Nov. 9 (Bloomberg) -- American International Group Inc., the world's biggest insurer, will restate five years of earnings for a second time to fix errors in balance sheet and income tax accounting.

AIG estimated today that it understated earnings by $500 million from 2000 through the first half of 2005, after reducing profits by $3.9 billion in May. The New York-based company said third-quarter net income probably was about $1.7 billion after costs from Hurricanes Katrina and Rita.

AIG has blamed former senior management for skirting internal controls, eight months after it ousted Maurice ``Hank'' Greenberg as chief executive officer. Greenberg told investigators in August that much of the restatements were unnecessary and driven by fear. AIG has pledged to resolve a securities fraud suit by New York Attorney General Eliot Spitzer.

The accounting mistakes, which will delay the filing of third-quarter results until Nov. 14, stem from some of the same inadequacies in oversight identified in the first restatement, AIG said. In May, the company lowered 2000 to 2004 net income by $3.9 billion, or 10 percent, to correct transactions, including reinsurance contracts, that hid losses and understated liabilities. The corrections also included a change in how the company accounted for the fair-market value of derivatives.

Shares of AIG were down 67 cents at $65.18 in German trading. The stock has gained 8.4 percent during the past 12 months, trailing the 14 percent advance of the 24-member KBW Insurance Index.

AIG's report comes a day after MBIA Inc., the world's largest bond insurer, said it would restate seven years of earnings as the company prepares to settle an accounting probe with regulators.

The insurer didn't say whether third-quarter net income would rise or fall and didn't break out restated results for the year-earlier quarter. The company previously reported $3.24 billion in net income for the three-month period.

The company estimated net income for the first nine months of 2005 was about $10.1 billion, adding that figure ``may change, perhaps materially,'' as it completes its financial statements.

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