AIG has admitted that improperly accounting for a deal with General Re could have inflated its profits by $1.7bn (£904m).

The announcement came as AIG confirmed that it would delay announcing year end results until the end of April.

In a statement yesterday the company said a reinsurance transaction involving the Berkshire Hathaway subsidiary General Reinsurance was improperly reported as insurance when in fact there was no risk transfer.

The company said: “The General Re documentation was improper, and, in light of lack of evidence of risk transfer, these transactions should not have been recorded as risk transfer.”

The deal has come under hot scrutiny from New York attorney general Eliot Spitzer. Last week AIG chief executive and chairman Hank Greenberg resigned from his posts.

The spotlight has now turned on Berkshire Hathaway boss Warren Buffett. Reports today claim that Buffett was informed of the deal by General Re's former chief executive Ronald Ferguson. Buffett will meet with US regulators in April to discuss the controversial deal.

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