Outside auditors PricewaterhouseCoopers (PwC) has concluded there is a ‘material weakness’ in AIG’s internal controls over financial reporting as a result of how it has valued the credit default swap (CDS) portfolio in its filing with USA’s Securities and Exchange Commission.
According to Reuters, Morgan Stanley analyst Nigel Dally revealed in an investor note that AIG's mark-to-market unrealised loss on its CDS portfolio is expected to result in a charge of about $4.88bn, based on October and November pricing.
These findings have put a question mark over a statement by Martin Sullivan, AIG chief executive, to investors in December that the company had ‘a high degree of certainty in what we have booked to date’.
AIG is expected to report its fourth-quarter results later this month. The company has not disclosed if its analysis of December data will lead to further deterioration in the value of the CDS portfolio.
Further reading:
Comments