General Re/AIG dealings in focus

FRESH details about dealings between insurance giants American International Group (AIG) and General Re are expected to emerge later today.

AIG will finally publish its annual report for 2004 this afternoon. It has already admitted that several transactions between the company and General Re’s Dublin operations were “improper.” New details about the transactions, which inflated AIG’s profits and reserves, will be disclosed in the report.

It has also emerged that a board meeting of an AIG subsidiary, Starr International, which is also under regulatory scrutiny, was held in Dublin last year.

The links between Starr International, which is registered in Panama, but domiciled in Dublin, and AIG are also being probed by the US Securities & Exchange Commission and New York’s Attorney General Elliot Spitzer.

One of Starr International’s key roles within AIG is to act as the conduit for compensation for the board of directors and to oversee a stake in the company worth $16 billion. AIG’s former chief executive Hank Greenberg has been charged by Mr Spitzer with creating transactions with General Re that were designed to “falsely inflate” AIG’s reserves.

Mr Spitzer alleges that two deals with General Re’s Dublin office, worth $500 million in total, were nothing more than “sham” transactions. Mr Greenberg and AIG’s former chief financial officer Howard Smith, who was also charged, deny any wrongdoing.

The Irish financial regulator has also been monitoring the investigations of AIG and General and will be hoping that no fresh scandals emerge.

General Re, the reinsurance subsidiary of Warren Buffett’s Berkshire Hathaway group, has already come in for criticism from Australian regulators.

Following the 3 billion collapse of Australian insurance firm HIH Group, the General Re Dublin office was linked to several transactions that contributed to its collapse.

After the probe, six General Re executives were barred from working in the market, and two of them turned up in the Irish subsidiary. One of them has left the company and the second, John Houldsworth is on leave.

The Irish regulator has said that it was satisfied that General Re was taking “corrective” action and denied that Dublin’s International Financial Services Centre (where both General Re and AIG are based) was akin to a financial “Wild West.”