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NEW YORK (CNN/Money) -
Embattled insurer American International Group admitted Wednesday to some improper transactions that could stretch back 14 years and delayed filing results with regulators.
AIG said it was uncertain of the impact of ongoing investigations into the deals, but that they could reduce its equity by about $1.7 billion, or 2 percent.
The New York-based company said it needs more time to review its books and delayed filing its 2004 annual financial report until late April.
Shares of AIG (Research), which have lost more than $40 billion in value since the investigations were disclosed in mid-February, sank nearly 2 percent on the New York Stock Exchange.
The company, one of 30 in the Dow Jones industrial average, is facing probes of some transactions that prompted the departure of its longtime chairman and CEO Maurice "Hank" Greenberg earlier this month.
The Securities and Exchange Commission and New York Attorney General Eliot Spitzer are examining a number of deals, specifically two with General Re, a reinsurer owned by Warren Buffett's Berkshire Hathaway Inc. (Research) The statement from AIG Wednesday admitted those transactions were improper.
"Based on its review to date, AIG has concluded that the Gen Re transaction documentation was improper and, in light of the lack of evidence of risk transfer, these transactions should not have been recorded as insurance," it said in a statement.
It said the adjustment for those transactions will not materially change its financial condition, but that it would reduce the reserve for losses and loss expenses by $250 million and increase other liabilities by $245 million.
The insurer also expects to take $670 million of after-tax charges related to its general insurance operations.
Buffett and Greenberg are both due to be interviewed by regulators investigating the transactions.
Regulators suspect AIG designed the General Re deals to manipulate its earnings statements, and the company's statement seemed to confirm at least some of those suspicions.
"The continuing review has led AIG management to conclude that the accounting for certain of these matters may need to be recharacterized or otherwise adjusted," the company's said.
"Certain, but not all, of the original characterizations resulted from transactions which appear to have been structured for the sole or primary purpose of accomplishing a desired accounting result," it added.
The company also admitted to previously undisclosed ties with offshore reinsurance companies.
"AIG now believes that a significant portion of the ownership interests of (reinsurer) Union Excess shareholders are protected under financial arrangements with Starr International Company Inc., a private holding company which owns approximately 12 percent of AIG's outstanding common stock and whose board of directors consists of current and former members of AIG management," said the company's statement.
The relationship with Union Excess and other reinsurers could force to reduce AIG's previously stated shareholder's equity, the company added.
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