AIG to restate five years of earnings

In response to a number of accounting investigations that occurred early in 2005, the American International Group Inc. (AIG) has delayed filing its quarterly results and will restate its earning for the past five years for a second time in attempts to fix accounting errors.The company estimates net income 2000 through the first half of 2005 was understated by $500 million after reducing profit by $3.9 billion in May. AIG’s first restatement lowered 2000 to 2004 net income by 10% to correct transactions, including reinsurance contracts, that hid losses and understated liabilities. AIG will file its 10-Q quarterly financial statement with the SEC on November 14. Accounting investigations led by New York Attorney General Eliot Spitzer, the Securities and Exchange Commission and other regulators instigated the Company’s restatement of five years of results.Investigations into AIG stemmed from the Companies problems accounting for derivatives used to hedge risks, income-tax accounting and other accounting errors. Former senior management including former ceo Maurice “Hank” Greenberg are being blamed for much of these internal mistakes. “AIG continues to believe its hedging activities have been and remain economically effective, but do not qualify for hedge accounting treatment,” a statement from AIG reads. The Company also issued a $1.7 billion estimate for third-quarter earnings for 2005, which represents net earnings after costs incurred by Hurricanes Katrina and Rita. AIG says third-quarter catastrophes cost $1.57 billion. Katrina contributed $1.03 billion, while Rita cost $200 million. Before Rita made landfall, AIG had predicted $1.1 billion in costs for the quarter. AIG estimates net income for the first nine months of 2005 was about $10.1 billion.