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AIG delays report after discovering $500m hole in accounts

American International Group (AIG) has announced it will delay the filing of its Form 10-Q for the q...

American International Group (AIG) has announced it will delay the filing of its Form 10-Q for the quarter ended 30 September 2005 after discovering a number of errors, including a $500m hole in its accounts.

The delay is to allow AIG time to incorporate into its third-quarter and nine-month financial statements the correction of certain errors, the majority of which were identified during the remediation of previously disclosed material weaknesses in internal controls.

The most significant errors identified relate to the previously disclosed material weaknesses in internal controls surrounding accounting for derivatives, related assets and liabilities under FAS 133, and the reconciliation of certain balance sheet accounts and income tax accounting. AIG said that it continues to believe its hedging activities have been and remain economically effective, but do not qualify for hedge accounting treatment.

AIG's remediation of the material weaknesses in internal controls disclosed in its 2004 Form 10-K is continuing, and further remediation developments will be described in future filings with the Securities and Exchange Commission.

AIG estimates that the errors identified in the third quarter of 2005 resulted in an understatement of previously reported consolidated retained earnings at 30 June 2005 of approximately $500m. The effect on net income in prior periods may be positive or negative in a particular period, and will also vary in amount from period to period.

Due to the significance of these corrections, AIG will restate its financial statements for the years ended 31 December 2004, 2003 and 2002, along with affected Selected Consolidated Financial Data for 2001 and 2000, quarterly financial information for 2004 and the first two quarters of 2005. AIG's prior financial statements for those periods should therefore no longer be relied upon.

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