AIG TO RESTATE FIVE YEARS’ EARNINGS, DELAYS FILING AGAIN

An internal investigation at AIG has uncovered a further $1bn in accounting improprieties that will require restatements of earnings for 2000 to 2003 and force the New York-based group to again delay the filing of its 2004 annual report, this time to May 31. The new $2.77bn after-tax figure represents 3.3% of AIG's $82.87bn equity as of December 31 2004. AIG's share price jumped by more than 5% yesterday as investors expressed relief that the news was not worse. However, Fitch Ratings and Moody's dropped AIG's financial-strength and long-term credit ratings. The group's latest estimate of adjustments for faulty accounting included $1.2bn for reinsurance deals with Union Excess Reinsurance, General Re and Richmond Insurance, which AIG now admits should have been recorded as deposits rather than premiums and loss reserves. The probe also uncovered $700m adjustments for changes in estimates for tax accruals, deferred acquisition costs and other contingencies and allowances. AIG confirmed that outside auditor PricewaterhouseCoopers would issue “an adverse opinion” with respect to its internal control over financial reporting. AIG said that “certain control deficiencies” had enabled former senior management to circumvent reporting controls. It also acknowledged that accounting for improper transactions “appear to have had the purpose of achieving an accounting result that would enhance measures important to the financial community”. David Boies, attorney for ex-CEO Maurice Greenberg, dismissed the AIG statements, saying that accounting decisions had been made by “present senior management, including operational heads, and the company’s present directors and auditors” in addition to former senior management.