American International Group (AIG), in a long-delayed regulatory filing, said Tuesday that it overstated net income by $3.9 billion for the past five years.

The New York-based insurer also said that it cut its net worth by $2.26 billion through the end of 2004. The figure is less than the $2.7 billion that was previously estimated.

The report, which was delayed three times, was filed with the Securities and Exchange Commission. The reduction in net income included an increase in its reserve for asbestos and environmental exposures of $850 million for the last quarter of 2004.

AIG acknowledged accounting improprieties, including "improper or inappropriate transactions," the

Associated Press reported. The company said in its filing, “In many cases, these transactions or entries appear to have had the purpose of achieving an accounting result that would enhance measures believed to be important to the financial community and may have involved documentation that did not accurately reflect the true nature of the arrangements."

Michael Chren, senior portfolio manager of National City Investment Management Co., told Reuters that the smaller-than-expected reduction in net worth is good news. "But the big negative from our perspective is the asbestos reserve review. That will leave a cloud over the shares,” he said.

The insurer also revealed in its filing that the cost of insuring its board members against future lawsuits has gone up 249 percent this year, TheStreet.com reported. The premium on AIG's directors and officers' liability policy is now $32.8 million, up from $9.4 million. The one-year policy went into effect May 25.

The regulatory filing comes just days after New York authorities filed civil fraud charges against AIG and former chief Hank Greenberg, who is accused of propping up AIG's stock price through various accounting maneuvers.

New AIG President and Chief Executive Officer Martin Sullivan said in a statement, "We are embarking on a new era for AIG that will be marked by changes in the way we operate - including greater responsiveness and transparency...,"

AIG said it will seek an independent review of the loss reserves of its principal property-casualty insurance operations. The insurer expects to file its financial report for the first quarter of 2005 by the end of June.