NEW YORK, March 31 -- The troubling things about the $1.7 billion in accounting problems reported Wednesday by American International Group Inc. are their number and variety, accounting and finance experts said.
The eight accounting issues revealed by the company range from a transaction with a company closely linked to AIG that could reduce shareholder equity by $1.1 billion to others that were improper but will have little or no effect.
"My initial reaction was 'Wow!' They have about eight different new issues here, and it pretty much covers the waterfront" of improper accounting, said University of Georgia accounting professor Dennis R. Beresford. "It's an indication that a lot of things are messed up."
But Beresford and others also said the insurance giant's overall health and survival do not appear to be in jeopardy. So far, AIG estimates that the total value of the restatement will be about $1.7 billion, about 2 percent of shareholder equity of nearly $83 billion at the end of 2004.
In contrast, by the time WorldCom Inc. finished writing off the company's $11 billion fraud and its overvalued assets and goodwill, the company was broke. Frauds at WorldCom and Enron Corp. disguised large operating losses, while AIG's estimated write-down is less than one-fifth of the $11 billion profit previously reported for 2004.
"This is not the same as Enron. They were trying to look better than they are, but they were not in terrible shape," said Columbia University accounting professor Itzhak Sharav.
AIG announced Wednesday that it was delaying filing its annual report with the Securities and Exchange Commission until April 30 to give executives more time to comb the company's books for improper transactions and accounting issues. The AIG board has already forced out chairman and chief executive Maurice R. "Hank" Greenberg and fired three top executives for invoking their Fifth Amendment right not to incriminate themselves.
Wednesday's report also gave shareholders a first glimpse of the size and kinds of problems that an internal investigation has found, although the review is continuing and more problems could emerge.
First, AIG acknowledged in a news release that two $250 million reinsurance transactions with General Re Corp. -- a subsidiary of Berkshire Hathaway Inc. -- in 2000 and 2001 were "improper" and should not have been characterized as insurance deals because they did not transfer risk from one company to another.
The SEC and New York Attorney General Eliot L. Spitzer's office issued subpoenas to AIG in mid-February, seeking information about the transactions. The company's stock price has slid more than 22 percent since then.
