American International Group may have to restate several years of earnings if regulatory probes prove it misused two reinsurance companies in Bermuda and Barbados that it secretly controlled, a story in Barron?s revealed yesterday.

The report said that the under-fire company ? longtime chief Maurice ?Hank? Greenberg was deposed as CEO earlier this month after nearly 40 years at the helm ? has been under investigation since last year by New York Attorney General Eliot Spitzer and the US Securities and Exchange Commission for questionable finite risk deals.

Barron?s said: ?The once-impregnable Greenberg was laid low by investigations by the SEC and NY AG into a possibly sham reinsurance deal in late 2000 and early 2001 to artificially pump up AIG?s policy-loss reserves and satisfy the concerns of Wall Street analysts.? Mr. Greenberg?s involvement in a reinsurance arrangement with Berkshire Hathaway?s General Re to boost AIG?s reserves by $500 million has been pointed to as the reason for his ouster from the company he long presided over.

But AIG?s problems may not have ended with Mr. Greenberg?s exit, according to the Barron?s, which revealed materials uncovered by investigators now suggest that AIG used Barbados-based Union Excess and Bermuda-based Richmond Insurance Co. Ltd. ?to improve AIG?s earnings, underwriting results and capital position over a period of years by various finite-risk reinsurance schemes. Among other things, these companies appeared to be convenient dumping grounds for poorly performing property and casualty insurance policies to get them off AIG?s books.

By laying off business on these supposedly independent reinsurers, AIG was able to write off more business than its true capital position might otherwise have permitted.?

The story said that AIG ? if it did indeed control Richmond and Union Excess ? would have been in a position to negotiate itself better finite risk deals with the two companies than it could have in the market.

It would however be on the hook for any claims that came in.

Barron?s reported that figures from insurance newsletter IBNR Weekly showed that at the end of 2003, Richmond and Union Excess accounted for nearly $1.2 billion of the reinsurance recoverables on AIG?s books ? a hefty portion of the $3.6 billion in total from all offshore reinsurers.

If AIG is indeed found to be in control of these companies, it could find itself having to restate years of earnings and take off the near $1.2 billion in reinsurance recoverable from the asset side of its balance sheet, Barron?s said.

That would be a much more serious blow than the $100 million charge that recent media reports have speculated AIG could face.

Barron?s said research found the Bermuda-based Richmond had ?a tiny capital base of $44 million to support the $666 million it owes AIG at the end of 2003?.

It said that Richmond dealt almost exclusively with AIG, and is housed in AIG?s Bermuda offices on Richmond Road.