NU Online News Service, May 31, 9:57 a.m. EDT

American International Group released its postponed 2004 annual report today and said its internal audit had cut the company's book value by 2.7 percent--equaling some $2.26 billion.

The reduction to $80.61 billion was within the range that analysts had said the giant insurer could easily sustain.

AIG said it was reporting its net income for the year at $9.73 billion==a reduction of $1.32 billion (11.9 percent) from the $11.05 billion it had announced on Feb. 9.

The report's release is the latest development in an ongoing scandal that has enveloped the New York-based company since it fell under the eye of investigators for its accounting practices.

Last week, New York Attorney General Eliot Spitzer and New York Insurance Superintendent Howard Mills announced a lawsuit against the company, charging the company's ousted chairman, Maurice Greenberg, and former Chief Financial Officer Howard Smith had engaged in numerous fraudulent business transactions that exaggerated the strength of the company's core underwriting business to prop up its stock price.

The suit, alleging that the firm manipulated its books to deceive regulators and the investing public, followed revelation after revelation concerning AIG's business practices that began last year, when New York officials accused the carrier of bid rigging with brokers at Marsh.

In addition to investigations by the U.S. Securities and Exchange Commission and New York authorities, the company's activities are under scrutiny from the U.S. Justice Department.

AIG said it would hold a conference call after the stock market closes at 4:30 p.m. today to discuss its revised financial picture.

In releasing the revised figures, AIG President and CEO Martin J. Sullivan assured stockholders in a statement that the company's "financial position is sound, our insurance cash flow is strong and our global franchise is unmatched."

He said the company is continuing to cooperate with investigations that are underway, and that the company has embarked on a new way of operating, "including greater responsiveness and transparency" that will "make AIG an even stronger and better company."

Special Reports /

AIG Restated Income Drops Book Value 2.7 %

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