After missing several self-imposed deadlines, American International Group Inc. filed its 2004 annual report and the restatements of its results from 2000 through 2003 and an adjustment to its 2004 results.
The embattled insurance giant, whose accounting practices are being investigated by several regulators, cut its 2004 net income by 11.9 percent, to $9.73 billion, from the $11.05 billion announced in its February 9 earnings release. Altogether it reduced net earnings by $3.9 billion over the five-year period.
AIG also cut shareholders’ equity as of December 31, 2004, by $2.26 billion, or 2.7 percent. This is actually a smaller reduction than the $2.7 billion it had anticipated in early May.
The report also stated that management had identified material weaknesses in AIG’s internal control over financial reporting, according to Reuters.
“I am pleased that we have completed our internal review and filed our 2004 Form 10-K, which reflects the results of our detailed and thorough review of AIG’s major business units globally,” said president and chief executive officer Martin J. Sullivan, in a statement. “AIG’s financial position is sound, our insurance cash flow is strong, and our global franchise is unmatched.”
AIG’s internal review was conducted in consultation with its accounting firm, PricewaterhouseCoopers, and the law firms Paul, Weiss, Rifkind, Wharton & Garrison and Simpson Thacher & Bartlett.
“It’s a relief that they are sorting it out,” Alison Sinclair, a fund manager who helps oversee $20 billion at Britannic Asset Management in Glasgow, told Bloomberg. “It doesn’t seem to be worse than our worst fears.” Added Peter Boockvar, an equity strategist, at Miller Tabak & Co., “The news is finally out, and it takes away some uncertainty,” according to Reuters.
AIG also announced that it will commission a comprehensive independent actuarial review of the loss reserves of its principal property-casualty insurance operations. The review is expected to be completed before the company reports its full-year 2005 financial results.
The company noted that it increased its reserves for asbestos and environmental exposures by $850 million in the fourth quarter of 2004, Reuters pointed out. AIG reported $1.51 million in net reserve for losses and loss expenses at the end of 2004 related to asbestos and environmental claims, the wire service added.