American International Group Inc. announced late Sunday night that it will restate its results for the four-year period ended 2003 and the first three quarters of 2004 to correct accounting errors.
AIG added that the revisions would cut its net worth by $2.7 billion, or about $1 billion more than it had estimated just one month ago.
The embattled insurance giant, which had planned to issue its 2004 results this past Saturday, once again postponed the release, to May 31, “which will allow it adequate time to complete its review and restate its financial statements, and allow PwC time to complete its audits,” according to its press release. AIG also said it expects to receive unqualified audit opinions from PricewaterhouseCoopers with respect to its consolidated financial statements and its internal control assessment process.
In a statement, AIG acknowledged that the revised financials will correct errors in prior accounting for “improper or inappropriate transactions or entries that appear to have had the purpose of achieving an accounting result that would enhance measures important to the financial community and that may have involved documentation that did not accurately reflect the nature of the arrangements.”
In certain instances, these transactions or entries may also have involved misrepresentations to management, regulators, and auditors, the company added.
AIG also said it identified a number of control deficiencies that are material weaknesses, including the ability of certain former members of senior management to circumvent internal controls over financial reporting in certain circumstances; ineffective controls over accounting for certain structured transactions; and transactions involving complex accounting standards and ineffective balance-sheet-reconciliation processes. “We now know that there were serious issues with our internal controls, and that it is necessary for us to address those issues and strengthen our controls,” said president and chief executive officer Martin J. Sullivan in a statement.
Meanwhile, over the weekend Berkshire Hathaway chairman Warren Buffett said at his company’s annual meeting that recent probes by regulators have reined in accounting abuses in the reinsurance industry. “I really think it’s gone,” Buffett said at a press conference, according to Bloomberg. He acknowledged, however, that “there will always be outright crooks.”
“We had a couple of big public hangings and that really does change behavior,” added vice chairman Charles Munger. “People are terrified at what has happened. And I think that is a really good thing.”
Buffett also hailed ousted AIG chairman Maurice Greenberg, declaring he “developed an extraordinary company in his lifetime,” according to the wire service. He called Greenberg “the number one man in insurance.”