updated 5/31/2005 6:32:30 PM ET 2005-05-31T22:32:30

American International Group Inc., the huge insurance company under investigation by state and federal regulators over accounting issues, filed its long-awaited 2004 annual report with the Securities and Exchange Commission on Tuesday, restating financial results for the past five years.

As part of the restatement, AIG cut shareholders’ equity at Dec. 31, 2004 by $2.26 billion, or 2.7 percent, to $80.61 billion, less than the $2.7 billion reduction the company had projected earlier. This included an after-tax reduction of $1.19 billion for changes in estimates for the fourth quarter of 2004.

Revised calculations by the New York-based company lowered AIG’s profits by nearly $4 billion for the five years since 2000. The biggest of those changes came in 2004, with net income cut by $1.32 billion, or nearly 12 percent, to $9.73 billion from the $11.05 billion that had been reported on Feb. 9.

In its new filing with the SEC, AIG acknowledged accounting improprieties, including “improper or inappropriate transactions.”

It also said: “In many cases, these transactions or entries appear to have had the purpose of achieving an accounting result that would enhance measures believed to be important to the financial community and may have involved documentation that did not accurately reflect the true nature of the arrangements.”

In some instances, the filing said, the transactions “may also have involved misrepresentations to members of management, regulators and AIG’s independent auditors.”

Moody’s Investors Service confirmed its long-term senior debt ratings on AIG at Aa2 based on the report and revised its outlook to “stable.” Fitch Ratings termed AIG’s filing “a modest positive development” but kept the company’s debt on negative ratings watch because of “significant short-term and longer term uncertainties.”

Analysts said investors may have been concerned with AIG’s announcement that it was boosting its reserves for asbestos cases by $850 million and would commission “a comprehensive independent actuarial review” of reserves for property-casualty operations.

AIG’s chief executive, Martin J. Sullivan, told analysts on a conference call that “we’re comfortable that our reserves are reasonable,” and said the independent review “would really help our judgments going forward.”

But Paul Newsome, an insurance analyst with A.G. Edwards & Sons Inc. in St. Louis, Mo., said that “whenever a company says they’re going to do an independent review of reserves, you typically think the reserves need to be increased.” An increase in reserves generally reduces earnings.

John Elliott, dean of the Zicklin School of Business at Baruch College in New York, said it’s not unusual for a company “caught in the spotlight” to look at issues like reserves.

“New management obviously wants sins of the past fixed,” Elliott said. “But there’s also the attitude of, ’I want to do everything I can to be sure that any lurking issues — and these could include fair-judgement issues like reserves — get resolved.”

Last week, New York regulators filed a civil lawsuit against AIG and the company’s former chief executive officer, Maurice “Hank” Greenberg, and former Chief Financial Officer Howard I. Smith, saying they orchestrated an accounting scheme that made AIG’s financial picture appear brighter than it was, misleading both investors and regulators.

In the suit, New York Attorney General Eliot Spitzer accused the company and the former executives of using “deception and fraud” to boost the company’s stock price.

Greenberg, 80, resigned as chief executive officer and chairman of AIG in March, ending nearly 40 years at the helm of the insurance company. Smith was fired later for failing to cooperate with investigators.

There was no immediate comment from Greenberg’s legal team on the AIG report.

Sullivan, who replaced Greenberg as president and chief executive officer, said in a statement earlier Tuesday that the company “continues to cooperate to the fullest possible extent” with investigators.

He added: “AIG’s financial position is sound, our insurance cash flow is strong and our global franchise is unmatched.”

Sullivan said the company, with 92,000 workers worldwide, had embarked on “a new era” that would improve the way the company operates and contribute to future growth.

AIG’s internal review into accounting errors was conducted in consultation with its independent public accounting firm, PricewaterhouseCoopers LLP, as well as with the law firms Paul, Weiss, Rifkind, Wharton & Garrison LLP and Simpson Thacher & Bartlett LLP.

Sullivan told the analysts that “we believe the restatement in the 10-K is the restatement, and there should be no further restatements going forward.”

He also said the company expects more volatility in its earnings and that “we will not be providing guidance” on future results.

AIG said it expects to file its financial report for the first quarter of 2005 by the end of June.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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