Inaccurate accounting blights insurance giant
The world's biggest insurer, AIG, is expecting a £890m reduction to its book value because of inaccurate accounting.
American International Group has admitted that erroneous accounting is expected to reduce its book value by £890m, approximately 2% of shareholders funds.
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The insurer is already facing investigations from SEC, New York state attorney general Eliot Spitzer and the justice department about possible accounting irregularities.
William Wilt, an analyst with Morgan Stanley, told the Financial Times that the ‘depth and breadth of troubles and apparent lack of accounting controls’ was ‘alarming’.
AIG said that an internal review had revealed that certain transaction documentation was ‘improper’ and that as there was a ‘lack of evidence of risk transfer’ the transactions should not have been recorded as insurance.