American International Group's chief executive Martin Sullivan told analysts after Tuesday's filing of AIG annual report and restatements that he believes his company's accounting practices have now been thoroughly reviewed and that there won't be any more restatements in the future.
AIG's CEO Martin Sullivan said during an analyst conference call on Wednesday: "We went though a very extensive review of all our major businesses globally, from bottom up and top down. We believe there should be no further restatement going forward."
He added, "This provides an in-depth disclosure about financial results of 2004 and our restated results for prior periods. We still have work to do, but the investing public can now focus on AIG's future."
Mr. Sullivan's comments came after AIG's much-delayed filing of its 10-K with the U.S. Securities and Exchange Commission==originally scheduled for March 16, but delayed three times as the company undertook its internal review. The 10-K shows AIG has restated a wide range of major financial figures for 2004. These changes include cutting net income by $3.92 billion for the past five-year period to correct for improper accounting and to add reserves for A&E claims. AIG also said its book value–also known as shareholders equity==was revised down to $80.6 billion as of year-end 2004, $2.26 billion lower than previously reported.
AIG also disclosed in its 10-K that it had added $850 million to its loss reserves to reflect changes in asbestos. Additionally, the carrier also said it will begin an independent actuarial review of loss reserves in its property-casualty operations, with a plan to complete the review before announcing 2005 results.
During this week's analyst conference call, Mr. Sullivan also addressed questions lingering in the minds of AIG observers. For one, why did it take this long for AIG to file its 10-K?
"The answer is that subsequent to our previous earnings press release, we discovered new information that raised serious issues that prompted us to conduct a thorough internal review," he said. AIG had determined that there were material weaknesses in AIG's controls and that financial statements needed to be restated, he noted. "And as the 10-K notes, AIG has already taken numerous steps to strengthen our controls, but this is an ongoing process and it will take time to complete."
Mr. Sullivan also acknowledged that recent events surrounding AIG has hurt the insurer's competitive position. Included in the fallout is the loss of the carrier's "triple-A" ratings, which hurt customer relationships in the financial products area while raising AIG's borrowing costs.
"So our primary mission is to stabilize our ratings. We are working closely with ratings agencies to try to accomplish this," noted Mr. Sullivan.
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