AIG AFFIRMS ACCOUNTING ERRORS, CUTS 2000-2004 INCOME BY $3.9BN

New York-based AIG has filed its thrice-postponed 2004 annual report, affirming previously acknowledged accounting improprieties and cutting financial results by a combined $3.9bn over the last five years. With the restatements, AIG said that its end-2004 shareholders’ equity has been reduced by $2.26bn, or 2.7%, to $80.61bn. Around a third of the overall earnings restatement applied to 2004, as AIG cut its annual income by $1.32bn, or 12%, to $9.73bn from the $11.05bn that it had posted in February. The 2004 result included a Q4 charge of $850m for an addition to asbestos reserves, a move that took most analysts by surprise. AIG acknowledged the impropriety of two deals with Berkshire Hathaway’s General Reinsurance subsidiary, which are at the centre of the New York attorney-general office’s investigation. AIG said that the deals with General Re were “done to accomplish a desired accounting result and did not entail sufficient qualifying risk transfer”. Rather than accounting for the deals as reinsurance, AIG has re-listed them as deposits. Recently appointed AIG chief Martin Sullivan said that with restated earnings the group was “embarking on a new era” of greater responsiveness and transparency. To that end, the group plans to commission an independent actuarial review of loss reserves in its principal p/c operations. However, going forward AIG does not plan to provide earnings guidance to investors, Mr Sullivan said.