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| AIG said it may take some time to unwind its relationship with firms still controlled by its ousted chairman and CEO Maurice "Hank" Greenberg. |
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NEW YORK (CNN/Money) -
AIG Tuesday cut its reported profits by nearly $4 billion over the last five years and said it was seeking to unwind its ties to firms controlled by its ousted ex-chairman and CEO.
AIG, the world's largest insurer by market value, said the review of its accounting practices caused it to lower net income for 2004 by $1.3 billion, or 11.9 percent, and for the past five years by $3.9 billion, or 10 percent.
Chief executive Martin Sullivan told analysts and investors in a conference call that the restatement, which included figures significantly different from a press release of May 1, would be the last major restatement after a thorough review of all of AIG's divisions worldwide.
Sullivan was asked about the impact of the ongoing investigations and reorganization of the company.
"We haven't seen much impact on our foreign general or foreign life businesses," Sullivan said. "Some of our producers have been cautious placing business with some of our AIG subsidiaries."
Management explained that it would not be able to discuss first-quarter results Tuesday, but assured investors that the numbers would be available by the last week of June.
AIG (Research) stock, which has lost about $57 billion of market value in recent months, slid another 1.4 percent Tuesday.
"People are selling on the good news of the 10-K coming out," A.G. Edwards Inc. analyst Paul Newsome told Reuters news agency, referring to the company's 10-K filing with the Securities and Exchange Commission.
New York-based AIG said the $3.9 billion reduction in net income for the five years through 2004 included an $850 million increase in its asbestos and environmental reserves for the fourth quarter of 2004.
"There is both good and bad news," said Michael Chren, senior portfolio manager of National City Investment Management Co. "But the big negative from our perspective is the asbestos reserve review. That will leave a cloud over the shares."
The reserves were adjusted to reflect potentially more claims against the company as AIG tries to account for losses. AIG said it will commission an independent review of loss reserves in its main property and casualty insurance operations.
The company said in its filing that it's seeking to unwind its relations with Starr International Co., Starr Foundation and C.V. Starr & Co., which together own nearly 16 percent of AIG stock and which were responsible for part of the pay of AIG's top executives.
Maurice "Hank" Greenberg, who was forced out as chairman and CEO of AIG in March over its accounting questions, still controls those firms. But the company said unwinding ties to the Starr companies will take time and it could not predict when that process will be completed.
The firm also said management has identified weaknesses in AIG's internal financial reporting and started fixing those problems, but cautioned that there was more work to do.
"We are embarking on a new era for AIG that will be marked by changes in the way we operate -- including greater responsiveness and transparency -- while preserving the core values that have enabled us to build an unequaled franchise," new CEO Martin Sullivan said in a statement.
"AIG's financial position is sound, our insurance cash flow is strong and our global franchise is unmatched," he added.
The company is facing ongoing federal and state investigations into its accounting practices as well as its reinsurance transactions. It said it is cooperating with all investigations.
New York Attorney General Eliot Spitzer sued the firm Thursday, alleging it manipulated its books to deceive regulators and the investing public.
The civil lawsuit also named Greenberg and former CFO Howard Smith, charging they engaged in fraud to exaggerate the strength of the company's business and prop up its stock price. Smith was also forced out in March.
In its filing, AIG said shareholders' equity at the end of 2004 was about $80.6 billion, down $2.26 billion, or 2.7 percent, from the previously reported amount. But the company had warned net worth could be cut by as much as $2.7 billion.
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-- from staff and wire reports
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