Wharton examines the possible consequences of ongoing investigations at AIG and the fate of "Hank" Greenberg, CEO of American International Group, in an article available online. Can AIG Stay on Top? - Knowledge@Wharton
AIG is under scrutiny now for at least one "finite reinsurance" transation with GenRe several years ago. Questions have arisen as to the propriety of treating it as a transfer of risk instead of a loan. Finite reinsurance can be used as a means of "smoothing" earnings, but are controversial. If the transaction in question is undone, it could reflect on the propriety of past earnings reports by AIG.
The Wharton article points to renewed corporate concerns following recent scandals (e.g. Enron and WorldCom) and responsive legislation, such as Sarbanes Oxley.
See also: "Finite Risk Reinsurance" background online" Unintended Consequences, Nov. 24, 2004.
Posted by dougsimpson at March 28, 2005 09:46 AM