIG is the
beneficial owner of 17,073,690 shares of common stock of TRH;
WHEREAS, under current statutory accounting rules, AHAC is required to
value its ownership in the TRH stock at either its market value or statutory
book value and if the market valuation method is elected, a further reduction in
statutory value is required based on the aggregate percentage of ownership of
TRH, as measured at the ultimate holding company level;
WHEREAS, historically, AHAC has valued its investment in TRH based on TRH's
market price as of any statutory reporting date;
WHEREAS, because of a decline in TRH's market price from December 31, 2007
to December 31, 2008 of approximately 45%, application of the market price
valuation would result in a statutory valuation for AHAC's investment in TRH
being approximately $272 million lower than a statutory valuation resulting from
the application of the statutory book value;
WHEREAS, under statutory rules, an insurer may change the method of valuing
a subsidiary provided it receives regulatory approval;
WHEREAS, to avoid a reduction of AHAC's surplus of approximately $272
million, AHAC requested approval from the New York Department of Insurance (the
"NYDOI") to change valuation method from market valuation to statutory book
valuation for AHAC's investment in TRH;
WHEREAS, the NYDOI stated that it would gain comfort in approving the
change in valuation method for AHAC if AIG agreed to make AHAC whole in the
event that TRH was sold at a price below statutory book value; and
WHEREAS, it is contemplated that AIG may contribute, or transfer for value,
some or all of its directly owned shares of common stock of TRH to AHAC or other
insurance company subsidiaries of PCG.
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties hereto agree as follows:
1. Contemporaneously with the closing of any sale of shares of common stock
of TRH ("TRH Shares") by AHAC or by another insurance company subsidiary of PCG
holding TRH Shares after the date of this Agreement (each, an "Other Holder"):
(a) AIG hereby agrees to deposit into an account of and designated by
AHAC, in immediately available funds, such amount as shall equal the number
of TRH Shares sold by AHAC multiplied by the difference between the per
share statutory book value of TRH and the per share sale price of the TRH
Shares sold (if less than the per share statutory book value); and
(b) AIG hereby agrees to deposit into account(s) of and designated by
such Other Holder, in immediately available funds, such amount as shall
equal the number of TRH Shares sold by such Other Holder multiplied by the
difference between the per share statutory book value of TRH and the per
share sale price of the TRH Shares sold (if less than the per share
statutory book value).
2. AIG hereby agrees that the deposit obligation set forth in Section 1 of
this Agreement shall be absolute and unconditional under any and all
circumstances and irrespective of any set-off, counterclaim or defense to
payment that AIG may have or ever has had against any of PCG, AHAC, or any Other
Holder.
3. AIG's obligations under paragraph 1 of this Agreement shall continue in
full force and effect with respect to any TRH Shares owned by AHAC or an Other
Holder until such TRH Shares are sold, conveyed or transferred to a party other
than AHAC or an Other Holder.
4. In no event shall AIG's obligations under paragraph 1 of this Agreement
apply to any TRH Shares not owned by AIG or a wholly owned subsidiary of AIG on
the date of this Agreement, other than any TRH Shares issued to AIG or a wholly
owned subsidiary of AIG as a result of a recapitalization, stock split, stock
dividend, combination or exchange of shares, merger, consolidation, rights
offering, separation, reorganization or liquidation or other change in the
corporate structure or shares of TRH.
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5. AIG hereby agrees at all times to protect, indemnify and save harmless
AHAC and the Other Holders from and against any and all claims, actions, suits
and other legal proceedings, and from and against any and all losses, claims,
demands, liabilities, damages, costs, charges, reasonable fees of counsel and
other expenses which AHAC or the Other Holders may at any time sustain or incur
by reason of or arising out of AIG's failure to promptly make the deposits
described in paragraph 1.
6. This Agreement may be amended at any time by written agreement signed by
both parties.
7. All notices required to be given hereunder shall be in writing and shall
be deemed duly given on the date on which the same is hand delivered or sent by
telecopier or facsimile transmission, or, if mailed, after the same is deposited
with the United States mail, by registered or certified mail, postage prepaid,
addressed as follows:
If to AIG addressed as follows:
American International Group, Inc.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Treasurer
If to PCG addressed as follows:
AIG Property Casualty Group, Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Financial Officer
8. This Agreement shall be governed by the laws of the State of New York.
9. The Other Holders shall be deemed to be express third party
beneficiaries of this Agreement with full rights and remedies as if such Other
Holders had been a party to this Agreement on the date hereof.
10. This Agreement may be executed in counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same
instrument.
[SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the 27th day of February, 2009.
AMERICAN INTERNATIONAL GROUP, INC.
By: /s/ Xxxxxx X. Gender
------------------------------------
Name: Xxxxxx X. Gender
Title: Treasurer
By: /s/ Xxxxxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxxxxx X. Xxxxxxx
Title: Secretary
AIG PROPERTY CASUALTY GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Treasurer
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Assistant Secretary
AMERICAN HOME ASSURANCE COMPANY
By: /s/ Xxxxxx. X. Xxxxxxx
------------------------------------
Name: Xxxxxx. X. Xxxxxxx
Title: Treasurer
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Secretary
