AIG to restate financial reports

Shares in American International Group (AIG), embroiled in controversy over a $500 million (€388 million) reinsurance deal with a Dublin company, rose on the back of news that it will restate four years of accounts.

The group ousted its chief executive, Maurice "Hank" Greenberg, after a row over whether or not it should have declared a $500 million reinsurance deal with Warren Buffet's General Reinsurance group as a debt, rather than as part of its reserves.

The deal was done with General's Dublin arm, Cologne Re.

AIG's shares price rose five per cent to $53.67 on Wall Street after investors welcomed the insurer's decision to restate financial reports. The group said it will restate more than four years of reports because of accounting errors.

Meanwhile, US manufacturing growth slowed in April for the fifth straight month, but economists said it was unlikely to stop the Fed raising interest rates. Data from the Institute for Supply Management (ISM) yesterday showed the industry group's index of factory activity fell to 53.3 in April from 55.2 in March.

The April index receded to the lowest level since July, 2003. However, a reading above 50 still indicates the sector is growing, which it has done for nearly two years. "The jury is still out on the depth and size of the soft patch in the economy due to the jump in oil prices, and these reports do not answer that question decisively," said Lynn Reaser, chief economist at Banc of America Capital Management in Boston.

Another report yesterday showed US construction spending jumped a surprisingly large 0.5 per cent to a record high in March as home building hit record levels. Construction outlays climbed to a seasonally adjusted annual rate of $1.052 trillion from a revised $1.047 trillion in February, the Commerce Department said.

Total private construction rose 0.5 per cent to $816 billion from $811 billion the previous month, while private residential construction climbed 0.3 per cent to $585 billion from a revised $584 billion in February. Both figures were fresh record highs.

- (additional reporting, Reuters)