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Investigation into insurer AIG expanded

Shares of American International Group sank Friday after a report that regulators expanded their investigations into whether the insurer inflated a closely watched performance yardstick.
/ Source: Reuters

Shares of American International Group sank Friday after a report that regulators expanded their investigations into whether the insurer inflated a closely watched performance yardstick.

“There is the ongoing uncertainty over what shoes might next fall,” said Thomas Russo, who helps invest more than $1 billion for Gardner Russo & Gardner in Lancaster, Pennsylvania, and owns AIG shares. “Uncertainty chases away investors.”

Regulators are examining whether AIG, which this week admitted improper accounting going back 14 years, inappropriately capped its underwriting “loss ratio” — the percentage of each dollar of premiums used to pay claims — and potentially boosted the firm’s surplus capital, the Wall Street Journal reported, citing people familiar with the matter.

AIG declined to comment.

Surplus capital data can be used to determine how much insurance an insurer can sell.

The Journal did not specify which regulators were involved in the examination.

AIG, one of the world’s largest insurers, addressed its accounting problems in a statement on Wednesday in which it said a series of accounting errors had overstated its book value by as much as $1.7 billion.

The insurer also said it would delay its annual 10-K financial report for a second time as it tallies other potential accounting improprieties.