National Union Fire Insurance Co. of Pittsburgh and American Home Assurance Co., which issued the guarantees to bolster other AIG units, had contingent liabilities tied to the promises of $157 billion on Dec. 31, 2008, compared with the $138.3 billion disclosed at the time, Robert Pratter, the state’s acting insurance commissioner, said today in a report.

AIG was instructed by the regulator to limit or end its intra-group guarantees, according to the report. It doesn’t face financial penalties, Rosanne Placey, a spokeswoman for the Pennsylvania regulator, said in an e-mail. The New York-based insurer, once the world’s largest, was brought to the brink of collapse in September 2008 when the company was unable to meet its obligations without a cash injection from the government.

Failing to report contingent liabilities may be “a serious problem because of the systemic risk for the whole enterprise,” said Robert Hunter, a former Texas insurance commissioner who is now insurance director at the Washington-based Consumer Federation of America.

Insurance companies are required to disclose their subsidiaries’ guarantees to state regulators. They aren’t bound to recognize the obligations as liabilities on balance sheets.

Remediation Plan

“We have adopted a remediation plan to ensure that our disclosures are more accurate going forward,” Mark Herr, an AIG spokesman, said in an e-mailed statement. “We are not required to establish a liability for these guarantees in which the likelihood of payment is remote.”

AIG came under investigation in Pennsylvania as rivals including Chubb Corp. and Liberty Mutual Holding Co. complained that the company’s government backstop was allowing the insurer to sell policies below competitive rates.

Pennsylvania said in the report that AIG’s pricing and underwriting were “not out of line” with competitors. The Government Accountability Office, the investigative arm of the U.S. Congress, said in a March 2009 report it found no evidence of under-pricing by AIG.

AIG agrees with Pennsylvania’s findings, Robert Schimek, chief financial officer of Chartis, the company’s property- casualty business, said in a Dec. 7 letter to the regulator. AIG’s units “have the appropriate controls to ensure more accurate disclosures,” Schimek said in the letter, which was attached to the report.