Originally created 11/10/05

AIG is again restating finances

NEW YORK - American International Group Inc., one of the world's largest insurers, said Wednesday that it was delaying its third-quarter earnings report until next week because it must again restate earlier financial results to correct accounting errors.

The insurance behemoth's shares seesawed in trading as investors considered the prospect of yet another restatement - this time for fiscal years 2002, 2003 and 2004 - against broker recommendations that AIG remained a good investment.

AIG, which is based in New York, restated five years of results in late May, cutting shareholders' equity by $2.26 billion, after New York Attorney General Eliot Spitzer launched an investigation into whether the company was using accounting tricks to boost its stock.

In the latest round, AIG said accounting errors caused it to understate previous consolidated results by $500 million, forcing the restatement of its 2002 to 2004 fiscal years. The company also will restate some financial data for 2000 and 2001, and quarterly financial information for 2004 and the first two quarters of 2005.

AIG said that the problems are related in part to "accounting for derivatives and related assets." It added: "AIG continues to believe its hedging activities have been and remain economically effective, but do not qualify for hedge accounting treatment."

"It's a reflection of continued deeper due diligence," AIG spokesman Chris Winans said of the restatements. "We're in the process of remediating our internal controls weaknesses."

Despite the accounting problems, both Lehman Brothers and Goldman Sachs advised investors to buy AIG shares if they fell in price.

Lehman Brothers noted that the latest changes "will result in a favorable restatement" to AIG's book value. It added that "investors may view the announcement with concern, but we recommend purchasing AIG on weakness because the core franchise remains strong and underlying earnings would have beat expectations."

A year ago, AIG reported net income in the third quarter of $2.51 billion, or 95 cents a share.


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