Shares in American International Group (AIG) have plummeted by more than 10% in US trading after the US insurance giant said its auditor had raised concerns about some of its financial controls.
AIG revealed that its auditor, PricewaterhouseCoopers, had found a 'material weakness' in its financial reporting. The problem was related to a complex credit default swap portfolio. A credit swap usually involves the exchange of one security for another, typically to re-jig an investment portfolio.
AIG said in a filing with the Securities and Exchange Commission watchdog that it believes it has put the 'necessary compensating controls' in place to remedy any weaknesses.
The insurer also unsettled investors as it disclosed that the value of its credit default swap portfolio had declined by $5.2 billion, far more than previously calculated.
The insurer's revelations triggered market jitters because of an ongoing credit crunch. The credit markets have tightened as big banks and financial firms have divulged multibillion-dollar losses tied to mortgage investments.
