- The Washington Times - Tuesday, May 31, 2005

NEW YORK (AP) — American International Group Inc., the insurance giant under investigation by state and federal regulators over accounting issues, filed its long-awaited 2004 annual report with the Securities and Exchange Commission yesterday, restating financial results for the past five years.

As part of the restatement, AIG cut shareholders’ equity as of Dec. 31 by $2.26 billion, or 2.7 percent, to $80.61 billion — less than the $2.7 billion reduction the company had projected earlier. That included an after-tax reduction of $1.19 billion for changes in estimates for the fourth quarter of 2004.

Revised calculations by the New York company lowered AIG’s profit by nearly $4 billion for the five years since 2000. The biggest of those changes came in 2004, with net income cut by $1.32 billion, or nearly 12 percent, to $9.73 billion from the $11.05 billion that had been reported Feb. 9.

In its new SEC filing, AIG acknowledged accounting improprieties, including “improper or inappropriate transactions.”

It also said: “In many cases, these transactions or entries appear to have had the purpose of achieving an accounting result that would enhance measures believed to be important to the financial community and may have involved documentation that did not accurately reflect the true nature of the arrangements.”

In some instances, the filing said, the transactions “may also have involved misrepresentations to members of management, regulators and AIG’s independent auditors.”

Moody’s Investors Service confirmed its long-term senior debt ratings on AIG based on the report and revised its outlook to “stable.” Fitch Ratings termed AIG’s filing “a modest positive development” but kept the company’s debt on negative ratings watch because of “significant short-term and longer-term uncertainties.”

AIG shares fell 85 cents, or 1.5 percent, to close at $55.55 on the New York Stock Exchange. Its shares have traded in a 52-week range of $49.91 to $74.98.

Analysts said investors may have been concerned with AIG’s announcement that it was boosting its reserves for asbestos cases by $850 million and would commission “a comprehensive independent actuarial review” of reserves for property-casualty operations.

AIG’s chief executive officer, Martin J. Sullivan, told analysts that “we’re comfortable that our reserves are reasonable,” and said the independent review “would really help our judgments going forward.”

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