AIG’s annual returns for 2004 have been delayed to enable the company to account properly for a $US500 million retrocessional loss portfolio contract organised through General Re. It’s expected the accounting review will cost AIG as much as $US2 billion in lower equity values, tax adjustments, reductions in reserves and increases in liabilities.

AIG says it will handle the General Re contract as a deposit rather than as net premium.

The review has also turned up some intriguing and little-known aspects of the AIG operation. For example, there is the case of Starr International (named after Cornelius van der Starr, who founded AIG). Starr’s directors are all former and present senior AIG managers. It owns 12% of AIG, as well as a number of associated reinsurance operations that had been regarded as separate entities. 

Yesterday Starr pushed seven of its nine board members out, and the Wall Street Journal said they will be replaced by former AIG managers.

AIG said in a statement that some accounting “errors” could stretch as far bar back as 1991. The company has lost more than $US40 billion in value since the investigations first focused on the company in February.

New CEO Martin Sullivan says the annual accounts will now be published on April 30 – a month later than originally scheduled.